FedEx and Kellogg retirees are asking the Sixth Circuit Court of Appeals to revive two proposed class action lawsuits alleging their former employers used outdated actuarial assumptions that shortchanged pension annuity benefits. The appeals focus on the meaning of “actuarial equivalent” under the Employee Retirement Income Security Act.
Following oral arguments on May 8, the appellate panel issued a rare post-argument briefing request asking parties to address what “actuarial equivalent” meant when ERISA was enacted in 1974 and whether it was a term of art. Both proposed classes and the companies filed supplemental briefs responding to the court’s questions.
Dispute Over Actuarial Standards
The lawsuits challenge the companies’ use of outdated mortality and interest rate assumptions when converting single-life annuities to joint-and-survivor annuity benefits. Joint-and-survivor annuities provide surviving spouses with lifetime payouts in exchange for lower monthly benefits during the retiree’s lifetime.
During oral arguments, multiple judges questioned how clearly outdated assumptions could meet ERISA’s requirement that single-life and joint-and-survivor benefits be “actuarial equivalent” to each other. The panel appeared skeptical of lower court holdings that ERISA placed no requirements on the actuarial assumptions used for these conversions.
The FedEx retirees argued that “actuarial equivalent” was “a term of art within actuarial science and practice” based on objective inputs reflecting real-world comparisons between benefit forms. They contended that established actuarial practice requires assumptions that accurately reflect life expectancy and discount rates at the time of payment.
Company Defenses
Both FedEx and Kellogg countered that “actuarial equivalent” was not a precisely defined term of art in 1974. Kellogg argued that whatever the term meant, “it did not mean that plans were required to use reasonable standards or recent mortality tables to calculate joint and survivor annuities.”
FedEx maintained that “actuarial equivalent” simply meant two benefit sets were equal under given assumptions, without conveying limitations on those assumptions. The company pointed to Congress adding specific requirements for lump sum calculation assumptions in 1984 as evidence that such restrictions weren’t originally intended.
Siri & Glimstad LLP attorneys Oren Faircloth and Lisa R. Considine represent both groups of retirees alongside other firms. Radha Pathak, representing the Kellogg retirees, stated that “pre-ERISA sources make it clear that Congress intended ‘actuarial equivalence’ to be an objective standard, not a loophole for plan sponsors to reduce benefits.”
The cases are Thomas N. Reichert et al. v. Kellogg Co. et al. and Robert Watt et al. v. FedEx Corp. et al. in the U.S. Court of Appeals for the Sixth Circuit.