Ruppert v. Alliant Energy Cash Balance Pension Plan, 726 F.3d 936

Background

Plaintiffs are participants in a cash-balance defined-benefit plan who received lump-sum distributions after leaving employment and sued under ERISA § 1132(a)(1)(B) alleging the plan understated those lump sums.
The plan credited participants with either 4% or 75% of plan returns (whichever was greater) but used a 30-year Treasury rate for both discounting and (in practice) projection in 1998 calculations.
When a participant takes a lump sum before normal retirement, the plan must "whipsaw": project account growth to retirement (using a projection rate) then discount back to present value; the projection rate must be a reasonable, good-faith estimate of future interest credits.
District court found the 30-year Treasury projection rate unreasonable, held the appropriate projection rate was 8.2% (after a bench trial with experts), and rejected the plan’s 1-to-5-year rolling-average method as improperly truncated to exclude pre-1998 years.
The plan retroactively amended the 1998 formula in 2011 to adopt the 1-to-5-year rolling average; the district court ruled that amendment could not reduce damages already owed. The court also held the plan’s pre-retirement mortality discount was unlawful under the plan terms.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Projection-rate reasonableness	Plan used an unreasonably low projection rate; judge should set a reasonable rate (8.2%).	30-year Treasury (or rolling-average method) was reasonable and disclosed.	Projection rate used earlier was unreasonable; district court's 8.2% finding affirmed (subject to SOL limitations below).
Plan's rolling-average method (1–5 yrs)	Method was arbitrary and improperly excluded known pre-1998 returns to depress rates.	Rolling average is permissible and produced lower projection rates.	Rejects the truncated 1–5-year averaging as exploitative; plan’s method improperly produced lower rates.
Retroactive 2011 amendment	Amendment cannot reduce damages already fixed by judgment; retroactivity doesn't erase accrued claims.	Amendment retroactively fixes plan terms and should limit damages.	Retroactive amendment cannot be used to diminish damages; judge correctly refused to apply it to already-accrued claims.
Pre-retirement mortality discount	Plan language entitles survivor to actuarial equivalent that includes interest to normal retirement; discount denying interim interest is unlawful.	Discount reflects mortality risk and avoids paying interest to deceased participants.	Discount unlawful under plan terms; survivor can wait until retirement date to receive equivalent benefits.
Statute of limitations (SOL)	Claims timely; communications did not provide clear notice to start SOL; 2011 amendment was a fresh violation for some claims.	Notice in 1998 put participants on inquiry notice so SOL bars many claims; 2011 amendment restarts or moots claims.	SOL: borrowing six-year Wisconsin limitation. Communications were too murky to start SOL in 1998 for many. But claims for participants who took lump sums more than six years before suit remain time-barred; 2011 amendment created a fresh violation but did not revive already-barred claims.
Adequacy of class representatives	Class reps adequate for class; any changes can be handled on remand.	One rep inadequate; thus class certification flawed.	Argument rejected as untimely/meritless; but because Ruppert and Larson no longer represent subclass A (one received a higher projection-rate distribution; the other’s claim is time-barred), new subclass-A representative(s) must be appointed on remand.

Key Cases Cited

Thompson v. Retirement Plan for Employees of S.C. Johnson & Son, Inc., 651 F.3d 600 (7th Cir.) (projection-rate and whipsaw standards under ERISA)
Berger v. Xerox Corp. Retirement Income Guarantee Plan, 338 F.3d 755 (7th Cir.) (whipsaw and projection-rate reasonableness)
Johnson v. Meriter Health Servs. Emp. Retirement Plan, 702 F.3d 364 (7th Cir.) (discussion of whipsaw mechanics)
Esden v. Bank of Boston, 229 F.3d 154 (2d Cir.) (projection/discounting guidance for cash-balance plans)
Martin v. Bartow, 628 F.3d 871 (7th Cir.) (limitations and successive-judgment injury principles)
West v. AK Steel Corp., 484 F.3d 395 (6th Cir.) (survivor rights and actuarial-equivalent payments)
Sosna v. Iowa, 419 U.S. 393 (U.S. Supreme Court) (class representative adequacy principles)
Reed v. United Transp. Union, 488 U.S. 319 (U.S. Supreme Court) (borrowing state SOL for federal statutory claims)