Court Slims Down JPMorgan Cash Balance Suit

JPMorgan Chase & Co. has successfully convinced a federal judge that a former employee should be barred from moving forward with allegations about the company’s cash balance conversion.

Plaintiff Frank Bilello’s alleged that the financial services company’s notices about its cash balance conversion were legally incomplete and inadequate.

However, U.S. District Judge Denise Cote of the U.S. District Court for the Southern District of New York also handed the employer a setback by refusing to throw out the plaintiff’s claim that the company committed a fiduciary breach by misleading workers about how the planned conversion would affect their benefit levels.

Regarding the inadequate notice issue, Cote ruled that the Employee Retirement Income Security Act (ERISA) did not mandate JPMorgan’s corporate predecessors to include additional financial analysis about each employee’s benefit impact on their conversion notice, but merely required an alert the conversion was taking place and the date it would happen.

In a mixed bag ruling, Cote ruled Bilello could continue with the allegations that JPMorgan:

  • violated ERISA’s anti-backloading rule by using incorrect interest-credit rates under its 2002 and 2005 cash balance plans;
  • misinformed participants in 1992 and 1994 summary plan descriptions regarding the existence of “wear-away,” among other things;
  • violated ERISA by failing to provide Bilello with formal plan documents that were used to “operate” the plan in effect in 2007.
  • Bilello’s allegations go back to 1989 when Chase & Co implemented a cash balance plan conversion and distributed employee notices.

In 2006, an employee group of employees filed a lawsuit against JPMorgan (that now owned the company after a series of mergers and acquisitions), saying the plan violated ERISA by discriminating against older workers and by backloading benefits. The employees also alleged that they did not receive adequate notice of the plan conversion and the impact the conversion would have on their benefit accruals.

While Bilello originally was a member of the group pursuing the 2006 suit, he filed his own lawsuit on behalf of employees who had once worked for Chemical Banking and focused on claims that Chemical Banking did not give proper notice of its conversion.

In earlier rulings, Cote said Bilello had legal standing to move forward (see “Ex-Employee Given Green Light for Cash Balance Suit”) and that JPMorgan did not violate ERISA by failing to specify the projection method it used to calculate lump-sum distributions under its pension plan (see “Court Dismisses Claims against JPMorgan Cash Balance Plan”).

The case is Bilello v. JPMorgan Chase Retirement Plan, S.D.N.Y.,No. 07 Civ. 7379 (DLC).