AT&T Cleared in Cash Balance Notification Suit

US District Judge Jose Linares of the US District Court for the District of New Jersey ruled that the notice of the plan conversion was not required because the change was not causing participants’ “amount of future benefits” to be reduced, BNA reported. Linares turned aside arguments that the notification was required if a conversion cut the “rate of future benefits.”

After comparing the rates of future benefits under AT&T’s defined benefit formula to the rates of future benefits under the cash balance formula, Linares asserted that there was no reduction in the rate of future benefits. So, AT&T had no duty to give participants 15 days’ notice prior to the plan conversion, he said.

threw out the participants’ claim that AT&T, through a summary plan description, violated ERISA’s reporting and disclosure rules by hiding the “bad parts” of the plan conversion from the participants. According to the court, although AT&T’s SPD put a “spin” on the plan transition to make it more palatable for employees, this did not rise to the level of active concealment that would entitle the employees to substantive remedies.

Acording to the court record, AT&T converted its traditional defined benefit plan to a cash balance plan in June 1997. A group of AT&T employees sued the company, alleging that the conversion violated ERISA. The employees also alleged that AT&T discriminated against older and longer service management employees in violation of the Age Discrimination in Employment Act when it implemented the cash balance plan.

In his ruling, Linares said that AT&T did not attempt to withhold the “bad parts” of the cash balance plan altogether. “Rather, it appears to the Court that AT&T was cognizant of the possibility that the implementation of cash balance was likely to receive negative feedback from employees and wished to reduce this type of occurrence. The record does not reflect, nor do the Plaintiffs demonstrate to this Court, that AT&T did anything more than ‘spin’ the Plan transition to make it more palatable for employees,” the court said.

The case is Engers v. AT&T, D.N.J., No. 98-3660 (JLL), unpublished 3/31/06.