Supreme Court Lets Stand Alternate Definitions for Retirement Age

February 23, 2010 ( – The U.S. Supreme Court has let stand a federal court's decision that an employer may define normal retirement age using years of service and not a specific age.

In July 2009, the 7th U.S. Circuit Court of Appeals found that employers had a good deal of leeway in determining the definition of normal retirement age to be used for their plans. The petition for the high court’s review asked it to decide whether the 7th Circuit erred in interpreting ERISA Section 3(24) as unambiguously granting pension plan sponsors discretion to define normal retirement age in terms other than a specific age.

The 7th Circuit’s decision came in a challenge to Exelon Corp.’s cash balance plan by Thomas Fry who questioned the plan’s normal retirement age definition after getting a lump sum distribution when he left Exelon in 2003 (see Appellate Judges Affirm Years-of-Service Definition for Retirement). Fry contended that the retirement age definition was a way to get around performing a whipsaw calculation when determining an employee’s plan balance for distribution, in violation of the Employee Retirement Income Security Act (ERISA).