AK Steel Faces New Lawsuit on Whipsaw Calculation for
Distributions
July 7, 2009 (PLANSPONSOR.com) - A new lawsuit
alleging AK Steel Corp. violated the Employee Retirement
Income Security Act (ERISA) by failing to use a "whipsaw"
calculation in computing lump-sum distributions has been
filed on behalf of union-represented employees who retired
between July 1994 and August 2006.
According to a BNA news report, the complaint alleges
the company calculated the retirees' lump-sum
distributions as being equal to the then-current cash
balance amount held in the retirees' accounts, instead
of using the two-step whipsaw calculation that was required
of cash balance plans prior to the passage of the Pension
Protection Act in 2006.
To comply with ERISA, the lump-sum payments must be the
actuarial equivalent of the normal accrued pension benefit.
The first step is to project forward to normal retirement
age a participant's hypothetical account balance using
the rate at which future interest credits would have
accrued if the participant had stayed in the plan until
that time. Then the calculation discounts that amount
back to its present value on the date of the actual
lump-sum distribution
The Pension Protection Act (PPA) lifted the whipsaw
calculation requirement from the cash balance plan
distributions, but the change only applied after August 17,
2006.
The suit mimics a lawsuit,
West v. AK Steel Corp. Retirement Accumulation Pension
Plan
, brought by former non-union employees in which the 6th
U.S. Circuit ruled AK Steel had violated ERISA (see
AK Steel Cash Balance Distributions Not
Covered by PPA
). The U.S. Supreme Court let the decision against AK Steel
stand when it turned down a request to review the
$46-million award to former steel workers (see
U.S. Supreme Court Turns Away AK Steel
Review Request
).
"Despite the fact that the courts in
West
have mandated that the Defendants' method of
calculating lump sum benefits was unlawful, Defendants have
refused to recalculate the lump sum payments of the
Plaintiff and the putative class," the new complaint
said, according to BNA.
The new suit, filed on July 2, is
Schmidt v. AK Steel Corp. Pensions Agreement
Plan
, S.D. Ohio, No. 1:09-cv-464 MRB.
Rebecca Moore
editors@plansponsor.com