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In September 2026, three different plan sponsors – Kellanova (hereafter, simply Kellogg), FedEx, and Southern Company Services – filed petitions for certiorari with the Supreme Court, requesting review of decisions by the Sixth and Eleventh Circuits applying a “reasonableness” requirement to single life-to-qualified joint and survivor annuity conversions, allowing plaintiffs to proceed to discovery on challenges to the sponsors’ defined benefit plans’ use of specified (and allegedly “outdated”) mortality tables for such conversions.
This litigation, and the Circuit Courts’ application of a reasonableness standard, represent the most expensive legal threat to sponsors of legacy defined benefit plans.
In this article we briefly summarize the issues in this case.
The lower court decisions
We discuss the Sixth Circuit’s (consolidated) decision in Kellog and FedEx here and the Eleventh Circuit’s decision in Southern Company here.
What is “actuarial equivalence?”
The legal issue in these cases is ERISA section 205’s general requirement that retirement plans provide a “qualified joint and survivor annuity” (QJSA), and ERISA section 205(d)’s definition of a QJSA as “the actuarial equivalent of a single annuity for the life of the participant.”
The plans in each of these cases specified that, for this purpose, actuarial equivalence was to be determined using (among other things) specified mortality tables, including, e.g., UP 84 and 1971 GAM – tables that were based on mortality data from the 1960s and 1970s.
Plaintiffs argued that the data was “outdated,” and argued that the use of these tables in a QJSA conversion violated ERISA because the term “actuarial equivalence” implicitly included a requirement that the actuarial assumptions used to make this conversion be reasonable. And if (allegedly more) reasonable mortality assumptions were used their benefits would have been bigger.
The lower courts’ analysis
Both the Sixth and the Eleventh Circuits applied a similar analysis to this question, reading into the statute a reasonableness requirement based on the following arguments:
“[T]he plain meaning of the words in ‘actuarial equivalent’ suggests reasonable, realistic actuarial assumptions.”
Pursuant to “actuarial norms,” “a requirement to use ‘reasonable’ or ‘current’ actuarial assumptions is ‘baked into the concept of an actuarial equivalent.’”
With respect to similar language in the Tax Code, “the Secretary of the Treasury has interpreted the statute’s provision mandating ‘actuarial equivalent’ joint-and-survivor annuities to require conversion from the plan’s ‘normal form of life annuity’ using ‘consistently applied reasonable actuarial factors.’”
“Depriving ‘actuarial equivalent’ of its force is problematic given the protective purpose that is apparent from the joint-and-survivor annuity provision’s text and statutory context.” In this regard, the lower courts argued that not implying a reasonableness requirement could lead to absurd results, e.g., the use of mortality tables from 1789 (in the Southern Company case) or the sixteenth century (in the Kellogg/FedEx cases).
Pre-ERISA state court cases (applying different statutes) concurred with this approach.
Sponsor arguments for reversal
The sponsors (in similar certiorari petitions) argue that these decisions should be reversed for the following reasons:
There is no “reasonableness” requirement in statutory text. Particularly persuasive on this point, they argue, is the fact that “ERISA expressly mandates ‘reasonable’ or specified actuarial assumptions in at least four other places and uses the word ‘reasonable’ dozens of times throughout the statute. But Congress did not include that term here.”
The lower courts’ arguments that (at the time of ERISA enactment) “actuarial equivalence” was understood to include a reasonableness requirement are not supported by dictionary definitions and are “cherry-picked [from] among academic sources, elevating a ‘few academic sources’ while ignoring that other ‘contemporaneous actuarial academics’ were ‘agnostic about the selection of actuarial assumptions.’” [Quoting from the dissent in the Kellogg/FedEx litigation.]
The lower courts’ argument that not implying a reasonableness standard would lead to absurd results “reflects a discredited method of statutory interpretation”: “This reasoning illustrates the ‘slippery slope’ of using the absurdity doctrine as a license for ‘judicial revision of [statutory] texts to make them (in the judges’ view) more reasonable’ [quoting an article by Justice Scalia].” Moreover, even without an ERISA reasonableness standard, rules under the Tax Code would place a constraint on the mortality (and interest rate) assumptions plans used.
References to IRS regulations under the Tax Code are inapposite (they apply to a different statute) and (again quoting from the dissent in the Kellogg/FedEx litigation) “the fact that the Treasury deemed it necessary to specify a reasonableness requirement by regulation [with respect to that provision] shows that the plain meaning of the statute doesn’t convey that requirement.”
Similarly, references to state court decisions interpreting different statutes are not relevant.
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As the sponsors’ certiorari petitions note, there is a huge amount of money at stake in this litigation. Several sponsors have already settled actuarial equivalence lawsuits for tens of millions of dollars.
There is also a theoretical split in the circuits: Quoting the Kellogg petition:
The D.C. Circuit has taken the opposite view [from the Sixth and Eleventh Circuits] in considering the definition of “actuarially equivalent” for purposes of calculating lump-sum payments under [ERISA section 204(c)(3)]. It held that the term “actuarially equivalent” requires only a mathematical equivalence of the present value of the two benefits being compared based on the plan’s stated actuarial assumptions.
Given the amount of money at stake and the expressed concern of the Supreme Court about the ability of lower courts to “’divide the plausible sheep from the meritless goats’ in ERISA class action cases” (quoting the Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer), and the issues raised by sponsor-petitioners about the lower courts’ reasoning, there is a good chance that the Court will take this case.
We will continue to follow this issue.
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This is a publication of O3 Plan Advisory Services. If you have any comments, or have questions about regulatory developments, please contact your relationship manager or Mike Barry at mbarry@octoberthree.com.
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