U.S. District Judge Walker D. Miller of the U.S. District Court for the District of Colorado said his ultimate decision to certify as a class plaintiffs’ allegations of a violation of the Age Discrimination in Employment Act (ADEA) will depend on whether plaintiffs’ lawyers can more properly describe who should be involved.
Miller asked that the employees redefine the class to those whose benefits were subject to a wear-away period. One of the charges in the case is that the plan effectively discriminated against older workers during the time it took for their new cash balance plan account to catch up in value to the frozen balance of their prior defined benefit plan account.
Miller asserted there were remaining issues he could not yet resolve dealing with whether a summary plan description (SPD) issued by El Paso Corp. satisfied the notice and disclosure requirements of the Employee Retirement Income Security Act (ERISA).
The employees have contended that the El Paso SPD did not comply with ERISA because it did not disclose that the cash balance plan:
- caused older participants to earn no additional benefits beyond those already earned,
- significantly reduced the rate of future benefit accruals, and
- changed the basis for benefits to year-by-year salary instead of highest pay base averaging.
At the same time, however, Miller cited federal court case law to support his ruling that cash balance arrangement such as the one set up by El Paso Corp. does not lead to an illegal benefits backloading or cause a benefits forfeiture.
El Paso converted its traditional defined benefit plan to a cash balance plan in 1997. A group of El Paso employees brought a lawsuit alleging the company violated the ADEA claiming El Paso set the initial cash balance accounts for older, longer-service employees at levels significantly below the value of their accumulated annuities under the old plan.
In March 2007, Miller threw out the employees’ ERISA age bias claim, but declined to dismiss the ADEA allegation (See Judge Tosses ERISA Cash Balance Discrimination Claim ).
The case is Tomlinson v. El Paso Corp., D. Colo., No. 04-cv-02686-WDM-MEH, 3/19/08.
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