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PricewaterhouseCoopers LLP defeated a long-running class action by participants in the firm’s cash balance pension plan who challenged the calculation of their benefits ( Laurent v. PricewaterhouseCoopers LLP , 2017 BL 255545, S.D.N.Y., No. 1:06-cv-02280-JPO, 7/24/17 ).
The participants’ requested relief—replacement of the plan’s allegedly less favorable interest rate with a different rate—isn’t allowed under the Employee Retirement Income Security Act, Judge J. Paul Oetken of the U.S. District Court for the Southern District of New York held July 24. While ERISA allows a court to look outside a plan’s written language in deciding what a term means, it doesn’t authorize a court to alter that term, Oetken held in granting judgment to PwC.
The decision is the latest development in an 11-year dispute between the consulting firm and former employees who elected to receive their pension benefits through lump-sum distributions. They argued that PwC’s lump-sum calculation, which used the 30-year Treasury rate, resulted in an unlawful forfeiture of their accrued benefits in violation of ERISA because it undervalued the future interest credits allegedly promised by the plan.
Prior to Oetken’s latest ruling, the participants had scored multiple wins in earlier stages of the case. These rulings held that PwC’s definition of normal retirement age as five years of service violated ERISA.
Last year, the U.S. Supreme Court declined to review a decision by the U.S. Court of Appeals for the Second Circuit in favor of the participants. The Second Circuit affirmed Oetken’s previous decision that PwC violated ERISA on different grounds. Ruling against PwC, Oetken said that the plan’s “normal retirement age” violated ERISA because it didn’t qualify as “age” as the term is ordinarily used. In 2014, Oetken also granted the participants’ request for class certification on some of their claims.
In his latest decision, Oetken relied on a 2011 Supreme Court ruling that courts may invoke ERISA’s provision to recover benefits only to enforce the terms of the plan as written.
The participant’s request for reformation would require the court to reform the plan by changing its actual words, rather than determining the meaning of those words, Oetken said. The relief requested by the participants is reformation—not interpretation or gap-filling—and requires more than the simple enforcement of the terms of the plan as written, Oetken concluded.
Gottesdiener Law Firm PLLC represents the class. Gibson, Dunn & Crutcher LLP represents PwC.
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