Retirees sue UPS alleging company shortchanged pension benefits

Eight former employees in two defined benefit plans run by United Parcel Service of America Inc. have sued the company and plan fiduciaries alleging they were shortchanged in their retirement benefits because the plans used out-of-date mortality tables to calculate the benefits.

They allege that retirees who took joint and survivor annuity benefits instead of a single life annuity didn't receive the actuarial equivalent of the SLA, the most common annuity for retirees — a violation of ERISA.

There are two parts to a retirement benefit calculation — the mortality table and interest rate which, when combined, create a conversion factor that plans apply when participants choose a JSA, the complaint said. "By failing to pay JSA benefits in amounts that are actuarially equivalent to the single life annuities offered to participants, defendants are causing retirees to lose part of their vested retirement benefits in violation of ERISA," according to the lawsuit, which was filed April 27 in a U.S. District Court in Atlanta.

Plaintiffs are seeking class-action status in Brown et al. vs. United Parcel Service of America Inc. et al. covering the $11.2 billion UPS Pension Plan, Atlanta, and the $29.3 billion UPS Retirement Plan, Atlanta. Assets for both plans are as of Dec. 31, 2020, according to the latest Form 5500s.

"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 to calculate a conversion factor decreases the present value of a JSA and — interest rates being equal — the monthly payment retirees receive."

The lawsuit accused the defendants of using mortality tables "based on data from the 1960s through the 1980s," thus enabling defendants to "depress the present value of JSA benefits (relative to the SLA) resulting in monthly payments that are materially lower than they would be if defendants used reasonable, up-to-date actuarial assumptions."

Using allegedly outdated mortality tables for retirement calculations "is particularly egregious because the company uses current, updated actuarial assumptions

to calculate the plans' liabilities, which are reported in the Company's audited financial statements and disclosed to investors in public filings," the lawsuit said.

This is the second time the plaintiffs have sued UPS over allegations of out-of-date mortality tables. The original suit, filed in January 2020, was dismissed in August 2020 by U.S. District Court Judge Timothy C. Batten Sr., Atlanta. He wrote that the plaintiffs failed to pursue all administrative remedies before suing.

Matthew O'Connor, a UPS spokesman, said in an email that the company doesn't comment on pending litigation.