April 3, 2012 (PLANSPONSOR.com) – A federal appellate court affirmed a ruling that a 45-day delay in making a lump-sum payment from a U.S. Airways pension plan is unreasonable.
An analysis U.S. Airways conducted during the 1990s found calculation of a lump-sum payment took, at most, 21 business days, the U.S. Court of Appeals for the District of Columbia Circuit found. According to the analysis, it took seven to 10 business days to complete data checks and benefit calculations, two to three business days to review the calculation and check for qualified domestic relation orders, three to five business days to transmit a check and three business days to review the check.
Aside from restating the process required to calculate lump-sum payments, the Pension Benefit Guaranty Corporation (PBGC) made no argument explaining why the participants’ lump sums were additionally delayed. The PBGC is now the trustee of the plan due to U.S. Airways bankruptcy (see “PBGC to Pay Interest on Unreasonably Delayed DB Payments”).
“In the absence of any contrary evidence, U.S. Air’s 45-day delay appears unrelated to the administrative calculation of plaintiffs’ lump sum benefits. And, because the delay does not correspond to administrative necessity, it is not ‘reasonable,’” the opinion said. The court ruled plaintiffs are entitled to interest.
The court rejected the argument from the dissent that remanding this case “may well open the courthouse doors to litigation over de minimis amounts of interest accrued during a few weeks or even days.” The majority said the flood the dissent fears may amount to a mere trickle. “And to the extent the courthouse doors are open to suits concerning sizable and unreasonable delays, they should be.” The opinion in the case is available at http://www.pbgc.gov/documents/lfad/stephens.pdf.