Judge Calls S.C. Johnson Cash Balance
Participants' Claim "Speculative"
November 18, 2008 (PLANSPONSOR.com) - A federal
judge in Wisconsin gave cash balance plan participants at
S.C. Johnson & Sons Inc. only a limited victory by
throwing out one claim of an Employee Retirement Income
Security Act (ERISA) violation but refusing to toss out a
second charge.
U.S. District
Judge J.P. Stadtmueller of the U.S. District Court
for the Eastern District of Wisconsin ruled that the
plaintiffs' claim of a violation of ERISA interest
credit rules that went into effect earlier this year was
premature.
The new ERISA cash balance rule said pension plans
will be in violation if they use interest credits above a
market return rate. However, Stadtmueller pointed out,
the interest crediting rate used by the plan for 2008
will not be known until December 31, 2008, or
after.
Stadtmueller also pointed out that the deadline for
amending pension plans to impose the market rate ceiling
is not until December 31, 2009, and the Treasury
Department has not yet issued regulatory guidance on what
constitutes a market rate of interest for ERISA Section
204(b)(5)(B)(i)(1) purposes.
"Plaintiffs cannot know whether the Plans
employed an interest crediting rate above the market rate
before the end of the year, making the claim
speculative," Stadtmueller said.
However, the court refused to dismiss the
participants' claim that the plan violated ERISA by
not using a whipsaw calculation in computing
participants' lump-sum distributions. The court
rejected the plan's contention that the participants
could not proceed with this claim without first
exhausting their administrative remedies, saying that
pursuing administrative remedies would be futile.
The age discrimination lawsuit was brought by
participants in cash balance plans sponsored by S.C.
Johnson and JohnsonDiversey Inc.
The case is Thompson v. Retirement Plan for
Employees of S.C. Johnson & Sons Inc.,
E.D. Wis., No. 07-CV-1047, 11/14/08.
Fred Schneyer
editors@plansponsor.com