Former employees of United Parcel Service of America Inc. have sued the company and two UPS pension plans alleging that their use of out-of-date mortality tables for calculating benefits underpaid retirees and violated their fiduciary duties under ERISA.
The two UPS defined benefit plans use 1983 mortality data to calculate retiree benefits, which fails to account for people living longer and thus leads to reduced benefits, the lawsuit said.
"By using outdated mortality assumptions, UPS materially reduces the monthly benefits the participants and beneficiaries receive in comparison to the monthly benefits they would receive if UPS applied updated, reasonable mortality assumptions," said the complaint filed by three UPS retirees on Jan. 31 in a U.S. District Court in Atlanta. They are seeking class-action status for their complaint.
The plaintiffs wrote that UPS exacerbated the alleged calculation problem "by using a male-only (mortality) table for participants, which does not account for males' greater improvements in mortality over the past 40 years relative to females."
To illustrate their argument, the plaintiffs wrote that a 65-year-old male had an average life expectancy of 16.7 years based on the 1983 mortality table and a 65-year-old female had an average life expectancy of 21.3 years.
Using an updated 2014 table, a male's life expectancy was 21.6 years after age 65 and a female's life expectancy was 23.8 years after age 65.
"Accordingly, the average retiring employee would have expected to receive, and the average employer would have expected to pay, benefits for a substantially longer period of time," said the complaint filed in the case of Brown et al. vs. United Parcel Service of America Inc. et al.
"We will vigorously defend ourselves, and continue to provide industry-leading compensation packages for our employees," Matthew O'Connor, a company spokesman wrote in an email.
"UPS offers competitive compensation packages and uses factors that are common to many similar benefit plans across the country to calculate those benefits," he wrote." These factors are reasonable and comply with all applicable laws."
The plaintiffs wrote that UPS officials "knew or should have known" that the mortality tables used to calculate retirees' benefits "were outdated and unreasonable" because the company applies updated mortality tables to its financial statements.
UPS used "reasonable actuarial assumptions to report a greater liability for benefits than it was paying out using the unreasonable" 1983 mortality table for retirees, they wrote.
"There is no reasonable justification for defendants to use old mortality tables that presume an early death and an early end to benefit payments to calculate an unfairly low annual benefit for participants, while at the same time using a reasonable mortality table to project a longer duration of these very same annual benefit payments for annual financial reporting," they wrote.
"Since these two analyses measure the length of the very same lives and the very same benefit streams, they should use the same mortality assumptions," they wrote.
The UPS lawsuit is similar to a series of lawsuits that have been filed against large U.S. employers since December 2018, including Metropolitan Life Insurance Co., American Airlines Inc., U.S. Bancorp, Raytheon, Huntington Ingalls, and Anheuser-Busch.
