I enjoyed Alvin Lurie’s article posted at Benefitslink.com entitled: “What Will Judge Posner Do Next? Balm or Bomb for Cash Balance Plans?” For those who do not know, the IBM case, Cooper et al. v. The IBM Personal Pension Plan et al., will go to the same court on appeal (the 7th Circuit) that decided the Xerox case, Berger et al. v. Xerox Corporation Retirement Income Guarantee Plan, with Judge Richard Posner being the likely author of any opinion in the IBM appeal. The article addresses the speculation that is running rampant that Judge Posner will not overturn the lower court decision which ruled that the IBM cash balance plan violated ERISA. Mr. Lurie calls the speculation “unwarranted” and predicts that “IBM has a fair chance of prevailing in his court, if the judge has his way.” The article distinguishes the Xerox case in which Judge Posner ruled in favor of employees’ claims:
But the point of this piece is not to criticize Xerox, but rather to describe it sufficiently to delineate its difference from the “rate of accrual” issue, as relates to the statutory test for age discrimination, which is the focus of the IBM litigation. . . It is immediately apparent that the matter decided in Xerox has no bearing on the discrimination issue in IBM, save that the decisions in both cases are heavily influenced by the “frontloaded” cash balance formats at issue, that is, “interest adjustments to a hypothetical (pay-based) allocation . . . provided through normal retirement age, even though the employee terminates employment . . . before that age.” (Treas. Reg. Sec 1.401(a)(4)-8(c)(3)(iv).) Neither the issue of the proper discount rate that so dominated the Xerox decision nor the matter of the effect of pre-retirement cashouts has pertinence to IBM.”
Please note that Judge Posner will be the featured judge for Howard Bashman’s “20 questions for the appellate judge” in December.
Also, a previous post here at Benefitsblog notes that, in a CNBC interview with Judge Posner entitled “Richard Posner discusses his position on law, pragmatism and democracy” on July 28, 2003 (prior to the issuance of the opinion in the Xerox case) Mario Bartiromo for CNBC asked Judge Posner about his views regarding employees suing pension funds over reduced payments. His response was that with all of the litigation and all of the “detailed regulations of pension funds,” Congress might have to “step in at some point and change the rules.”
Unfortunately, Congress has not changed the rules, but suspended the rules (which you can read about here, here and here), creating a great deal of further legal uncertainty for these types of plans.