Court Dismisses WaMu Cash Balance Plan Discrimination Claim

December 31, 2007 ( - The U.S. District Court for the Western District of Washington has dismissed claims by a group of Washington Mutual employees that the company's cash balance plan benefit formula discriminates against participants based on age.

In her ruling, U.S. District Judge Marsha J. Pechman cited previous court decisions on cash balance discrimination claims, such as Cooper v. IBM, that relied on the definition of “rate of benefit accrual” under the Employee Retirement Income Security Act (ERISA) (See IBM Cash Balance Discrimination Ruling Reversed ). The plaintiffs in the WaMu case, similarly to the plaintiffs in Cooper and other cash balance suits, argued that the WaMu plan was discriminatory because the formula for applying interest credits to participant accounts took into consideration years of service until retirement, thereby discriminating against older workers.

Pechman agreed with WaMu that the plaintiffs were treating the time value of money as being age discriminatory, and quoting the 7th U.S. Circuit Court of Appeals decision in Cooper, said: “Treating the time value of money as a form of discrimination is not sensible.”

“The Court finds that WaMu’s cash benefit plan does not violate ERISA because it does not reduce a participant’s rate of benefit accrual on the basis of age,” Pecham said in her decision. The district judge went on to dismiss several notice-related claims because they were based on the proposition that the plan discriminated based on age.

WaMu initiated its cash balance plan in 1987.   According to the court document, any accrued benefit in WaMu’s prior plan, or in a plan under a company who later merged with WaMu, became the participant’s initial balance. Pay credits were based on a percentage of the participant’s annual compensation and added to participant accounts each pay period, while interest credits were earned at a uniform rate and were compounded daily.

The opinion in Buus v. WaMu Pension Plan is here .