The accounting giant had defined in its plan the normal retirement age as “five years of service,” which is an invalid period under ERISA, the court said. Therefore, the court said that the default retirement age was the statutory 65.
The plaintiffs also sued the firm on the grounds that the cash balance plan violates ERISA standards for calculating lump-sum benefits payable from such a program, standards for calculating accrued benefits and age discrimination rules. But the court dismissed those claims.
In 1994 Price Waterhouse replaced its previous defined benefit arrangement with a cash balance plan, and when the company merged with Cooper & Lybrand in 1999, all employees were switched over to the plan. Under the plan, a participant is fully vested after five years of employment with the firm, meaning that PWC must then provide the employee with 100% of the company’s contributions to the plan. However, participants who leave the company after this five-year period can elect to receive their “normal retirement” benefit as a lump sum distribution at the time they leave, the opinion stated.
The plaintiffs argued that because the plan’s definition of the retirement age violated ERISA, the default age was 65, and then the plan should project the balance of their hypothetical accounts forward to age 65 and the pay the present value of that projected balance. The court agreed, ruling that three employees who left the firm before they turned 65 should get lump-sum distributions recalculated to include interest credits they would have gotten between the time they left and age 65.
The court also said the plan’s normal retirement age was invalid because it was not clearly laid out in the summary plan description.