In a statement released Monday, the company also said if the 7 th U.S. Circuit Court of Appeals decision stands, “the U.S. pension trust would be required to pay these amounts, but the company will take the necessary steps to modify the plan to ensure pension expenses will not increase.”Rohm and Haas did not specify the nature of those “necessary steps” in its statement.
The Philadelphia company’s announcement said that the $0.20 per share post-tax charge acknowledged the potential fiscal impact of the decision.
The 7 th Circuit in August affirmed a ruling by U.S. District Judge Sarah Evans Barker of the U.S. District Court for the Southern District of Indiana that COLAs provided to defined benefit plan participants who choose to receive their distributions as an annuity must also be included in the calculation of benefits for those who choose to receive a lump sum (See COLAs Must be Included in Lump-Sum Benefits for DB Participants ).
The class action suit against the company was led by plaintiff Gary Williams, who chose to receive his pension in a lump-sum distribution. The suit alleged that he was wrongfully denied benefits under the plan because his lump-sum distribution did not include the present value of the COLA he would have received had he chosen to receive his pension as monthly annuity payments.
The appellate court pointed out that the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code prescribe that if a defined benefit pension plan allows for a lump-sum distribution, that distribution must equal the present value of the accrued benefit expressed in the form of a single-life annuity. The court further said that not including the COLA in the calculation of lump-sum benefits to the class of retirees covered under the plan violates ERISA’s anti-cutback rule.
The 7th Circuit opinion in Williams v. Rohm and Haas Pension Plan is here .