ERIC calls for legal recognition of cash balance plans

With respect to the Register v. PNC Financial Services Group case, ERIC’s brief has addressed the plaintiffs’ claim that cash balance plans ( which define an employee’s benefit as the sum of their accumulated pay credits and interest credits) are inherently age discriminatory because younger employees will accrue a larger benefit due to the longer period before they reach retirement age compared to older workers.

Under the plaintiff’s reasoning , all cash balance plans - covering over eight million participants - would be illegal. According to ERIC this is a “strained” interpretation of the law, produces “absurd results” and is contrary to long held views of the Department of Treasury.

ERIC has claimed other types of plans under which retirement benefits continue to grow until the employee begins to receive benefits would also be invalid. It believed by applying the plaintiff’s rationale, social security benefits would be unlawful since they index benefits in much the same manner.

Mark Ugoretz, ERIC president said: “Some 25% of all employees covered by a single-employer could see their pension plans invalidated if the courts adopt the plaintiff’s reasoning in this case. It is essential the court recognises these plans are fair, operate consistent with the law, and provide valuable benefits to those they cover.”

The Register case is one of several currently moving through the federal court system over cash balance plans. To date only two district court have held the plans violate age discrimination requirements.

By Daniel Flatt