A federal District Court judge in White Plains, N.Y., dismissed a lawsuit against PepsiCo Inc. by three retirees who said the company's defined benefit plan shortchanged their postretirement benefits.
The plaintiffs, who took early retirement, said their benefits were adversely affected by the company's improper calculations relating to PepsiCo Salaried Employees Retirement Plan.
The retirees, with their spouses, are receiving a joint and survivor annuity. They argued that the formula for calculating these benefits is "not actuarially equivalent" to a single-life annuity, thus reducing their expected payments.
The latter annuity "is based on their wages and years of service with PepsiCo, not with life expectancies or interest rates," the retirees maintained in their lawsuit, DuBuske et al vs. PepsiCo. Inc. et al., which was filed in December 2018 and which sought class-action status.
The plaintiffs alleged that the conversion factors used by PepsiCo to calculate benefits violated a provision of the Employee Retirement Income Security Act and caused a breach of fiduciary duty.
PepsiCo responded that the allegation about violating ERISA's anti-forfeiture provision was faulty because this provision "applies only to normal retirement benefits upon the attainment of normal retirement age," wrote U.S. District Judge Vincent L. Briccetti in his Sept. 24 opinion. "The court agrees."
Mr. Briccetti noted that the retirees "do not claim defendants have deprived plaintiffs of the full amount of pension payments they would achieve at a normal retirement age."
Because the plaintiffs "inadequately pleaded" that PepsiCo's action caused a forfeiture of benefits, Mr. Briccetti also dismissed their claim for breach of fiduciary duty.
Total U.S. pension plan assets were $12.5 billion as of Dec. 31, 2018, according to PepsiCo's latest 10-K statement.