ERISA § 1055(d) Requires Reasonable Actuarial Assumptions for QJSAs (Outdated Mortality Tables Can Violate Actuarial Equivalence)

Introduction

In a consolidated, recommended-for-publication decision, the United States Court of Appeals for the Sixth Circuit reversed two district-court dismissals involving retired, married participants in defined-benefit pension plans sponsored by Kellogg (now Kellanova/WK Kellogg) and FedEx. The plaintiffs (including Robert A. Watt and others in the FedEx case) alleged that their plans used decades-old mortality tables (and, for FedEx, additional “setbacks”) to convert a single life annuity (SLA) into joint-and-survivor annuity (JSA) forms required for married participants under ERISA.

The central legal issue was whether ERISA’s “actuarial equivalent” requirement for a “qualified joint and survivor annuity” (QJSA) in 29 U.S.C. § 1055(d)(1)(B) permits plans to use any actuarial assumptions they choose, or instead limits plans to assumptions that are reasonable—specifically, whether allegedly “unreasonably outdated” mortality tables can produce a QJSA that is not “actuarial equivalent” to the SLA and thus violate ERISA.

Summary of the Opinion

The Sixth Circuit held that § 1055(d)’s requirement that a QJSA be the “actuarial equivalent of a single annuity for the life of the participant” prohibits plans from using “unreasonable, inappropriate actuarial assumptions” when calculating QJSAs. Accepting the complaints’ allegations as true at the pleading stage, the court concluded that using mortality data from the 1960s and 1970s plausibly states a claim that the resulting JSAs are not actuarially equivalent to the SLA and that the plans systematically underpaid benefits. The court therefore reversed and remanded for further proceedings.

The court declined to reach FedEx’s additional alternative grounds for dismissal because the district court had not addressed them and no “exceptional circumstances” justified deciding them in the first instance on appeal.

Analysis

Precedents Cited

  • Lockheed Corp. v. Spink, 517 U.S. 882 (1996): Used to frame ERISA’s role as protective rather than benefit-mandating—employers need not create plans, but once they promise benefits, ERISA helps ensure participants “will not be left empty-handed.” This supports taking § 1055(d) seriously as a substantive protection for promised benefit value.
  • Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) and Akers v. Palmer, 71 F.3d 226 (6th Cir. 1995): Invoked to emphasize ERISA’s trust-law roots and fiduciary obligations, contextualizing why benefit-calculation choices can matter as fiduciary conduct.
  • West v. AK Steel Corp., 484 F.3d 395 (6th Cir. 2007) and Smith v. CommonSpirit Health, 37 F.4th 1160 (6th Cir. 2022): Cited for definitional background distinguishing defined-benefit from defined-contribution plans—critical because actuarial equivalence disputes arise in defined-benefit benefit-form conversions.
  • Shields v. Reader's Digest Ass'n, Inc., 331 F.3d 536 (6th Cir. 2003): Used to explain why a JSA typically yields a lower monthly payment than an SLA (because payments may continue longer due to survivor benefits), setting up why conversion factors and assumptions directly affect the “equivalence” question.
  • Stephens v. U.S. Airways Grp., 644 F.3d 437 (D.C. Cir. 2011): Important for treating “actuarial equivalence” as a term of art: “Two modes of payment are actuarially equivalent when their present values are equal under a given set of actuarial assumptions.” The Sixth Circuit embraced this framing but then asked whether § 1055(d) tolerates any set of assumptions, or only reasonable ones.
  • Corning Glass Works v. Brennan, 417 U.S. 188 (1974) and United States v. Hansen, 599 U.S. 762 (2023): Support the methodology of giving technical terms their technical meaning and presuming Congress adopted the “cluster of ideas” attached to a borrowed term of art.
  • NLRB v. Coca-Cola Bottling Co., 350 U.S. 264 (1956): Cited (in a footnote) to reinforce that when a word has a “peculiar connotation” in a specialized field, courts should apply the technical meaning.
  • Concrete Pipe & Prods. of Cali., Inc. v. Constr. Laborers Pension Tr. for S. Cali., 508 U.S. 602 (1993) and Sofco Erectors, Inc. v. Trs. of Ohio Operating Eng'rs Pension Fund, 15 F.4th 407 (6th Cir. 2021): Though arising in different ERISA contexts (e.g., withdrawal liability assumptions), these cases were used to justify the court’s chosen standard of judicial review: actuaries’ selections receive deference if “within the scope of professional acceptability.” The Sixth Circuit imported that “range of reasonableness” approach to § 1055(d) disputes.
  • Boggs v. Boggs, 520 U.S. 833 (1997): Used to connect § 1055’s purpose to spousal protection—“to ensure a stream of income to surviving spouses.” This purposive anchor bolstered the court’s refusal to read actuarial equivalence as a hollow formality.
  • Russello v. United States, 464 U.S. 16 (1983) and City of Columbus v. Ours Garage & Wreckage Serv., Inc., 536 U.S. 424 (2002): Addressed in rejecting defendants’ “negative implication” argument (that other ERISA sections expressly mention “reasonable,” so § 1055(d) must not). The court held the inference weak because the cited provisions address different problems and use different formulations, so the omission is not dispositive.
  • Tiger Lily, LLC v. U.S. Dep't of Hous. & Urban Dev., 5 F.4th 666 (6th Cir. 2021) and Hibbs v. Winn, 542 U.S. 88 (2004): Applied for anti-surplusage principles: statutory language must be given effect; defendants’ reading would make “actuarial equivalent” meaningless or redundant.
  • Dodd v. United States, 545 U.S. 353 (2005) and Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000): Cited for avoiding interpretations that yield “absurd” outcomes; used to illustrate that defendants’ reading could permit nonsensical tables (e.g., “sixteenth century” mortality) without violating ERISA.
  • Mertens v. Hewitt Assocs., 508 U.S. 248 (1993): Defendants invoked it to emphasize ERISA’s “comprehensive and reticulated” nature. The Sixth Circuit distinguished it, noting plaintiffs sought enforcement of an express statutory mandate (§ 1055(d)), not creation of extra-statutory remedies.
  • Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024): Cited to justify giving “great respect” to a “roughly contemporaneous” and “consistent” Treasury interpretation (in regulation) of actuarial equivalence as using “reasonable actuarial factors,” while recognizing courts interpret statutes independently.
  • Husted v. A. Philip Randolph Inst., 584 U.S. 756 (2018) and Helix Energy Sols. Grp., Inc v. Hewitt, 598 U.S. 39 (2023): Used to reject policy-driven narrowing of statutory text; policy concerns cannot override “unambiguous” statutory meaning.

Legal Reasoning

  1. Textual focus on “actuarial equivalent … for the life of the participant.” The court read § 1055(d)(1)(B) to require equivalence in present value between the QJSA and the SLA the participant would receive over the participant’s lifetime. Because present value equality depends on interest and mortality assumptions, the court reasoned that “actuarial equivalent” inherently imports a demand that the assumptions be professionally acceptable.
  2. Term-of-art methodology. Relying on Corning Glass Works v. Brennan and United States v. Hansen, the court treated “actuarial equivalent” as a technical term used in actuarial practice, historically tied to equal present value “after accounting for” mortality and interest assumptions. This prevented treating the phrase as a purely formal label that can be satisfied by any stated inputs.
  3. Reasonableness as an internal limit, not an extra-textual add-on. The court’s key move was to conclude that actuarial equivalence cannot be achieved if mortality assumptions “fail to align” with the actual life expectancy of the relevant population; therefore, unreasonably outdated mortality tables can defeat the statutory equivalence requirement. The “reasonableness” constraint is thus presented as part of giving effect to “actuarial equivalent,” not as inserting a new word into the statute.
  4. Administrative-law support from Treasury regulation. The court found reinforcement in 26 C.F.R. § 1.401(a)-11(b)(2), which states equivalence may be determined on “consistently applied reasonable actuarial factors.” Though issued under the Internal Revenue Code’s parallel regime, the court treated it as a persuasive, expert, contemporaneous understanding of what “actuarial equivalent” entails.
  5. Deference framework. To limit judicial second-guessing, the court adopted the “scope of professional acceptability” standard (from Concrete Pipe & Prods. of Cali., Inc. v. Constr. Laborers Pension Tr. for S. Cali. and applied in Sofco Erectors, Inc. v. Trs. of Ohio Operating Eng'rs Pension Fund), framing reasonableness as a range rather than a single mandated table.
  6. Pleading-stage posture. The court emphasized that whether the assumptions in fact fail actuarial equivalence is a question of fact; at Rule 12(b)(6), it sufficed that plaintiffs plausibly alleged that mortality tables built on 1960s/1970s data systematically reduce QJSA amounts below actuarially equivalent levels.
  7. Dissent’s textual critique. Judge Nalbandian argued the majority improperly added “reasonable” to the statute and that other ERISA provisions show Congress knew how to require “reasonable” assumptions when it wanted to. He also argued the Internal Revenue Code’s tax-qualification regime already incentivizes reasonableness. The majority responded that defendants’ reading would nullify § 1055(d)(1)(B) and that comparisons to other sections were inapt because they addressed different problems and lacked the same “actuarial equivalent … for the life of the participant” formulation.

Impact

  • New Sixth Circuit rule: Married-participant QJSA conversions under ERISA § 1055(d) are constrained by actuarial-professional reasonableness. Plans may face liability if they rely on assumptions—especially mortality tables—that are plausibly “unreasonable” due to age or mismatch with current participant longevity.
  • Litigation pathway opened: The decision revives claims at the pleading stage in the Sixth Circuit for “outdated mortality table” underpayment theories under § 1055 and derivative fiduciary-breach theories under § 1104.
  • Practical compliance pressure: Plan sponsors and administrators should expect increased scrutiny of conversion factors, mortality tables, and add-on devices like “setbacks,” and should document why chosen assumptions remain professionally acceptable for the participant population.
  • Standard of review framing: By analogizing to actuarial deference in other ERISA settings, the court signals it will not mandate a single table, but it will police the boundary of actuarial plausibility—encouraging expert-driven litigation over professional standards and current demographic realities.
  • Potential circuit dialogue: The dissent’s approach tees up a textualist counter-model (no implied reasonableness; rely on other statutes/regimes). If other circuits disagree, the issue may mature toward Supreme Court review.

Complex Concepts Simplified

  • SLA (Single Life Annuity): Monthly pension payments that last only as long as the retiree lives.
  • JSA (Joint and Survivor Annuity): Monthly payments during the retiree’s life, and after death continued payments to the spouse (often at 50%–100% of the prior amount).
  • QJSA (Qualified Joint and Survivor Annuity): ERISA’s required default form for married participants unless properly waived, with statutory survivor-percentage bounds and an “actuarial equivalent” value requirement.
  • Actuarial equivalent: Two benefit forms have the same economic value today (present value) when you account for interest (time value of money) and mortality (expected lifespans).
  • Mortality table: A chart predicting how likely people of certain ages are to die each year. If a plan uses a table that assumes people die sooner than they really do today, it can undervalue benefits that last for life.
  • Conversion factor: The multiplier used to convert an SLA amount into a lower (or different) JSA amount while aiming to keep total value equal. The factor depends heavily on the mortality table and interest rate chosen.
  • Setback (as alleged in FedEx): Treating a spouse as “younger” than their real age in the mortality table, increasing the assumed length of survivor payments and thereby reducing the retiree’s monthly amount.
  • Reasonableness as a “range”: The court did not require perfect forecasting. It held assumptions must fall within professional actuarial acceptability—leaving room for actuarial judgment, but not for assumptions that are plausibly obsolete or misaligned with present-day longevity.

Conclusion

The Sixth Circuit’s core holding is that ERISA § 1055(d)’s command that a QJSA be the “actuarial equivalent” of the participant’s SLA is not merely a disclosure or formality requirement. It imposes a substantive constraint: the actuarial assumptions used to compute equivalence must be professionally reasonable, and plaintiffs plausibly state a claim when they allege that decades-old mortality tables (and related techniques) depress benefits below actuarially equivalent levels.

Going forward, the decision strengthens ERISA’s spousal-protection framework by making “actuarial equivalence” enforceable in a way that tracks actuarial practice—while still preserving discretion through a reasonableness/deference standard rather than a single mandated set of tables.