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.
The appellate court rebuffed participants’ argument that the interest credits were part of participants’ accruals because they were an input credited by Monsanto to each participant’s stated account balance.
Instead, the 7th Circuit found, the interest credits were not benefit accruals and as such were not protected by Section 204(b)(1)(H)(i). 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.
Last June, U.S. District Judge J. Phil Gilbert of the U.S. District Court for the Southern District of Illinois ruled that Monsanto had not violated ERISA by directing that cash balance plan “interest credits” stop at age 55 (see Employer Wins One, Loses One in Cash Balance Case).
The 7th Circuit case is Walker v. Monsanto Co. Pension Plan, 7th Cir., No. 09-3637.