Class Action Claims FedEx Shorts Former Pilots on Certain Retirement Benefits

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A proposed class action claims FedEx has deprived former pilots participating in its employee pension plan and their beneficiaries of millions by failing to provide joint and survivor annuities that are “actuarially equivalent” to a single life annuity.

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The 42-page lawsuit explains that under the federal Employee Retirement Income Security Act (ERISA), FedEx and its retirement plan investment board are required to provide plan participants with certain joint and survivor annuities (JSA)—which offer retirees a monthly benefit for life and a contingent annuity for their spouse or beneficiary after they pass away—that are at least the “actuarial equivalent” of a retiree’s single life annuity (SLA).

Per the suit, two benefit forms are considered actuarially equivalent when the present values, taking into account interest rates and mortality tables, of the two benefits are the same, based on reasonable actuarial assumptions.

However, according to the complaint, FedEx uses “outdated” mortality data to calculate JSAs and qualified preretirement survivor annuities (QPSA) for retired pilots. The case more specifically contends that FedEx determines these amounts based on a formula that uses the Uninsured Pensioners 1984 mortality table (UP-84), which uses data from the 1960s and 1970s to predict the rate at which retirees will die at any given age. 

Because the UP-84 fails to reflect the fact that life expectancies have increased over the past several decades, the formula FedEx uses produces conversion factors that are consistently lower than the conversion factors produced by contemporary actuarial assumptions, the suit alleges.

This has caused retired FedEx pilots who select pension benefits in the form of JSAs and QPSAs to receive less than they would have had the defendants used current and reasonable actuarial assumptions, the filing says.

For example, the plaintiff, a former FedEx pilot, says he began collecting benefits under the company’s pension plan in July 2019. The complaint says that the man accrued and was offered an SLA that would have paid him $11,260.02 per month, but selected a 50 percent JSA—which would pay his spouse after he dies half the amount he currently receives each month, or $10,068.82.

The filing claims that had FedEx used reasonable, current actuarial assumptions to calculate the plaintiff’s benefits, he would receive $10,462.81 per month.

“By using a formula based on outdated actuarial assumptions that produce unreasonably low conversion factors, instead of reasonable, current actuarial assumptions,” the lawsuit says, “Defendants reduced the present value of Plaintiff Covic’s benefits by approximately $70,703 (past damages of $19,305.51 and future damages of $51,397.49).”

The case notes that FedEx and its retirement plan investment board use current and reasonable assumptions to calculate JSA benefits for non-pilot participants.

The lawsuit seeks to cover all pilot participants and beneficiaries of the FedEx Corporation employees’ pension plan who began receiving a 50 percent, 75 percent or 100 percent JSA or a QPSA on or after August 18, 2017, whose benefits had a present value that was less than the present value of the SLA they were offered using the applicable Treasury Assumptions (assumptions set by the Secretary of the Treasury based on current market rates and mortality assumptions) as of each participant's benefit commencement date.

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