Thompson v. Retirement Plan for Employees of S.C. Johnson & Son, Inc.
651 F.3d 600
7th Cir.2011Background
- In 1998 the S.C. Johnson plan converted to a cash balance defined-benefit plan with notional accounts and annual interest credits of the greater of 4% or 75% of plan return.
- The plan used a wash calculation, deeming the 30-year Treasury rate as the actuarial equivalent, which produced zero net future interest for lump-sum distributions and violated ERISA.
- Plaintiffs, former plan participants who received lump-sum distributions, filed suit in the Eastern District of Wisconsin on November 27, 2007.
- The district court held Wisconsin’s six-year contract limitations period applied and split plaintiffs into subclass A (timely) and subclass B (untimely) based on lump-sum timing.
- The court concluded accrual occurred at the time of lump-sum distributions and ordered recalculation of future interest without yet selecting a method, deferring to the parties if they could agree.
- On appeal, the Seventh Circuit affirmed most rulings, reversed the trial court’s deference to the plans on choosing a damages method, and remanded to resolve the proper damages calculation method.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did ERISA claims accrue? | Thompson argued accrual aligned with 1998–1999 disclosures or later lump-sum receipt, not earlier. | Plans contend accrual dates either 1998–1999 or at lump-sum receipt for all. | Accrual occurs at lump-sum receipt; earlier disclosures did not trigger accrual. |
| Who should determine subclass A's recovery calculation? | District court should determine the proper future-interest calculation. | Plan defendants argue entitlement to deference and a preferred method. | District court, not the plans, must determine the damages calculation method. |
| Are plan fiduciaries entitled to deference in this damages calculation? | Deference not warranted for post-hoc calculation of damages. | Conkright permits deferential treatment of fiduciaries’ interpretations. | Deference to plan-determined method is not applicable; court must decide damages method. |
| What is the proper method to calculate future interest credits on remand? | Use a method closely tied to actual interest crediting and accurate projection. | Plan method (five-year average) is appropriate and should be respected. | Remand to district court to select a proper, non-deferential damages method; not bound to plan’s proposed method. |
Key Cases Cited
- Berger v. Xerox Ret. Income Guar. Plan, 338 F.3d 755 (7th Cir. 2003) (ERISA cash balance damages and accrual principles; actuarial equivalence and wash issues)
- Esden v. Bank of Boston, 229 F.3d 154 (2d Cir. 2000) (accrual and actuarial circumstances in ERISA plans)
- Young v. Verizon's Bell Atl. Cash Balance Plan, 615 F.3d 808 (7th Cir. 2010) (lump-sum accrual considerations; reliance on remedies exhaustion distinct from present case)
- Conkright v. Frommert, 130 S. Ct. 1640 (U.S. 2010) (fiduciary deference in plan interpretation; limits on discretionary abuse)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (U.S. 1989) (fiduciary deference framework for plan interpretations)
- Durand v. Hanover Ins. Group, Inc., 560 F.3d 436 (6th Cir. 2009) (remedial authority principles for calculating damages; district-court role)