UPS Retirement Plan JSA Payment Calculation Class Action

This class action against United Parcel Service of American, Inc. (UPS) concerns its UPS Retirement Plan and UPS Pension Plan and the calculation of benefits. The complaint alleges that joint and survivor (JSA) benefits are not actuarially equivalent to single life annuities (SLAs), as required by the Employee Retirement Income Security Act (ERISA). It brings suit against UPS, the Administrative Committee of the UPS Retirement Plan, and the Board of Trustees of the UPS Pension Plan.

The UPS retirement plans offer single life annuities, that is, a payment for the rest of a participant’s life after retirement. The benefits can be in the form of an SLA or any of a number of JSAs.

A JSA is a payment for the life of the plan participant and, if the participant dies, a continuing payment of some proportion of that payment for the life of the spouse. A 75% JSA, for example, would pay 75% of the joint benefit to the spouse after the participant’s death.

The monthly benefit paid for a JSA will always be less than the monthly benefit for an SLA, because the benefit calculation must take into consideration that the JSA may have to pay benefits for a longer period if the spouse survives the participant. JSAs that pay from 50% to 100% of the benefit during the period when both are alive are Qualified Joint and Survivor Annuities (QJSAs) and, the complaint says, “must be at least the actuarial equivalent of the SLA.”

According to the complaint, “[t]wo benefit options are actuarially equivalent when they have the same present value, so long as the present values of both benefits are calculated using the same, reasonable actuarial assumptions.”

Calculating the present value requires the use of actuarial assumptions about both mortality and interest rates. People have been living longer in recent years, the complaint says, so using older mortality tables decreases the present value of a JSA and therefore the monthly payment to be received. Similarly, using lower interest rates also decreases the present value of JSAs. The two factors together create a conversion factor used to calculate JSA benefits.

The complaint alleges that UPS and the other defendants use mortality tables from the 1960s through the 1980s to calculate JSA benefits. The complaint alleges this “depress[es] the present value of JSA benefits (relative to the SLA) resulting in monthly payments that are materially lower than they would be if Defendants used reasonable, up-to-date actuarial assumptions.”

The class for this action is all participants and beneficiaries of the plans who began receiving a JSA or QPSA after January 1, 2013 that was calculated using (1) the 1983 GAM/6%, (2) the UP-84/7%, or (3) The UP-84/8%.

Article Type: Lawsuit
Topic: Employment
Tags: Annuities, Calculation of Benefits, Incomplete payment of benefits due, Retirement Plans