Cash Balance Litigation Settles for $1.85M

June 21, 2006 ( - A federal judge has approved a $1.85 million settlement between a Pennsylvania health care firm and its former employees over allegations that workers were never informed that the company's retirement program was a cash balance arrangement.

US District Judge for the Eastern District of Pennsylvania, Eduardo Robreno said the pact between the former workers of Allegheny Health, Education and Research Foundation (AHERF) and the company was fair. Robreno ordered notice of the settlement be sent to about 5,000 participants who would share the proceeds.

Five former AHERF employees filed the lawsuit in 1998, alleging they were led to believe their pension plan was a fully funded defined contribution program   with pools of money set aside for them, according to the ruling.

Workers discovered the truth about the plan when AHERF sold medical facilities in 1998 and went into US Bankruptcy Court for protection from its creditors. That triggered a plan takeover by the Pension Benefit Guaranty Corporation (PBGC), which took control of the plan as statutory trustee.

According to the opinion, employees were then notified that, under the plan, employees who had less than five years of service with AHERF were not entitled to any benefits because their benefits were not vested. The settlement, which was reached last fall, calls for potential class action members to receive about $0.04241 per dollar in their individual account plans. Individuals would recover amounts ranging from $23 to $2,269.

The court also said it would grant conditional approval of the settlement because the $1.85 million in monetary compensation was “a welcomed recovery particularly in light of AHERF’s bankruptcy.”

The case is Grunewald v. Kasperbauer, E.D. Pa., No. 05-1273, 5/30/06. The latest court ruling is   here .