Drutis v. Quebecor World (Usa), Inc.
| Decision Date | 25 September 2006 |
| Docket Number | No. 04-269-KSF.,04-269-KSF. |
| Citation | 459 F.Supp.2d 580 |
| Parties | Larry DRUTIS, Harold E. Parker, Joe Tkacz and John Wayne Simpson Plaintiffs v. QUEBECOR WORLD (USA), INC. Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
Charles William Arnold, Lexington, KY, for Plaintiffs.
Carol Connor Flowe, Gretchen Ann Dixon, Arent Fox PLLC, Washington, DC, Jack B. Harrison, Frost Brown Todd LLC, Cincinnati, OH, Adam R. Kegley, Frost Brown Todd LLC, Lexington, KY, for Defendant.
This matter is before the Court on cross motions for summary judgment by Plaintiffs [DE # 57] and the Defendant [DE# 58]. Having been fully briefed, these motions are ripe for review.
The four Plaintiffs claim that a change in their pension plan from a traditional defined benefit plan to a cash balance plan violated § 204(b)(1)(H), the anti-age discrimination provision of the Employee Retirement Income Security Act ("ERISA").1 The relevant facts are not in dispute. The only dispute concerns the interpretation of the statute and its application to these facts. It is the Opinion of this Court that the change in pension plans did not violate ERISA's anti-discrimination provision, and Defendant is entitled to judgment as a matter of law.
Each of the four Plaintiffs was previously employed by Rand McNally Book & Media Services ("Rand McNally Book") and participated in the Rand McNally & Company Pension Plan ("Rand McNally Plan"), a traditional defined benefit plan. On January 17, 1997, World Color Press, Inc. ("World Color") purchased Rand McNally Book, and the Plaintiffs became employees of World Color. The pension benefits of the employees were transferred to the World Color Press Cash Balance Plan ("World Color Plan"). Each participant in the World Color Plan was credited with a Transition Balance that was equal to the amount they would have been paid if they had taken a lump sum distribution of their Rand McNally Plan benefit on January 16, 1997. This sum was the full actuarial value of the employee's existing accrued benefit. Each month, the Transition Account was credited with interest at the rate payable on one-year U.S. Treasury bills as of December 31 of the preceding year. Additionally, each World Color Plan participant had a Future Service Account in which they received monthly credits equal to 4 percent of their monthly compensation plus interest at the one-year Treasury bill rate, with a minimum of 3 percent interest.
The World Color Plan also had a special "grandfather" provision applicable to those employees who: (1) had an accrued benefit under the Rand McNally Plan on January 16, 1997; (2) were 55 years old on or before that date; and (3) had at least five years of vesting service as of that date. These "grandfathered" participants could choose a retirement benefit that was the greater of: (a) the benefit they would have received under the Rand McNally Plan if they had continued to participate until their retirement date, or (b) their cash balance under the World Color Plan.
Plaintiffs Larry Drutis and Joseph Tkacz retired from World Color on December 31, 1998 and took the distribution of their benefits from the World Color Plan at that time. They both met all of the "grandfather" requirements, and they both chose to receive their benefits calculated as if they had continued in the Rand McNally Plan until their retirement date. They both also were younger than 65 when they retired.
In 1999, a subsidiary of Quebecor Printing, Inc. merged with World Color and the resulting entity is Quebecor World (USA), Inc. ("Quebecor"). In December 2000 the World Color Plan was merged into the Quebecor World Pension Plan, which is not a cash balance plan. After that date, the World Color Plan ceased to exist. Accordingly, this case concerns only the World Color Plan from January 17, 1997 through December 31, 2000.
Plaintiff Harold Parker became disabled August 5, 1996 and retired on disability effective January 31, 1997. He is younger than 65, and has not elected to receive his retirement benefits. Plaintiff John Simpson is currently an employee of Quebecor and has not received any distribution of his retirement benefits. He also is younger than 65.
In support of their claim of age discrimination, Plaintiffs offered the testimony of Claude Poulin, an actuary. Mr. Poulin testified that he has attended the annual enrolled actuaries meetings in Washington, D.C. since 1976 (Poulin Dep. p. 16). He could not identify any literature presented at these meetings that would support his opinion. In fact, he said the actuaries attending the meetings "would disagree with [his] opinion." Id. at 17. He admitted that the American Academy of Actuaries has "taken the position that cash balance plans are not inherently age discriminatory." Id. at 134, 139. Nonetheless, Mr. Poulln's Report states that the World Color Plan "rates of benefit accrual" decline "with each year of advancing age" and these reductions "are a clear violation of Section 204(b)(1)(H) of ERISA...." [DE # 57, Exhibit D].
Two types of pension plans are recognized by federal law: defined benefit plans and defined contribution plans. See generally, Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999). Defined benefit plans entitle the participant upon retirement to a fixed periodic payment from a general pool of assets provided by the employer. The employer "typically bears the entire investment risk and ... must cover any underfunding as the result of a shortfall that may occur from the plan's investments." Id. at 439, 119 S.Ct. 755. The amount of the "fixed payment" typically is based on a formula including the employee's highest recent earnings and the number of years of service. In a defined benefit plan, the "accrued benefit" is defined as an amount "expressed in the form of an annual benefit commencing at normal retirement age." ERISA § 3(23)(A).
Defined contribution plans, on the other hand, establish an individual account for each participant. The employer contributes periodically to the account, and the employee may be able to supplement those contributions. The benefit at the time of retirement is a function of the balance in the account, consisting of the contributions and the interest or investment earnings on the contributions over the employee's career. The retirement benefit is not a "fixed" amount, but varies depending upon the amount accumulated in the account over time. The participant bears the investment risk.
Cash balance plans, by law, are defined benefit plans, but they function more like defined contribution plans. See Internal Revenue Service Notice 96-8, 1996-1 C.B. 359 ("Notice 96-8"); Laurent v. Price-WaterhouseCoopers, 448 F.Supp.2d 537, 538 (S.D.N.Y.2006). Each participant has a hypothetical account to which the employer imputes value through "credits," typically equal to a percentage of compensation, and interest credits based on a specified benchmark, such as the annual yield on one-year U.S. Treasury bills. The interest credits are not determined by the actual investment yield on the plan's assets; instead, if the actual investment yield falls below the interest rate guaranteed by the plan, the employer is required to make up the difference. To determine an employee's "accrued benefit" under a cash balance plan, an employer is required to provide "credits" for not only the current year of interest but also credits for all years until the employee's normal retirement age. Thus, a participant's account is said to be "front loaded" with estimated interest. Id. at 544-45. If the employee retires and takes a distribution of his pension before the normal retirement age, the hypothetical account balance is discounted back to its present value. See Cooper v. IBM Personal Pension Plan, 457 F.3d 636, 641 (7th Cir. 2006)
The Rand McNally Plan was a traditional defined benefit plan that provided a life annuity at the normal retirement age of 65 based on the number of years of service and compensation. Employees with at least fifteen years of service could choose to receive a distribution at age 55, either in the form of an annuity or a lump sum if their benefit was at least $10,000.
The World Color Plan was a cash balance plan consisting of a Transition Balance equal to the actuarial equivalent of the benefit earned under the Rand McNally Plan as of January 16, 1997, plus credits for interest on that amount, and a Future Service Account in which each participant received credit each month for 4 percent of his or her monthly compensation, plus interest at the one-year Treasury bill rate or a minimum of 3 percent. Each employee received the same 4 percent of compensation credit and rate of interest credit whether the employee was 25, 45, 55 or any other age.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. R. 56(c); U.S. v. One TRW, Model M14, 7.62 Caliber Rifle, 441 F.3d. 416, 417 (6th Cir.2006). When deciding a motion for summary judgment, the court must view the evidence and draw all reasonable inferences in favor of the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Browning v. Department of Army, 436 F.3d 692 (6th Cir.2006).
For this Court to have jurisdiction under Article III of the United States Constitution, a plaintiff must allege an actual case or controversy.
...
To continue reading
Request your trial
-
Register v. Pnc Financial Services Group, Inc.
...district court in this case, have reached the same result that the court of appeals reached in Cooper. See Drutis v. Quebecor World (USA), Inc., 459 F.Supp.2d 580 (E.D.Ky. 2006); Laurent v. PriceWaterhouseCoopers LLP, 448 F.Supp.2d 537 (S.D.N.Y. 2006); Hirt v. Equitable Ret. Plan for Employ......
-
Mugworld, Inc. v. G.G. Marck & Associates, Inc., 4:05cv441.
... ... Corporation, North American Investments Corp., and Photo USA Electronic Graphic, Inc., which are all owned or operated by James Peng ... ...
-
Drutis v. Rand McNally & Co.
...disputed and the following summary is taken largely from the fact section of the district court opinion. See Drutis v. Quebecor World (USA), Inc., 459 F.Supp.2d 580 (E.D.Ky. 2006). The four plaintiffs—Larry Drutis, Harold Parker, John Wayne Simpson, and Joseph Tkacz—were all previously empl......