This class action sues Delta Air Lines, Inc., the Administrative Committee of Delta Airlines, Inc., and three individuals on that committee for its calculation of joint and survivor annuity benefits for some of its retirement plans. The complaint claims that the benefits are not “actuarially equivalent,” as required by the Employee Retirement Income Security Act (ERISA).
The class for this action is all participants and beneficiaries of the plans at issue in this case who are receiving a JSA with a survivor benefit of at least 50%, and no more than 100%, of the benefit paid during the participant’s life, where the first payment to the participant was paid on or after December 10, 2015, and all persons who are receiving qualified pre-retirement survival annuity (QPSA) benefits whose first payment was received on or after December 10, 2015.
The three plans at issue, which are sponsored by Delta, are Northwest Airlines pension plans for contract employees, salaried employees, and pilot employees, respectively.
A single person who retires under these plans normally gets a Single Life Annuity (SLA). This pays a benefit for the rest of the person’s life.
A participant who is married will want a plan that, in the event of their death, will continue to pay some benefits to their spouse, that is, a Joint and Survivor Annuity (JSA). The amount paid to the surviving spouse may be less than the amount paid to the couple. Married retirees under the Northwest plans normally get a 50% qualified Joint and Survivor Annuity (JSA), but they have the option of a 75% JSA and a 100% JSA.
The monthly amount paid under a JSA is less than the monthly payment for an SLA, because a JSA risks having to pay out for a longer period for a surviving spouse.
Why would anyone choose the 50% JSA over the 100% JSA? Because these options must both be “actuarially equivalent” to the SLA received by a single person. Plans that are actuarially equivalent have the same present value, that is, their values are calculated with the same actuarial assumptions.
The present value of a plan is calculated using two assumptions: (1) mortality rate assumptions that consider how long each person is likely to live, and (2) interest rate assumptions that consider the future value of dollars.
These two assumptions provide a conversion factor, which the complaint says “expresses the dollar amount of one monthly benefit as a fraction of the dollar amount of the monthly benefit paid in the form of” the SLA or a more valuable benefit.
The complaint charges that Delta uses a conversion factor of .90 for the 50% JSA and .80 for the 100% JSA. This, the complaint alleges, make the plans not actuarially equivalent. It claims that the conversion factor for the 50% JSA should be .92.
Article Type: LawsuitTopic: Employment
Most Recent Case Event
Delta Air Lines Retirement Plans Conversion Factors ERISA Complaint
December 10, 2021
This class action sues Delta Air Lines, Inc., the Administrative Committee of Delta Airlines, Inc., and three individuals on that committee for its calculation of joint and survivor annuity benefits for some of its retirement plans. The complaint claims that the benefits are not “actuarially equivalent,” as required by the Employee Retirement Income Security Act (ERISA).
Delta Air Lines Retirement Plans Conversion Factors ERISA ComplaintCase Event History
Delta Air Lines Retirement Plans Conversion Factors ERISA Complaint
December 10, 2021
This class action sues Delta Air Lines, Inc., the Administrative Committee of Delta Airlines, Inc., and three individuals on that committee for its calculation of joint and survivor annuity benefits for some of its retirement plans. The complaint claims that the benefits are not “actuarially equivalent,” as required by the Employee Retirement Income Security Act (ERISA).
Delta Air Lines Retirement Plans Conversion Factors ERISA Complaint