Ex-Employee Given Green Light for Cash Balance Suit

January 8, 2009 (PLANSPONSOR.com) - Drawing a distinction between legal claims to recover pension benefits and those to collect money damages from a pension dispute, a federal judge has given a former JP Morgan Chase employee permission to pursue his cash balance plan lawsuit.

U.S. District Judge Denise Cote of the U.S. District Court for the Southern District of New York ruled that, because of the benefits versus damages distinction, ex-employee Frank Bilello would still be considered a participant under the Employee Retirement Income Security Act (ERISA) even though he had taken a lump sum distribution.

Declaring him still a participant under ERISA, Cote said, gave him the requisite legal standing.  

Bilello alleged in his suit that the company violated ERISA by not giving employees proper notice of the cash balance conversion’s impact on their benefits level.

In issuing the ruling, Cote relied on recent case law stating that former employees who take a lump sum distribution cannot later sue for damages – because they would no longer be considered ERISA participants – but can later pursue claims for additional benefits they should have received but for the alleged ERISA violations.

Cote ruled that Bilello’s requested remedy to have the plan returned to its traditional defined benefit formula under which he claimed he would have received more benefits than under the cash balance program was what gave him standing to pursue the case despite his distribution.

The case is Bilello v. JPMorgan Chase Retirement Plan, S.D.N.Y., No. 07 Civ. 7379 (DLC), 1/6/09.