Cash Balance Plans

Cash Balance Plans Have Risk Mitigation Challenges
Excerpt:"Plan sponsors who move to a cash balance plan from a traditional defined benefit (DB) program may not always realize they are trading interest rate risk for investment risk."(PLANSPONSOR.com)

[Opinion] Cash Balance Plans Can Hold Hidden Risks for Plan Sponsors
Excerpt:"Plan sponsors who move to a cash balance plan from a traditional defined benefit (DB) plan may not always realize they are trading interest rate risk for investment risk, Vanguard's chief actuary maintains."(The Vanguard Group, Inc.)

[Guidance Overview] Court Upholds Cash Balance Plan's Pre-PPA Whipsaw Correction, With a Tweak
Excerpt:"In deciding how a cash balance plan should correct pre-PPA lump sums, a federal court gave deference to the plan's proposed whipsaw interest crediting method in the wake of the US Supreme Court's Conkright ruling . . . ."(Mercer)

Appellate court rules in Verizon's favor in ERISA case
Excerpt:"Verizon Communications Inc. shouldn't be penalized for a drafting error in the preparation of a cash balance pension plan, the 7th U.S. Circuit Court of Appeals in Chicago ruled Tuesday."(Pensions&Investments; registration may be required)

7th Circuit Finds No Age Bias in Cash Balance Plan's Interest Credits
Excerpt:"A cash balance plan was not age-discriminatory, even though participants stopped receiving interest credits on one of the cash balance accounts at age 55, the 7th US Circuit Court of Appeals has ruled (Walker v. Monsanto Pension Plan)."(Mercer LLC)

The Beauty of a Cash Balance Plan Buy-Out Tool
Excerpt:"In the context of a partnership buy-out, a cash balance plan can be incorporated as an overlay to an existing 401(k) plan and create the opportunity for massive retirement plan contributions for older people in their 60s."(WebCPA)

Monsanto Cash Balance Plan Cleared of Age Discrimination
Excerpt:"A provision in Monsanto Co.'s cash balance pension plan that cut off interest credits once participants reached age 55 did not discriminate against older workers, a federal appellate court has ruled."(PLANSPONSOR.com)

[Opinion] American Benefits Council Recommendations to IRS for 2010-2011 Guidance Priority List (PDF)
2 pages. Excerpt:"Most notably, we are anxious to see the pending final regulations on cash balance and pension equity plans as well as proposed regulations defining a market rate of return for hybrid plans. These regulations implement legislation enacted as part of the Pension Protection Act of 2006, which was enacted nearly four years ago."(American Benefits Council)

How to Start a Cash Balance Pension Plan
Excerpt:"Contributions to the plan must be funded by the due date of your tax return including extensions and no later than eight and a half months after the year ends. That means you have until September 15, 2011 to fund the plan to get the deduction for 2010, assuming you've filed for a tax extension."(Mansueto Ventures LLC)

[Guidance Overview] Court Grants Preliminary Approval to Settlement of Washington Mutual Cash Balance Suit
Excerpt:"[The judge] moved forward claims of employees who were participants in the company's defined benefit plans at the time of their conversion to a cash balance plan under [ERISA] that WaMu failed to give them timely notice of the conversion."(PLANSPONSOR.com)

Ledbetter Law Fails To Save El Paso Workers'Cash Balance Plan Suit
Excerpt:"A federal judge has once again thrown out a suit claiming that El Paso Corp. discriminated against workers based on age when it modified a retirement plan, ending a long-running putative class action brought after the natural gas company converted its pension plan to a cash balance system."(Forbes.com)

California's Dual Pension Crisis (PDF)
11 pages. Excerpt:"The stark contrast between the guaranteed and increasingly expensive pensions and retiree health benefits enjoyed by most public workers in California and the less secure (and often missing) retirement plans of private-sector workers has touched off pension envy."(New America Foundation)

[Opinion] Create a Fiscally Sustainable Pension System That Offers Adequate Retirement Security to Public and Private Workers Alike
Excerpt:"There is [a] long-term reform option for California, one that would provide more retirement security for public workers and more fiscal stability and certainty for taxpayers. It is known as a cash balance pension, a hybrid that combines the best aspects of defined-benefit or pension-style plans and defined-contribution plans such as 401(k)s."(Los Angeles Times)

Cash Balance Plans Provide Practical Option for Today's Retirement Environment (PDF)
4 pages. Excerpt:"Although 401(k) plans are likely to remain the leading retirement plan option for years to come, consultants and advisors would be wise to understand the potential of cash balance plans, and to be comfortable in presenting the option to their clients."(SPARK via Milliman)

JPMorgan Chase Cash Balance Settlement Gets Court Approval
Excerpt:"[The District Court judge] signed off on the agreement covering approximately 100,000 plaintiffs in the two class actions under which the company will provide a year of financial planning services."(PLANSPONSOR.com)

Facing Shortfalls, Some States Combine Guaranteed Plans with 401(k)-Like Options
Excerpt:"These hybrid plans are a cost-cutting measure for states seeking to pare back the guaranteed-retirement payments considered a bedrock benefit for government workers."(The Wall Street Journal)

More Small Businesses Add Cash Balance Pensions
Excerpt:"It is the prospect of higher taxes that has doctors, lawyers, plumbers and other small business operators favoring these hybrid plans, which enable them to set aside significantly more pretax dollars than they could in a 401(k) or profit-sharing plan."(The Wall Street Journal)

[Guidance Overview] Alliant Energy Corp. Tagged for Pre PPA Whipsaw Calculation for Lump-Sum Distributions
Excerpt:"U.S. Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin asserted that the company ran afoul of the Employee Retirement Income Security Act (ERISA) with the calculations, but said she could not determine the correct rate the company should have used before the Pension Protection Act of 2006 (PPA). The PPA amended ERISA to provide that cash balance plans are no longer required to make whipsaw calculations."(PLANSPONSOR.com)

[Guidance Overview] AT&T Cleared in Cash Balance Suit Alleging ERISA and ADEA Violations
Excerpt:"The decision . . . ends a 12-year court fight over allegations the company's operation of the pension program discriminated against older workers and violated ERISA's anti-backloading rule. [The judge] also cleared the communications company of violating U.S. Treasury Department regulations that require'subsidized early retirement benefits'to be the actuarial equivalent of the subsidized benefit."(PLANSPONSOR.com)

[Guidance Overview] Court Approves Settlement of Cash Balance Claims against Avnet
Excerpt:"The U.S. District Court for the District of Arizona has approved a $34 million settlement of claims Avnet Inc. violated the Employee Retirement Income Security Act in the administration of its cash balance plan. Former employees of Avnet, Inc. and participants in the Avnet Pension contended that Avnet violated ERISA by calculating participants'lump sum distributions without a'whipsaw calculation,'resulting in an underpayment of retirement benefits."(PLANSPONSOR.com)

Cash Balance Pension Plans Surge In Popularity: 359% Increase In Six Years
Excerpt:"There were 4,797 cash balance plans active in 2007 (the most recent year for which IRS pension plan data is available), up from 1,337 in 2001. That represents a 359% increase, according to a new national research report from retirement plan consultant Kravitz."(Wolters Kluwer)

[Guidance Overview] Cash Balance Plan's Whipsaw Interest Rate Disputed
Excerpt:"A federal court declined to decide what interest rate a cash balance plan should use in its whipsaw calculation (Thompson v. Ret. Plan for Employees of S.C. Johnson&Sons). The plan agreed to recalculate pre-PPA lump sums by projecting accounts forward with interest to age 65, then discounting back. But the parties disputed what interest rate to use where the plan's interest credits were based on the trust's actual investment return. Instead of pulling an interest rate from'thin air,'the court directed the parties to determine a reasonable rate, subject to court review if they can't agree."(Mercer LLC)

AT&T Requests Discrimination Claims on Pensions Be Dismissed
Excerpt:"AT&T has asked a US judge to dismiss claims that it discriminated against older workers when it converted its defined benefit pension scheme to a'cash balance'arrangement in 1997. According to legal documents, lawyers representing the telecoms giant are seeking to have the age discrimination claim - which is seeking US$2.3bn in damages for 24,000 current and former employees - thrown out."(Global Pensions)

Kravitz National Cash Balance Research Report 2010 (PDF)
7 pages. Excerpt: From a press release:'There were 4,797 Cash Balance Plans active in 2007 (the most recent year for which IRS pension plan data is available), up from 1,337 in 2001. That represents a 359% increase. . . . 80% of Cash Balance Plans are in place at firms with less than 100 employees. . . . 79% of Cash Balance Plans are combined with a Profit Sharing or 401(k) plan, and more than half of those plans use New Comparability."(Kravitz, Inc.)

[Guidance Overview] S.C. Johnson&Sons Inc. Cleared of Wrongdoing in Connection with Allegations It Backloaded Its Cash Balance Pension Plan
Excerpt:"U.S. District Judge J.P. Stadtmueller of the U.S. District Court for the Eastern District of Wisconsin issued that ruling in a participant lawsuit charging violations of the Employee Retirement Income Security Act (ERISA) by the consumer products manufacturer."(PLANSPONSOR.com)

Time to Shine for Cash Balance Plans
Excerpt:"Most defined benefit pension sponsors are facing a financial slug in the gut this year in the form of a spike in required funding contributions resulting from the 2007-2008 stock market crash and the drop in interest rates. . . . Will this latest development ignite another uptick in conversions to hybrid pension designs that followed the enactment of the Pension Protection Act of 2006, the law that, among other things, validated the legitimacy of cash balance plans?"(Employee Benefit News)

The IRS 2010 Guidance Plan: A Look at What's Coming
Excerpt:"Each year the IRS issues a list of its top-priority guidance initiatives for the year, called the guidance plan. The long-awaited list of items was issued in late 2009, and sets forth the plan for issuing much-needed guidance for the July 2009?June 2010 year. . . . A look at a number of provisions from the guidance plan that remain to be addressed, based on the type of plan, will give us an idea of what is in store for the coming year."(Groom Law Group)

Supreme Court Declines to Review Cash Balance Age Rulings
Excerpt:"The Supreme Court on Feb. 22 declined to review, and thus let stand, lower-court rulings that a cash balance plan that defined'normal'retirement age as completion of five years of service is legal. Last year, in a unanimous decision, a three-judge panel of the 7th U.S. Circuit Court of Appeals in Chicago affirmed a lower court's ruling that the cash balance plan established in 2002 by Exelon Corp., Chicago, is legal."(Pensions&Investments)

[Guidance Overview] Federal Court Rules Participants not Due Additional Benefits Based on Defective Summary Plan Description
Excerpt:"The court pointed out that the SPD included a caveat that it was only a summary and that participants should refer to the master plan document for more information. In addition, Northrop held Town Hall meetings in which the benefits calculations, including the offset, were discussed, and participants had received a summary of material modifications which described benefits calculations, including the offset."(PLANSPONSOR.com)

Investments for Cash Balance Plans
Excerpt:"When deciding to set up a cash balance plan, the general assumption usually is that the investment values and the benefit liabilities will always be approximately the same. In that situation, none of the partners would suffer significantly or benefit greatly, regardless of the performance of the markets. However, in our case, the departing partner gets $300,000 more than the value of the underlying investments, while the remaining partners are left to fund the $300,000 shortfall for that partner . . . ."(Reish&Reicher)

Hybrid Plans in 2010 and Beyond
Excerpt:"A new study by Watson Wyatt highlights the wide-ranging variations in hybrid pension plans, reflecting the spectrum of sponsors'workforce planning, compliance and other needs and goals. It examines eligibility requirements, definitions of applicable compensation, benefit formulas, interest rates and transition methods for cash balance plans (CBPs) and pension equity plans (PEPs)."(Watson Wyatt Worldwide)

[Guidance Overview] IRS's Limited Cash Balance Plan Interest Crediting Rate Relief
Excerpt:"Sponsors of hybrid plans, including cash balance plans, have faced issues concerning the PPA requirement that the interest crediting rate under a cash balance plan not exceed a'market rate.'The IRS recently published Announcement 2009-82 to provide temporary guidance."(J.P. Morgan Compensation and Benefit Strategies)

[Official Guidance] Text of IRS Notice 2009-97: Extension of Deadline for Certain Qualified Plan Amendments Required by PPA and WRERA (PDF)
6 pages. Excerpt:"The deadline is extended to the last day of the first plan year that begins on or after January 1, 2010. This extension applies to: 1. The deadline for amending single-employer defined benefit plans to meet the requirements of ?? 401(a)(29) and 436, relating to funding-based limits on benefits and benefit accruals under single-employer plans; 2. The deadline for amending cash balance and other applicable defined benefit plans, within the meaning of ? 411(a)(13)(C), to meet the requirements of ? 411(a)(13) (other than ? 411(a)(13)(A)) and ? 411(b)(5), relating to vesting and other special rules applicable to these plans; and 3. The deadline for amending applicable defined contribution plans, within the meaning of ? 401(a)(35)(E), to meet the requirements of ? 401(a)(35), relating to diversification requirements for certain defined contribution plans. This notice also provides limited relief from the anti-cutback requirements of ? 411(d)(6) . . . ."(Internal Revenue Service)

PBGC Issues Semi-Annual Regulatory Agenda
Select Pension Benefit Guaranty Corporation from the drop-down list on the target web page. Projects in the proposed rule stage include expansion of the existing Missing Participants program to cover multiemployer plans, small professional service employer plans (25 or fewer active participants), and individual account plans; and a rule on valuing benefits in terminating cash balance and other hybrid plans. (RegInfo.com)

Cash Balance Plan Can Rely on Fractional Accrual Rule, Second Circuit Holds
Excerpt:"Cash balance plans can rely on the'fractional rule'to satisfy ERISA's minimum accrual standards, the US Court of Appeals for the Second Circuit has decided. The court also found participants received proper notice of the cash balance conversion, even though the notice didn't explain that departing employees'benefits might increase to satisfy accrual rules. The first appellate ruling on the question, this court's fractional-rule analysis could influence other courts and may open up compliance alternatives for sponsors preparing to grapple with PPA's market-rate-of-interest rules."(Mercer LLC)

[Guidance Overview] Additional IRS Anti-Cutback Relief for Cash Balance Plans (PDF)
Excerpt:"Pending the publication of final regulations, the IRS has recently issued Announcement 2009-82 to provide additional relief for sponsors of hybrid plans that must amend their plans'interest crediting rates. First of all, the IRS does not expect the final regulations to go into effect before the first plan year that begins on or after January 1, 2011. Secondly, the IRS plans to provide additional anti-cutback relief for plans that are amended before the effective date of the final regulations to reduce the future interest crediting rate, even if the amendment is adopted after the last day of the first plan year beginning on or after January 1, 2009."(Prudential Retirement)

Cash Balance Plan Wins in Eighth Circuit on Opening-Balance and Age-Bias Claims
Excerpt:"No ERISA violation occurred when a pension plan used an 8 percent interest rate to establish opening balances in connection with a 1998 cash balance conversion, the US Eighth Circuit Court of Appeals has ruled. Participants claimed the rate was too high, but the appeals court said the plan was free at that time -- before passage of the Pension Protection Act -- to set opening balances as it wished, as long as already-accrued benefits did not decrease. The court also dismissed participants'age-bias claims, consistent with rulings by five other appeals courts."(Mercer LLC)

Hybrid Retirement Plan in the Works: DB(k) Alongside 401(k) Would Provide Security, Guaranteed Pension
Excerpt:"The vulnerabilities of the 401(k) plan have cast doubt on whether a voluntary savings plan is the best way for workers to prepare for retirement. There are possible alternatives coming, however, that might catch on. One that may become available in January offers a guaranteed pension-like retirement benefit alongside a 401(k). It's called the DB(k), and it was created in the tax code in 2006. The law allows companies with fewer than 500 workers to start the hybrid plan after Jan. 1, 2010, and some proponents would like to see it available to all workers. As it is now, barely 40 percent of all workers even participate in a retirement plan at work."(The Washington Post; free registration required)

[Guidance Overview] IRS Grant of Hybrid Pension Plan Relief on Timing of Amendments and Notices (PDF)
3 pages. Excerpt:"On November 10, the IRS released Announcement 2009-82, which gives sponsors of cash balance and other hybrid pension plans additional time to bring their plans into compliance with the Pension Protection Act of 2006 (PPA) requirement that the plan's interest-crediting rate not exceed a'market rate of interest.'The IRS indicated in the announcement that regulations outlining what constitutes a market rate of interest under PPA will be issued'in the near future.'The announcement also grants 204(h) notice relief for plan sponsors that adopt amendments to adopt a market rate of interest by the end of the 2009 plan year."(Morgan, Lewis&Bockius LLP)

[Guidance Overview] IRS Relief for Hybrid Plans Pending Soon to be Released Regulations (PDF)
Excerpt:"[T]he IRS issued Announcement 2009-82 providing relief for plan sponsors of statutory hybrid defined benefit plans (including cash balance plans) to comply with the Pension Protection Act of 2006 (PPA) requirement to not have interest crediting rates in excess of a market rate of return."(Buck Consultants)

[Official Guidance] Text of IRS Announcement 2009-82: Hybrid Plan Guidance (PDF)
2 pages. Excerpt:"The Treasury Department and the Internal Revenue Service are announcing relief for sponsors of statutory hybrid plans that must amend the interest crediting rate in those plans. Plan sponsors may rely on this announcement pending publication of the anticipated additional guidance described below. Treasury and the Service expect to issue in the near future final regulations and proposed regulations relating to statutory hybrid plans. The regulations will include rules interpreting the requirement in ? 411(b)(5)(B)(i) of the InternalRevenue Code that such plans not have an interest crediting rate in excess of a market rate of return. The rules in the regulations specifying permissible market rates of return are not expected to go into effect before the first plan year that begins on or after January 1, 2011."(Internal Revenue Service via American Benefits Council)

[Guidance Overview] IRS Offers Relief on Interest Crediting Rate Amendment
Excerpt:"The Treasury Department and the Internal Revenue Service have announced relief for sponsors of statutory hybrid plans that must amend the interest crediting rate in those plans. The IRS said plan sponsors may rely on announcement 2009-82 pending publication of anticipated additional guidance. Anticipated guidance includes rules interpreting the requirement in ? 411(b)(5)(B)(i) of the Internal Revenue Code that hybrid plans not have an interest crediting rate in excess of a market rate of return. The rules specifying permissible market rates of return are not expected to go into effect before the first plan year that begins on or after January 1, 2011."(PLANSPONSOR.com; free registration required)

[Guidance Overview] Verizon Escapes $1.6 Billion Pension Liability for Drafting Error
Excerpt:"A federal judge in Illinois who ruled last year that Verizon was bound by the language in its defined benefit plan document even if it included a drafting error has now decided that Verizon can simply correct the error that could have cost $1.67 billion."(PLANSPONSOR)

[Guidance Overview] In District Court, Verizon Defeats Group Lawsuit Over Cash Balance Plan That Might Have Cost $1.67 Billion
Excerpt:"The complaint was brought after Verizon mistakenly included language in its pension plan documents, U.S. Magistrate Judge Morton Denlow wrote in a ruling issued Nov. 2. The mistake was in a formula for converting Bell Atlantic employees onto the same pension system following a series of mergers. The new calculations would have almost tripled the opening balances that some employees had accrued, according to the ruling."(Bloomberg)

[Guidance Overview] PPA-Related Cash Balance Plan Amendments Required by End of 2009
Excerpt:"A number of provisions in the Pension Protection Act of 2006 (PPA) apply to cash balance plans, including: (1) a requirement that a plan's interest crediting rate not exceed a market rate of return; and (2) a clarification that the payment of a participant's vested cash balance account satisfies the minimum lump sum requirements of sections 411(c) and 417(e) of the Internal Revenue Code."(Hewitt)

IRS Personnel Share Unofficial Comments on Compliance Issues with ABA Employee Benefits Committee
Excerpt:"IRS representatives shared their unofficial views on certain benefits issues that were presented earlier this year by the Employee Benefits Committee of the Tax Section of the American Bar Association. Although the views cited by the IRS representatives are not binding and do not represent the policy of the agency, they provide useful insight into areas of concern. Some of the notable unofficial and non-binding views shared by the IRS representatives were the following . . . ."(Deloitte via BenefitsLink.com)

[Guidance Overview] Administrative Remedies Need not be Exhausted in Cash Balance Case
Excerpt:"The U.S. District Court for the Eastern District of Kentucky has declined to dismiss a case against BP Corporation North America over calculations used in its cash balance plan, saying the plaintiff was not required to exhaust his administrative remedies under the plan. The court found that Robert French's complaint challenges the overall legality of BP's plan methodology, so administrative exhaustion would be futile and is not required. The court said a 6th U.S. Circuit Court of Appeals opinion makes clear that when a plaintiff's'suit [i]s directed to the legality of [a plan], not mere interpretation of it[,] exhaustion of the plan's administrative remedies would be futile.'"(PLANSPONSOR.com; free registration required)

[Guidance Overview] In Re: Citigroup Pension Plan ERISA
Excerpt:"A somewhat surprising, technical decision that permits Citigroup to skirt ERISA prohibitions against'backloading,'which occurs when a pension plan awards covered employees disproportionately higher benefit accruals for later years of service."(Wrobel&Schatz LLP)

[Guidance Overview] Cash Balance Plan Sponsor Liable for Deficient Disclosures, Appeals Court Rules
Excerpt:"A cash balance plan sponsor is liable for deficient communications about wearaway periods, the US Second Circuit Court of Appeals has ruled in a summary opinion with no precedential effect (Amara v. CIGNA). The appeals court upheld the lower court's order to determine benefits after a pre-PPA cash balance conversion using an'A+B'approach (instead of the plan's opening balance approach) because the SPD didn't sufficiently alert participants to possible wearaways. The court did not reinstate the traditional formula, which plaintiffs argued was the proper remedy for a faulty'204(h)'notice."(Mercer LLC)

[Guidance Overview] Court Finds No ERISA Violation for Cash Balance Plan with Interest Credits Tied to Asset Performance
Excerpt:"Where a cash balance plan's interest credits are based on the plan's actual investment returns, investment policy changes that result in lower returns do not violate ERISA's anti-cutback rules, a federal court in Wisconsin has ruled (Thompson v. Ret. Plan for Employees of S.C. Johnson). The plan credited participants'accounts with interest equal to 75 percent of actual returns (with a 4 percent floor). The court concluded participants have no protected right'to any particular investment policy decision or particular mix of investments,'so no reduction in accrued benefits occurred."(Mercer LLC)

[Guidance Overview] Flight from Equities in Cash Balance Plan no ERISA Miscue, According to Judge
Excerpt:"An employer's move to reduce its equity holdings and increase fixed income investments in its cash balance pension plan did not represent an illegal benefits reduction, a federal judge has ruled. U.S. District Judge J.P. Stadtmeuller of the U.S. District Court for the Eastern District of Wisconsin asserted that the decision by S.C. Johnson&Sons did not violate the anti-cutback rule in the Employee Retirement Income Security Act (ERISA). Stadtmeuller said the employer's pension plan changes did not result in a'reduction of accrued benefits'that would trigger the ERISA provision prohibiting sponsors from changing their plan in a way that generates lesser benefits for participants."(PLANSPONSOR.com; free registration required)

[Opinion] Industry Group Letter to Treasury Regarding Hybrid Plan Guidance (PDF)
6 pages. Excerpt:"This letter, which is submitted by the Coalition to Preserve the Defined Benefit System (the'Coalition'), the American Benefits Council (the'Council') and The ERISA Industry Committee ('ERIC'), identifies key transition and process issues with respect to upcoming hybrid plan guidance."(American Benefits Council)

[Opinion] ERIC Letter Identifies Key Transition and Process Issues on Upcoming Hybrid Plan Guidance
Excerpt:"The ERISA Industry Committee (ERIC), in conjunction with the Coalition to Preserve the Defined Benefit System and the American Benefits Council, on October 1 submitted a letter to the Internal Revenue Service and the Department of Treasury identifying key transitional and procedural issues related to upcoming proposed regulations on hybrid plans. It is the organizations'understanding that Treasury and IRS may soon issue final regulations on substantially all of the hybrid plan amendments contained in the Pension Protection Act, and that the (1) requirement that a hybrid plan's interest crediting rate not exceed a market rate of return and (2) the rules regarding pension equity plans (PEPs) may be addressed separately in proposed regulations. The letter says that the organizations strongly support this three-part approach to hybrid plan guidance."(The ERISA Industry Committee)

Hybrid Plan Sponsors Concerned About Lack of Regulatory Guidance
Excerpt:"The Pension Protection Act of 2006 (PPA) established new rules for the operation and administration of hybrid pension plans, but plan sponsors are still waiting for guidance. The lack of final (or in a number of cases even proposed) guidance leaves hybrid sponsors in a difficult position -- required to act without knowing the rules for doing so. Watson Wyatt recently conducted a survey to identify the issues most important to these plan sponsors."(Watson Wyatt Worldwide)

[Guidance Overview] U.S. District Court Says Cash Balance Plan ADEA Claim Not Time Barred Under Lilly Ledbetter Act (PDF)
2 pages. Excerpt:"In Tomlinson v. El Paso Corporation, a federal court in Colorado applied the Lilly Ledbetter Fair Pay Act to allow an age discrimination claim involving a cash balance plan conversion to proceed, reversing its prior dismissal of the lawsuit. The case involves a company that converted its traditional defined benefit pension plan to a cash balance plan in 1997 with a wearaway provision. Although the court initially dismissed the case for not being timely filed, it found that the subsequently enacted Ledbetter Act required it to reconsider this decision. While this is one court's ruling and is limited to Colorado, it demonstrates the potential reach of the Ledbetter Act beyond payroll practices to pension-related claims."(Buck Consultants)

Court Finds Ledbetter Act Revives Age-Bias Claim Arising from Cash Balance Conversion
Excerpt:"An active pension plan participant's age-bias challenge to a cash balance conversion may be timely, even though filed years after the plan change, a federal court has ruled (Tomlinson v. El Paso Corp.). The suit alleges that a'wearaway'period after the conversion discriminated against older employees. Last Jan. 21, the court had held that the claim was not filed soon enough after the conversion. Now the court has overturned its own ruling in the wake of the Jan. 29 enactment of the Lilly Ledbetter Fair Pay Act. The new ruling addresses only the timeliness, not the merits, of the claim."(Mercer LLC)

Ledbetter Act Revives Pension Accrual Age Discrimination Claim
Excerpt:"In 2004, Wayne Tomlinson and other employees brought a class action against their employer, El Paso Corp., for age discrimination caused by changes made to accrual rules when the company switched from a defined benefit plan to a cash balance plan in 1997. Tomlinson alleged that the company selectively froze the pension benefits of workers 40 and older. He alleges that he didn't know enough about the changes to file his action until 2004. The action was originally dismissed in January of this year as untimely, but plaintiffs'attorneys filed a motion to reconsider after the Ledbetter Act was signed into law."(Workplace Prof Blog)

Court Slims Down JPMorgan Cash Balance Suit
Excerpt:"JPMorgan Chase&Co. has successfully convinced a federal judge that a former employee should be barred from moving forward with allegations about the company's cash balance conversion. Plaintiff Frank Bilello's alleged that the financial services company's notices about its cash balance conversion were legally incomplete and inadequate. However, U.S. District Judge Denise Cote of the U.S. District Court for the Southern District of New York also handed the employer a setback by refusing to throw out the plaintiff's claim that the company committed a fiduciary breach by misleading workers about how the planned conversion would affect their benefit levels. Regarding the inadequate notice issue, Cote ruled that the Employee Retirement Income Security Act (ERISA) did not mandate JPMorgan's corporate predecessors to include additional financial analysis about each employee's benefit impact on their conversion notice, but merely required an alert the conversion was taking place and the date it would happen."(planadvisor)

[Guidance Overview] Five Years of Service Is Valid'Normal Retirement Age'in Pre-2006 Plan
Excerpt:"A pre-2006 cash balance plan did not violate ERISA when it defined'normal retirement age'to be five years of service with the employer, the U.S. Court of Appeals in Chicago (CA-7) has ruled in Fry v. Exelon Corporation Cash Balance Pension Plan."(Wolters Kluwer)

[Guidance Overview] ERISA Litigation Newsletter for August 2009 from Proskauer Rose (PDF)
Articles include Bucking the Trend, District Court Finds That Utah's Attempt to Bar Discretionary Clauses Is Preempted By ERISA; When Discretion Is Gone... Is There Full Blown Federal Discovery?; Are Unpaid Employer Contributions to an ERISA Plan'Plan Assets'? Courts and Government Weigh In; Defendants Acquire Favorable Judgments in Latest Round of Stock Drop Cases Involving Subprime and Stock Option Claims; Seventh Circuit Rules That'Normal Retirement Age'Need Not Be Defined By Reference To A Specific Age. (Proskauer Rose)