Two former FedEx pilots have sued the company and FedEx pension fund fiduciaries, alleging the defendants violated ERISA by using out-of-date mortality data in calculating pensions that short-changed them and other pilots.
"Despite the considerable increases in life expectancy over the past 50 years, defendants continue to use antiquated actuarial assumptions to calculate pension benefits for retired pilots," said the complaint filed Aug. 18 in a U.S. District Court in Memphis, Tenn. The defendants use pension calculations data from the 1960s and 1970s, according to the complaint in Covic et al. vs. FedEx Corp. et al., which is seeking class-action status.
"We deny the allegations and will defend the lawsuit," Meredith Miller, a company spokeswoman wrote in an email.
The lawsuit focuses on the pension plan's alleged failure to provide the "actuarial equivalent" between a standard single-employee pension called a single life annuity and alternatives, such as the joint and survivor annuity or a qualified preretirement survivor annuity, which cover an employee's spouse.
To convert the single life annuity payment to an alternative pension payment, fiduciaries use a formula based on a mortality table and an interest rate.
"Defendants violate ERISA's actuarial equivalence requirements by using antiquated actuarial assumptions, which produce unreasonably low conversion factors and, therefore, depress the value" of the alternative pensions offered to the retired pilots, the lawsuit said.
Non-pilots' pensions are subject to different and more generous calculations, and FedEx uses updated mortality data for other purposes, the plaintiffs wrote.
"Defendants regularly update the actuarial assumptions used for determining the present value of the Plan's pension benefit obligation," they wrote. "The PBO is a liability on a company's balance sheet, and, therefore, public companies like FedEx must disclose their PBO to investors in their annual 10-K filings with the SEC."
The plaintiffs argued that FedEx routinely uses updated mortality tables for its "assumption used to calculate the plan's liabilities."
The FedEx Corp. Employees' Pension Plan, Collierville, Tenn., had assets of $25.5 billion as of Dec. 31, 2021, according to the latest Form 5500.