Highlights
- Managers of large pension plans have been facing a wave of lawsuits from participants since 2018 relating to whether the qualified joint and survivor annuities (QJSA) and other forms of annuities provided by the plans are the "actuarial equivalent" of the single life annuities (SLA) offered under the plans.
- A group of such cases that were dismissed by district courts but are on appeal in the U.S. Courts of Appeal for the Sixth and Eleventh Circuits have renewed focus on what the mandate of "actuarial equivalent" under the Employee Retirement Income Security Act of 1974 (ERISA) requires when a plan converts an SLA to a QJSA.
- This Holland & Knight alert reviews where these cases stand and what they could mean for defined benefit plan sponsors in the future.
Large pension plans have been facing a wave of lawsuits from participants since 2018 relating to whether the qualified joint and survivor annuities (QJSA) and other forms of annuities provided by the plans are the "actuarial equivalent" of the single life annuities (SLA) offered under the plans. Holland & Knight previously discussed the variety of lawsuits plans were facing in 2020. Over the past few years, some cases were dismissed by district courts, and others that have made it past a motion to dismiss resulted in a settlement. However, until recently, no U.S. court of appeals had the occasion to weigh in on the meaning of "actuarial equivalent" in the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1055(d).
A group of cases, all having been dismissed by district courts, are on appeal in the U.S. Courts of Appeal for the Sixth and Eleventh Circuits and have placed renewed focus on what ERISA's mandate of "actuarial equivalent" requires when plans convert an SLA to a QJSA. What remains at stake is whether sponsors may rely on legacy mortality tables and interest assumptions embedded in plan documents or whether, as plaintiffs contend, ERISA compels the use of reasonable and contemporary assumptions for the two forms of benefit have equal present value when payments begin. The three cases summarized below, Reichert v. Kellogg Co., et al. (Kellogg) and Watt v. FedEx Corp., et al. (FedEx) in the Sixth Circuit and Drummond v. Southern Company Services, Inc. (Southern Company) in the Eleventh Circuit, illustrate the core arguments now before the courts.
Sixth Circuit
On May 8, 2025, the Sixth Circuit held oral arguments on Kellogg and FedEx that were dismissed from the U.S. District Courts for the Eastern District of Michigan and Western District of Tennessee, respectively, for failing to state a violation of ERISA Section 1055(d) by using legacy mortality tables when converting an SLA to a QJSA.
The argument in Kellogg centers on whether ERISA Section 1055(d) imposes a substantive limit on the actuarial assumptions used to convert benefits (as the plaintiffs claim) or if it requires only that sponsors follow assumptions stated in their plan documents (as the defendants contend).
The plaintiffs argued that "actuarial equivalent" is a term of art that inherently requires reasonableness, meaning, according to the plaintiffs, the use of newer mortality tables and interest rates, resulting in a comparator that is the "real‑world" SLA available to the same participant at commencement. That is, the plaintiffs contend that using 1970s mortality tables undervalues the SLA and, in turn, yields a depressed QJSA. The defendants maintained that ERISA Section 1055(d) imposes no substantive limits on actuarial assumptions, requiring only that sponsors apply the assumptions stated in the plan documents. They argue that "actuarial equivalent" is a procedural concept, leaving the choice of tables and rates to the plan sponsor for consistency and predictability, not subject to a judicially created reasonableness standard.
At oral argument on May 8, 2025, the judges questioned both sides about several key issues: 1) whether the language of the statute suggests that actuarial assumptions must be reasonable, 2) how fiduciary responsibilities relate to the way benefits are calculated and 3) whether Congress' use of different wording in other parts of ERISA, such as when it later required specific assumptions for lump-sum payments, should make courts cautious about interpreting a reasonableness requirement into this context.
The plaintiffs emphasized timing, arguing that equivalence must be measured at benefit commencement. The defendants alternatively stressed ERISA's written‑instrument rule and Internal Revenue Code (Code) Section 401(a)(25), highlighting that these statutes require assumptions to be fixed in plan terms, rather than fluidly updated by actuaries, and "preclude discretion."
The panel also explored whether "actuarial equivalent" is a trade term informed by industry usage and whether Congress' choice to include "reasonableness" in other ERISA provisions, but omit it from Section 1055(d), supports the view that no substantive limit should be read into this section.
In FedEx, similar to Kellogg, the plaintiffs argued that ERISA demands equivalence to the actual SLA the participant could take at retirement and that using older mortality tables depresses that benchmark and the resulting QJSA. Citing pre‑ERISA authorities, including a 1959 Washington Supreme Court decision and midcentury actuarial texts, to show that "actuarial equivalent" historically contemplated the most accurate or realistic tables available and not static assumptions "from the 1970s," the plaintiffs noted the defendants use more contemporary assumptions for plan‑funding disclosures to the U.S. Securities and Exchange Commission (SEC) under Generally Accepted Accounting Principles (GAAP), claiming to undercut the notion that decades-old tables are acceptable for benefit payouts. The defendants argued that when ERISA was enacted in 1974, "actuarial equivalent" meant equality of benefits under the plan's stated assumptions and that no limits were imposed on those assumptions. They noted that Congress later added specific requirements for lump-sum calculations, reinforcing that ERISA leaves actuarial assumptions for annuity conversions to the plan terms and historical sources support assessing equivalence based on those provisions rather than overriding them.
At oral argument, the Sixth Circuit considered whether collective bargaining agreements could protect the use of legacy actuarial assumptions and raised direct questions about regulatory oversight. Specifically, the court asked whether agencies such as the IRS or U.S. Department of Labor could step in if a plan relied on very old mortality tables, such as those from the 1600s, even if ERISA allows any assumptions that are written into the plan. The plaintiffs responded that private enforcement remains necessary and that courts have long looked to U.S. Department of the Treasury regulations and professional standards when construing ERISA in analogous settings. The defendants countered that Code Section 401(a)(25) bars discretion to "update" assumptions for payments and that Congress knew how to mandate specific assumptions, as it later did for lump sums, yet did not do so for annuity forms. The plaintiffs also pointed to other district courts that have allowed similar claims to move forward beyond the initial stage, indicating that many courts recognize "actuarial equivalent" under ERISA as having substantive requirements beyond simply adhering to the plan's written terms, such as a reasonableness standard.
Both cases remain under advisement with the Sixth Circuit.
Eleventh Circuit
On Sept. 17, 2025, the Eleventh Circuit heard arguments in Southern Company, a proposed class action by married retirees alleging their QJSAs were undervalued because the defendants used old mortality tables in conversions, a violation of ERISA. The panel of judges closely questioned the dismissal by the U.S. District Court for the Northern District of Georgia, whose decision held that plan‑specified assumptions to determine the actuarial equivalent need not be "reasonable."
In a key exchange, the court pressed defense counsel on whether ERISA would allow using a hypothetical 1789 mortality table with much shorter life expectancies. Counsel for the defendants acknowledged that while theoretically permissible, plans "practically" would not do that. The Eleventh Circuit also probed whether one of the cases relied on by defendants and the actuarial literature that case cites contemplate periodic review and modification of interest rate and mortality assumptions, suggesting that "actuarial equivalent" may implicitly require reasonableness. The court questioned whether assumptions that differ from current longevity data can provide employers a reliable estimate of benefit costs and whether there is an implied requirement that actuarial assumptions be reasonable when determining plan obligations.
This case remains under advisement with the Eleventh Circuit.
Key Takeaways
Hopefully, the decisions in these cases will provide clarity to defined benefit plan sponsors. The varied decisions among the district courts to date have left many plan sponsors at a standstill, weighing the risks of making a change, with the potential that a change could be weaponized against them in litigation, against the risks of not making a change at all. Like so many areas in the ERISA space, plan sponsors and practitioners simply want an answer on how to ensure their plans are ERISA-compliant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
