Blue Cross Dr Awarded COLA Money

February 18, 2002 ( - A federal judge put on his actuary hat in ruling on a recent pension dispute that an employer had to include the present value of cost of living adjustments (COLA) to workers who took lump-sum defined benefit payouts.

The ruling by Chief Judge William G. Young of the US District Court for the District of Massachusetts, was based on his earlier finding that the COLA payments represented “accrued benefits” under ERISA as part of the pension plan sponsored by Blue Cross and Blue Shield of Massachusetts.

The judge ruled that prohibiting COLA benefits to participants who accepted lump sum distributions instead of life annuities, was a violation of ERISA.

The ruling came in a lawsuit filed by Dr James Laurenzano, a former Blue Cross employee.

The judge ruled that:

  • Laurenzano was entitled to 2.3% interest dating from his distribution to the suit filing and 12% starting on the suit-filing date, and
  • the plaintiff’s COLA amount should be calculated from the yield on the 30-year Treasury bonds starting in October of the year before the lump-sum payment. A 4% deduction should be figured in, and the entire figure should be subject to a 3% cap

The case is Laurenzano v. Blue Cross and Blue Shield of Massachusetts Inc. Retirement Income Trust.