U.S. District Judge J.P. Stadtmueller of the U.S. District Court for the Eastern District of Wisconsin ruled that the plaintiffs’ claim of a violation of ERISA interest credit rules that went into effect earlier this year was premature.
The new ERISA cash balance rule said pension plans will be in violation if they use interest credits above a market return rate. However, Stadtmueller pointed out, the interest crediting rate used by the plan for 2008 will not be known until December 31, 2008, or after.
Stadtmueller also pointed out that the deadline for amending pension plans to impose the market rate ceiling is not until December 31, 2009, and the Treasury Department has not yet issued regulatory guidance on what constitutes a market rate of interest for ERISA Section 204(b)(5)(B)(i)(1) purposes.
“Plaintiffs cannot know whether the Plans employed an interest crediting rate above the market rate before the end of the year, making the claim speculative,” Stadtmueller said.
However, the court refused to dismiss the participants’ claim that the plan violated ERISA by not using a whipsaw calculation in computing participants’ lump-sum distributions. The court rejected the plan’s contention that the participants could not proceed with this claim without first exhausting their administrative remedies, saying that pursuing administrative remedies would be futile.
The age discrimination lawsuit was brought by participants in cash balance plans sponsored by S.C. Johnson and JohnsonDiversey Inc.
The case is Thompson v. Retirement Plan for Employees of S.C. Johnson & Sons Inc., E.D. Wis., No. 07-CV-1047, 11/14/08.