U.S. District Judge Walker D. Miller of the U.S. District Court for the District of Colorado sided with a growing number of jurists in other cash balance cases when Miller ruled that El Paso Corporation’s cash balance program did not violate the Employee Retirement Income Security Act (ERISA).
Miller said he agreed with the majority of federal courts that have ruled the “rate of benefit accrual” in ERISA’s age discrimination provision should be based on what an employer puts into a participant’s plan account and not what the worker takes out at retirement (See Boeing Cash Balance Ruling Adds to Pro-CB Case Law , Rules/Regs: Prevailing Wisdom ).
However, Miller rebuffed El Paso’s request to also throw out claims it had violated the Age Discrimination in Employment Act (ADEA) when it allegedly set the initial cash balance accounts for older, longer-service employees significantly below their accumulated annuities under the company’s former pension.
Miller rejected El Paso’s claim that the employees’ ADEA claim should be dismissed because of participants’ failure to file a charge of age discrimination with the Equal Employment Opportunity Commission within 300 days of the January 1, 1997 conversion.Miller asserted it was not clear whether the employees knew or should have known on January 1, 1997, that they had an ADEA claim because while the employees received a brochure on that date explaining that the plan was being converted, the employees claimed the brochure said nothing about a freeze in accruals under the old plan.
According to Miller’s ruling, El Paso did the cash balance conversion in 1997. Between January 1, 1997 and December 31, 2001, participants accrued benefits under both the new cash balance plan and the old pension. Retiring employees could opt for whichever alternative benefited them the most, the court said. Once the transition period expired retirees still could choose either option but the old plan was frozen at whatever benefits the employee had earned as of December 31, 2001, the court added.
A group of El Paso employees brought a lawsuit alleging the company violated the ADEA because El Paso set the initial cash balance accounts for older, longer-service employees at levels significantly below the value of their accumulated annuities under the old plan. Plaintiffs Wayne Tomlinson, Alice Ballesteros and Gary Muckelroy, who represented other workers in the class action case, also alleged that the cash balance plan violated ERISA’s age discrimination rules.
The case is Tomlinson v. El Paso Corp.,D. Colo., No. 04-cv-02686-WDM-MEH, 3/22/07.