# Amara v. Cigna Corp.

> District Court, D. Connecticut · February 15, 2008 · 534 F. Supp. 2d 288

URL: https://www.frixlaw.com/law-library/cases/1443249

## Case

- **Full name:** Janice C. AMARA, Individually and on Behalf of Others Similarly Situated, Plaintiff, v. CIGNA CORPORATION and Cigna Pension Plan, Defendants
- **Court:** District Court, D. Connecticut
- **Decided:** February 15, 2008
- **Citations:** 534 F. Supp. 2d 288; 43 Employee Benefits Cas. (BNA) 1011; 2008 U.S. Dist. LEXIS 11378; 2008 WL 450421
- **Precedential status:** Published
- **Opinion:** Opinion by Kravitz
- **Judges:** Mark R. Kravitz
- **Cited by:** 31 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Vacated on other grounds by CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/1443249

## How later opinions describe it (automated extraction)

- finding that “in September 1997, several articles began to 45 appear on cash balance conversions at other companies, and in some cases, complaints by employees resulted in partial or complete rollbacks of the proposed changes”
- finding that “in September 1997, several articles began to appear on cash balance conversions at other companies, and in some eases, complaints by employees resulted in partial or complete rollbacks of the proposed changes”
- explaining that the plaintiff’s backloading argument was “unpersuasive” because “the change in accumulation rates . . . is not the result of a specific plan provision,” but is rather the result of a shift in plans
- explaining that the plaintiff’s backloading argument was "unpersuasive” because "the change in accumulation rates ... is not the result of a specific plan provision,” but is rather the result of a shift in plans

## Opinion text

MEMORANDUM OF DECISION
MARK R. KRAVITZ, District Judge.
Since the mid-1980s, hundreds of U.S. employers have converted their traditional defined benefit pension plans into what are known as “cash balance” retirement plans. In fact, according to the Pension Benefit Guaranty Corporation, over 1,500 cash balance plans and other similar hybrid plans were in existence as of 2003, providing pension benefits to over 8 million participants, approximately one-quarter of the total employee population covered by defined benefit plans.
See
Pension Benefit Guaranty Corp., Pension Insurance Data Book 2004, at 59-60 (2005),
available at
http://www.pbgc.gov/docs/2004databook. pdf. Like many other corporations, CIG-NA Corporation converted its traditional defined benefit plan to a cash balance plan, in 1998.
Despite their popularity among employers, cash balance plans have spawned considerable litigation. This case is yet another in a long list of cases challenging an employer’s conversion to a cash balance retirement plan under the Employee Retirement Income Security Act (“ERISA”).
1
Plaintiffs consist of a class of current and former CIGNA employees who participated in CIGNA’s traditional defined benefit plan before January 1, 1998 and have participated in CIGNA’s cash balance plan since that time.
See
Memorandum of Decision [doc. # 61]. Plaintiffs and Defendants raise numerous class, sub-class, and individual claims and defenses.
See
Order Under Federal Rule 23(c)(1)(B) [doc. # 241] (listing the class, sub-class, and individual claims and defenses). At the risk of over-simplification, however, the central issues in this case may generally be described as follows: whether CIGNA’s cash balance plan is age discriminatory or otherwise violates certain non-forfeiture and anti-backloading rules under ERISA; whether CIGNA gave the notices and other disclosures required by ERISA; and whether the information CIGNA provided its employees about the conversion and the cash balance plan in summary plan descriptions and other materials satisfied ERISA’s requirements.
The questions raised in this case are vitally important to both employers and employees (and their families). Given how profoundly significant retirement plans and planning are to the great majority of Americans — employees and employers alike — this is one area where the answers should be clear, explicit, and definite. Regrettably, however, the answers to the issues raised by these parties are not entire
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ly clear, in large measure due to the fact that ERISA, and the regulations under it, are often lamentably obscure — to describe them as a tangled web does not do them justice. On top of that, there are conflicting decisions around the country on identical issues, making planning for nationwide enterprises impossible. Difficult, time-consuming, and expensive litigation with uncertain results — such as this case represents — is assuredly not a sensible way to manage the Nation’s retirement system for either employers or employees. Sadly, at least for now, litigation appears to be the only option available to them.
In this case, the Court conducted a bench trial over seven days, hearing testimony (live and via deposition) from more than a dozen witnesses and receiving into evidence over 800 exhibits. The parties submitted detailed stipulations, proposed findings of fact and conclusions of law, and pre-trial briefs, and following trial, they submitted post-trial briefs and proposed findings of fact and conclusions of law. The Court also held a lengthy oral argument following completion of post-trial briefing. Counsel for each side distinguished themselves throughout this case by their skillful advocacy, professionalism, and civility. The Court is grateful to each of them.
In accordance with Rule 52 of the
Federal Rules of Civil Procedure,
the Court makes the following findings of fact and conclusions of law. As a preface to those findings and conclusions, the Court would note that these are close questions of law, involving complex and technical regulations, and the facts underlying this case are also complicated and extensive. Risking oversimplification, the Court can summarize as follows its general findings and conclusions to the key issues noted above: CIGNA’s Plan is not age discriminatory and does not violate the non-forfeiture and anti-backloading rules under ERISA; in effectuating the conversion to the cash balance plan, CIGNA did not give a key notice to employees that is required by ERISA; and CIGNA’s summary plan descriptions and other materials were inadequate under ERISA and in some instances, downright misleading. ERISA gives employers substantial leeway in designing a pension plan, and the Court believes that CIGNA’s Plan complies with the relevant statutory provisions. However, ERISA also emphasizes the importance of disclosure by employers to employees regarding the details of the company’s pension plan, to enable employees to plan for their retirement and to make decisions of profound importance for their lives. This is where CIGNA failed to fulfill its obligations; the company did not provide its employees with the information they needed to understand the conversion from a traditional defined benefit plan to a cash balance plan and its effect on their retirement benefits. As noted below, the Court will require further briefing on the issue of what remedies are required or appropriate in view of the Court’s rulings on liability.
I. Factual Background
The summary that follows, which is based upon the facts adduced at trial, is intended to provide general background information needed to understand the parties’ dispute. Further facts bearing directly on certain contested issues are discussed in later sections.
Background Regarding Retirement Plans. A traditional defined benefit plan provides an eligible employee with an annuity (an annual benefit payable for the life of the employee) that is calculated as a percentage of the employee’s salary multiplied by the employee’s years of service. “Salary” may be defined as the highest salary the employee achieved, an average of the employee’s salary over the last several years of service, or some other similar
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definition. For example, an employee might accrue a pension benefit beginning at age 65 of 1.5% of salary for every year of service; an employee who worked for the company for 30 years would then have an annual retirement benefit of 45% of salary. If a retirement plan defines “salary” as the employee’s highest salary, then the employee’s plan benefits would increase as the employee moves closer to retirement and enjoys the higher salary that typically comes with longer service. By design, participants in traditional defined benefit plans often earn most of their benefits in the last several years of service. Also by design, the employer bears the risk of fluctuations in interest rates or the market over the life of the retired employee.
Traditional defined benefit plans often offer subsidized early retirement benefits, which encourage employees to remain with the company until the benefits are available and then to leave. A subsidized early retirement benefit is a benefit payable before normal retirement age (often as of age 55) that has an overall value that is greater than the present value of the benefit payable at normal retirement age (usually age 65). If the employee does not retire at the earliest opportunity to obtain the subsidized early retirement benefit— say, 55 — -the value of that benefit diminishes with each passing year until it is completely lost as of the date of normal retirement — for example, by age 65.
By contrast to traditional defined benefit plans, defined contribution plans do not offer fixed assurances of annual benefits for life upon retirement. Instead, the employer contributes a certain amount (for example, 10% of each year’s salary) to the plan each year. Each employee is entitled to the money allocated to a separate individual retirement account, plus the upside risk of favorable investment returns. However, the employee bears the risk of fluctuations in interest rates or the market once the employer contributes the funds to the employee’s retirement account.
Cash balance plans “imitate some features” of defined contribution plans by referring to individual accounts and allocations,
Esden v. Bank of Boston,
229 F.3d 154, 158 (2d Cir.2000), but the accounts and allocations are only “hypothetical,” not real. The “employee has no actual account, the employer makes no contributions to the employee account, and so there is no account balance to which interest might be added.”
Berger v. Xerox Corp. Ret. Income Guarantee Plan,
338 F.3d 755, 758 (7th Cir.2003). Though they may imitate some of the features of defined contribution plans, cash balance plans are governed by the rules for defined benefit plans.
See Esden,
229 F.3d at 158 .
Cash balance plans were introduced in the mid-1980s, and hundreds of employers have adopted them since then. Recent estimates are that between one-quarter and one-third of large U.S. employers sponsor a cash balance plan.
See
Pension Benefit Guaranty Corp., Pension Insurance Data Book 2004, at 59-60. Though Plaintiffs in this case contend that cash balance plans discriminate against older workers (an issue the Court addresses below), depending on how the plan is configured, cash balance plans may provide advantages for both employees and employers. Because employees covered by cash balance plans earn benefits more evenly throughout their careers, those plans may provide increasingly more mobile employees more benefits than they could expect to receive under a traditional defined benefit plan, where benefits accrue primarily at the end of an employee’s career. The accounts are also familiar to employees who are increasingly comfortable with 401(k)-type programs. Often,
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cash balance plans (unlike many traditional defined benefit plans) provide for payment of a lump sum benefit, giving employees the ability to manage their funds during their retirement. For an employer, while cash balance plans are not inherently more or less costly than traditional defined benefit plans, converting to a cash balance plan can provide significant cost savings. For example, a 2004 Mellon Bank survey found that the long-term costs of plans converted to cash balance formulas were expected to decrease for 64% of plans.
See
Ex. 232, at 30;
see also
Ex. 28 (Interoffice Memo), at D12287 (“A cash balance approach allows us to provide the competitive benefit level of a defined contribution plan but reduce overall cost by earning more on our investments than we pay in the declared rate.”); Ex. 31 (email from Gerry Meyn), at D029113 (“A conversion to a cash balance plan clearly reduces the ultimate benefits paid, and, of course, lowers the net pension liability....”). Cash balance plans also allow employers to shed some or all of the risk of interest rate and market fluctuations during the employee’s life. See Trial Tr. 1001:13 to 1002:4 (Mr. Sher, Defendants’ expert, testifying that employees assume the risk of interest rate fluctuations with respect to annuities under cash balance plans).
In a cash balance plan, each eligible employee has a hypothetical account that receives benefit credits. One credit is referred to as a “pay credit,” and it is equal to a percentage of the employee’s salary. Pay credits can be defined in a number of different ways: they may be set as a fixed percentage of pay (5% of salary); they may be integrated with Social Security (3% of pay up to the Social Security wage base and 5% over the base); or they may vary with the employee’s age or service (4% each year to age 40 and 5% each year thereafter), referred to as “graded pay credits.” Cash balance plans also typically provide “interest credits,” determined by applying a specified interest rate to the employee’s hypothetical account balance. Some plans provide that the interest credit is a floating rate that changes annually or more frequently and is tied to a market rate, such as the yield on selected U.S. Treasury securities. Others allow the interest credit rate to float subject to a maximum (say, 8%) or a minimum (say, 4%), or both. Unlike with many traditional defined benefit plans, which pay benefits as an annuity and do not include a lump sum option, benefits under a cash balance plan often are payable as either a lump sum that equals the hypothetical account balance or an annuity based upon the value of the account balance.
Many cash balance plans are the result of conversions from traditional defined benefit plans, and there are a variety of ways in which employers may provide for the conversion and transition to the new plan. One approach is to freeze the benefits payable under the prior plan and at the same time provide for the employees to receive benefit credits (both pay and interest credits) under the cash balance plan going forward. The prior plan benefits continue to be paid under the terms of the prior plan and the cash balance benefits are paid under the new plan. Under this approach, the employee has essentially two separate pension benefits, with different rules, formulas, and procedures governing them. This is the so-called “A plus B” approach discussed at trial.
Other employers instead provide the employee with an opening account balance. There are a variety of ways of establishing the opening account balance, though no legal requirements governing the creation of opening balances. See Ex. 13, at MER01798 (a consultant to CIGNA advised the company that opening balances “could even be zero if you wanted”); Ex.
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533 (General Accounting Office Report), at 30 (“[Cjurrent federal law does not govern how plan sponsors set opening hypothetical account balances for cash balance plans.... ”).
2
One method of creating opening balances is to calculate the present value of the employee’s normal retirement benefit (an annuity commencing at normal retirement age, usually age 65) under the prior plan as of the conversion date. Such a plan typically would also provide that each employee would in any event never receive less than the benefit earned under the prior plan as of the date of conversion under the pre-conversion benefit formula. Depending on how the employee’s opening account balance and minimum benefit are calculated, the minimum benefit may be greater than the employee’s account balance. This is the so-called “greater of A or B” approach referred to in the testimony.
CIGNA’s Traditional Defined Benefit Plan. Before January 1, 1998, CIGNA had a traditional defined benefit plan for its employees, which will be referred to in this Opinion as “Part A.” Part A provided two benefit formulas depending upon the individual’s date of hire. Individuals hired before December 31, 1988 were known as “Tier 1 employees”; individuals hired after that date were “Tier 2 employees.”
Tier 1 employees received 2% of final three-year average pay for each year of service up to 30 years, less a Social Security offset. Tier 1 employees with 10 or more years of service also received a subsidized early retirement benefit; they could retire at age 55 and receive an immediate annuity benefit equal to the accrued age-65 benefit (not reflecting the Social Security offset, known as the “Social Security supplement”), reduced for early commencement by certain factors set forth in the Plan. Upon reaching age 65, the benefit would be reduced by the participant’s Social Security offset.
Tier 2 employees received an age-65 annuity benefit equal to 1.67% of final five-year average pay for each year of sendee up to 35 years, less a Social Security offset. Tier 2 employees also received subsidized early retirement benefits; a Tier 2 employee with 15 years or more of service could retire at age 55 and receive an immediate annuity benefit equal to the accrued age-65 benefit (not reflecting the Social Security offset), reduced by 5% per year if benefits began before age 65 (thus 50% for commencement at age 55). Upon reaching age 62, the benefit payable would be reduced by the Social Security offset (adjusted to age 62).
Tier 1, but not Tier 2, employees also were eligible for a “Free 30%” survivor’s benefit (the “Preserved Spouse’s benefit”). Under this benefit, a portion of a participant’s pension (generally 30%) would be payable after the participant’s death for the remaining lifetime of the surviving spouse. Many plans effectively require participants to pay for the added value of the survivor’s benefit, but under CIGNA’s Part A, eligible Tier 1 employees received the benefit without charge. A participant who wanted a larger portion to go to a surviving spouse (say, 50%) would pay a charge based only on the difference between the Free 30% and the percent requested (here, 20%).
CIGNA’s Part A did not offer a lump sum option. Participants could elect to receive their benefits in one of several different annuity options, but they could not receive their benefits in a lump sum. Under Part A, when an employee separated from CIGNA, their plan benefit re
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mained frozen and did not grow, because it was based on the employee’s earnings at CIGNA.
CIGNA’s Conversion to Cash Balance Plan. During 1996 and 1997, CIGNA, along with outside consultants such as the William Mercer Co. (“Mercer”), engaged in planning for a conversion of its defined benefit pension plan to a cash balance plan. In accordance with its conversion plan, in November 1997, CIGNA’s Chief Executive Officer (“CEO”) signed an amendment to CIGNA’s defined benefit pension plan freezing benefit accruals for all Tier 2 employees and for all Tier 1 employees with a combined age and years of service less than 45. The plan was that Tier 1 employees who had age and service credits of 45 or more would be grandfathered under the old Plan and thus continue to accrue benefits under Part A. All other employees would be moved to the new cash balance plan.
The November 1997 amendment provided in pertinent part as follows:
Notwithstanding any other provision of the Plan, no Employee who, as of December 31, 1997, is a New Formula Participant or has a combined total of Years of Credited Service and age less than forty-five (45) shall accrue any additional benefits under the Plan after December 31, 1997....
The foregoing cessation
and/or suspension in benefit accruals and exclusion from eligibility to participate in the Plan after December 31, 1997,
shall remain in effect until the adoption of a subsequent amendment to the Plan,
and such subsequent amendment may provide for benefit accruals under terms and conditions different from the Plan provisions in effect before 1998. No such subsequent amendment shall result in the accrued benefit of any Participant being less than such Participant’s accrued benefit under the plan as of December 31,1997.
Ex. 2 (Part A), at D00132 (Amendment No. 4) (emphasis added).
On December 21, 1998, CIGNA’s CEO signed the plan document for the cash balance plan, Part B, as well as an updated Part A plan document.
See
Ex. 501 (Part A), at D10440; Ex. 1 (Part B), at D00349. Even though the cash balance plan document was not signed until the end of 1998, the cash balance plan was made retroactive to January 1, 1998 so that Part B participants received retirement pay and interest credits for the entire year of 1998.
See
Ex. 519.
Non-grandfathered employees who were employed as of December 31, 1997 became participants in Part B. Additionally, any employees hired for the first time after January 1, 1998 automatically became participants in Part B upon their hire. These individuals are not part of the Class in this case; the Class includes only those Part B participants who previously were participants in Part A.
Part B provides that grandfathered participants in Part A who left CIGNA before December 31, 1997 and were rehired after adoption of Part B would become participants in Part B upon their rehire. As a result, those former employees who rejoined CIGNA between January 1, 1998 and December 21, 1998 (when Part B was signed) were placed into Part B. However, in a lawsuit filed by one such rehire, John Depenbrock, the United States Court of Appeals for the Third Circuit held that certain rehires should have remained in Part A, because the amendment creating Part B and establishing its rule applicable to rehires was not valid until signed by CIGNA’s CEO on December 21, 1998.
See Depenbrock v. Cigna Corp.,
389 F.3d 78, 82-83 (3d Cir.2004). As a result of the
Depenbrock
decision, other grandfathered Part A participants who were rehired between January 1, 1998 and December 21,
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1998 were notified in February 2005 that their benefits would be recalculated under Part A.
See
Ex. 539 (Letters from plan administrator regarding
Depenbrock
dated February 4, 2005). There are approximately 194 employees who fall into this group.
See
Ex. 173, at SuppD 15466.
3
Opening Balances. Non-grandfathered employees who were employed by CIGNA as of December 31, 1997 received a hypothetical opening account balance that was calculated by reference to their Part A accrued benefits. In particular, the opening account balance was calculated by taking the participant’s current annual benefit at normal retirement age (age 65) and computing the actuarial value of that benefit based on a 6.05% interest rate and by using the 1983 (unisex) Group Annuity Mortality Table (GATT). A lower 5.05% interest rate was applied to the accrued benefit at age 62 for Tier 2 participants who were active employees on December 31, 1997 and whose age and service totaled 55 or greater.
4
Thus, older or longer-serving employees received a more favorable opening balance calculation than similarly-situated younger or shorter-service employees. By design, therefore, for employees with identical service and compensation histories before 1998, the older employee would always receive a greater opening account balance than the similarly-situated younger employee.
The opening balance did not, however, include the full value of the subsidized early retirement benefit, the Social Security supplement, or the Preserved Spouse’s benefit. Also, the GATT mortality tables were used to discount the retirement benefit for pre-retirement mortality — that is, the likelihood that the participant would die between his or her current age and the normal retirement age of 65. Plaintiffs expert Claude Poulin explained that this pre-retirement mortality discount would be approximately 10% for a 30- or 40-year-old employee.
See
Trial Tr. 211:14-22. The discount was applied for purposes of determining employee opening balances, and therefore, as an employee grew older and the risk of pre-retirement mortality diminished, the employee would not recoup the amount of the discount taken in calculating the employee’s opening balance.
Benefit Credits. Part B participants also earn benefit credits that have both a pay and an interest component. These benefit credits are age-and service-favored — that is, Part B provides a higher credit rate to older or longer-serviee employees than similarly-situated younger or shorter-service employees. The benefit credits are also integrated with Social Security, meaning that Part B provides a higher credit on pay over the Social Security integration level, which is defined as one-half of the Social Security taxable wage limit each year (for example, $34,200 in 1998). Ex. 1 (Part B), at D00291; Ex. 10 (Sher Report), at 6.
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The following table shows Part B’s pay-credit rates:
Rate Applied to Pay Up to Rate Applied to Pay Over Age and Service Points_Integration Level_Integration Level
Under 35_3%_45%_
_35-44_4%_5J5%_
_45-54_5%_615%_
_55-64_6%_715%_
65 or More_7%8.5%
Therefore, an employee whose age is 40 with 10 years of service would have age and service points of 50. Assuming a Social Security integration level of $43,500 and further assuming that the employee earned $60,000 in a particular year, the employee would receive a pay credit of $8,247.50 (5% of $43,500 plus 6.5% of $16,500). If that same employee was 60 (thus having 70 age and service points), she would receive a pay credit in that same year of $4,447.50 (7% of $43,500 plus 8.5% of $16,500). As a consequence of the Part B design, for any two participants who have the same service and compensation history, the older one will receive a pay credit for any given year that is the same or higher than the younger employee.
Participants in Part B also receive interest credits quarterly on their hypothetical account balances at a floating rate that is subject to change at the beginning of each calendar year. The annualized interest rate is the yield on five-year U.S. Treasury securities in the preceding November plus 0.25%, subject to a minimum rate of 4.5% and a maximum of 9.0%.
See
Ex. 1 (Part B), at D00293 (§ 4.2(b)). Thus, Plan participants bear the risk of interest rate fluctuations, within the rate corridor provided by the Plan. Interest rate credits continue until the participant’s account is paid out as a lump sum or annuity payments begin. In any given year, all participants earn interest at the same rate; the interest rate credit is thus the same for all participants, regardless of age or length of service.
Under Part B, at retirement, or upon termination of employment, a participant could elect to receive benefits in the form of a lump sum. Alternatively, a participant could elect to receive benefits in one of several other forms available, including a single life annuity (stream of monthly payments payable for life) or a joint and survivor annuity (stream of monthly payments for life, with additional payments payable to a spouse for the life of the spouse).
See
Ex. 1 (Part B), at D00307-D00309 (§ 7.2).
Minimum Benefits and Wear Away. Under the terms of Part B, employees receive the greater of a retirement benefit based on their hypothetical account balances or their minimum benefit, as defined in the Plan. The Plan defined “minimum benefit” as, “in the case of a Participant who has a Part A Accrued Benefit which is converted into an Initial Retirement Account, the Participant’s Part A Accrued Benefit, expressed in the form of a single life annuity commencing at the Participant’s Normal Retirement Date,” “increased by the Equivalent Actuarial Value of the applicable Preserved Spouse’s Benefit.” Ex. 1 (Part B), at D00280 (§ 1.32). Part B also provided that these employees’ Part B accrued benefit, “expressed in the form of an immediate lump sum distribution, shall in no event be less than the present Equivalent Actuarial Value (determined using the Applicable Interest Rate and the Applicable Mortality Table) of the Participant’s Minimum Benefit.” Ex. 1
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(Part B), at D00720 (§ 1.1(c)). In effect, the minimum benefit was the participant’s age-65 annuity benefit under Part A, enhanced by the Free 30% spouse’s benefit if applicable. Section 7.3 of the Plan also protected the employee’s right to subsidized early retirement benefits to which they were entitled under Part A, provided those benefits were taken in the form of an annuity.
As a consequence of the manner in which opening balances were calculated under Part B, a participant’s opening account balance was not always equivalent to the value of the participant’s Part A accrued benefit. This is because the opening account balances were discounted to account for the risk of pre-retirement mortality and did not include the value of certain benefits, such as the Social Security supplement. As a result, an employee’s opening account balance could be much less than the employee’s Part A accrued benefit. Take Ms. Amara, for example. Under Part A, before Part B became effective, she had earned vested retirement benefits of $1,833.65 a month starting at age 55. Therefore, that was her Part A accrued benefit. However, her opening account balance under Part B was $91,124.88, which converts to an approximate age-55 annuity benefit of only $900, less than half her Part A accrued benefit.
See
Ex. 3 (Poulin Declaration), ¶¶ 25-26.
Interest rate fluctuations also affect the relationship between an employee’s minimum benefit and her account balance. Recall that within a rate corridor bounded by a minimum and a maximum, the employee bore the risk of interest rate fluctuations. Since the opening account balances were calculated by converting each participant’s annuity benefit into a lump sum using a particular interest rate (6.05% or 5.05%), if interest rates dropped, the employee’s minimum benefit could exceed the employee’s account balance. That is just what happened at CIGNA. With one exception, interest rates dropped each year after CIGNA converted to a cash balance plan, and that exacerbated the gap between employees’ opening account balances and their minimum benefits. The actual historical interest credit rates under Part B are as follows:
Year Interest Credit Rates
1998 6.05%
1999
2000 6.22%
2001 5.95%
2002 4.50%
2003 4.50%
2004 4.50%
2005 4.50%
2006 4.70%
Ex. 10; Ex. 587; Ex. 588. To illustrate this point, assume that an employee aged 40 had earned a $1,000 per month annuity before 1998. That annuity would be converted to an opening account balance of approximately $27,900 using a 6% interest rate, but when interest rates dropped to 4.5%, an account balance of $45,150 would be required to purchase that same $1,000 per month annuity.
See
Ex. 3 (Poulin Deck), ¶¶ 33-34; Ex. 4 (Supplemental Pou-lin Declaration), ¶¶ 12-14.
Thus, the design of Part B, plus the drop in interest rates, led to a phenomenon that is known as “wear away” for many, though by no means all, employees. Wear away means that there are periods of time in which the employee’s account balance is less than the employee’s minimum benefit. What wear away means in practice is that even though an employee is continuing each year to receive pay and interest credits under Part B, and the employee’s account balance may even be growing, it nonetheless remains less than the minimum benefit earned as of December 31, 1997; in effect, where there is wear away,
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even though the employee continues to work for CIGNA and continues to receive benefit credits, the employee’s expected retirement benefits have not grown beyond what the employee was entitled to under Part A as of December 31, 1997.
See, e.g.,
Ex. 40 (2002 memorandum from CIGNA’s Vice President for Employee Benefits), at D028635 (“Using the present value of normal retirement age benefits results in a significant ‘wear away’ period during which time employees accrue no additional benefits with future service.”).
And, as this ease illustrates, it may take years for some employees’ account balances to catch up to the minimum benefit to which the employees were entitled under Part A as of December 31,1997. Take Ms. Amara again. In her case, even though she was earning pay and interest credits every year, Plaintiffs expert Claude Poulin estimated that “it would take over 10 years for her cash balance account to exceed the value of her previously earned benefits.” Ex. 4 (Supp. Pou-lin Deck), ¶ 22;
see also
Ex. 3 (Poulin Decl.), ¶¶ 25-27; Ex. 32, at D028174, D028629.
Ms. Broderick and Ms. Glanz also experienced several years of wear away, as Defendants’ expert, Lawrence Sher, acknowledged.
See
Ex. 235. According to Plaintiffs’ expert, Patricia Flannery experienced nearly six years of wear away, from October 2000 to the present. At the end of 2005, her account balance converted to an annuity benefit of $756 per month, compared to the annuity of $813 per month she had earned with her service before 1998.
See
Ex. 7; Ex. 156. Plaintiff sought data showing the precise number of employees who actually experienced wear away, but Defendants assert that they do not maintain data that would provide that information. According to Plaintiffs’ expert, Mr. Poulin, “the overwhelming majority” of CIGNA’s employees experience wear away, with the exception of short-service employees and Tier 2 employees, like Barbara Hogan and Stephen Curlee, who had more than 55 age and service points and therefore benefited from the 5.05% interest rate used to calculate opening balances.
See
Trial Tr. 218:15 to 219:9; Trial Tr. 219:15 to 220:1; Ex. 4 (Supp. Poulin Deck), ¶ 28.
Defendants disagree regarding the precise amount of the wear away and the precise number of years for the catch-up period for any given employee; they also characterize that period differently from Plaintiffs. However, there is no doubt, and Defendants’ expert conceded this, that wear away is a real phenomenon, that is a consequence of the design of Part B, and that many CIGNA employees experienced it.
See, e.g.,
Ex. 27 (CIGNA’s answers to interrogatories No. 8 and 10); Ex. 241 (Hodges Deposition), at 93-103. Thus, both experts essentially agreed that the reasons for wear away were a combination of the following factors: (a) CIGNA’s selection of the “greater of A or B” approach rather than the “A plus B” approach; (b) the exclusion of early retirement subsidies from the opening balances; (c) the application of a pre-retirement mortality discount in determining opening balances; and (d) the effect of falling interest rates after 1997 on the annuities to which the accounts can be converted.
Moreover, as Defendants’ own expert acknowledged, wear away is a phenomenon that was well known and understood at the time of CIGNA’s adoption of a cash balance plan. Thus, in response to the Court’s questions, Mr. Sher admitted that wear away can be anticipated depending upon the design of the cash balance plan and the assumptions a company makes about interest rates:
The Court: Would it be typical to expect, for a decent sized portion of an
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emplojree population, that they might go as long as five or six years before they would actually cross and get into the positive on the conversion?
Mr. Sher: I think you have to, first we have to, look at each individual situation .... What are the causes of this phenomenon? ... I would characterize the early retirement as sort of a byproduct, ... that what we talked about is a natural thing for the early retirement to have that impact.
Trial Tr. 1008:17-21,1008:23 to 1009:10.
The Court: But going into a plan like this, would you expect there to be ... [a] reasonably significant portion of your employee population who could expect to not add to their minimum benefit for periods of between three and five years? Mr. Sher: I think it depends. I mean, the early retirement is one factor.... One approach is to do this grandfathering which is suggesting that CIGNA did it for a large group of people, not for everyone. So there are some people who are getting that early retirement, who could have that early retirement wearaway and that could last several years, the early retirement wearaway.
Trial Tr. 1009:23 to 1010:13.
The Court: In 1998, was it predictable and known to CIGNA, because of the various things we talked about — probably not with respect to interest rates so much but the early retirement subsidy sort of bringing that out and the prere-tirement mortality, in fact people’s opening balances ... would be lower than their minimum protected benefit?
Mr. Sher: I think certainly benefit projections, you know, could have been done to get at your question.... The problem is it’s hard to disregard [interest rate changes] but yes, absent that, yes.
The Court: Listen, we all have to predict things. Taking normal old regular old interest rate assumptions as you are standing in 1998, you still would have known that the opening balances for some sizeable group of employees, not obviously all, would be less than their protected benefit under the old plan? You would know that because you know mathematically that you are eliminating the early retirement subsidy.
Mr. Sher: Yes.
Trial Tr. 1029:21 to 1030:22.
The Court: [0]ne could ... have some prediction of whether there was going to be no wearaway; that the wearaway was minimal, you know, two months for most employees; or on average, depending upon where you fell in the spectrum, it could be two to three years. That would be some quantity that might prove to be wrong but would have been at least knowable at the time, right?
Mr. Sher: Yes, I think at least my experience, that’s often done....
Trial Tr. 1032:19 to 1033:2;
see
Trial Tr. 1019:7-11 (The Court: “So in designing these plans, would it be typical that you or the consultants in the company would try to make some estimates of wearaway for the employee population and then discuss potential mitigative solutions or not?” Mr. Sher: “Yes.”); Trial Tr. 1031:11-15 (Mr. Sher: “[PJeople do various kinds of analy-ses including projections using various assumptions as to what might happen in the future.... That’s how they design the transition provisions essentially, by looking at the potential impact....”).
The Court finds that wear away should have been anticipated by CIGNA, though the precise amount of wear away or duration for any given employee could not be predicted with accuracy. As discussed later, CIGNA was aware that its Plan could result in wear away, although there is no evidence in the record that CIGNA made any estimates of the preeise amount of
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wear away for its employee population.
See
Ex. 81 (Mercer materials, which do not include any calculations of wear away).
CIGNA Announces and Describes Conversion to Employees. In early November 1997, about a year before CIG-NA’s CEO signed the plan documents for Part B, CIGNA sent a special edition “Signature Benefits Newsletter” (the “1997 Newsletter”) to all employees. Ex. 8, Tab 1; Ex 516.
5
It was entitled “Introducing Your New Retirement Program,” and it described not only the conversion to the cash balance plan, but also enhancements to CIGNA’s Savings and Investment Plus (“SIP”), the 401(k) defined contribution plan.
The 1997 Newsletter informed employees that a new retirement program was going to be introduced effective January 1, 1998:
On January 1, 1998, CIGNA will introduce a new retirement program. The program includes the new CIGNA Retirement Plan, which replaces the current CIGNA Pension Plan for most employees, plus an enhanced version of Savings and Investment Plus (SIP), our 401(k) plan. Most CIGNA employees will participate in the new CIGNA Retirement Plan, although some long-service employees will remain in the current Pension Plan.... If you are moving to the new Retirement Plan, you will continue to earn benefits under the Pension Plan through December 31, 1997, and then transfer to the CIGNA Retirement Plan beginning in 1998.
Ex. 516, at D00607 (emphasis omitted). The 1997 Newsletter stated that employees participating in the new plan would “stop earning benefits under the current Pension Plan on December 31, 1997.”
Id.
at D00611. It also informed employees that additional information would be forthcoming in December 1997.
In an inset box on the 1997 Newsletter’s cover, a “Message from CEO Bill Taylor” states: “I am pleased to announce that, on January 1, 1998, CIGNA will significantly enhance its retirement program.... These enhancements will make our retirement program highly competitive.... ”
Id.
at D00607. The 1997 Newsletter tells employees that “the new plan is designed to work well for
both
longer-and shorter-service employees,” it provides “steadier benefit growth throughout [the employee’s] career,” and it “build[s] benefits faster” than the old plan.
Id.
at D00610. On the same page, the 1997 Newsletter tells employees that “[o]ne advantage the company
will not
get from the retirement program changes is cost savings.”
Id.
However, an internal expense projection prepared at the time showed that CIGNA anticipated a reduced cost of approximately $10 million by virtue of the conversion from a traditional defined benefit plan to a cash balance plan, though it also expected to incur an additional cost of approximately $10 million by virtue of upgrades to its SIP or 401(k) plan.
See
Ex. 739. The 1997 Newsletter did not discuss or even mention the phenomenon of wear away.
The 1997 Newsletter described how employees would receive an opening account balance and benefit credits:
The new CIGNA Retirement Plan is an account balance plan — a type of retirement plan that is becoming increasingly popular as a simpler alternative to traditional pension plans. Here’s how the new plan will work:
• If you are transferring from the current Pension Plan to the new plan, an
*307
account will be set
up for you in
January.
• If you earned a benefit under the current Pension Plan, the lump sum value of that benefit as of December 31, 1997, will be transferred to your account as your opening balance.
• Beginning in January, your Retirement Plan account will grow through two types of credits:
— Benefit credits. CIGNA will make a benefit credit to your account for each year in which you work at least 1,000 hours for the company. These credits will range from
3%
to 8.5% of your eligible annual earnings, depending on your age, service and earnings.
— Interest Credits. CIGNA will also credit your account with interest each quarter until you receive your benefit from the plan. The annual interest rate will vary from 4.5% to 9%, depending on recent yields of 5-year Treasury Bonds. This interest rate is consistent with guidelines set by the IRS for account balance retirement plans.
Ex. 516, at D00608 (emphasis omitted). The 1997 Newsletter informed employees that information concerning their account balances was forthcoming:
CIGNA will begin the process of calculating final pension benefits and Retirement Plan opening balances early in 1998, after all 1997 payroll data are finalized. Benefit calculations are expected to be completed in the spring. Once balances are calculated, they will be credited to Retirement Plan accounts retroactively to January 1, 1998, so you won’t lose any interest credits for the first part of 1998. You will be informed of your final Pension Plan benefit and Retirement Plan opening balance in your Total Compensation Report, scheduled to be mailed in May 1998.
Id.
at D00611 (emphasis omitted).
The 1997 Newsletter also told employees about their options upon leaving CIGNA:
When you retire or leave CIGNA, you will have the option to receive your vested account balance in one of two ways. You may choose an annuity (monthly payments for life), or you may take your account balance as a single lump sum payment. The lump sum option is new and resembles the SIP payment option. If you prefer, you may roll over your lump sum payment into an individual retirement account (IRA) or your new employer’s qualified retirement plan. This provision allows you to assume investment control over your benefit — and defer income taxes on it — until you are ready to use it. You will also have the option to leave your account balance in the Retirement Plan, where it will continue to earn interest credits until you elect to receive your benefit.
Id.
at D00608.
In December 1997, CIGNA sent each participant a Retirement Program Information Kit (“Retirement Kit”). Ex. 508. There were four different versions of the Retirement Kit, depending upon whether the participant was being converted to Part B or grandfathered in Part A and whether he or she participated in CIGNA’s supplemental pension plan. Again, the Retirement Kit, like the 1997 Newsletter, explains that the changes were being made to “improve the competitiveness of our benefits program and thus our ability to attract and retain top talent.” Ex. 508, at D00724 (emphasis omitted). The Kit states that the changes are “enhancements to the plans,” and that CIGNA is not saving any money with the changes, “nor has the new program been designed to save money.”
Id.
at D00724-D00725.
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The Retirement Kit explained that non-grandfathered employees would cease accruing benefits under Part A as of December 31, 1997, and would automatically become a participant in Part B “on January 1, 1998.”
Id.
at D00726, D00718. The Retirement Kit provided greater detail than the Newsletter regarding pay and interest credits, which would be added to employees’ hypothetical accounts on a quarterly basis, and payment options. It also told employees that they would receive periodic account statements called “Total Compensation Reports” so they could “keep track of [their] account growth.”
Id.
at D00745.
The Retirement Kit also contained detailed information about the calculation of opening balances. However, it did not state that a pre-mortality discount would be applied in calculating the opening balances. CIGNA informed employees as follows:
Step 2: Converting Your Final Pension Benefit to an Opening Balance Your normal pension benefit is an annual payment made to you for life, beginning when you turn age 65. To convert that annual pension benefit into an opening balance for the new plan, a calculation has to be made to determine how much that future stream of payments is worth today. This type of calculation is called a present value calculation.
The method used to calculate the present value of a pension benefit is established by law. Basically, the present value of your pension benefit equals the amount of money that someone would need to invest now to have enough money in the future to pay your annual pension benefit. This calculation is made assuming that the “invested” money would earn a moderate rate of interest (about 6.5% per year). Because of the relatively low interest rate, the amount available to you today is relatively large. In fact, to increase your opening balance, CIGNA has selected a much lower interest rate than the 7% or 8% rate adopted by most companies making similar pension plan changes. Your current age affects the present value of your pension benefit, because the closer you are to retirement age, the less time there is for the lump sum balance to grow, and therefore the more money you need to invest now. Because of this, two people who have earned the same pension benefit at age 65 will have different opening account balances if their ages are different. The older person will have the larger opening balance because there is less time for that person’s account balance to grow.
Table 1 shows the factors that will be used to convert final annual pension benefits to opening balances....
Special Conversion Formula for Older, Longer-service Employees
If your age and credited service with CIGNA total 55 or more on January 1, 1998, two special procedures will be used in calculating your opening account balance:
• First, your opening balance will be based on the present value of your age 62 early retirement benefit, rather than on the present value of your age 65 normal retirement benefit. The age 62 benefit has a higher present value than the age 65 benefit.
• Second, a lower interest rate will be used in making the present value calculation (one percentage point less than the standard rule — for instance, 5.5% if the standard rate is 6.5%). The lower interest rate increases the size of your opening balance.
These special procedures have been adopted because most employees in this age and service category will have fewer years to accumulate benefits under the new Retirement Plan. CIGNA wants to
*309
ensure that these older, longer-service employees receive fair and adequate benefits at retirement.
Id.
at D00719-D00721 (footnote omitted).
Under a heading captioned “How Your Benefit Grows,” the Retirement Kit states that “[e]ach dollar’s worth of credits is a dollar of retirement benefits payable to you after you are vested.”
Id.
at D00740. It also contains examples of how a hypothetical employee’s account would grow. The Retirement Kit includes this question: “Will my benefit be better under the new Retirement Plan?” The answer was as follows:
The new Retirement Plan is different from the current Pension Plan, so exact comparisons of benefits that cover all possible outcomes are difficult.
Generally speaking, the new Retirement Plan, in comparison with the current Pension Plan, tends to provide larger benefits for shorter-service employees and comparable benefits for longer-service employees.
... Of course, other features of the new plan add to your benefit value as well. The lump sum distribution option can be very valuable, since it will allow you to move your benefits into other tax-deferred investments after you retire or leave CIGNA. Also, because the Retirement-Plan works like a savings plan, with contributions credited to an account, you should find it easier to understand. You now have two plans that are account-based, enabling you to track your retirement benefits by looking at your statements. As
a result, you will see the growth in your total retirement benefits from CIGNA every year and will be able to update your financial plans accordingly.
Id.
at D00729 (emphasis added);
see also id.
at D00724 (“[B]enefits will grow faster during the early part of your career.”). Once again, there is no discussion of wear away. In response to the question, “Why wasn’t I allowed to stay in the Pension Plan?,” the Retirement Kit told participants who were being moved to the cash balance plan that “[o]ur analysis showed that, in comparison to people with a higher age and service combination, you have plenty of time to take full advantage of the many attractive features of the Retirement Plan....”
Id.
at D00725. CIGNA did not produce any such analysis in discovery or at trial.
The Retirement Kit also addressed the issue of rehired employees. It noted that they would be placed in Part B.
Id.
at D00739 (“If you are hired or rehired after January 1, 1998, you will become a participant in the Retirement Plan on your date of hire.”).
In February 1998, participants received the February 1998 Signature Benefits Newsletter, and in May 1998, participants received an additional newsletter answering frequently asked questions about Part B.
See
Ex. 97; Ex. 180. The February 1998 Newsletter states that employees hired before 1989 with fewer than 45 age and service points “were moved [to Part B] because they have enough time to take advantage of the new Plan provisions. They do not face the problems that those nearer retirement would face if they were suddenly moved out of the pre-1989 Plan.” Ex. 97, at SuppD1330.
A June 1998 Newsletter explained how to use the Total Compensation Reports.
See
Ex. 101. Each participant annually received a Total Compensation Report. One CIGNA employee’s 1998 Report showed how the opening account balance was calculated:
Your Highest Eligible Average Earnings $143,478.96
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Your Benefit Service Factor x 01670
Years of Credited Service x 7.00
Your Age 62 Benefit Before Offset = $16,772.69
Your Social Security Offset (see note) plus - $3,859.89 Early Retirement Reduction
Your Actual Age 62 Annual Benefit = $12,912.80
Based on average life expectancy at your age x 6.0813 and an interest rate of 5.05% the lump sum actuarial factor is
Your lump sum benefit — Opening Account $78,562.55 Balance
Ex. 85, at P1801. The Report also stated that “[t]his [initial] balance represents the full value of the benefit you earned for service before 1998 payable to you at age 65.... This means that the lump sum growing at this rate of interest to retirement is equivalent to the value of the lifetime annuity payments you have earned.” Ex. 98, at P1527 (emphasis omitted).
The Report also notified employees of financial planning and retirement planning tools that CIGNA had made available to employees. All the named Plaintiffs received annual Total Compensation Reports. These annual statements list the opening balance at the beginning of each year, the new pay and interest credits earned, and the closing balance.
See, e.g.,
Ex. 519; Ex. 520.
In October 1998, CIGNA issued the Summary Plan Description (“SPD”) for Part B, and a nearly identical version was re-issued in September 1999. Ex. 505 (1998 SPD); Ex. 506 (1999 SPD). The SPD contained information regarding the following topics: eligibility; how breaks in service affect eligibility; how the cash balance account grows, including how pay and interest credits accrue; when benefits are paid; how benefits are paid; how the benefit is affected by certain “life events”; administrative details concerning the operation of the Plan; minimum benefits; change of control protections; spouse’s rights; the appeal process; circumstances under which the Plan can be amended or terminated; and a statement of ERISA rights.
See
Ex. 505 (1998 SPD); Ex. 506 (1999 SPD). It also informed employees that they could obtain a copy of the Plan from the plan administrator, and the Plan was later made available on CIGNA’s intranet site.
See
Ex. 524.
As the Retirement Kit stated, the SPD also repeats the following: “Each dollar’s worth of credit is a dollar of retirement benefits payable to you after you are vested.” Ex. 505 (1998 SPD), at D00828; Ex. 506 (1999 SPD), at D00624 (same). It explained that “[y]our account balance grows in two ways — annual benefit credits and quarterly interest credits.... For each year in which you earn a year of credited service, CIGNA will add benefit credits to your account equal to a percentage of your annual eligible earnings.... Your account also will grow through interest credits.” Ex. 505 (1998 SPD), at D00828-D00829 (emphasis omitted); Ex. 506 (1999 SPD), at D00624 (same). The SPD did not mention or explain wear away, although it did state that participants would never receive less than the minimum benefit:
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If you participated in the Pension Plan before 1998, your old plan benefits were converted to an opening account balance in this Plan. Your final Plan benefits cannot be less than your old plan benefits on December 31, 1997.
If this minimum benefits rule applies to you, you’ll be notified by the Retirement Service Center when you request a distribution.
Ex. 505 (1998 SPD), at D00838 (original emphasis omitted and emphasis added).
The SPD provides the following information to employees who were rehired by CIGNA, and the SPD was provided in binders for new hires and rehired employees:
If you were in the old Plan when you left, the pension benefits you earned will be converted to an opening account balance in the this
[sic]
plan when you return. The conversion formula used [to obtain the opening account balance] is based on guidelines established by the federal government for valuing pension benefits. If you have questions about the conversion formula, you may call the CIGNA Retirement Service Center at 1.800.224.4624.
Ex. 505 (1998 SPD), at D00833;
see also
Exs. 509-12.
This Lawsuit. This lawsuit was filed in 2001 by Ms. Amara and others. Judge Dominic Squatrito, who previously presided over this case, certified it as a class action on December 20, 2002,
see
Mem. of Decision [doc. # 61], and additional named Plaintiffs were added on February 15, 2006.
See
Order [doc. # 164]. On March 12, 2007, this Court issued an order complying with the requirements of new Rule 23(c)(1)(B) [doc #241], and that Order specifies the class, sub-class, and individual claims and defenses. The following diseussion seeks to address the class and subclass issues.
II. Threshold Procedural Issues
Before turning to the parties’ substantive arguments, the Court will address two threshold procedural issues raised by CIG-NA: The first is whether Plaintiffs’ claims are time-barred; the second is whether the named Plaintiffs and thousands of other Class members waived the claims asserted in this case. Neither argument has merit.
A. Statute of Limitations. Plaintiffs brought this lawsuit under section 502 of ERISA, 29 U.S.C. § 1132 , which does not contain a limitations period. Where Congress fails to provide a statute of limitations, federal courts apply the statute of limitations that governs the most closely analogous state cause of action.
See Sandberg v. KPMG Peat Marwick, LLP,
111 F.3d 331, 333 (2d Cir.1997);
Miles v. N.Y. State Teamsters Conference,
698 F.2d 593 , 598 (2d Cir.1983);
Chisholm v. United of Omaha Life Ins. Co.,
514 F.Supp.2d 318, 324 (D.Conn.2007). The question in this case is which state cause of action is most closely analogous to ERISA. Plaintiffs argue for Connecticut’s six-year statute of limitations for written contracts, Conn. Gen.Stat. § 52-576; CIGNA, on the other hand, contends that Connecticut’s 180-day statute of limitations for age discrimination claims, Conn. Gen.Stat. § 46a-82, or its two-year statute of limitations for actions to collect wages or fringe benefits, Conn. GemStat. § 52-596, is more appropriate.
Every decision of the Second Circuit that the Court has found holds that the most closely analogous state statute of limitations for employee benefit claims similar to Plaintiffs’ is that for written contracts.
6
*312
Courts have generally reasoned, and this Court now adopts that reasoning, that even when the claim is that a company’s plan does not comply with ERISA’s statutory requirements, the focus is on the adequacy and legality of the plan itself, which is a written contract between employers and their employees. In
Miles,
for example, the Second Circuit held that because employee benefit plans are contracts, New York’s six-year statute of limitations for causes of action in contract applied to claims under ERISA to determine the employee’s eligibility for pension benefits.
See
698 F.2d at 598;
see also Campanella v. Mason Tenders’ Dist. Council Pension Plan,
299 F.Supp.2d 274, 280 (S.D.N.Y. 2004),
aff'd
132 Fed.Appx. 855 (2d Cir. 2005) (applying six-year statute of limitations for claims of statutory violations under ERISA);
Carey v. Int’l Bhd. of Elec. Workers,
201 F.3d 44, 49 (2d Cir.1999) (“[W]e affirm the judgment of the District Court that Carey’s ERISA claim is barred by the six-year statute of limitation.”).
7
District courts in the Second Circuit have also uniformly held that New York’s and Connecticut’s statutes of limitations for written contracts govern actions under ERISA.
See, e.g., Cole v. Travelers Ins. Co.,
208 F.Supp.2d 248, 252 (D.Conn.2002) (applying Connecticut’s six-year statute of limitations for contract actions);
Venturini v. Metro. Life Ins. Co.,
55 F.Supp.2d 119, 120 (D.Conn.1999) (same);
Manginaro v. Welfare Fund of Local 771, I. A. T.S.E.,
21 F.Supp.2d 284, 293 (S.D.N.Y.1998) (applying New York law).
Indeed, colleagues in this District have expressly rejected both Connecticut’s 180-day statute of limitations for age discrimination claims and its two-year statute of limitations for actions to collect on unpaid wages in favor of the six-year limit for written contracts.
See Parsons v. AT&T Pension Benefit Plan,
No. 3:06cv552 (JCH), 2006 WL 3826694 , at *2 (D.Conn. Dec. 26, 2006) (“Contrary to
Sandberg ,
which involved no claims related to specific benefits, this case deals with determining specific benefits, and thus is about a contract. Hence, the court finds that the most analogous state statute of limitations is six years, for breach of contract claims[, not 180 days, for age discrimination claims].”). As the court explained in
Christensen v. Chesebrough-Pond’s, Inc.,
No. 5-92-cv-727(AHN), 1993 U.S. Dist. LEXIS 21278 (D.Conn. Nov. 24,1993)
[T]his court remains unpersuaded that it should depart from the considerable weight of authority which holds that ERISA actions to recover unpaid employee welfare benefits should be governed by state statutes of limitations governing contract actions. In addition, this result is consonant with the remedial nature of ERISA, and the liberal construction traditionally given to the Act, a conclusion that other circuits apparently share.
Id.
at *16 (citation and quotation marks omitted). This Court agrees.
Finally, several district courts that have recently considered claims similar to Plaintiffs’ regarding the conversion of a
*313
traditional defined benefit plan to a cash balance plan have held that the six-year statute of limitations period for written contracts applies to such claims.
See Hirt v. Equitable Ret. Plan,
450 F.Supp.2d 331, 333-34 (S.D.N.Y.2006) (applying New York law);
In re Citigroup Pension Plan ERISA Litig.,
470 F.Supp.2d 323 , 336-37
&
n. 70 (S.D.N.Y.2006) (“Defendants argue that the Court should apply a three-year statute of limitations. In arguing for a three-year time limit [rather than New York’s six-year limit for written contracts], defendants ignore — without attempting to distinguish — many Second Circuit decisions.”) (citation omitted);
In re J.P. Morgan Chase Cash Balance Litig.,
460 F.Supp.2d 479, 483 (S.D.N.Y.2006) (“Employee benefit plans are contracts, accordingly, under New York law, the applicable statute of limitations is six years.”).
Not only does CIGNA fail to distinguish any of this case law, it also does not cite even a single case in which a court in this Circuit has applied the shorter statutes of limitations that CIGNA urges upon the Court. Simply asserting that the reasoning in
Parsons
is “unpersuasive,” Defendants’ Post-Trial Brief [doc. # 251], at 31 n. 23, is insufficient. The only case CIG-NA cites for support is
Syed v. Hercules Inc.,
214 F.3d 155 (3d Cir.2000), in which the Third Circuit considered which statute of limitations to apply to Mr. Syed’s claim for benefits under § 502a(l)(B) of ERISA. At the outset of its analysis, the court noted, “Although this Circuit has not decided which state statute of limitations is applicable to ERISA § 502(a)(1)(B),
every other circuit
to address the issue has applied the statute of limitations for a state contract action.” 214 F.3d at 159 (emphasis added) (collecting cases). The Third Circuit chose to apply a contract statute of limitations as well, but Delaware law had two such statutes of limitations. Thus, although the Third Circuit eventually settled on the shorter statute of limitations under the more specific contract provision covering employment disputes, the court nevertheless accepted the premise that a contract statute of limitations is the most closely analogous state statute of limitations. The court also went on to add that it was “inclined to agree with the dissent that the one-year limitations period of § 8111 is not optimal.” 214 F.3d at 161 . Given the overwhelming weight of authority in the Second Circuit for applying Connecticut’s six-year contract statute of limitations, the Court rejects CIGNA’s argument for a shorter limit and concludes that Plaintiffs’ claims are timely.
8
B. Waivers. Several of the named Plaintiffs and many Class members signed written waivers of claims in order to receive severance benefits.
9
The signed waivers defined the released claims as follows:
“Claims” are any and all claims, demands and causes of action of whatever kind, including any claim for attorney’s fees, that you now have, or at any time had, against any Released Persons, but only to the extent they arise out of or relate in any way to your employment or
*314
termination of employment with the Company and its affiliates.
Ex. 525, ¶ 5(e). Importantly, the waivers included an exception for “any claims for benefits under any retirement, savings, or other employee benefit programs.”
Id.
¶ 5(f). CIGNA contends that the exception “only applies to claims for
benefits
under the Plan, not claims alleging statutory ERISA violations,” and that Plaintiffs’ claims of statutory violations are barred by the release language of the waivers. Defs.’ Post-Trial Brief [doc. # 251], at 121. The Court disagrees.
The Court acknowledges at the outset that employees can release claims of statutory ERISA violations in return for severance benefits. “In
Lockheed Corp. v. Spink,
517 U.S. 882, 894 , 116 S.Ct. 1783 , 135 L.Ed.2d 153 (1996), the Supreme Court sanctioned the use of early retirement incentives conditioned upon the release of claims and found that conditioning additional benefits on the voluntary waiver of claims against an employer was not prohibited by section 406(a)(1)(D) of ERISA.”
De Pace v. Matsushita Elec. Corp. of Am.,
257 F.Supp.2d 543, 555 (E.D.N.Y.2003) (citation and quotation marks omitted);
see also Smart v. Gillette Co. Long-Term Disability Plan,
887 F.Supp. 383, 385 (D.Mass.1995) (“Both parties agree that the conditioning of severance benefits on an agreement to waive an ERISA claim is not prohibited by the statute.”). Nor need a release expressly mention ERISA in order for a court to conclude that ERISA claims were waived.
See, e.g., Chaplin v. NationsCredit Corp.,
307 F.3d 368, 373 (5th Cir.2002) (“Finally, plaintiffs cite no section of ERISA or any caselaw to suggest, much less to require, that, to cover an ERISA claim, a release must specifically mention ERISA.”).
10
However, courts have also uniformly held that the party relying on the waiver bears the burden of proving that the waiver was “an intentional relinquishment or abandonment of a known right or privilege.”
Smart,
887 F.Supp. at 385 (quotation marks omitted);
see also Shaver v. Siemens Corp.,
No. 2:02cv1424, 2007 WL 1006681 , at * 14 (W.D.Pa. Mar. 29, 2007) (“As previously noted, it is generally recognized that the proponent of a release seeking to assert it as a defense to a cause of action bears the burden of proving the effectiveness of the release.”). Further, “the validity of a waiver of pension benefits under ERISA is subject to closer scrutiny than a waiver of general contract claims.”
De Pace,
257 F.Supp.2d at 555 (alteration and quotation marks omitted). The reason courts have taken this more protective approach in the ERISA context is “‘because individuals waiving pension benefits claims are relinquishing rights that ERISA indicates a strong congressional purpose of preserving.’ ”
Linder v. BYK-Chemie USA, Inc.,
No. 3:02 CV 1956(JGM), 2006 WL 648206 , at *6 (D.Conn. Mar. 10, 2006) (alteration omitted) (quoting
Finz v. Schlesinger,
957 F.2d 78, 81 (2d Cir.1992)).
When courts have found waivers to bar ERISA claims, the language of the waiver was all-inclusive and unambiguous. In
LINDER,
for example, the release stated:
*315
The Executive hereby fully and forever releases the Company Group from any and all claims, causes of action and charges, of whatever kind or nature, whether known or unknown, which he now or hereafter may have against any member of the Company Group, including, but not limited to, claims arising under or in any way connected with his employment with the Company or the termination of such employment.
Id.
The
LINDER
court found the terms of the release to be clear, and also noted that the plaintiff was already aware at the time he signed the release of the issue for which he eventually sued his former employer.
Id.
at *8. Similarly, in
Smart ,
“[t]he language of the agreement explicitly state[d] that Smart waived all claims ‘known and unknown.’ ” 887 F.Supp. at 386 . And in
Chaplin ,
the court relied on a waiver to bar plaintiffs’ ERISA claims because “[t]he terms of the releases unambiguously reveal an intent to cover every imaginable cause of action.” 307 F.3d at 372 . By contrast, in
Carter v. AT & T Co.,
870 F.Supp. 1438 (S.D.Ohio 1994), the court sided with the plaintiff, who claimed that the manner in which AT
&
T calculated her years of service under its pension plan violated the Pregnancy Discrimination Act of 1978. Ms. Carter had signed a general release of claims against the company, but the release “specifically reserve^] the employee’s rights for benefit claims under the pension plan.” 870 F.Supp. at 1441 . The court held that AT & T’s early retirement enhancement system, which credited certain employees with additional years of service but denied full credit for time spent on maternity leave, violated Title VII, and that this was “exactly the exception that was provided for in the release.”
Id.
at 1442 .
Consistent with the protective approach to ERISA waivers, courts have also looked askance at defendants’ attempts to use ambiguous waivers to bar claims employees reasonably thought were preserved under a waiver. For example, in
Thomforde v. IBM Corp.,
406 F.3d 500, 502 (8th Cir. 2005), Mr. Thomforde signed a waiver that he (and his counsel) believed released all claims except those under the Age Discrimination in Employment Act (“ADEA”). However, IBM argued that Mr. Thom-forde had confused the release of claims and the covenant not to sue, and that in fact Mr. Thomforde’s substantive claims under the ADEA were also barred. The court refused to accept IBM’s position:
We can easily see how a participant under this Agreement could construe the statement that ‘this covenant not to sue does not apply to actions based solely under the ADEA’ as an exception to the general release, not just an exception to the covenant not to sue. Given the lack of clarity in the Agreement, and IBM’s declination to tell Thomforde what it meant by the language, we hold that the Agreement is not written in a manner calculated to be understood by the intended participants as required by the [Older Workers Benefits Protection Act].
Id.
at 504 (alterations omitted). Similarly, in
Carrabba v. Randalls Food Markets, Inc.,
145 F.Supp.2d 763, 771 (ND.Tex. 2000), plaintiffs sued for payments they claimed were owed under a previous pension plan offered by the company, which had been terminated “long before the execution of any of the releases” that defendant argued barred their claims. The court refused to enforce the waivers with respect to those claims, noting that
[t]he indication from the evidence is that neither party to the waiver/release documents gave any thought to the [prior pension plan] or any claims arising under [that plan] when the documents were drawn, signed, and delivered. There is certainly no basis in the evi
*316
dence for any finding that any signatory on such a release/waiver document intended by execution and delivery of the document to release defendant of any claim that is being asserted in this action.
Id.
at 772 .
Examining the language of CIG-NA’s waivers, the initial release language is broad, though not so all-encompassing as some of the releases in the cases noted above. However, the CIGNA release contains an explicit exception for claims under CIGNA’s retirement programs, and the Court finds no indication that either party, much less both, intended to draw the kind of fine distinctions CIGNA now argues the Court should read into the exception. CIGNA points to no language, either in the waivers themselves or in the SPD for the Severance Pay Plan,
11
that suggests, let alone explicitly states, that the exception covers only claims for benefits under the terms of the Plan, and not claims under ERISA itself. Although CIGNA cites to three decisions in the Second Circuit that have distinguished between claims for benefits and statutory ERISA violations, none of those cases considered the distinction in the context of a release of ERISA claims.
See Campanella,
299 F.Supp.2d at 280, 281 (exhaustion context);
De Pace,
257 F.Supp.2d at 558 (same);
Gray v. Briggs,
No. 97 CIV. 6252(DLC), 1998 WL 386177 , at *7 (S.D.N.Y. July 7, 1998) (same).
CIGNA drafted the release language and certainly could have limited the exception to claims for benefits under the Plan only, and not under ERISA.
12
CIGNA did not do so, and the Court will not rewrite the release for CIGNA at this stage. Accordingly, the Court concludes that CIG-NA, which has the burden of proof on this issue, has failed to demonstrate under any standard, much less the “closer scrutiny” applicable in the ERISA context,
see De Pace,
257 F.Supp.2d at 555 , that the waivers signed by CIGNA employees intentionally relinquished or abandoned the claims Plaintiffs assert here.
See Smart,
887 F.Supp. at 385 .
13
III. Age Discrimination
One of Plaintiffs’ principal contentions in this case is that CIGNA’s cash balance plan discriminates against workers on the basis of age. Section 204(b)(1)(H) of ERISA prohibits a defined benefit plan under which “an employee’s benefit aecru
*317
al is ceased, or the rate of an employee’s benefit accrual is reduced, because of the attainment of any age.” 29 U.S.C. § 1054 (b)(l)(H)(i);
see also
26 U.S.C. § 411 (b)(l)(H)(i) (similar Internal Revenue Code provision). The statutory provisions do not define “benefit accrual,” “rate of ... benefit accrual” or “because of the attainment of any age.” The Treasury Department proposed regulations to define those terms, but withdrew its proposals in the expectation of congressional amendments, which were not enacted at the time CIGNA adopted its cash balance plan.
14
That legislative and administrative vacuum has led to considerable litigation in the courts over the meaning of those phrases.
In brief, CIGNA — through its expert Lawrence Sher — contends that so long as the rate at which employees accrue interest and pay credits does not discriminate on the basis of age, the Plan does not violate the prohibitions on age discrimination. As Mr. Sher points out, under CIG-NA’s Plan, older and longer-serving employees accrue pay credits at the same or higher rates than younger or shorter-serving employees. This is because pay credits in the CIGNA Plan are age-and service-favored; interest rate credits are the same regardless of age or service. Furthermore, the calculation of opening balances favored older employees by using a more favorable conversion rate for participants whose age and service totaled 55 or greater.
Plaintiffs, on the other hand, contend that in determining the “rate of benefit accrual,” courts must focus not on the annual accruals — or inputs — but rather on the benefits that are payable upon normal retirement — the outputs. Through their expert Claude Poulin, Plaintiffs assert that a younger worker who has the same service record and same compensation as a similarly-situated older worker will at normal retirement receive a greater annuity than the similarly-situated older worker. This is because the younger worker has more years to normal retirement and therefore more years to accumulate benefit credits and reap the financial advantages of the phenomenon of compound interest.
Since this litigation was filed, numerous courts have addressed the precise issue presented in this case. Two divergent positions have emerged. At the risk of oversimplification, one school of thought — exemplified by a decision of the Court’s colleague Judge Janet C. Hall — concludes, after an assessment of the statutory text and legislative history, that the phrase “rate of benefit accrual” in the age discrimination provision should be equated with the term “accrued benefit,” which is defined in ERISA and means the annual benefit commencing at normal retirement age.
See Richards v. FleetBoston Fin. Corp.,
427 F.Supp.2d 150, 157-62 (D.Conn. 2006). According to this line of reasoning, since younger employees will receive an annual benefit payable at normal retirement age greater than the benefit that an older, similarly-situated worker would receive, cash balance plans (or at least plans like CIGNA’s) violate the age discrimination prohibitions. Other courts have embraced Judge Hall’s analysis.
See, e.g., In re Citigroup,
470 F.Supp.2d 323 ;
In re J.P. Morgan Chase,
460 F.Supp.2d 479 .
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Judge Frank Easterbrook of the Seventh Circuit took a contrary view in
Cooper v. IBM Personal Pension Plan,
457 F.3d 636 (7th Cir.2006).
Cooper
held that when Congress used the phrases “rate of benefit accrual” and “accrued benefit” in ERISA, Congress meant different things; otherwise, according to ordinary canons of construction, Congress would not have used different phrases. According to
Cooper ,
“rate of benefit accrual” refers to the rate of the employer’s contributions to the plan (which in CIGNA’s case is always greater for older employees than younger, similarly-situated employees), rather than to the increase due to compounding interest in a participant’s accrued normal retirement benefit. As Judge Easterbrook put it, Plaintiffs’ argument “treats the time value of money as age discrimination ... [and][t]reating the time value of money as a form of discrimination is not sensible.”
Id.
at 638-39 . Furthermore, Judge East-erbrook explains, Plaintiffs’ approach adds to the younger and older workers’ accounts all of the interest earned until age 65, but then neglects to discount that resulting sum to present value for purposes of comparison. When an appropriate discount rate is used, the apparent excess earned by the younger worker (through the magic of compound interest) disappears.
The two circuit courts to address this issue since
Cooper
have agreed with Judge Easterbrook and found cash balance plans not to be age discriminatory.
See Drutis v. Rand McNally & Co.,
499 F.3d 608 (6th Cir.2007);
Register v. PNC Fin. Servs. Group., Inc.,
477 F.3d 56 (3d Cir.2007). Many other district courts have also embraced
Cooper’s
reasoning.
See, e.g., Custer v. S. New Eng. Tel. Co.,
No. 3:05cv1444 (SRU), 2008 WL 222558 (D.Conn. Jan. 25, 2008);
Tomlinson v. El Paso Corp.,
No. 04-cv-02686-WDM-MEH, 2007 WL 891378 (D.Colo. Mar. 22, 2007);
Sunder v. U.S. Bank Pension Plan,
No. 4.-05CV01153 ERW, 2007 WL 541595 (E.D.Mo. Feb. 16, 2007);
Finley v. Dun & Bradstreet Corp.,
471 F.Supp.2d 485 (D.N.J.2007);
Tootle v. ARINC, Inc.,
222 F.R.D. 88 (D.Md.2004);
Eaton v. Onan Corp.,
117 F.Supp.2d 812 (S.D.Ind.2000).
The Second Circuit has not yet had the opportunity to consider this issue. However, that court currently has before it two cases that will afford the circuit an opportunity to decide the question presented by this case. In
Hirt,
441 F.Supp.2d 516 ,
appeal docketed,
No. 06-4757cv (2d Cm. Oct. 13, 2006), District Judge Alvin Heller-stein held that PNC’s cash balance plan was not age discriminatory. Similarly, in
Bryerton v. Verizon Communications Inc.,
No. 06 Civ. 6672(DC), 2007 WL 1120290 (S.D.N.Y. Apr. 17, 2007),
appeal docketed,
No. 07-1680cv (2d Cir. Apr. 23, 2007), Judge Denny Chin followed
Hirt. Accord Custer,
2008 WL 222558 ;
Laurent v. PriceWaterhouseCoopers LLP,
448 F.Supp.2d 537 (S.D.N.Y.2006).
Hirt
and
Bryertin
have been briefed but not yet argued before the Second Circuit.
Given the fact that
Hirt
and
Bryertin
are before the Second Circuit and that the courts that have considered this issue have already thoroughly discussed the arguments on each side of the question, the Court will not repeat those arguments at length in this decision. Counsel for both parties agreed that there were no material differences between CIGNA’s Plan and the plans that were considered in the previously cited decisions. Suffice it to say that after careful consideration, this Court adopts the position of the Third, Sixth, and Seventh Circuits, as well as that of the district courts in
Hirt
and
Bryertin.
In this Court’s view, CIGNA’s cash balance plan is not age discriminatory. To the contrary, the CIGNA Plan provides greater annual benefits to older workers who are similarly situated to younger
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workers. Thus, this Court agrees with Judge Chin, who recently summarized the reasons why a cash balance plan like CIG-NA’s is not age discriminatory:
First, the terms of the Plan are not only age neutral, but actually provide pay credits at a rate that is more generous for older employees than for younger employees. Interest credits are calculated at an identical rate for all employees. Thus, the fact that a younger employee’s pay credits are eventually worth more than those paid to an older employee (with a comparable salary and similar number of years of service) results not from discrimination, but from the fact that the younger employee has had more time to accumulate interest (as it will take more years for the younger employee to reach age 65). In other words, the discrepancy results from the time value of money.
As the
Cooper
court explained, “[n]oth-ing in the language or background of § 204(b)(l)(H)(i) suggests that Congress set out to legislate against the fact that younger workers have (statistically) more time left before retirement, and thus a greater opportunity to earn interest on each year’s retirement savings. Treating the time value of money as a form of discrimination is not sensible.” Second, plaintiffs’ position is based on their repeated assertion that “benefit accrual” and “accrued benefit” are equivalent. There is, however, simply no indication that Congress meant for the two terms to be used interchangeably. Congress easily could have used the same terminology, but it did not. Indeed, I agree with Judge Easter-brook’s interpretation that the phrase “benefit accrual” in § 204(b)(l)(H)(i) “reads most naturally as a reference to what the employer puts in ... while the defined phrase ‘accrued benefit’ refers to outputs after compounding.” Third, a comparison of the parallel anti-discrimination provisions for defined benefit and defined contribution plans reinforces this reading of the text. According to § 204(b)(2)(A), “[a] defined contribution plan satisfies the requirements of this paragraph if, under the plan, allocations to the employee’s account are not ceased, and the rate at which amounts are allocated to the employee’s account is not reduced, because of the attainment of any age.” This provision is nearly identical with the anti-discrimination provision for defined benefit plans, with the exception that the provision for defined benefit plans states what is prohibited, while the provision for defined contribution plans states what works.... [I]t would make little sense for Congress to allow for the accumulation of interest for defined contribution plans, but prohibit it for defined benefit plans.
Bryertin,
2007 WL 1120290 , at *4-5 (citations omitted).
Furthermore, as Judge Easterbrook pointed out in
Cooper
and as Plaintiffs’ expert Mr. Poulin acknowledged,
see
Trial Tr. 266-67, when one discounts the younger worker’s benefits to present value, any difference between the older worker and younger worker’s annuity disappears. That is, one cannot compare what an older worker will receive as an annuity in 2015 to the annuity that a younger worker will receive in 2080. Not surprisingly, those figures will always be different and the younger worker’s annuity will always look greater. That is what Mr. Poulin did in his report. But that differential is because of interest, not age discrimination. As Mr. Sher properly explains,
see
Ex. 10 (Sher Report), at 17; Trial Tr. 1147-49, to make any meaningful comparison, one needs to discount the younger worker’s annuity to 2015 (or inflate the older worker’s to 2030) and when that is done, the differential caused by compound interest disappears.
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One final argument bears mention. In addition to what might be called the traditional age discrimination argument, Plaintiffs claim that CIGNA’s Plan discriminates against older employees because, they say, wear away affects older employees more than younger employees — older participants have longer wear away periods under the CIGNA Plan according to Plaintiffs. If that were true, Plaintiffs might well have a good age discrimination claim. But the Court finds that there is simply no evidence to support Plaintiffs’ assertion, and much of the evidence refutes it.
Plaintiffs rely heavily upon the fact that wear away is affected by the elimination of subsidized early retirement benefits in calculating the opening balance and that early retirement eligibility is a function of age. But as the experts testified, wear away results from a variety of factors, and in this case it was principally driven by the fall in interest rates, which affects all employees equally.
See Custer,
2008 WL 222558 , at *10 (“The ‘wear-away’ period is not necessarily longer for older workers; it is longer for workers that have greater frozen benefits. Under the old plan, the size of a worker’s frozen benefits is a function of a worker’s salary and years of service, not his age.”). Furthermore, Plaintiffs’ expert acknowledged that the mortality discount used in calculating the minimum benefit always is greater for younger participants than for similarly-situated older participants. Indeed, Plaintiffs expert conceded that he had never actually analyzed the lengths of wear away periods for older and younger participants, or even the demographics of the participants in the Plan, though in his defense Plaintiffs complain that CIGNA failed to produce during discovery the data necessary to conduct such an analysis.
15
However, if CIGNA’s Plan did structurally disfavor older employees in terms of wear away, the Court does not understand why Mr. Poulin could not have shown it; he seemed to have little difficulty seeking to show other alleged adverse impacts from the structure of the CIGNA Plan.
Finally and importantly, the Court agrees with CIGNA that what Plaintiffs see as age discrimination is merely the transition from one plan that was heavily age-favored to another plan that is still age-favored but less so. In the Court’s view, that transition is not age discrimination.
See Cooper,
457 F.3d at 642 (“But removing a feature that gave extra benefits to the old differs from discriminating against them. Replacing a plan that discriminates against the young with one that is age-neutral does not discriminate against the old.”).
IV. Anti-Backloading and Non-Forfeiture Rules
A. Anti-Backloading Rules. Section 204 of ERISA addresses “back-loading,” or the practice by which employers seek to postpone the crediting of the bulk of retirement benefits to their employees’ pensions until late in the employees’ careers.
See
29 U.S.C. § 1054 (a)-(b)(1). Backloading does not merely postpone the time at which employers must make contributions to the employees’ accounts; it also benefits the employer because only employees who remain at the
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company until retirement reap relatively large retirement benefits. As the Second Circuit explained in
Langman v. Laub,
328 F.3d 68 (2d Cir.2003), “ ‘The primary purpose of [minimum accrual rates] is to prevent attempts to defeat the objectives of the minimum vesting provisions by providing undue ‘backloading,’ i.e., by providing inordinately low rates of accrual in the employee’s early years of service when he is most likely to leave the firm and by concentrating the accrual of benefits in the employee’s later years of service when he is most likely to remain with the firm until retirement.’ ”
Id.
at 71 (alteration in original) (quoting H.R.Rep. No. 93-807 (1974)).
The anti-backloading provisions of ERISA require employers to satisfy one of three possible tests, all aimed at ensuring a steady accumulation of retirement benefits over the course of an employee’s career. The parties agree that the applicable test in this case is the so-called 133-1/3% rule, rather than the 3% rule or the fractional accrual rule, because benefits under CIGNA’s cash balance plan are calculated using a career pay history.
See
29 U.S.C. § 1054 (b)(1). The other two rules apply to plans that, unlike the CIG-NA Plan, base their benefit calculations
on
final or highest average pay.
See
29 U.S.C. § 1054 (b)(1)(A), (C).
It is apparent from the statutory text that the 133-1/3% rule is prospective, in that an employer must demonstrate each year that the plan will comply with the rule in all future years; benefit accruals in previous years are not taken into consideration.
See
IRS Revenue Ruling 2008-7. A defined benefit plan satisfies the requirements of the 133-1/3% rule if under the plan
the accrued benefit payable at the normal retirement age is equal to the normal retirement benefit and the annual rate at which any individual who is or could be a participant can accrue the retirement benefits payable at normal retirement age under the plan for any later plan year is not more than 133 1/3 percent of the annual rate at which he can accrue benefits for any plan year beginning on or after such particular plan year and before such later plan year.
29 U.S.C. § 1054 (b)(1)(B);
see also
26 C.F.R. § 1.411 (b)l(b)(2). Thus, the rate of benefit accrual in any given year may not exceed the rate of benefit accrual in any prior year by more than 133-1/3 %. The corollary of this requirement is that each year’s accrual must be no less than 75% of any later year’s accrual.
There are important limitations or restrictions in making the calculations required to demonstrate compliance with the rule. For one, the 133-1/3% rule is to be examined without consideration of any pri- or formulas or prior plans. Thus, the rule provides that “any amendment to the plan which is in effect for the current year shall be treated as in effect for all other plan years.” 29 U.S.C. § 1054 (b)(l)(B)(i). Furthermore, “the fact that benefits under the plan may be payable to certain employees before normal retirement age shall be disregarded.” 29 U.S.C. § 1054 (b)(1)(B)(iii). In light of this provision, Plaintiffs conceded at oral argument that wear away due solely to the exclusion of early retirement benefits from the protected minimum benefit should not be considered in determining compliance with the 133-1/3% rule. In addition to the exclusion of early retirement benefits from the calculations under the 133-1/3% rule, ERISA also provides that “social security benefits and
all other relevant factors
used to compute benefits shall be treated as remaining constant as of the current year for all years after the current year.” 29 U.S.C. § 1054 (b)(l)(B)(iv) (emphasis added). These factors include the applicable consumer price index, for example.
See
26 C.F.R. § 1.411 (b) — 1(b)(2)(D).
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Plaintiffs make two arguments under the 133-1/3% rule. Their principal argument is that Part B violates the rule because there are no benefit accruals during wear away periods, as benefits under Part B will not be paid to an employee with a protected minimum benefit under Part A unless and until the employee’s cash balance account exceeds the protected minimum benefit. The second claim does not rely on the phenomenon of wear away; rather, Plaintiffs argue that Part B violates the 133-1/3% rule structurally because of the use of variable interest rates. Neither of these arguments is persuasive.
Regarding wear away, the evidence showed that there were many CIGNA employees who experienced this phenomenon, including named Class representatives. During the wear away period, Plaintiffs argue, the rate of benefit accrual is zero. Thus, any later accrual, once the cash balance account exceeds the protected minimum benefit, must necessarily be more than 133-1/3% of the (non-existent) accrual during wear away. CIGNA points out that Plaintiffs’ argument is dependent upon comparing the minimum vested benefit under CIGNA’s prior plan with the accrued benefits under CIGNA’s new plan, and argues that such a comparison between the two plans is not permissible under 29 U.S.C. § 1054 (b)(l)(B)(i). In response, Plaintiffs invoke the so-called “aggregation rule,” under which
[a] defined benefit plan may provide that accrued benefits for participants are determined under more than one plan formula. In such a case, the accrued benefits under all such formulas must be aggregated in order to determine whether or not the accrued benefits under the plan for participants satisfy one of the alternative methods [i.e., one of the three anti-backloading tests].
26 C.F.R. § 1.411 (b) — 1 (a). Plaintiffs assert that the aggregation rule should apply to Part B because “more than one plan formula” is involved in calculating the benefit accruals of employees who have a protected minimum benefit under Part A. Plaintiffs’ claim is that although benefit accruals under Part A were frozen before Part B was introduced, Part B is still sufficiently dependent on Part A that the two plans can both be said to determine participants’ accrued benefits within the meaning of the aggregation rule.
The Court disagrees with Plaintiffs. It is true that a participant’s right to be paid her vested benefits from a prior version of the Plan may indirectly affect the accrual calculation under the new version of the Plan during the wear away period. However, the Court does not consider the mere comparison of benefits under Part A and Part B to constitute sufficient use of the terms of Part A to qualify for the application of the aggregation rule. The potential overlap of the two versions of CIGNA’s Plan, referred to here as a wear away period, is essentially an artifact of the transition from a defined benefit plan to a cash balance plan; it is not a backloading issue.
16
Even Plaintiffs’ expert, Mr. Poulin, admitted that if CIGNA had originally implemented a cash balance plan, rather than a defined benefit plan, there would
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have been no wear away for any employees,
see
Trial Tr. 409:15 to 410:16, and so no possibility of a backloading claim based on that wear away. Assuming that Part B is not itself violative of the 133-1/3% rule, then, Part B does not impermissibly back-load CIGNA employees’ benefits.
The Court finds further support for its decision in the fact that all other courts to have considered whether a transition from a defined benefit plan to a cash balance plan under a “greater of A or B” approach like CIGNA’s falls under the aggregation rule, have held that it does not. As the Third Circuit noted in
Register,
477 F.3d 56 , Plaintiffs’ “argument fails ... because it cannot surmount the barrier that the [aggregation rule] they cite does not apply in cases of plan amendments. Rather, it applies in cases where there are
two co-existing formulas under a single plan.
”
Id.
at 71-72 (emphasis added). Judge Hall also recently dismissed an almost identical argument under the aggregation rule in
Richards,
427 F.Supp.2d at 171 , on the ground that under 29 U.S.C. § 1054 (b)(l)(B)(i),
the Amended Plan is treated as having been in effect for all plan years, [and so] employees such as Richards would never have accrued a benefit under the Traditional Plan, and would have started accruing benefits under the cash balance formula from the start of their employment. Assuming such a scenario, such employees would suffer no backloading of benefits.
See also Custer,
2008 WL 222558 , at *12-13 (applying amendment, rather than aggregation, rule in the case of a cash balance transition employing the “greater of A or B” model);
Finley,
471 F.Supp.2d at 494-95 (same);
Allen v. Honeywell Ret. Earnings Plan,
382 F.Supp.2d 1139, 1160 (D.Ariz.2005) (“Thus, in determining whether a new benefit formula violates the 133 1/3 percent rule, one does not compare the new formula with the old formula; rather, the backloading question must be answered by considering the new formula on a stand-alone basis.”). Although Plaintiffs attempt to distinguish this line of cases, they cite to no opinion in which the court applied the aggregation rule, rather than the amendment rule, to a similar conversion from a traditional defined benefit plan to a cash balance plan.
The Court’s conclusion also sensibly conforms to the policy concerns motivating the antibackloading rules. Those rules were intended to ensure the steady accumulation of retirement benefits and to protect employees’ interests.
17
Assuming that the “greater of A or B” formula was intended to, and did in fact, guarantee that CIGNA employees who had accrued benefits under Part A received the larger of those benefits or the new benefits they accrued under Part B, the Plan furthered, rather than frustrated, the goals of the 133-1/3% rule. This fact reinforces the Court’s conviction that the backstop provided by the protected minimum benefit is simply a form of grandfathering to assure an orderly and sensible transition between plans, and not impermissible back-loading.
18
See Register,
477 F.3d at 72
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(“Moreover, the objective of the anti-back-loading provisions, to prevent a plan from being unfairly weighted against shorter-term employees, simply is not implicated by the PNC conversion [to a cash balance plan].”) (quotation marks and citation omitted).
Plaintiffs also argue that apart from the issue of wear away, there is a structural flaw in CIGNA’s Plan that violates the 133-1/3% rule. Part B uses a fixed scale of pay credits that ranges from 3-7% of pay under the Social Security integration level. As 7% is more than 133-1/3% of 3%, the only way that Part B can satisfy the 133-1/3% rule is if the interest credits added to the pay credits “smooth out” the overall accumulation of retirement benefits. This smoothing occurs because the younger employees, having more time until retirement, receive more interest credits than similarly-situated older employees, helping to offset the greater pay credit percentages for the latter group. Under Part B, interest credits, unlike pay credits, are not set in advance; rather, they are based on an interest rate that is variable within a certain range. Plaintiffs argue that fluctuating interest rates may cause the accrual of the normal retirement benefit to vary in ways that would violate the 133-1/3% rule. This is because each year’s interest rate is used to project the value of the cash balance account to normal retirement age and so to estimate an employee’s age-65 annuity (the “normal retirement benefit” for defined benefit plans). Even seemingly small changes in interest rates from year to year may result in large fluctuations in the accumulation of the normal retirement benefit as a result of the projection of those current benefits potentially decades into the future.
This argument, too, fails under the plain language of the relevant statutory section. ERISA states that “social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after the current year.” 29 U.S.C. § 1054 (b)(l)(B)(iv); see
also
26 C.F.R. § 1.411 (b)-l(b)(2)(D). Thus, CIGNA could permissibly hold constant, as it did, the interest rate used to calculate the accumulation of future benefits in determining compliance with the anti-backloading rules.
See Wheeler v. Boeing Co.,
No. 06-cv-500-DRH, 2007 WL 781908 , at *3 (S.D.Ill. Mar. 13, 2007) (“Plaintiffs ... argue that the ‘real-world’ effect of the Plan’s use of a variable interest rate (the annual rate on 30-year Treasury securities) to compute ‘Interest Credits’ creates a situation in which variations in the 30-year Treasury rate are likely to cause backloading. This argument is simply wrong. The Plan clearly is a ‘frontloaded’ — not backloaded- — cash balance plan within the meaning of applicable Treasury regulations. As noted, 26 C.F.R. § 1.411 (b) — 1 states plainly that factors used to compute benefits will be assumed to be constant even when a plan uses a variable outside index like the Consumer Price Index (“CPI”) to compute such benefits.”). Further, assuming that future years’ benefits do not accrue at a rate that exceeds 133-1/3 % of the rate for the base year in question, the fact that the base year’s rate of accrual may exceed that of a prior year by more than 133-1/3 % due to real-world fluctuations in interest rates does not violate the rule.
19
Plaintiffs
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have not claimed, or provided any evidence to suggest, that if one holds constant any interest rate in CIGNA’s permissible window of 4.5-9% for all future- Plan years, the rate of future benefit accrual would violate the 133-1/3% rule.
Furthermore, under Part B, employees could only benefit from the variability of interest rates — they will never earn less than 75% of any future year’s accrual in a given year, assuming that the minimum interest rate applies, and they may earn more if they retire in a year in which the variable interest rate happens to be higher than the minimum guaranteed rate.
20
The court in
Wheeler,
2007 WL 781908 , at *5, noted the “gotcha!” quality of Plaintiffs’ argument,
which seeks to trip up the Plan on the basis of swings in the 30-year Treasury rate. The Court sees no compelling interest in playing such games, or in forcing Boeing to alter Plan provisions that obviously are intended to benefit Plan participants. As discussed, the Plan provides a minimum 5.25% floor for computing “Interest Credits,” but the variable rate enables participants to do better than 5.25% in Plan years when the applicable 30-year Treasury rate exceeds the 5.25% floor.
Id.
at *5 . Thus, the Court holds that the 133-1/3% rule is not violated by the use of a variable interest rate, provided that no interest rate in the 4.5-9% window, held constant, results in impermissible back-loading. Although the Court is sympathetic to Plaintiffs’ concerns regarding wear away, and will discuss that issue in greater detail elsewhere in this opinion, the Court finds that Part B does not violate ERISA’s prohibition on backloading.
B. Non-forfeitable Benefits. As part of its efforts to protect employees and their retirement benefits, ERISA prohibits the forfeiture of accrued benefits except under limited circumstances that do not apply to this case.
See
29 U.S.C. § 1053 (a)(3). Section 203(a) of ERISA states emphatically, “Each pension plan shall provide that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age_” 29 U.S.C. § 1053 (a). A defined benefit plan “satisfies the requirements of this clause if an employee who has completed at least 5 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions.”
Id.
§ 1053(a)(2)(A)(ii). Elsewhere, ERISA defines “nonforfeitable” as “a claim obtained by a participant or his beneficiary to that part of an immediate or deferred benefit under a pension plan which arises from the participant’s service, which is unconditional, and which is legally enforceable against the plan.” 29 U.S.C. § 1002 (19).
Plaintiffs argue that Part B works an impermissible forfeiture for two reasons. First, Article VII of Part B gives CIGNA employees the option of receiving their retirement benefits as either an annuity or
*326
a lump sum.
See
Ex. 1 (Part B), at D00305-D00307 (Art. VII). However, as Section 7.3 makes clear, a prior Part A participant’s vested early retirement benefits are available only if the employee chooses an annuity.
See id.
at D00309 (§ 7.3). Thus, Plaintiffs claim that an employee choosing a lump sum forfeits any early retirement benefits for which she otherwise qualified. Second, even disregarding early retirement benefits, Plaintiffs argue that in establishing a “greater of A or B” formula, CIGNA has required its employees to forfeit either the cash balance accruals, if they choose an annuity, or the protected minimum benefit, if they choose a lump sum. For the reasons that follow, the Court rejects each argument.
Despite ERISA’s requirement that benefits be non-forfeitable, employers have substantial leeway in deciding how to define the non-forfeitable benefit. As the Supreme Court explained in
Alessi v. Raybestos-Manhattan, Inc.,
451 U.S. 504 , 101 S.Ct. 1895 , 68 L.Ed.2d 402 (1981),
the statutory definition of “non-forfeitable” assures that an employee’s claim to the protected benefit is legally enforceable, but it does not guarantee a particular amount or a method for calculating the benefit. As we explained last Term, “it is the claim to the benefit, rather than the benefit itself, that must be ‘unconditional’ and ‘legally enforceable against the plan.’ ”
Id.
at 512 , 101 S.Ct. 1895 (quoting
Nachman Corp. v. Pension Benefit Guaranty Corp.,
446 U.S. 359, 371 , 100 S.Ct. 1723 , 64 L.Ed.2d 354 (1980)). In Alessi, an employer sought to offset the pension benefits of its employees by the value of any workers’ compensation benefits for which those employees were eligible. The Supreme Court held that such offsets did not work an impermissible forfeiture of benefits under ERISA. According to the Supreme Court, “It is particularly pertinent for our purposes that Congress did not prohibit ‘integration,’ a calculation practice under which benefit levels are determined by combining pension funds with other income streams available to the retired employees.”
Id.
at 514, 101 S.Ct. 1895 ;
see Bonovich v. Knights of Columbus,
963 F.Supp. 143, 148 (D.Conn.1997) (permitting integration of participants’ renewal commissions with their pension plan benefits).
21
The Court further noted that “in considering this integration option, the House Ways and Means Committee expressly acknowledged the tension between the primary goal of benefit[t]ing employees and the subsidiary goal of containing pension costs.”
Alessi,
451 U.S. at 515 , 101 S.Ct. 1895 . As a result, Congress chose the compromise position of protecting the overall level of benefits to which employees were entitled, while at the same time permitting employers to use funds freed up by the integration procedure to support the pensions of employees without access to such third-party sources of income.
Although CIGNA did not employ an integration procedure
per se
in defining benefit accrual under Part B, the company’s use of a “greater of A or B” formula had a similar effect. Part B explicitly defines the “accrued benefit” of prior participants
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in Part A as “no ... less than the present Equivalent Actuarial Value ... of the Participant’s Minimum Benefit” under Part A. Ex. 1 (Part B), at D00270 (§ 1.1(c)). The minimum benefit, in turn, is “the Participant’s Part A Accrued Benefit, expressed in the form of a single life annuity commencing at the Participant’s Normal Retirement Date,” increased by the “Equivalent Actuarial Value of the ... Preserved Spouse’s Benefit” where applicable.
Id.
at D00280 (§ 1.82). CIGNA thus defined benefit accrual under Part B as occurring only when and if the cash balance account of prior Part A participants exceeds the minimum benefit under Part A. As
Alessi
made clear, this approach is permissible, and in fact CIGNA’s Plan is more favorable to its employees than that approved by the Supreme Court. After all, CIGNA considers only benefits it already owes to participants under Part A, not additional sources of outside income such as workers’ compensation. Unless a benefit has accrued under Part B, no impermissible forfeiture can take place, and so the Court must reject Plaintiffs’ argument that in establishing a “greater of A or B” formula, CIGNA has required them to forfeit either the cash balance accruals, if they choose an annuity, or the early retirement benefits, if they choose a lump sum.
Two other courts have reached the same conclusion in similar circumstances, where employers used an “A or B” approach in shifting from a defined benefit to a cash balance retirement plan. In
Richards,
427 F.Supp.2d 150 , FleetBoston established opening account balances for its employees in a manner similar to CIGNA’s. Those employees who had previously accrued benefits under the old pension plan, as under Part B, would receive the greater of the cash balance account at the time of retirement or the frozen benefits under the prior plan. Early retirement benefits were not made a part of the opening account balances, and so FleetBoston employees argued that they were required impermissibly to forfeit those benefits in order to receive the benefits accrued under the new plan, or were forced to forfeit the cash balance accruals if they chose the frozen benefits. FleetBoston, on the other hand, argued that no forfeiture existed, because employees always received the greater of the two amounts. Again looking to
Alessi ,
the court held that
the Amended Plan terms give Richards no claim to benefit accrual during the years in which her hypothetical account balance is below the value of her frozen Traditional Plan benefit. Section 203(a) gives Richards a non-forfeitable claim to her accrued benefit, but the balance of the hypothetical cash account does not become part of her accrued benefit until it surpasses the value of the frozen Traditional Plan benefit. Thus, the plan does not require a forfeiture of an accrued benefit, nor is the receipt of accrued benefits conditional.
427 F.Supp.2d at 170 . Thus, FleetBoston had authority to determine the content of the benefit that, once accrued, became non-forfeitable under ERISA, and the company chose to define the accrued benefit as the balance in the cash account
only if it
exceeded the frozen benefits.
22
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Similarly, in
Campbell v. BankBoston, N.A.,
327 F.3d 1 (1st Cir.2003), BankBo-ston shifted from a defined benefit to a cash balance plan, but put in place a “benefit safeguard” provision intended to ensure that employees who had accumulated benefits under the defined benefit plan would not receive less than the value of those benefits upon retirement. Given that Mr. Campbell’s accruals under the old plan were significantly larger than the opening balance of his cash account, the implementation of the cash balance plan effectively ended his pension accrual. In upholding BankBoston’s plan under ERISA, the First Circuit noted that “[b]enefits already earned under an old plan may not be taken away, but benefits expected but not yet accrued are not similarly protected.”
Id.
at 8 (citations omitted). Thus, “[t]here was no forfeiture, because no accrued benefits were reduced; only expected benefits were reduced, which BankBoston could, under the law, modify or eliminate.”
Id.
For similar reasons, the Court reaches the same result with respect to Plaintiffs’ early retirement benefits. Part B states:
A Participant’s normal retirement benefit shall be his Accrued Benefit at his Normal Retirement Date. Notwithstanding the foregoing, the amount of the Participant’s normal retirement benefit, expressed in the form of a single life annuity, shall in no event be less than the greatest early retirement benefit he could have received if he had elected to retire and commence receiving his vested Accrued Benefit in the form of a single life annuity prior to his Normal Retirement Date.
Ex. 1 (Part B), at D00294-D00295 (§ 5.2(a)). Although this language would appear to support Plaintiffs, the text continues, “This provision is intended to comply with Treas. Reg. § 1.411 (a)-7(c), and shall have no application except as required by that regulation.” Treasury Regulation 1.411(a)7(c) excludes Social Security offsets from the calculation of an employee’s “early retirement benefit.” 26 C.F.R. § 1.411 (a)-7(c)(4)(i) (“For purposes of this paragraph [on calculating the normal retirement benefit], the early retirement benefit under a plan shall be determined without regard to any social security supplement.”). Further, actuarial subsidies such as Part A’s subsidized early retirement benefits are also ignored under the regulations for the purposes of calculating the normal retirement benefit.
See
26 C.F.R. § 1.411 (a)-7(c). Thus, Part B complies with the Treasury regulations by including only the value of the Preserved Spouse’s benefit, where applicable, in the value of the minimum benefit under Part A, as the other benefits offered under Part A (the Social Security offset and the subsidized early retirement benefits) need not be included. A violation of the non-forfeitability statute, then, could only occur if a CIGNA employee chose a lump sum distribution worth less than the present actuarial value of his normal retirement benefit under Part A, plus the Preserved Spouse’s benefit if applicable. Because Plaintiffs have not shown that any employee in fact made such a choice, they have failed to demonstrate any impermissible forfeiture.
Plaintiffs cite to
Esden,
229 F.3d 154 , and
Berger,
338 F.3d 755 , for support, but these cases are inapposite. Both deal with the phenomenon known as “whipsaw.” Whipsaw may occur when an employee under a defined benefit plan requests a lump sum disbursal of his benefits before reaching age 65. Cash balance plans must be “frontloaded” in order to be tax-qualified, meaning that the employee vests in his future interest credits at the same time that he vests in the underlying pay credits. As a result, he is entitled to the interest on
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any already-earned pay credits until the normal retirement age of 65, even if he chooses to retire sooner. If the employee retires at the age of 55 and requests a lump sum, for example, the employer must use a projection rate to calculate the actuarial value of the annuity at age 65, and then apply a discount rate to determine the present lump sum value of that annuity at the time of disbursal. The federal government sets the discount rate that pension plans must use to determine the present value of future sums, but the plans themselves set the projection rate. Thus, if the projection rate is higher than the discount rate (which was the case in
Esden
and
Berger),
then the present value of the employee’s normal retirement benefit will exceed his current cash account balance. This disparity is known as whipsaw. In order to avoid paying employees a sum greater than the balance of their cash accounts, the employers in
Esden
and
Berger
adopted a special projection rate for these kinds of early retirement calculations, and set the projection rate equal to the government-mandated discount rate. The result was that the projected actuarial value of the normal retirement benefit, when discounted to its present value, was equivalent to the balance in the cash accounts.
The courts in both
Berger
and
Esden
held that the employers’ practice constituted an impermissible forfeiture of accrued benefits under 29 U.S.C. § 1053 (a).
See Berger,
338 F.3d at 761-62 ;
Esden,
229 F.3d at 173 . However, in both
Berger
and
Esden,
the benefits in question were future interest credits on underlying pay credits that the employees had already accrued. These future interest credits are unquestionably part of the normal retirement benefit that ERISA protects. Here, on the other hand, as already explained, Plaintiffs have not been required to forfeit any part of their normal retirement benefit. The pay and interest credits under Part B do not accrue (and so become part of the normal retirement benefit) until the balance of the cash account exceeds the minimum benefit under Part A, and all the elements of the benefits provided under Part A that ERISA protects from forfeiture are made part of the minimum benefit under Part B. As a result,
Esden
and
Berger
are simply irrelevant, and the Court finds as a fact that no violation of the non-forfeiture statute occurred here.
V. Plan Descriptions and Disclosures
Plaintiffs assert that CIGNA failed to provide certain required disclosures to its employees and that the plan descriptions that CIGNA did provide did not meet the statutory standards under ERISA. Before turning to the parties’ arguments, however, the Court must first address CIGNA’s contention that Plaintiffs did not sue the right defendant on these claims.
A. Plan Administrator. CIGNA argues that Plaintiffs’ failure to name the plan administrator as a defendant, in addition to CIGNA and the CIGNA Pension Plan, is fatal to Plaintiffs’ claims regarding plan descriptions and disclosures because only the plan administrator may be held liable for defects in the notices and disclosures required by ERISA.
The Court readily acknowledges that this particular area of ERISA is even more confused and confusing than other aspects of ERISA law. The confusion is apparent from the variety of approaches taken even within this District. For example, in
Custer,
2008 WL 222558 , the court never discussed the possibility that only the plan administrator could be held liable for failures in plan descriptions, despite the fact that the plaintiffs in that case had only named the plan and the employer as defendants. By contrast, in
Richards,
427 F.Supp.2d 150 , the court focused on the nature of the relief requested — whether under ERISA § 502(a)(1)(B) or § 502(a)(3)- — and dismissed claims against
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the employer brought under the former section but allowed claims under the latter.
Whether the plan administrator alone may be held liable for defects in statutorily-required notices and disclosures is more complicated than, and conceptually distinct from, the question of under which statutory section Plaintiffs seek relief. Under ERISA, the plan administrator is responsible for issuing certain required disclosures, such as periodic Summary Plan Descriptions (“SPDs”) and Summaries of Material Modifications (“SMMs”),
see
29 U.S.C. § 1024 (b)(1), and notices of significant reductions in the rate of future benefit accrual under § 204(h).
See
29 U.S.C. § 1054 (h)(1). ERISA defines the plan administrator as “the person specifically so designated by the terms of the instrument under which the plan is operated [or] if an administrator is not so designated, the plan sponsor.” 29 U.S.C. § 1002 (16)(A). In this case, the plan sponsor is CIGNA.
See
29 U.S.C. § 1002 (16)(B)(i). The plan administrator at the time the § 204(h) notice and 1998 and 1999 SPDs were published was Mr. Stewart Beltz, a CIGNA employee, and the current holder of that position is Mr. John Arko, another CIGNA employee.
See
Ex. 507, at SuppD1098, SuppD1092. Neither of these individuals was named as a defendant in this suit; the only defendants are CIGNA and the CIGNA Pension Plan.
In arguing that the plan administrator is the only party who can be sued on Plaintiffs’ disclosure claims, CIGNA relies primarily on the statutory language in the sections of ERISA regarding the provision of notices and disclosures. Both § 204(h) and § 104(a), which discusses SMMs and SPDs, explicitly require the plan administrator to provide the documents at issue.
See
29 U.S.C. § 1054 (h) (an amendment is invalid unless “the
plan administrator
provides a written notice” meeting the requirements of the statute) (emphasis added); 29 U.S.C. § 1024 (b)(1) (stating that
“[t]he administrator
shall furnish to each participant” the required SPDs and SMMs) (emphasis added). Indeed, Plaintiffs admit that “ERISA places the responsibility for these disclosures on the ‘plan administrator.’ ” Pis.’ Post-Trial Brief [doc. #247], at 51. The Second Circuit has also noted this assignment of duties by permitting suits to recover benefits under a plan to proceed against the plan itself and/or the administrator of the plan, while restricting claims of inadequate disclosures to plan administrators only.
See Lee v. Burkhart,
991 F.2d 1004, 1010 (2d Cir.1993) (“ERISA undoubtedly requires that participants be told who has the financial obligation to fund the plans. But that obligation is placed on the person designated under ERISA as the ‘administrator’ of the plan, not on every fiduciary.”);
Nechis v. Oxford Health Plans, Inc.,
421 F.3d 96, 104 (2d Cir.2005) (limiting liability for defective notices to administrators as defined by ERISA);
see also Klosterman v. W. Gen. Mgmt.,
32 F.3d 1119, 1122 (7th Cir.1994) (“Western General, the only defendant, cannot be held liable for any inaccuracies in the SPD. Congress has explicitly provided that the responsibility for complying with these statutory requirements falls on the plan administrator. The case law also confirms that any cause of action for violations of these disclosure requirements is proper only against the plan administrator, the party responsible under the statute.”).
Plaintiffs have two responses to CIG-NA’s argument: first, that the designation of Mr. Beltz, and presumably also Mr. Arko, as plan administrator was procedurally defective (making CIGNA, as the plan sponsor, the default administrator); and second, that even if Mr. Beltz was the validly-appointed plan administrator, CIG-NA effectively retained control over the content and provision of the documents at
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issue in this case and therefore CIGNA should be held liable for any defects in those documents.
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Plaintiffs claim that CIGNA should be considered

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/1443249. Public record. Not legal advice.