After a lengthy legal battle spanning nearly two decades, Colgate-Palmolive has resolved to settle a class action lawsuit concerning pension benefits, with a hefty sum of $332 million. This settlement concludes a saga that began in the mid-2000s, involving over a thousand current and former employees who argued that their lump-sum pension distributions were inadequately calculated by the company.

The origin of the dispute dates back to 1989, when Colgate transitioned from a traditional pension plan to a cash-balance plan. This new plan, although intended to offer greater flexibility, was quickly criticized for its complex nature. Employees opting for lump-sum payouts claimed they were financially disadvantaged by the company’s payment formula. Despite an attempt to rectify this in 2005 with a retroactive amendment, the plaintiffs felt the recalculations were still insufficient, leading to the protracted litigation under the Employee Retirement Income Security Act (ERISA).

As the legal proceedings advanced, the first lawsuits appeared on the court dockets by 2007. A significant development occurred in 2016 when these were consolidated into the class action titled McCutcheon et al. v. Colgate-Palmolive Co., where the company was accused of breaching fiduciary duties and misrepresenting benefits. Throughout the litigation, Colgate maintained that their calculations were compliant with federal laws. However, faced with escalating legal expenses and the unpredictable nature of trial outcomes, Colgate decided settling was the more prudent option.

The settlement, which awaits judicial approval, earmarks a total of $332 million, with approximately $232.7 million intended directly for the employees and retirees after deducting legal fees and expenses. This agreement covers roughly 1,177 individuals and has been prepared for financially by Colgate since as early as 2023, ensuring that the payout does not shock investors. This resolution is among the largest pension-related settlements in recent times.

This case serves as a crucial reminder of how pension disputes can extend over many years, casting long shadows over both companies and employees. It highlights the potential long-term financial and reputational risks companies face from pension plan disputes. For employers, it’s a lesson in the critical importance of accurate pension calculations and transparent communication. For employees, it underscores the effectiveness of persistence and legal recourse under ERISA against even the most formidable corporate adversaries.

The final approval of this settlement will close a chapter on a dispute that originated in the late 1980s, demonstrating the enduring impact and complexity of managing corporate pension plans.