The 7th U.S. Circuit Court of Appeals, in agreeing with a lower court decision, asserted that the interest credits did not represent “benefit accruals” and that their discontinuance at 55 did not violate the Employee Retirement Income Security Act’s (ERISA) ban on stopping or cutting back accruals when a participant reached a certain age (see Monsanto Cash Balance Plan Cleared of Age-Bias Wrongdoing). The court said the credits were intended to reverse the 8.5% per year discount applied to employees’ opening account balances.
“Participants are promised a certain benefit at retirement, which is described as a lump-sum cash balance. Because this is not an ‘eligible cash balance plan’ [as described in Treasury regulations], the general mechanism for determining benefit accrual applies—‘the increase in the participant’s accrued normal retirement for the benefit year,’ ” wrote Circuit Judge Joel M. Flaum, for the appellate panel.The high court has turned away other cases alleging that cash balance plans, in general, are age biased (see U.S. Supreme Court Denies Cash Balance Challenge Review).
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