Court Approves Settlement of Cash Balance Claims against Avnet

Former employees of Avnet, Inc. and participants in the Avnet Pension contended that Avnet violated ERISA by calculating participants’ lump sum distributions without a “whipsaw calculation,” resulting in an underpayment of retirement benefits. They also alleged that Avnet violated ERISA by denying other participants the opportunity to elect lump sum distributions and by breaching its fiduciary duty to provide statutorily-required disclosures.

In February 2009, U.S. District Judge Frederick J. Martone denied a motion by Avnet to dismiss some of the claims because the Pension Protection Act of 2006 no longer required the whipsaw calculation required by ERISA. Martone noted that the PPA expressly provides that these rules “shall apply to distributions made after the date of the enactment of this Act,” which was August 17, 2006, and since the plaintiffs sought a correction of a pre- PPA miscalculation of benefits, Avnet cannot avoid liability for pre-PPA ERISA violations.  

Martone certified two classes of plaintiffs. The Lump Sum Class consists of all persons for whom the Avnet Pension Plan maintained a notional account at any time after 12/31/93, and who received a lump sum distribution from the plan between 1/1/94 and 8/17/06; and the lawful beneficiaries, estates or alternate payees of such persons. The Restricted Participant Class is certified consisting of all persons for whom the plan maintained a notional account at any time after 12/31/93, and who between 1/1/94 and 8/17/06 were not offered a lump sum distribution upon termination of their employment because the plan determined that the present value of their pre-1/1/94 benefit exceeded their notional account balance; and the lawful beneficiaries, estates or alternate payees of such persons.  

In the settlement approved by Martone on April 14, class counsel was awarded attorney’s fees, exclusive of costs and expenses, in an amount equal to 25% of the settlement amount ($8.5 million), plus costs and expenses in the amount of $400,000. Plaintiffs Levanna C. Traylor, Kevin R. Moses, James Frederic Coy, and Gwyn M. Moriarty were each awarded, in addition to their allocable shares of the Lump Sum Class Settlement Fund, an additional $3,000 as compensation for their contributions to the Lump Sum Class recovery. Plaintiffs Linda M. Phillips, Thomas G. Small, Dwayne E. Cohen, and Steve A. Dison were awarded, in addition to their allocable shares of the Restricted Participant Class Settlement Fund, $3,000 each for the time expended in pursuit of the benefits obtained by the Restricted Participant Class.   

Martone also authorized the Settlement Administrator to assess against the Lump Sum Class’s proceeds up to $100,000 to cover the cost of settlement administration.  

The case is Traylor v. Avnet Inc., D. Ariz., No. 08-cv-00918-PHX-FJM.