The complaint, filed by former employees of Mercantile Bank, U.S. Bancorp’s predecessor, Thomas L. Pellett and Richard A. Williams, seeks certification as a class, which the suit estimated to number in the thousands.
The complaint was filed a week after a judge in the same federal court district found the company’s use of an 8% discount rate instead of the 30-year treasury rate to calculate opening balances at the time it converted its defined benefit plan to a cash balance plan violated the Employee Retirement Income Security Act (ERISA) (See Discount Rate Used in Cash Balance Conversion not up to Plan Sponsor ).
U.S. Bank projected participants’ lifetime annuity to age 65 using an interest credit rate of 6.07%, the 30-year treasury rate at the time of conversion, but then discounted back to present value using a discount rate of 7% for participants younger than age 45 and 8% for participants 45 and older. The new complaint alleges and the prior court ruled that the regulations require the use of the 30-year treasury rate as the discount rate in the calculation.
In addition to class certification, Pellett and Williams are asking that the court order U.S. Bank to recalculate participants’ opening balances in the cash balance plan as of January 1, 1999, the date of conversion, and to pay or credit interest to participants’ accounts from that date.
The lawsuit, c ase number 4:07-cv-01683-CDP, has been assigned to U.S. District Judge Catherine D. Perry. The complaint is here .