Participants in a FedEx Corp. pension plan have sued the company and plan fiduciaries saying the formula used to calculate benefits for married workers shortchanges their retirement benefits in violation of ERISA.
The pension calculations for these participants — all former pilots — uses outdated mortality tables to calculate the retirement benefits, said the complaint filed Sept. 19 in U.S. District Court in Memphis, Tenn.
"Older mortality tables predict that people near (and after) retirement age will die at a faster rate than current mortality tables," the lawsuit said. "As a result, using an older mortality table decreases the present value of a JSA and — interest rates being equal — the monthly payments retirees receive."
JSA stands for joint and survivor annuity, which is available to participants and spouses as an alternative to the standard single-life annuity for individual employees. To create an "actuarially equivalent" payment for the JSA, as is required by ERISA, pension plans use a conversion formula consisting of a mortality table and interest rate.
The lawsuit said FedEx uses a mortality table containing data that is more than 50 years old "resulting in monthly payments that are materially lower than they would be if defendants used conversion factors based on up-to-date, reasonable actuarial assumptions," said the complaint in Watt et al. vs. FedEx Corp. et al.
Plaintiffs pointed out that FedEx uses more recent mortality table data when filing reports with the Securities and Exchange Commission to identify "the present value of its benefit obligations under the plan for financial reporting purposes," according to the lawsuit, which is seeking class-action status.
"We deny the allegations and will defend the lawsuit," spokeswoman Heather Wilson said in an email.
Two other former FedEx pilots filed a similar suit — Covic et al. vs. FedEx Corp. et al. — in August, alleging the pension plan's use of outdated mortality tables violated ERISA's rule of "actuarial equivalence" for calculating retirement benefits.
FedEx Corp. Employees Pension Plan, Collierville, Tenn., had $25.5 billion in assets as of Dec. 31, 2021, according to the latest Form 5500.