FedEx Faces Lawsuit Over Alleged Underpayment of Pension Benefits

In a legal battle that could affect the retirement benefits of thousands of employees, four individuals have taken on the delivery giant FedEx Corporation in a class-action lawsuit filed in the United States District Court for the Western District of Tennessee.

The plaintiffs, Robert A. Watt, Gary J. Friesen, Michael H. McKenna, and Geoffrey B. Coe, allege that FedEx has been underpaying joint and survivor annuity (JSA) benefits under the FedEx Corporation Employees' Pension Plan. This, they argue, is in direct violation of the actuarial equivalence requirements of the Employee Retirement Income Security Act of 1974 (ERISA).

ERISA is a federal law that sets minimum standards for pension plans in private industry. It requires that the amounts paid out under JSAs must be actuarially equivalent to those paid under a single life annuity (SLA). In essence, it ensures that retirees who choose a JSA, which continues payments to a surviving spouse, receive the same overall value of benefits as those who choose an SLA, which provides benefits only for the retiree's life.

The plaintiffs argue that FedEx calculates JSA benefits using outdated and unreasonable actuarial assumptions. Doing so, they claim, results in lower monthly payments for retirees. The lawsuit states, "Defendants have used and continue to use actuarial assumptions and factors that are unreasonable and that result in materially lower actuarial equivalent JSA benefits than if Defendants used reasonable actuarial assumptions and factors."

The plaintiffs further allege that while FedEx uses updated and reasonable actuarial assumptions for financial reporting purposes, it fails to apply the same assumptions when calculating JSA benefits. This discrepancy, they argue, is a clear breach of fiduciary duty, another violation of ERISA.

The lawsuit paints a picture of a company incentivizing early retirement by offering subsidized early retirement benefits and lower benefits at Normal Retirement Age. The plaintiffs assert, "Defendants have structured the Plan to incentivize early retirement by offering subsidized early retirement benefits and lower benefits at Normal Retirement Age."

The plaintiffs are seeking a range of remedies, including the recalculation and correction of previously paid JSA benefits, an accounting of prior benefits and payments, disgorgement of wrongfully withheld amounts and profits, the imposition of a constructive trust and equitable lien, and an injunction against further violations. They also seek any other just and proper relief.

The case brings to light the complexities of pension plan calculations and the potential for companies to use outdated or unreasonable actuarial assumptions to reduce their pension liabilities. If the court finds in favor of the plaintiffs, it could set a precedent for other companies to review and update their actuarial assumptions, potentially leading to increased pension benefits for retirees.