A Fifth Federal Appellate Court Upholds Cash Balance
Plan Designs
August 20, 2008 (PLANSPONSOR.com) - In a continuing
trend of federal court rulings backing cash balance plans,
the 9th U.S. Circuit Court of Appeals has ruled the plans do
not discriminate against older workers in favor of their
younger counterparts.
The 9
th
Circuit issued the latest ruling in a case involving
Southern California Gas Company and its SCGC Pension
Plan, which employees charged violated the Employee
Retirement Income Security Act (ERISA) by being
discriminatory. The 9
th
Circuit decision upheld a ruling by U.S. District Judge
Manuel L. Real of the U.S. District Court for the Central
District of California in favor of the company.
The latest ruling written by Circuit Judge N. Randy
Smith becomes the fifth federal appellate court to find
that cash balance plans do not discriminate if younger
workers end up with higher balances because that is a
product of the time value of money. In addition, Smith
said
cash balance formulas do not reduce an older worker's
accrued benefit because he or she attains a certain age,
and cash balance plans do not violate ERISA's
anti-backloading rules.
However, the appeals court reinstated the
participants' claim that the plan sponsor violated
ERISA's notice requirements by not giving them notice
of the cash balance plan's "wear-away
effect."
The case is Hurlic v. Southern California Gas
Co.,
9th Cir., No. 06-55599, 8/20/08.
Previously upholding cash balance plan designs were
the 2nd Circuit Court of Appeals (See
Federal Appellate
Panel Clears Two More Cash Balance Plans
), 3rd Circuit (See
Cash Balance
Proponents Get Two Legal Victories
), 6th Circuit (See
6th Circuit Latest
to Reject Cash Balance Age Discrimination Claims
), and the 7th Circuit (See
IBM Cash Balance Discrimination Ruling Reversed
).
Fred Schneyer
editors@plansponsor.com