Compliance November 15, 2006

Court Rebuffs Cash Balance Ruling Reconsideration Request

A federal judge has rebuffed the latest effort by FleetBoston Financial Corp. to derail a lawsuit charging that its cash balance plan discriminates against older workers.
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US District Judge Janet Hall of the US District Court for the District of Connecticut denied FleetBoston’s request to either reconsider her March 2006 ruling (See FleetBoston Cash Balance Suit Moves Forward) that a FleetBoston employee could proceed with her cash balance suit or allow the bank to take the matter up to the 2nd US Circuit Court of Appeals.

Lawyers for FleetBoston/Bank of America said they should be given a chance to argue to the appellate court that Hall should follow two recent federal court rulings that found that cash balance plans are not age discriminatory.

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In her rulings in the case, Hall rejected the findings of other federal courts that Employee Retirement Income Security Act (ERISA) Section 204(b) (1) (H)’s reference to “the rate of an employee’s benefit” accrual should be measured by the change in the balance of each participant’s hypothetical cash balance account (See Rules/Regs: Hanging in the Balance).

Instead, Hall asserted that Section 204(b) (1) (H) requires that “the rate of an employee’s benefit accrual” be measured solely in terms of an annuity payable at normal retirement age.

The case is Richards v. FleetBoston Financial Corp., D. Conn., No. 3:04-cv-1638 (JCH), October 16, 2006.

Compliance November 15, 2006

Plan Document Trumps Antenuptial Agreement

The US District Court for the Western District of Kentucky ruled that, even though the surviving spouse of a retirement plan participant waived her rights to benefits in an antenuptial agreement, the plan document dictated she receive his assets in the plan.
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Citing a ruling by the 6th US Circuit Court of Appeals, Judge John Heyburn III wrote in his opinion that the plan administrator, law firm Greenebaum Doll & McDonald, should only refer to the plan documents when deciding a beneficiary.

“If the plan administrator does not receive a proper designation naming a non-spouse beneficiary and reflecting spousal consent, the pertinent provisions of the Plan designate the participant’s widow as the beneficiary,” Heyburn wrote. He further stated that the provisions of the plan were in line with the requirements of the Employee Retirement Income Security Act (ERISA).

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The court said waiving the right to plan assets in an antenuptial agreement does not satisfy the plan’s requirement for designation of a new beneficiary under the plan, or spousal consent to name a beneficiary other than the surviving spouse.

The dispute over retirement benefits in this case was between Debbie Sandler, the surviving spouse of David Sandler, and his two children from a prior marriage.

The children brought a cross claim against Debbie Sandler, alleging breach of contract and seeking damages in the amount of the assets of their father’s retirement benefits account, or for specific performance of Debbie Sandler’s contractual obligation to “execute the documentation verifying and confirming her agreement” to waive her rights in her deceased husband’s account.

The court said there was no evidence that David Sandler had asked his wife to consent to changing the plan beneficiary.

The case is Greenebaum Doll & McDonald v. Sandler, W.D. Ky., No. 3:05CV-754-H, October 24, 2006.

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