Appeals Court Overturns, Remands FedEx, Kellogg Mortality Table Complaints

The U.S. 6th Circuit Court of Appeals has overturned the dismissals of two complaints accusing major corporations of underpaying retirees, ruling that their pension plans may have violated the Employee Retirement Income Security Act by relying on outdated life-expectancy data to calculate benefits.

In a decision issued March 16 in Reichert et al. v. Kellogg Co. et al. and Watt et al. v. FedEx Corp. et al., a three-judge panel on the 6th Circuit sided with retired workers from WK Kellogg Co. and FedEx Corp. in a two-to-one decision, finding the claims were improperly dismissed by lower courts.

Outdated Tables

The retirees allege their employers used decades-old mortality tables—based on data from the 1960s and 1970s—to determine monthly pension payments.

The tables are essential tools used to calculate pension liabilities, helping determine funding targets and minimum present values for certain distributions, as well as other key pension plan valuations. Because those tables assume shorter life spans than those supported by modern data, the calculations allegedly reduced the value of benefits paid to married retirees receiving joint-and-survivor annuities.

The court ruling is the latest wrinkle in the hotly contested debate over actuarial equivalence. Lawyers in Alston & Bird’s ERISA practice, writing for PLANSPONSOR in 2024, said in the six years since the first actuarial equivalence lawsuit was filed in 2018, more than 30 lawsuits had been filed against large pension funds, including at least 15 cases filed since 2022.

Mortality table lawsuits claim that some pension plans do not provide fair “actuarial equivalence” between a standard pension for a single employee—called a single-life annuity—and the pension options offered to married retirees, such as joint-and-survivor annuities or qualified pre-retirement survivor annuities. Plan fiduciaries convert the value of the single life annuity into these other forms by using formulas based on mortality tables and interest rates.

While the cases have had mixed success, including the initial dismissal of the complaints against Kellogg and FedEx and the appellate reversal, Raytheon agreed in 2021 to settle an actuarial equivalence complaint for approximately $59 million, the largest amount used to settle recent cases.

Reasonable Assumptions Required

Writing for the appeals court’s majority, U.S. Senior Circuit Judge Jane Stranch wrote that the core legal question centered on ERISA’s requirement that certain pension options be “actuarially equivalent” to others. The court concluded that this requirement does impose limits on the assumptions companies can use.

Specifically, the panel held that pension plans cannot rely on “unreasonably outdated” mortality data, because doing so may distort the value of benefits and violate ERISA’s protections for workers and their spouses.

“A 70-year-old today is expected to live roughly 30% longer than a 70-year-old retiree in the 1980s,” Stranch, who was joined in the majority by U.S. Circuit Judge John Bush, wrote. “It is improper for a pension plan to use a 50-year-old mortality table to calculate a retiree’s benefits in 2019 because antiquated mortality assumptions fail to account for the improvements.”

The ruling reverses two district court decisions that had dismissed the lawsuits on the grounds that ERISA does not mandate specific actuarial assumptions.

Billions at Stake

The lawsuits were brought by groups of retired employees from Kellogg and FedEx who claim their monthly pension payments were systematically reduced. The plaintiffs argue that using outdated mortality tables results in lower “conversion factors,” shrinking the payments made under joint-and-survivor annuities compared to what retirees would receive under single-life annuities.

Because defined benefit pensions often cover large populations of retirees, the financial implications could be significant for the plan sponsoring employers if the claims succeed.

The 6th Circuit did not decide whether the companies actually violated the law. Instead, it ruled that the retirees’ allegations are plausible and must be examined further in lower courts.

Dissent Warns of Overreach

In a dissenting opinion, U.S. Circuit Judge John Nalbandian argued that the majority improperly read a “reasonableness” requirement into the statute—language that does not explicitly appear in ERISA.

He contended that courts should not impose additional standards beyond what Congress wrote, warning that the decision could invite uncertainty and increased litigation over pension calculations.

The cases now return to their respective district courts for further proceedings, where judges will evaluate evidence on whether the mortality assumptions used by the companies were indeed unreasonable.

Stranch was appointed by former President Barack Obama. Bush and Nalbandian were appointed by President Donald Trump.