Sun Country has agreed to establish a $1.55 million settlement fund to resolve a class action alleging that it failed to make required retirement-plan contributions for pilots who took qualified military leave.
The agreement remains subject to final approval by the U.S. District Court for the District of Minnesota. Judge Kate M. Menendez certified the settlement class and granted preliminary approval on August 11, 2026, with a final fairness hearing scheduled for November 17.
The settlement is intended to compensate eligible current and former pilots for disputed employer contributions to the Sun Country 401(k) Profit Sharing Plan, together with investment earnings attributed to those contributions. Sun Country and the other defendants deny wrongdoing, and the agreement does not constitute an admission of liability.
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Pilots Challenged the Treatment of Military Leave
Pilots Nicholas Smith and Derik George filed the class action complaint in February 2024 against Sun Country, the plan’s board of trustees, individual board members and the retirement plan itself.
Smith and George alleged that Sun Country did not properly credit periods of qualified military service when calculating employer retirement contributions. Both pilots had taken military leave and subsequently returned to the airline.
The case centered on the Uniformed Services Employment and Reemployment Rights Act, or USERRA, and the Employee Retirement Income Security Act. The pilots alleged that Sun Country violated USERRA’s pension protections, while the plan fiduciaries breached their ERISA duties by failing to ensure that the correct contributions reached participants’ accounts.
Under Department of Labor guidance on USERRA, a returning service member generally must be treated as though employment had continued for pension purposes. An employer is not normally required to fund the relevant contribution while the employee remains on military duty, but it must make the contribution after the employee is reemployed.
The calculation depends on the compensation the employee would have received but for military service. When that rate is reasonably certain, the employer uses that amount. When it is not, USERRA generally calls for a calculation based on average compensation during the 12 months preceding the absence, or the employee’s shorter period of employment if the employee had not yet worked for a full year.
That distinction is particularly important for airline pilots because compensation can vary with credited hours, training, reserve assignments, premium flying, seniority and other contractual factors. A contribution based only on a narrow payroll entry can produce a different result from one designed to reconstruct what the pilot would probably have earned.
The complaint said Sun Country’s pilot participants received nonelective contributions based on compensation. The plaintiffs argued that missing or understated contributions caused two forms of loss: the original amount that should have entered each account and the investment return that money could have earned.
Settlement Covers Contributions and Lost Earnings
The parties executed their agreement on June 11, 2026, after two court-supervised settlement conferences and further written and telephone negotiations. The plaintiffs submitted the agreement for preliminary approval on July 30.
Under the proposed settlement agreement, Sun Country will pay $1.55 million into a common fund. The airline will pay settlement-administration costs separately, preventing those expenses from reducing the fund available for class payments and court-approved legal costs.
Attorneys’ fees, litigation expenses and any service awards approved for the named plaintiffs will be deducted from the fund. The remaining balance will be allocated among eligible class members under a formula intended to reflect their unpaid contributions and associated lost investment earnings.
The settlement class covers current and former Sun Country pilots who participated in the plan, completed qualified military service ending between July 21, 2011, and December 31, 2025, returned to employment with the airline and did not receive the contribution required under the applicable compensation calculation. Certain beneficiaries are also included.
Class members do not have to submit a conventional claim form. Payments will instead be calculated from Sun Country’s employment, military-leave, compensation and retirement-plan records. Participants may challenge the underlying information if they believe the airline’s records omit a period of service or contain an incorrect pay or contribution figure.
The allocation plan provides for money attributable to a pilot with an active plan account to be deposited through the retirement plan where possible. Payments to former participants without active accounts may be issued directly, subject to the applicable tax treatment and withholding requirements.
Sun Country Revised Its Calculation Process
The settlement includes prospective measures as well as compensation for earlier periods. Sun Country changed its methodology for calculating contributions associated with pilots returning from qualified military service effective October 1, 2025.
The airline must provide a written explanation of that methodology. It also agreed to give individualized calculations to pilots returning from military leave between January 1, 2026, and January 1, 2027, showing how their contributions were determined.
Those disclosures address one of the practical issues at the center of the litigation: a pilot must be able to determine which pay rate, work history and credited periods the airline used. An account deposit by itself may not show whether the employer reconstructed compensation in accordance with USERRA or used a simpler payroll measure.
The court’s preliminary approval order allows formal notice and the remaining settlement process to proceed. Class members may object by October 30, while challenges to individual data are due November 6. The certified class is mandatory, meaning members may object but cannot exclude themselves from the settlement.
If the court grants final approval and any appeals are resolved, the administrator can begin distributing the net fund. If approval is denied, the settlement will not take effect and the underlying litigation may resume.
Bottom Line
The settlement is significant beyond its $1.55 million value because airline pilot compensation does not always fit neatly into payroll systems designed around fixed salaries or predictable weekly schedules. Military leave calculations may require an airline to reconstruct the work and pay a pilot would probably have received, then apply the correct retirement contribution rate and account for the investment effect of a delayed deposit.
For Sun Country pilots, the prospective disclosure requirements may prove as important as the cash fund. Individualized calculations give returning service members a way to compare military-leave dates, compensation assumptions and employer deposits before discrepancies accumulate over several years. Other carriers with pilots serving in reserve or National Guard units have reason to review the same interfaces between crew scheduling, payroll, benefits administration and military-leave records.
The next milestone is the November 17 fairness hearing. The court will consider any objections, the allocation method, requested legal fees and whether the agreement provides adequate relief. Final approval would move the case from a disputed benefits calculation into implementation, where the accuracy of Sun Country’s underlying pilot and payroll records will determine how the fund is divided.
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