According to the Wilmington (Delaware) News Journal, Hercules retirees Charles Stepnowski and Sam Webster brought a suit against the chemical company, challenging the company’s decision in December 2001 to change the interest rate at which the lump-sum pension payments were calculated, which would reduce the amount paid out to retirees.
On January 1, 2002, the company quit using the rate published by the Pension Benefit Guaranty Corp (PBGC) – the nation’s private sector pension insurer – and started using the higher 30-year Treasury bill interest rate, the Delaware paper reported. When Hercules switched over to the different rate, it began to apply the Treasury bill rate retroactively to cover all employees’ entire length of service with the company, according to Kohn Swift & Graf PC, the law firm that represents some of the class action members.
The suit said that by changing the rates, the company broke a promise it made in 1999 that it would not do so, said one of Stepnowski’s lawyers.
US District Judge John Fullam ruled that the chemical company breached the terms of its pension plan and that it would have to use two interest rates – the PBGC rate for service time accrued up to December 31, 2001, and the Treasury bill rate for the service from January 1, 2002, until retirement, according to the News Journal.
Because of the ruling, retirees who opted for lump-sum benefits could see that amount rise between 6% and 12%, meaning a payout of between $12 million and $20 million to affected workers and retirees, according to the paper.
Under Hercules’ pension plan, eligible retirees can elect to take 51% of their benefits in the form of a lump sum at retirement, and the balance in a monthly annuity.
The news report said the ruling only affected lump-sum payments, not retirees’ monthly payments. Hercules has filed a motion asking Fullam to reconsider the ruling.