January 4, 2011 (PLANSPONSOR.com) – A federal judge in Wisconsin has ordered Alliant Energy Corp. to use an 8.2% interest rate when it carries out lump-sum distributions from its cash balance program.
With that ruling, U.S. District Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin effectively turned aside dueling recommendations from experts retained by both sides; the plaintiffs' expert argued for 8.45% while Alliant’s expert contended 7.63% was actually the preferable rate.
Crabb had ruled in mid-2010 that Alliant ran afoul of the Employee Retirement Income Security Act (ERISA) by using a 30-year Treasury rate in making the payout calculations for employees opting for the payments between 1998 and 2006 before reaching normal retirement age (see Alliant Tagged for Pre PPA Whipsaw Calculation). The Pension Protection Act amended ERISA to provide that cash balance plans are no longer required to make whipsaw calculations.
“Plaintiffs are entitled to a rate that fairly reflects what they should have been credited, but no more,” Crabb wrote in her latest opinion. “The interest credits that will be applied to plaintiffs' lump sum benefits are a windfall available only to plaintiffs, not to any other participants in the plan, and available only for the period in which the Internal Revenue Service required the whipsaw calculation.”
In late December, Crabb issued an order dealing with determining damages in the case (see District Court Issues Order on Cash Balance Suit Damages).
The case is Ruppert v. Alliant Energy Cash Balance Pension Plan, W.D. Wis., No. 08-cv-127-bbc.