Verizon Cash Balance Plan Gets Court Sanction

April 26, 2007 ( - Cash balance plans got another legal vote of confidence with a federal judge's ruling that Verizon Communications' cash balance program is not age discriminatory.

U.S. District Judge Denny Chin of the U.S. District Court for the Southern District of New York joined a chorus of other jurists in turning aside arguments that cash balance plans are improperly more generous to younger workers than their older counterparts.

Echoing findings by other judges considering cash balance discrimination claims, Chin said Verizon’s plan was age neutral and that the issue of additional benefits paid to younger employees over older employees was only a function of the time value of money and not age discrimination.

Also, as have other courts in cash balance cases, Chin ruled that the reference in the Employee Retirement Income Security Act (ERISA) to “benefit accrual” refers to what an employer puts into a plan, while “accrued benefit” refers to what the plan may pay out.

According to the ruling, Verizon’s cash balance plan is the successor to two cash balance plans sponsored by Bell Atlantic Corp. and NYNEX Corp. The Bell Atlantic plan was a traditional defined benefit plan until it was converted to a cash balance plan in 1996. The NYNEX plan was also a traditional defined benefit plan until its conversion to a cash balance plan in 1998.

According to the court, Verizon froze the cash balance plan on June 30, 2006, as a cost-cutting measure. In spite of the freeze, benefits remained payable under the plan based on the level of benefits accrued by each participant prior to the freeze and interest credits continued to be made to participants’ accounts, the court said.

Four Verizon employees filed suit against the company on September 1, 2006, two weeks after the passage of the Pension Protection Act. The suit complained of discrimination both before the PPA’s effective date and after.

The case is Bryerton v. Verizon Communications Inc., S.D.N.Y., No. 06 Civ. 6672 (DC), 4/17/07.