US Supreme Court Rebuffs Cash Balance Challenge Appeal

April 19, 2005 (PLANSPONSOR.com) - The nation's high court has refused to get involved in the appeal of a lower court ruling that a cash balance plan participant was not entitled to a pension "refund."

>The case turned away by the US Supreme Court concerned plaintiff Frank Crosby’s appeal of a September 2004 decision by the US 6 th Circuit Court of Appeals that he was not entitled to the extra pension money to compensate him for what his lump-sum benefits distribution would have been if the plan administrator had not used a preretirement mortality discount factor.

Appeals judges ruled that Crosby wasn’t entitled to the “refund” because it was a legal remedy and not permitted under the Employee Retirement Income Security Act (ERISA) Section 502(a)(3), which limits plaintiffs to equitable remedies.

objected to a move by his former employer, Bowater, on behalf of approximately 350 plan participants whose benefits were calculated using the preretirement mortality discount. The discount took into account the possibility that he might die before reaching the normal retirement age of 65. Crosby alleged the discount illegally reduced his accrued benefits in violation of ERISA.

In November 2002, US District Judge Richard Enslen of the US District Court for the Western District of Michigan ruled in favor of Crosby and ordered Bowater to refund to participants the amount they would have received if Bowater had not used the preretirement mortality discount. Bowater appealed.

Crosby’s petition for Supreme Court review asked the high court to decide whether the payment of pension benefits owed under ERISA’s anti-forfeiture rule constitutes equitable restitution available under ERISA Section 502(a)(3).

The opinion in Crosby v. Bowater Inc. Retirement Plan for Salaried Employees of Great Northern Paper Inc., U.S., No. 04-1081, cert. denied 4/18/05, is here.

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