794 F.3d 272
2d Cir.2015Background
- Plaintiffs are former PricewaterhouseCoopers LLP (PwC) employees who vested after at least five years of service in PwC’s Retirement Benefit Accumulation Plan (RBAP), a cash-balance (defined benefit) plan.
- RBAP defines “normal retirement age” as the earlier of age 65 or completion of five years of service, which for most employees makes vesting and normal retirement age coincide.
- Under cash-balance rules in effect when plaintiffs left employment, a vested participant taking a lump sum before normal retirement age was entitled to a “whipsaw” actuarially equivalent payment reflecting interest credits to normal retirement age.
- By defining normal retirement age to coincide with vesting, the RBAP eliminated any post-vesting accrual period and thereby prevented whipsaw payments for those participants.
- Plaintiffs sued under ERISA alleging (1) the RBAP’s definition of normal retirement age is invalid, (2) the plan is impermissibly backloaded, and (3) the SPD failed to disclose the true normal retirement age; the district court denied dismissal and this court affirmed on statutory-construction grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of defining “normal retirement age” as 5 years of service | Laurent: Five years of service is not a "normal retirement age" under ERISA §3(24) and thus violates the statute | PwC: §3(24)(A) allows plans to set “the time” of normal retirement age; years-of-service is a permissible time measure | Held: Invalid — a plan-selected time must bear a plausible relation to ordinary "normal retirement;" five years of service here does not |
| Whether "age" requires a calendar age (literal age) | Laurent: Statutory use of "age" requires an age measure, not a service-count metric | PwC: The statute permits any time-point; "age+5" or years-of-service are acceptable measures | Held: Court rejects rigid literalism and finds "age" need not be a calendar age, but the chosen time must still reflect a normal retirement age; five years fails that test |
| Backloading / vesting protection argument | Laurent: Tying vesting to normal retirement age here functionally evades ERISA’s anti-backloading and vesting protections | PwC: Plan complies with statutory vesting rules; sponsor discretion protects plan design | Held: Court did not base decision on backloading (did not reach); affirmed on normal-retirement-age ground alone |
| SPD notice and disclosure claim | Laurent: SPD omitted or misdescribed the plan’s normal retirement age, violating ERISA notice rules | PwC: SPD satisfied disclosure obligations | Held: Court did not reach the notice claim (affirmance rested on statutory-construction ground) |
Key Cases Cited
- Esden v. Bank of Boston, 229 F.3d 154 (1st Cir. 2000) (ERISA requires accrued benefits in defined-benefit/cash-balance plans be measured as an annuity at normal retirement age; plans may not evade actuarial-equivalence protections)
- Berger v. Xerox Corp. Ret. Income Guarantee Plan, 338 F.3d 755 (7th Cir. 2003) (describing improper elimination of whipsaw and the sale-back of pension rights)
- Fry v. Exelon Corp. Cash Balance Pension Plan, 571 F.3d 644 (7th Cir. 2009) (upholding a plan that defined normal retirement age as participant’s age at hire plus five years; held that formula yields an "age")
- Duchow v. N.Y. State Teamsters Conference Pension & Ret. Fund, 691 F.2d 74 (2d Cir. 1982) (distinguishing statutory vesting requirements and interpreting anniversary language in §3(24)(B))
- Lonecke v. Citigroup Pension Plan, 584 F.3d 457 (2d Cir. 2009) (cash-balance plans are defined-benefit plans; accrued benefit is the annuity at normal retirement age)
- Lyons v. Georgia-Pacific Corp. Salaried Emps. Ret. Plan, 221 F.3d 1235 (11th Cir. 2000) (earlier authority on whipsaw and actuarial equivalence)
- Brown & Williamson Tobacco Corp. v. FDA, 529 U.S. 120 (2000) (statutory interpretation principles: read terms in context within the statutory scheme)