Compliance

Court Limits Remedy for Cash Balance Notice Violation

By Rebecca Moore editors@plansponsor.com | July 05, 2013
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July 5, 2013 (PLANSPONSOR.com) – Participants in Solvay Chemicals’ pension plan were unable to prove its violation of notice requirements was an egregious act.

Therefore, the 10th U.S. Circuit Court of Appeals agreed with a district court ruling that the participants could not receive their lost early retirement benefits in whole as a remedy for the Employee Retirement Income Security Act (ERISA) Section 204(h) notice violation. The company's change from a traditional defined benefit pension plan to a cash balance pension plan eliminated early retirement subsidies.

The 10th Circuit previously found Solvay did violate Section 204(h) and sent the case back to district court for findings about to what remedy the participants were entitled (see "Court Preserves Early Retirement Subsidy Notice Issue"). The appellate court noted that the district court's discretion to award so much relief for a Section 204(h) notice violation is extremely limited: a district court may award "the benefits to which [the employees] would have been entitled" but only on a showing that the company's notice failure was "egregious."

A company's failure may be said to be "egregious" if the failure was "within [its] control" and was "intentional." And, a company's failure may be deemed "egregious" if the failure was "within [its] control" and the company failed "to promptly provide the required notice or information after [it] discover[ed] an unintentional failure to meet the requirements of" Section 204(h), the court opinion said.