S.D.N.Y.: Cash Balance Plan Violates ERISA With Service-Based Normal Retirement Age


PricewaterhouseCoopers LLP cannot shake claims by participants in its cash balance plan that the plan's service-based normal retirement age violates the Employee Retirement Income Security Act, the U.S. District Court for the Southern District of New York ruled Aug. 8 (Laurent v. PricewaterhouseCoopers LLP, S.D.N.Y., No. 1:06-cv-02280-GBD, 8/8/13).

Judge J. Paul Oetken agreed with the employees that the plan's normal retirement age (NRA)—which was defined as five years of service—violated ERISA, because it did not qualify as an “age” as that term is ordinarily used. Oetken also found that the plan's retirement age violated ERISA's accrual rules, which prohibit plans from changing the base used to calculate a participant's benefits “solely by reason of an increase in the number of years of participation.”

In 2012, the U.S. Court of Appeals for the Fourth Circuit reached the opposite conclusion in McCorkle v. Bank of America Corp., 688 F.3d 164, 53 EBC 2701 (4th Cir. 2012). In McCorkle, the Fourth Circuit concluded that Bank of America's definition of NRA as being “five years of vesting service” satisfied ERISA, noting that the Internal Revenue Service has “long recognized that a retirement plan may specify an NRA that is below age 65.”

The U.S. Supreme Court declined to review McCorkle earlier this year.

Excerpted from a story that ran in Pension & Benefits Daily (8/12/2013).