Court Finds 45-day Timing for Lump-sum Payments Reasonable

March 19, 2010 ( – The U.S. District Court for the District of Columbia has ruled that U.S. Airways policy to pay retired pilots lump-sum benefits 45 days after retirement was reasonable and it does not owe the pilots interest for the 45-day period.

U.S. District Judge Rosemary M. Collyer explained that the Benefits Commencement Date under the plan is not the actual date of payment. “Plaintiffs err in construing payment ‘as of’ a date to mean payment ‘on’ that date,” Collyer wrote.      

She pointed to an Internal Revenue Service regulation which provides that “[a] payment shall not be considered to occur after the annuity starting date merely because actual payment is reasonably delayed for calculation of the benefits amount if all payments are actually made.” Collyer said the significance of the regulation is that it informs the meaning of the term “Benefit Commencement Date” as used in the plan and clarifies that the term means “annuity starting date,” which is not necessarily the date on which benefits are payable.      

US Airways explained that because of the definition of ‘Final Average Earnings’ in the plan which is required to determine the final benefit, coupled with pay periods specified in the collective bargaining agreement and the multiple calculations required under the terms of the plan, it is administratively impossible to make a lump-sum payment on a pilot’s actual Benefit Commencement Date. US Airways said the process takes 40 business days to complete, so it adopted an administrative guideline of 45 days to allow for any problems which may occur.       

The court found that the pilots did not show that this was unreasonable under the circumstances.      

Collyer also said the pilots cite no legal authority supporting their argument that ERISA’s actuarial equivalence rule requires the payment of interest to account for the time value of money resulting from reasonable delay to allow for payment calculation. “ERISA’s actuarial equivalence rule requires only that the value of the lump sum benefit be the actuarial equivalent of the individual’s accrued benefit,” she wrote.      

The court granted summary judgment to the Pension Benefit Guaranty Corporation as successor-in-interest to the Retirement Income Plan for Pilots of U.S. Air, Inc.      

The case is Stephens v. US Airways Group, D.D.C., No. 07-1264 (RMC), 3/17/10.