Wednesday, November 1, 2006
In writing previously about the 7th Circuit Cooper decision by Judge Easterbrook, I suggested that the case might resolve whether conversions from traditional defined benefit plans to cash balance plans are unlawfully age discriminatory (reminder: this only continues to be an issue for plans in existence prior to enactment of the Pension Protection Act of 2006 which now generally states that such conversions are not age discriminatory).
Well, apparently Judge Baer of the Southern District of New York is not buying the reasoning of Easterbrook's Cooper decision.
Here's what he had to say in partially denying a motion to dismiss in the case of In re J.P. Morgan Chase Cash Balance Litigation, No. 06-732 (S.D.N.Y. Oct. 30, 2006) (thanks to The ERISA Blog for the heads up):
Part of the Seventh Circuit’s decision relied on a finding that “‘benefit accrual’ (for defined-benefit plans) and ‘allocation’ (for defined-contribution plans) both refer to the employer’s contribution.” Id. at 639. Defendants in this case make a similar argument and they argue that Congress was saying the same thing when they used the term “allocation” in one provision and “rate of benefit accrual” in the other. The fact is accrual, using its dictionary meaning and in line with the structure of defined benefit plans, refers to what the employee accumulates (the outputs from the plan) whereas allocation, using its dictionary definition and in line with the structure of defined contribution plans, refers to what an employer puts into the account. As this Circuit has observed, “[w]hen Congress uses particular language in one section of a statute and different language in another, we presume its word choice was intentional.” U.S. v. Peterson, 394 F.3d 98, 107 (2d Cir. 2005). . .
Further, the age discrimination arises because this is a defined benefit plan and older workers accrue their retirement benefits at a slower rate than similarly situated younger workers. As directed by the Supreme Court, my role “is to apply the text, not to improve upon it.” Pavelic & LeFlore v. Marvel Entm’t Group, 493 U.S. 120, 126 (1989). That is the province of Congress, and it addressed some of the tensions that arise when the binary statutory framework is applied to cash balance plans at the time they passed the Pension Protection Act of 2006 this summer.
So, in any event, in no sense of the word has Judge Easterbrook's take on cash balance plan conversions won the day and we in fact still might be heading for a Supreme Court show down for these neddlesome cases.