Free Trial Memo - District Court of Connecticut - Connecticut

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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT -----------------------------------------------------X : JANICE C. AMARA, GISELA : R. BRODERICK, AND ANNETTE S. : GLANZ individually, and on behalf : of others similarly situated, : : Plaintiffs, : v. : : CIGNA CORP. AND CIGNA : PENSION PLAN, : : Defendants. : : -----------------------------------------------------X

3:01 CV 2361 (MRK) Trial Dates: September 11-15, 2006 January 24-25, 2007

DEFENDANTS' POST-TRIAL BRIEF Dated: June 25, 2007 MORGAN, LEWIS & BOCKIUS LLP Joseph J. Costello Jeremy P. Blumenfeld Jamie M. Kohen Admitted pro hac vice 1701 Market Street Philadelphia, Pennsylvania 19103-2921 (215) 963-5295/5258/5472 (215) 963-5001 (fax) ROBINSON & COLE James A. Wade (CT # 00086) 280 Trumbull Street Hartford, Connecticut 06103 (860) 275-8270 (860) 275-8299 (fax) Attorneys for Defendants CIGNA Corporation and CIGNA Pension Plan

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TABLE OF CONTENTS PAGE

TABLE OF AUTHORITIES..........................................................................................................v I. II. INTRODUCTION..............................................................................................................1 JUDGMENT SHOULD BE ENTERED IN FAVOR OF DEFENDANTS ON COUNT 3 BECAUSE PART B IS NOT AGE DISCRIMINATORY...............................4 A. B. C. The Current State Of The Law Regarding Cash Balance Plans.............................5 Part B Treats Older Employees At Least As Well As It Treats Younger Employees ..............................................................................................................6 The Decisions Finding That Cash Balance Plans Are Age Discriminatory Are Flawed ..................................................................................................................11 1. 2. The Phrase "Rate Of An Employee's Benefit Accrual" Does Not Refer To The "Accrued Benefit.".......................................................................12 The Term "Benefit Accrual" Cannot Refer To The "Accrued Benefit" Because That Interpretation Cannot Be Applied Consistently At All Ages..........................................................................................................17 The Second Circuit's Decision In Esden v...............................................20 The Economic Effects That Plaintiffs Challenge Here Are Lawful In Other Contexts, Including With Traditional Defined Benefit Plans ....22 The Treasury Department Has Consistently Endorsed Cash Balance Plans As Not Being Age Discriminatory..................................................24

3. 4. 5. D. E. III.

Plaintiffs' Argument That Wear-Away Is Age Discriminatory Is A Distortion Of The Facts and Governing Law .......................................................27 Plaintiffs' Age Discrimination Claim Is Time-Barred .........................................30

JUDGMENT SHOULD BE ENTERED IN FAVOR OF DEFENDANTS ON COUNT 1 BECAUSE PART B DOES NOT VIOLATE ERISA'S 133% ANTIBACKLOADING OR NON-FORFEITABILITY RULES .............................................33 A. B. C. The Plan Does Not Violate ERISA's 133% Rule .............................................34 The Plan Does Not Cause Any Impermissible Forfeitures ..................................40 Plaintiffs' Backloading/Forfeiture Claims Are Time-Barred...............................44

IV.

JUDGMENT SHOULD BE ENTERED IN FAVOR OF DEFENDANTS ON COUNTS 2 AND 4 BECAUSE PLAINTIFFS WERE NOT LIKELY OR ACTUALLY HARMED, AND THE WRITTEN DISCLOSURES SATISFIED ERISA'S DISCLOSURE REQUIREMENTS .................................................................45

i

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TABLE OF CONTENTS PAGE A. The Opening Account Balance Information, Total Compensation Reports And Annual Account Statements Distributed To Plan Participants Foreclose Any Liability On Plaintiffs' Disclosure Claims ...........................................................46 1. The Plan Administrator Provided Part B Participants With Complete And Timely Information Regarding The Exact Amount Of Their Cash Balance Accounts .....................................................................................46 Courts In The Second Circuit Have Consistently Rejected ERISA SPD/Section 204(h) Disclosure Claims When Plan Participants Have Been Provided Sufficient Information About Their Benefits Through Other Means, As In This Case..................................................................54 The Trial Testimony Of Plaintiffs And The Testifying Class Members Demonstrates That Any Deficiencies In The 1998 And 1999 SPDs And The 1997 Section 204(h) Notice Constituted Harmless Error..........59 The Part B SPD Met The Requirements Of ERISA Section 102.............62 The Part B SPD Was Not Required To Disclose A Reduction In The Rate Of Benefit Accrual With Age ..........................................................65 The Part B SPD Was Not Required To Provide A Comparison To Benefits That Participants Would Have Earned Under The Old Plan......65 The Part B SPD Was Not Required To Disclose The Potential WearAway Effect..............................................................................................66 a. b. The Wear-Away Effect Did Not Cause Any Reduction In Plan Benefits, And Was Not The Result Of A Plan Provision.............70 The Wear-Away Effect Was Caused By Falling Interest Rates After The Conversion, Which The Plan Administrator Could Not Anticipate ..............................................................................71 The Wear-Away Effect Attributable To The Early Retirement Subsidy Could Only Possibly Affect A Small Subset Of Participants ...................................................................................76 (1) The Wear-Away Effect Attributable To The Early Retirement Subsidy Could Result Only For Eligible Employees During The Early Retirement Window..........77 The Wear-Away Effect Attributable To The Early Retirement Subsidy Would Only Result If A Plan Participant Elected An Annuity Option, But Most Cash Balance Participants Elect A Lump Sum .........................78

2.

3.

B.

The Part B SPD Met ERISA's Disclosure Requirements ....................................61 1. 2. 3. 4.

c.

(2)

5.

The Part B SPD Was Not Required To Disclose All Of The Factors In The OAB Calculation ...............................................................................79 ii

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TABLE OF CONTENTS PAGE 6. Even If The SPD Were Deficient, Plaintiffs' Benefits Must Be Governed Exclusively By The Terms Of The CIGNA Pension Plan, Not The SPD.............................................................................................83

C.

The Plan Administrator Provided Adequate Notice Under ERISA Section 204(h) ......................................................................................................85 1. 2. Only The Amendment Freezing Accruals Under Part A Required A Section 204(h) Notice, Which The Plan Administrator Provided ........86 Even If A 204(h) Notice Was Required For The Cash Balance Adoption, The Plan Administrator Fulfilled That Requirement ..............88 a. Section 204(h) As It Existed At The Time Part B Was Created Provides The Applicable Requirements For The Allegedly Required Notice ...........................................................89 The Plan Administrator Provided A Proper Section 204(h) Notice To Active Employees........................................................91

b. 3.

The Plan Administrator Was Not Required Under ERISA Section 204(h) To Notify Vested Separated Old Plan Participants About The Amended Rehire Rule ..............................................................................96

D. E.

Plaintiffs Do Not Have A Pending Claim For An Inadequate Summary Of Material Modification Regarding The Cash Balance Conversion .......................99 Plaintiffs' Disclosure Claims Are Time-Barred .................................................102 1. 2. Plaintiffs' SPD Claim Is Time-Barred ...................................................102 Plaintiffs' Section 204(h) Claim Is Time-Barred ...................................103

F. V.

Any Disclosure Claims Would Lie Against The Plan Administrator, Who Is Not A Party ............................................................................................104

JUDGMENT SHOULD BE ENTERED IN FAVOR OF DEFENDANTS ON COUNT 5 BECAUSE DEFENDANTS' FAILURE TO PROVIDE PRESENT-VALUE DISCLOSURES OF THEIR DIFFERENT BENEFIT OPTIONS PRIOR TO OCTOBER 2004 DID NOT VIOLATE ERISA ............................................................109 A. B. C. D. E. Part B Does Not Violate ERISA's Anti-Cutback Rule In Section 204(g) .........109 Plaintiffs Amara, Broderick And Glanz Do Not Have Standing To Pursue A Present-Value Disclosure Claim.........................................................................112 Pre­October 2004 Treasury Regulations Did Not Require Disclosure Of The Present Value Of Benefit Options ......................................................................114 Any Present-Value Disclosure Claims Would Lie Against The Plan Administrator, Who Is Not A Party....................................................................118 Plaintiffs' Present-Value Disclosure Claim Is Time-Barred ..............................119 iii

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TABLE OF CONTENTS PAGE VI. VII. PLAINTIFFS AND THOUSANDS OF CLASS MEMBERS SIGNED RELEASES THAT BAR THEIR CLAIMS...................................................................120 EVEN IF PLAINTIFFS PROVE ERISA VIOLATIONS, THEIR REMEDIES ARE LIMITED...............................................................................................................122 A. B. C. VIII. Monetary Damages Generally Are Unavailable Under ERISA Section 502(a)(3) ................................................................................................124 Plaintiffs Are Not Entitled To Retroactive Relief ..............................................127 Any Relief Must Be Limited By The Pension Protection Act Of 2006 .............130

CONCLUSION ..............................................................................................................130

iv

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TABLE OF AUTHORITIES PAGE CASES Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981) ..........................................................................................................40 Allen v. WestPoint-Pepperell, Inc., 11 F. Supp. 2d 277 (S.D.N.Y. 1997) ................................................................................. 80 Ariz. Governing Comm. for Tax Deferred Annuity & Deferred Comp. Plans v. Norris, 463 U.S. 1073 (U.S. 1983) ......................................................................................128, 129 Auer v. Robbins, 519 U.S. 452 (1997) ..........................................................................................................24 Averhart v. US WEST Mgmt. Pension Plan, 46 F.3d 1480 (10th Cir. 1994) .........................................................................................108 Barnes v. Lacy, 927 F.2d 539 (11th Cir. 1991) ...........................................................................................68 Estate of Becker v. Eastman Kodak Co., 120 F.3d 5 (2d Cir. 1997) ..................................................................................................68 Beecher v. Able, 575 F.2d 1010 (2d Cir. 1978) ..........................................................................................126 Berger v. Xerox Corp. Ret. Income Guarantee Plan, 338 F.3d 755 (7th Cir. 2003) .......................................................................................21, 22 Bogosian v. Woloohojian Realty Corp., 323 F.3d 55 (1st Cir. 2003) ...............................................................................................67 Bonovich v. Knights of Columbus, 963 F. Supp. 143 (D. Conn. 1997), aff'd, 146 F.3d 57 (2d Cir. 1998)........................43, 44 Bryerton v. Verizon Commc'n, Inc., No. 06-6672, 2007 WL 1120290 (S.D.N.Y. Apr. 17, 2007)...............................................5 Burke v. Kodak Ret. Income Plan, 336 F.3d 103 (2d Cir. 2003) ..................................................................................46, 55, 84 Campanella v. Mason Tenders Dist. Council Pension Plan, 299 F. Supp. 2d 274 (S.D.N.Y. 2004) ............................................................................. 121 v

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TABLE OF AUTHORITIES PAGE Campbell v. BankBoston, 327 F.3d 1 (1st Cir. 2003) .............................................................................................2, 42 Carey v. Int'l Bhd. of Elec. Workers Local 363 Pension, 201 F.3d 44 (2d Cir. 1999) ..............................................................................................101 Cement and Concrete Workers Dist. Council Welfare Fund v. Lollo, 148 F.3d 194 (2d Cir. 1998) ..............................................................................................58 Cent. Laborers' Pension Fund v. Heinz, 541 U.S. 739 (2004) ..................................................................................................15, 110 Chaplin v. Nationscredit Corp., 307 F.3d 368 (5th Cir. 2002) ...........................................................................................120 Chapman v. Choice Care Long Island Term Disability Plan, 288 F.3d 506 (2d Cir. 2002) ............................................................................................114 Charles v. Pepco Holdings, Inc., 437 F. Supp. 2d 248 (D. Del. 2006) ..................................................................................90 Chen v. U.S. Dep't of Justice, 434 F.3d 144 (2d Cir. 2006) ..............................................................................................19 Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) ..................................................................................................128, 129 In re Citigroup Pension Plan ERISA Litig., ("Citigroup I") 470 F. Supp. 2d 323 (S.D.N.Y. 2006) ........................................................................passim In re Citigroup Pension Plan ERISA Litig., Civ. A. No. 05-05296, 2007 WL 1074912 (S.D.N.Y. Apr. 4, 2007) ................................93 City of Los Angeles, Dep't of Water & Power v. Manhart, 435 U.S. 702 (1978) ................................................................................................127, 128 Coan v. Kaufman, 457 F.3d 250 (2d Cir. 2006) ............................................................................................124 Cooper v. IBM Pers. Pension Plan, 457 F.3d 636 (7th Cir. 2006) .........................................................................2, 5, 22, 23, 29 Cooper v. IBM Pers. Pension Plan, 274 F. Supp. 2d 1010 (S.D. Ill. 2003) .................................................................................6 vi

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TABLE OF AUTHORITIES PAGE Crowley v. Corning, Inc., 234 F. Supp. 2d 222 (W.D.N.Y. 2002)............................................................................107 Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995) ......................................................................................................61, 84 Daill v. Sheet Metal Workers' Local 73 Pension Fund, 100 F.3d 62 (7th Cir. 1996) ...............................................................................................31 De Pace v. Matsushita Elec. Corp. of Am., 257 F. Supp. 2d 543 (E.D.N.Y. 2003).............................................................................121 Depenbrock v. CIGNA Corp., 278 F. Supp. 2d 461 (E.D. Pa. 2003)...........................................................................86, 88 Depenbrock v. CIGNA Corp., 389 F.3d 78 (3d Cir. 2004) ....................................................................................59, 85, 88 Dickerson v. Feldman, 426 F. Supp. 2d 130 (S.D.N.Y. 2006) ............................................................................. 113 Drutis v. Quebecor World (USA), 459 F. Supp. 2d 580 (E.D. Ky. 2006)..................................................................................5 Eaton v. Onan Corp., 117 F. Supp. 2d 812 (S.D. Ind. 2000)................................................................5, 15, 19, 26 Eichorn v. AT&T Corp., 484 F.3d 644 (3d Cir. 2007) ............................................................................................125 Engers v. AT&T Corp., 428 F. Supp. 2d 213 (D.N.J. 2006)..................................................................................116 Engers v. AT&T Corp., No. 98-3660, 2001 U.S. Dist. LEXIS 25889 (D.N.J. June 6, 2001) ...................................5 Esden v. Bank of Boston, 229 F.3d 154 (2d Cir. 2000) .......................................................................................passim Exarhakis v. Visiting Nurse Serv. of N.Y., No. 02-CV-5562 (ILG), 2006 WL 335420 (E.D.N.Y. Feb. 13, 2006)..............................56 Fair v. Int'l Flavors & Fragrances, Inc., 905 F.2d 1114 (7th Cir. 1990) .........................................................................................120 vii

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TABLE OF AUTHORITIES PAGE Finley v. Dun & Bradstreet Corp., 471 F. Supp. 2d 485 (D.N.J. 2007)......................................................................................5 Fischer v. Phila. Elec. Co., 994 F.2d 130 (3d Cir. 1993) ..............................................................................................68 Fisher v. Penn Traffic Co., No. 06 Civ. 5848(HB), 2007 WL 496657 (S.D.N.Y. Feb. 16, 2007) .............................124 Florida v. Long, 487 U.S. 223 (1988) ................................................................................................128, 129 Francia v. Wonderoast, Inc. Profit Sharing Plan, No. 92-CV-790S, 1995 WL 625705 (W.D.N.Y. Oct. 19, 1995).......................................41 Frommert v. Conkright, 433 F.3d 254 (2d Cir. 2006) ........................................................................................44, 47 Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581 (2004) ..........................................................................................................14 Gerosa v. Savasta & Co., 329 F.3d 317 (2d Cir. 2003) ............................................................................................124 Gomes v. Avco Corp., 964 F.2d 1330 (2d Cir. 1992) ............................................................................................32 Graham County Soil & Water Conservation Dist. v. United States, 545 U.S. 409 (2005) ..........................................................................................................31 Graham v. N.Y. Dep't of Civil Serv., 907 F.2d 324 (2d Cir. 1990) ............................................................................................128 Gray v. Briggs, No. 97-6252, 1998 WL 386177 (S.D.N.Y. July 7, 1998) ...............................................122 Gray v. Great Am. Recreation Ass'n, Inc., 970 F.2d 1081 (2d Cir. 1992) ............................................................................................67 Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) ................................................................................................124, 125 H. Prang Trucking Co. v. Local Union No. 469, 613 F.2d 1235 (3d Cir. 1980) ..........................................................................................126 viii

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TABLE OF AUTHORITIES PAGE Hirt v. Equitable Ret. Plan for Employees, Managers and Agents, 441 F. Supp. 2d 516 (S.D.N.Y. 2006) ................................................................... 5, 90, 105 Hirt v. Equitable Ret. Plan for Employees, Managers and Agents, No. 01CIV7920 (AKH), 2006 WL 2627564, at *2 (S.D.N.Y. Aug. 24, 2006) ..............104 Hudson v. Gen. Dynamics Corp., 118 F. Supp. 2d 226 (D. Conn. 2000) ...............................................................................68 Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999) ..........................................................................................................84 In re J.P. Morgan Chase Cash Balance Litig., ("J.P. Morgan I") 460 F. Supp. 2d 479 (S.D.N.Y. 2006) ........................................................................passim In re J.P. Morgan Chase Cash Balance Litig., No. 06-732, 2007 WL 1549121 (S.D.N.Y. May 30, 2007).............................................125 Johnson v. Railway Express Agency, Inc., 421 U.S. 454 (1975) ..........................................................................................................30 Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523 (1983) ..........................................................................................................11 Jones v. Federated Fin. Reserve Corp., 144 F.3d 961 (6th Cir. 1998) ...........................................................................................108 Kagen v. Flushing Hosp., No. 96-CV-5795, 2000 WL 1678015 (E.D.N.Y. Nov. 3, 2000) .......................................91 King v. Pension Trust Fund of the Pension, Hospitalization and Benefit Plan of the Elec. Indus., No. 01-CV-2604, 2003 WL 22071612 (E.D.N.Y. Sept. 5, 2003)...............................3, 110 Koenig v. Intercont'l Life Corp., 880 F. Supp. 372 (E.D. Pa. 1995)......................................................................................91 Langman v. Laub, 328 F.3d 68 (2d Cir. 2003) ..........................................................................................34, 35 Langman v. Laub, No. 97 Civ. 6063(MGC), 2002 WL 472033 (S.D.N.Y. Mar. 28, 2002) .........................110

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TABLE OF AUTHORITIES PAGE Laurent v. PriceWaterhouseCoopers LLP, 448 F. Supp. 2d 537 (S.D.N.Y. 2006) ...........................................................................5, 58 Layaou v. Xerox Corp., 330 F. Supp. 2d 297 (W.D.N.Y. 2004)..............................................................................82 Layaou v. Xerox Corp., 238 F.3d 205 (2d Cir. 2006) ..............................................................................................82 Ledbetter v. Goodyear Tire & Rubber Co., Inc., 127 S. Ct. 2162 (2007) ................................................................................................30, 31 Lee v. Burkhart, 991 F.2d 1004 (2d Cir. 1993) ..................................................................................107, 109 Lehman v. Univ. of Hartford Defined Contribution Ret. Plan, No. CIV.A. 399CV2272CFD, 2002 WL 31076080 (D. Conn. Jul. 17, 2002) ................119 Linder v. Byk-Chemie USA, Inc., No. 3:02CV1956(JGM), 2006 WL 648206 (D. Conn. March 10, 2006) ........................122 Lorenzen v. Employees Ret. Plan of the Sperry & Hutchinson Co., 896 F.2d 228 (7th Cir. 1990) .......................................................................................68, 69 Lugo v. Employees Ret. Fund of Illumination Prods. Indus., 529 F.2d 251 (2d Cir. 1976) ............................................................................................116 McKeown v. Pac. Bell Directory, No. C-97-0427MHP, 1999 WL 111886 (N.D. Cal. Feb. 26, 1999) ..................................69 Malia v. Gen. Elec. Co., 23 F.3d 828 (3d Cir. 1994) ..............................................................................................107 Marcella v. Capital Dist. Physicians' Health Plan, Inc., 293 F.3d 42 (2d Cir. 2002) ................................................................................................25 McCarthy v. Dun & Bradstreet Corp., No. Civ.A.3:03CV431(SRU), 2004 WL 2743569 (D. Conn. Nov. 13, 2004) ............80, 84 McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007) .......................................................................................passim McKinsey v. Sentry Ins., 986 F.2d 401 (10th Cir. 1993) .................................................................................107, 108 x

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TABLE OF AUTHORITIES PAGE Mers v. Marriott Int'l Group Accidental Death, Dismemberment Plan, 137 F.3d 510 (7th Cir. 1998) .............................................................................................63 Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) ..................................................................................................61, 124 Metz v. United Techs. Corp., 754 F.2d 63 (2d Cir. 1985) ................................................................................................11 Miller v. Xerox Corp. Ret. Income Guarantee Plan, 447 F.3d 728 (9th Cir. 2006) .............................................................................................22 Moffett, Hodgkins & Clarke Co. v. City of Rochester, 178 U.S. 373 (1900) ........................................................................................................127 Mohasco Corp. v. Silver, 447 U.S. 807 (1980) ..........................................................................................................30 Mohegan Tribe v. State of Connecticut, 483 F. Supp. 597 (D. Conn. 1980) ....................................................................................14 Moore v. Philip Morris Cos., Inc., 8 F.3d 335 (6th Cir. 1993) ...............................................................................................119 Mullins v. Pfizer, Inc., 23 F.3d 663 (2d Cir. 1994) ................................................................................................67 Nechis v. Oxford Health Plans, Inc., 421 F.3d 96 (S.D.N.Y. 2005) ..................................................................................105, 126 Normann v. Amphenol Corp., 956 F. Supp. 158 (N.D.N.Y. 1997) .............................................................................90, 91 Park v. Trustees of the 1199 SEIU Health Care Employees Pension Fund, 418 F. Supp. 2d 343 (S.D.N.Y. 2003) ............................................................................... 55 Parsons v. AT&T Pension Benefit Plan, No. 3:06cv552(JCH), 2006 WL 3826694 (D. Conn. Dec. 26, 2006)..........3, 12, 13, 17, 31 Pastore v. Witco Corp., 388 F. Supp. 2d 212 (S.D.N.Y. 2005) .........................................................................47, 55 Pelosi v. Schwab Capital Markets, L.P., 462 F. Supp. 2d 503 (S.D.N.Y. 2006) ............................................................................. 126 xi

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TABLE OF AUTHORITIES PAGE Priest v. Fireman's Fund Ins. Co., No. 05-CV-0157E(Sr), 2007 WL 475325 (W.D.N.Y. Feb. 9, 2007) .............................. 126 Probe v. State Teachers' Ret. System, 780 F.2d 776 (9th Cir. 1986) ...........................................................................................129 Rabin v. Wilson-Coker, 362 F.3d 190 (2d. Cir. 2004) .............................................................................................12 Register v. PNC Fin. Servs. Group, Inc., No. 04-CV-6097, 2005 WL 3120268 (E.D. Pa. Nov. 21, 2005) ................................. 26, 65 Register v. PNC Fin. Servs., Group, Inc. 477 F.3d 56 (3d Cir. 2007) .........................................................................................passim Richards v. FleetBoston Fin. Corp., ("FleetBoston I") 427 F. Supp. 2d 150 (D. Conn. 2006) ........................................................................passim Richards v. FleetBoston Fin. Corp., ("FleetBoston II") 235 F.R.D. 165 (D. Conn. Mar. 31, 2006) ........................................................................27 Richards v. FleetBoston Fin. Corp., ("FleetBoston III") No. 04-1638, 2006 WL 2092086 (D. Conn. July 24, 2006)........................................37, 65 Robinson v. Shell Oil Co., 519 U.S. 337 (1997) ..........................................................................................................16 Rothwell v. Chenango County N.Y.S.A.R.C. Pension Plan, No. 3:03-CV- 00637 (GLS), 2005 WL 2276023 (N.D.N.Y. Sept. 19, 2005) ...................57 S.E.C. v. McCarthy, 322 F.3d 650 (9th Cir. 2003) .............................................................................................13 Sandberg v. KPMG Peat Marwick, LLP, 111 F.3d 331 (2d Cir. 1997) ..............................................................................................30 Scott v. Admin. Comm. of the Allstate Agents Pension Plan, 113 F.3d 1193, 1200 (11th Cir 1997))...............................................................................90 Seales v. Amoco Corp., 82 F. Supp. 2d 1312 (M.D. Ala. 2000)............................................................................119 Shaver v. Siemens Corp., No. 2:02cv1424, 2007 WL 1006681 (W.D. Pa. Mar. 30, 2007) .....................................120 xii

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TABLE OF AUTHORITIES PAGE Sheehan v. Metro. Life Ins. Co., 368 F. Supp. 2d 228 (S.D.N.Y. 2005) .........................................................................56, 57 Shields v. Reader's Digest Ass'n, Inc., 331 F.3d 536 (6th Cir. 2003) ...........................................................................................119 Sikora v. Am. Can Co., 622 F.2d 1116 (3d Cir. 1980) ..........................................................................................129 Smart v. Gillette Co. Long-Term Disability Plan, 887 F. Supp. 383 (D. Mass. 1995)...................................................................................120 Stahl v. Tony's Bldg. Materials, Inc., 875 F.2d 1404 (9th Cir. 1989) ...........................................................................................68 Strohmeyer v. Metro. Life Ins. Co., No. 3:04cv1808(WWE), 2005 WL 3963770 (D. Conn. Nov. 15, 2005) ........................ 126 Sunder v. U.S. Bank Pension Plan, No. 05-01153, 2007 WL 541595 (E.D. Mo. Feb. 16, 2007) ...............................................5 Swanson v. U.A. Local 13 Pension Plan, 779 F. Supp. 690 (W.D.N.Y. 1991)...................................................................................69 Swinney v. Gen. Motors Corp., 46 F.3d 512 (6th Cir. 1995) ...............................................................................................68 Syed v. Hercules Inc., 214 F.3d 155 (3d Cir. 2000) ........................................................................................31, 32 Tegtmeier v. Midwest Operating Eng'rs Pension Trust Fund, 295 F. Supp. 2d 844 (N.D. Ill. 2003).................................................................................69 Thomas v. City of New York, 143 F.3d 31 (2d Cir. 1998) ..............................................................................................114 Tocker v. Philip Morris Cos., 470 F.3d 481 (2d Cir. 2006) ..............................................................................................57 Tootle v. ARINC, Inc., 222 F.R.D. 88 (D. Md. 2004) ........................................................................................5, 19 Tyndall v. New England Teamsters & Trucking Indus. Pension Fund, No. 3:03 CV 194(CFD), 2006 WL 3815140 (D. Conn. Dec. 27, 2006) .........................127 xiii

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TABLE OF AUTHORITIES PAGE United States v. Maria, 186 F.3d 65 (2d Cir. 1999) ................................................................................................13 In re Unisys Sav. Plan Litig., 74 F.3d 420 (3d Cir. 1996) ..........................................................................................67, 68 United States v. Am. Trucking Ass'ns, 310 U.S. 534 (1940) ..........................................................................................................20 United States v. Caccia, 122 F.3d 136 (2d Cir. 1997) ..............................................................................................67 Wallace v. Kato, 127 S. Ct. 1091 (2007) ......................................................................................................31 Wasley Prods., Inc. v. Bulkalites, No. 3:03-383(MRK)/3:03cv1790(MRK), 2006 WL 3834240 (D. Conn. May 31, 2006) .................................................................109 Weinreb v. Hosp. for Joint Diseases Orthopaedic Inst., 404 F.3d 167 (2d Cir. 2005) ..............................................................................3, 47, 54, 55 White v. Sundstrand Corp., 256 F.3d 580 (7th Cir. 2001) .............................................................................................41 Wilkins v. Mason Tenders Dist. Council Pension Fund, 445 F.3d 572 (2d Cir. 2006) ..............................................................................................56 Williams v. Caterpillar, Inc., 944 F.2d 658 (9th Cir. 1991) .......................................................................................42, 43 Williams v. Comm'n on Human Rights and Opportunities, 786 A.2d 1283 (Conn. App. Ct. 2001) ..............................................................................31 Wilson v. Garcia, 471 U.S. 261 (1985) ..........................................................................................................30 STATUTES AND REGULATIONS 29 U.S.C. § 1001nt ............................................................................................................25 29 U.S.C. § 1002 ...................................................................................12, 16, 17, 105, 106 29 U.S.C. §§ 1021-25 ......................................................................................................108 xiv

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TABLE OF AUTHORITIES PAGE 29 U.S.C. § 1022 ...............................................................................................................63 29 U.S.C. § 1024(b)(1) ............................................................................................102, 105 29 U.S.C. § 1053(a)...........................................................................................................41 29 U.S.C. § 1054(b)(1) ...............................................................................................passim 29 U.S.C. § 1054(b)(2) ......................................................................................................16 29 U.S.C. § 1054(c)(3) ................................................................................................12, 17 29 U.S.C. § 1054(g).........................................................................................................112 29 U.S.C. § 1054(h).......................................................................................86, 91, 95, 105 29 U.S.C. §1104(a)(1) .....................................................................................................108 26 C.F.R. § 1.401(a)(4)-(13) .......................................................................................27, 28 26 C.F.R. § 1.410(b)-3.......................................................................................................27 26 C.F.R. § 1.411(d)-3.............................................................................................110, 117 26 C.F.R. § 1.411(d)-6T, Q 9 ..............................................................................97, 98, 100 26 C.F.R.. § 1.411(d)-6, Q&A 10......................................................................................91 26 C.F.R. § 1.417(a)(3) ...........................................................................................116, 117 26 C.F.R. § 54.4980F-1 .....................................................................................................28 29 C.F.R. § 1.411(b)-1.......................................................................................................35 29 C.F.R. §§ 2520.102-1 ­ 102-5......................................................................................62 29 C.F.R. § 2520.102-3 ...................................................................................62, 65, 70, 71 29 C.F.R. § 2520.102-4 .............................................................................................66, 101 29 C.F.R. § 2520.104b-4 .................................................................................................101 45 Fed. Reg. 14, 029, 14,030 (1980) ...............................................................................101 xv

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TABLE OF AUTHORITIES PAGE 56 Fed. Reg. 47,524 (Sept. 19, 1991)................................................................................25 63 Fed. Reg. 68,678, 68,682 (Dec. 14, 1998)..............................................................89, 91 67 Fed. Reg. 76,123-01 (Dec. 11, 2002) ...........................................................................26 68 Fed. Reg. 17,277 (Q&A 11) (Apr. 9, 2003) ...........................................................73, 96 RULES Fed. R. Civ. P. 15(c)(2) ...................................................................................................104 Fed. R. Civ. P. 23(c)(1)(B) ..............................................................................................112 STATE STATUTES Conn. Gen. Stat. Ann. § 31-53 ..........................................................................................32 Conn. Gen. Stat. Ann. §§ 31-58 ........................................................................................32 Conn. Gen. Stat. Ann. § 31-72 ....................................................................32, 45, 103, 119 Conn. Gen. Stat. Ann. § 46a-82.........................................................................................31 Conn. Gen. Stat. Ann. § 52-576, .....................................................................................125 Conn. Gen. Stat. Ann. § 52-596 ..................................................................32, 45, 104, 121 MISCELLANEOUS Carol Quick, Overview of Cash Balance Plans, EBRI Notes 1 (July 1999)...........................................52 Department of Treasury, General Explanation of the Administration's Fiscal Year 2005 Revenue Proposals 104 (2004)..............................................................26 Department of Treasury, General Explanation of the Administration's Fiscal Year 2006 Revenue Proposals 82 (2005)................................................................26 Department of Treasury, General Explanation of the Administration's Fiscal Year 2007 Revenue Proposals 66 (2006)................................................................26 xvi

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TABLE OF AUTHORITIES PAGE Dobbs, Law Of Remedies, § 4.3(7) (2d ed. 1993) ..........................................................126 H.R. Doc. No. 107-84, Legislative History of Public Law 107-16 ........................................................................95 H.R. Rep. No. 93-807 (1974), reprinted in 1974 U.S.C.C.A.N. 4639 ..............................36 H.R. Rep. No. 99-1012 (1986), reprinted in 1986 U.S.C.C.A.N. 3868 ............................19 I.R.S. Notice 96-8 ­ Cash Balance Plans ..........................................................................44 House Report 107-84, , .....................................................................................................95 Pub. L. No. 109-280, 120 Stat. 780 (2006) .................................................................5, 130 Pub. L. No. 107-16 § 659(b), 115 Stat. 38 (2001).......................................................89, 95 "Post-PPA Cash Balance Plan Determination Letter Process: IRS CloselyScrutinizing `Greater-Of' Benefit Formulas for Compliance with AntiBackloading Standards," May 18, 2007 ............................................................................39 Regina T. Jefferson, Striking a Balance in the Cash Balance Plan Debate, 49 Buffalo L. Rev. 513 (2001) .....52 W. Page Keeton, Prosser And Keeton On The Law Of Torts § 69 (5 ed. 1988).........................................108

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I.

INTRODUCTION Plaintiffs Janice C. Amara, Gisela R. Broderick, and Annette S. Glanz ("Plaintiffs") have

brought this action against Defendants CIGNA Corporation ("CIGNA") and the CIGNA Pension Plan (the "Plan") (together "Defendants") alleging violations of the Employee Retirement Income Security Act ("ERISA"). Plaintiffs' Third Amended Complaint (the "Complaint") challenges certain aspects of, and communications about, CIGNA's cash balance pension plan, known as "Part B," which was effective January 1, 1998. The Complaint contains five claims:1 · Count 1 alleges that the conversion to a cash balance plan and the protection of previously­earned benefits through the Plan's minimum benefit provisions violated the non-forfeitability and anti-backloading rules of ERISA Sections 203(a) and 204(b)(1)(B), 29 U.S.C. §§ 1053(a) and 1054(b)(1)(B). · Count 2 alleges that the summary plan description ("SPD") for Part B did not satisfy applicable statutory disclosure requirements under ERISA Section 102, 29 U.S.C. § 1022. · Count 3 alleges that Part B (and by definition all cash balance plans) is age discriminatory and therefore violates ERISA Section 204(b)(1)(H)(i), 29 U.S.C. § 1054(b)(1)(H)(i). · Count 4 challenges whether Defendants satisfied disclosure obligations under ERISA Section 204(h), 29 U.S.C. § 1054(h), as that provision existed in 1997-1998. · Count 5 alleges that Part B violated the anti-cutback rule under ERISA Section 204(g), 29 U.S.C. § 1054(g). See Complaint, dkt. #165.

1

Judge Squatrito certified a class by Order of December 20, 2002. See Memorandum of Decision, dkt. #61. On March 12, 2007, this Court entered an Order Under Federal Rule 23(c)(1)(B) describing the class, appointing class counsel, and identifying the class claims, issues and defenses, and the individual claims, issues and defenses. See Court's Order Under Federal Rule 23(c)(1)(B), dkt. #241 ("Rule 23 Order").

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Counts 1 and 3 depend on the terms and operation of Part B and the interpretation of applicable law. The two courts of appeals that have addressed the issue of whether cash balance plans are age discriminatory (Count 3) -- the Third and Seventh Circuits -- have concluded that they are not. Register v. PNC Fin. Servs. Group, 477 F.3d 56, 67-70 (3d Cir. 2007); Cooper v. IBM Pers. Pension Plan, 457 F.3d 636, 637-41 (7th Cir. 2006). Based on the legislative history, the Treasury Department's view that cash balance plans are legal, and fundamental economic principles, these courts, as well as nine district court judges, have rejected challenges to the design of cash balance plans. Three district court judges have essentially held that all cash balance plans are per se age discriminatory and illegal. For the reasons explained in detail herein, and consistent with Register and Cooper, Defendants respectfully submit that this Court should find that Part B is not age discriminatory and reject Plaintiffs' claim in Count 3. As to Count 1, every court to have considered the issues has rejected Plaintiffs' argument that similar formulas for setting opening account balances for cash balance plans violate ERISA. Register, 477 F.3d at 70-72 (cash balance conversion formula for setting opening account balances and protection of prior formula benefits as a minimum benefit does not violate ERISA); Campbell v. BankBoston, 327 F.3d 1, 8-9 (1st Cir. 2003) (same); Richards v. FleetBoston Fin. Corp., 427 F. Supp. 2d 150, 168-70 (D. Conn. 2006) ("FleetBoston I") (same). Thus, there is neither a factual nor a legal basis for Plaintiffs' claim in Count 1. Counts 2 and 4 challenge the adequacy of particular communications about the Plan -- specifically, the SPDs issued in 1998 and 1999, and the Section 204(h) notice distributed in 1997. These communications, however, fully complied with ERISA, and neither likely nor actually harmed Plaintiffs or the class members who testified at trial. As a result of CIGNA's distribution of detailed, individualized opening account balance information, annual account -2-

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statements and Total Compensation Reports, Plan participants knew the exact amount in their cash balance accounts and therefore had an informed basis for making employment and retirement decisions. Given these circumstances, the Court should reject Plaintiffs' claims in Counts 2 and 4. See Weinreb v. Hosp. for Joint Diseases Orthopaedic Inst., 404 F.3d 167, 17172 (2d Cir. 2005) (rejecting plaintiff's SPD disclosure claim where employer provided plaintiff with other communications "sufficient to inform him" of plan requirements). The parties are in the process of settling most of the issues raised in Count 5. However, Plaintiffs' present-value disclosure claim remains for the Court's consideration. The parties have different positions regarding when the Treasury regulations began to require that a benefit election form provide to participants present-value disclosures of their different benefit options. Nonetheless, even if the earlier Treasury regulations required the same disclosures as the new regulations issued in 2004 (which would mean that the adoption of the new, expansive regulations was pointless), Count 5 would still fail because such a claim does not arise under Section 204(g) of ERISA, the statutory provision upon which Plaintiffs' Complaint relies. See, e.g., King v. Pension Trust Fund of the Pension, Hospitalization and Benefit Plan of the Elec. Indus., No. 01-CV-2604, 2003 WL 22071612, at *10 (E.D.N.Y. Sept. 5, 2003) ("[T]he proper inquiry under ERISA § 204(g)(1) is whether plaintiff's monthly benefit was in fact reduced by a plan amendment.") (internal citations and quotations omitted). The present-value disclosure claim, never certified for classwide treatment by this Court, also fails because each of the three Plaintiffs was either only entitled to benefits of equal value or elected the most valuable benefit option available to her, and therefore has no standing to assert this claim. Finally, there are serious questions about the remedies available to Plaintiffs in the unlikely event that they prevail on one or more of their claims. In light of Plaintiffs' failure to -3-

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address this issue with any specificity in their submissions to the Court, Defendants respectfully request that they be given the opportunity to brief this issue fully if and when it becomes necessary to do so. However, Plaintiffs' vague description of their proposed remedies suggests that they are seeking monetary and retroactive relief, which is not available under ERISA Section 502(a)(3). See Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 215 (2002). Furthermore, to the extent Plaintiffs seek benefits that exceed those available under the written terms of the Plan, their claims and those of thousands of other class members are barred by the releases they signed in exchange for severance pay at the time they left CIGNA. For the reasons set forth below, and as further supported by Defendants' Post-Trial Proposed Findings of Fact and Conclusions of Law, there simply is no factual or legal basis for Plaintiffs' claims. Judgment should therefore be entered in favor of Defendants on all counts of the Complaint. II. JUDGMENT SHOULD BE ENTERED IN FAVOR OF DEFENDANTS ON COUNT 3 BECAUSE PART B IS NOT AGE DISCRIMINATORY. Since the inception of this litigation, the parties' primary dispute has been whether Part B violates ERISA's prohibition against age discrimination in Section 204(b)(1)(H), 29 U.S.C. § 1054(b)(1)(H). See Rule 23 Order at 5 - Count 3(A)(1). This Court should join the majority of courts that have addressed this issue and conclude that Part B, like other cash balance plans, is not age discriminatory. Count 3 is also time-barred.

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A.

The Current State Of The Law Regarding Cash Balance Plans

As this Court recognized during the trial of this matter, there is a split of legal authority on the question of whether cash balance plans are inherently age discriminatory.2 The two courts of appeals that have addressed this question -- the Seventh Circuit in Cooper v. IBM Pers. Pension Plan, 457 F.3d 636 (7th Cir. 2006), and the Third Circuit in Register v. PNC Fin. Servs. Group, 477 F.3d 56 (3d Cir. 2007) -- have held that cash balance plans are not age discriminatory and therefore do not violate ERISA Section 204(b)(1)(H). To date, nine district courts are in accord. See Bryerton v. Verizon Commc'n, Inc., No. 06-6672, 2007 WL 1120290 (S.D.N.Y. Apr. 17, 2007) (Chin, J.) (rejecting claim that cash balance plan design is age discriminatory); Sunder v. U.S. Bank Pension Plan, No. 05-01153, 2007 WL 541595 (E.D. Mo. Feb. 16, 2007) (Webber, J.) (same); Finley v. Dun & Bradstreet Corp., 471 F. Supp. 2d 485 (D.N.J. 2007) (Chesler, J.) (same); Laurent v. PriceWaterhouseCoopers LLP, 448 F. Supp. 2d 537 (S.D.N.Y. 2006) (Daniels, J.) (same); Drutis v. Quebecor World (USA), 459 F. Supp. 2d 580 (E.D. Ky. 2006) (Forester, J.) (same); Hirt v. The Equitable Ret. Plan for Employees, Managers and Agents., 441 F. Supp. 2d 516 (S.D.N.Y. 2006) (Hellerstein, J.) (same);3 Tootle v. ARINC, Inc., 222 F.R.D. 88 (D. Md. 2004) (Blake, J.) (same); Engers v. AT&T Corp., No. 98-3660, 2001 U.S. Dist. LEXIS 25889 (D.N.J. June 6, 2001) (Chelser, J.) (same); Eaton v. Onan Corp., 117 F. Supp. 2d 812 (S.D. Ind. 2000) (Hamilton, J.) (same). In reaching their conclusion that cash

2

In August 2006, the Pension Protection Act was enacted. Among other things, the statute confirmed that cash balance plans are not age discriminatory with respect to benefits earned on or after June 29, 2005. See Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (2006). Hirt is on appeal to the Second Circuit, Case No. 06-4757. As of the filing of this Brief, appellate Briefing in Hirt has been completed, and oral argument has not yet been set.

3

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balance plans do not discriminate against older participants, these courts have relied on the statutory text, the legislative history, the Treasury Department's considered and repeated view that cash balance plans are legal, the nature of how benefits are earned in cash balance plans, and fundamental economic principles. By contrast, three district court judges have held that cash balance plans are age discriminatory. See FleetBoston I, 427 F. Supp. 2d 150 (D. Conn. 2006) (Hall, J.); Parsons v. AT&T Pension Benefit Plan, 3:06CV552 (JCH), 2006 WL 3826694 (D. Conn. Dec. 26, 2006) (Hall, J.); In re J.P. Morgan Chase Cash Balance Litig., 460 F. Supp. 2d 479 (S.D.N.Y. 2006) (Baer, J.) ("J.P. Morgan I"); In re Citigroup Pension Plan ERISA Litig., 470 F. Supp. 2d 323 (S.D.N.Y. 2006) (Scheindlin, J.) ("Citigroup I").4 Respectfully, the courts that have held that cash balance plans are age discriminatory based their conclusions on a misinterpretation of the statute and without considering the legislative or regulatory history behind ERISA Section 204(b)(1)(H) or the economic and other implications of their holdings, both as to cash balance plans and traditional defined benefit plans. This Court has now had the benefit of hearing evidence at trial about how benefits are earned in a cash balance plan and the economic effect of these plans on participants. Based on this evidence, it is clear that CIGNA's cash balance plan does not discriminate based on age. Judgment should therefore be entered in favor of Defendants on Plaintiffs' age discrimination claim in Count 3. B. Part B Treats Older Employees At Least As Well As It Treats Younger Employees.

The trial evidence in this case leaves no doubt that benefits under Part B, and the accrual of those benefits, increase with age:
4

The first case holding that cash balance plans were age discriminatory was Cooper v. IBM Pers. Pension Plan, 274 F. Supp. 2d 1010 (S.D. Ill. 2003). That decision was reversed on appeal by the Seventh Circuit.

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·

First, the benefit credit rate is the same or higher for older employees than for

similarly situated younger employees, as set forth in Article VI of Part B. Defendants' Proposed Post-Trial Findings of Fact ("DFF") ¶¶ 47, 48. · Second, the interest credit rate under Part B is the same for all participants,

regardless of age. Although that rate can fluctuate from year to year (based on the yield on five year Treasury securities plus .25%), all participants in any given year will earn interest at the same rate. DFF ¶ 51. Notably, Plaintiffs' expert, Claude Poulin, has admitted that this rate approximates "the kind of investment return retiring plan participants would experience in the marketplace if they chose to invest in `relatively risk-free investments.'" McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007) ("Dun & Bradstreet") (quoting Claude Poulin).5 · Third, the calculations used to set opening account balances favored older

employees. Certain older employees, i.e., those with more than 55 age and service points (including testifying class members Hogan and Curley), had their opening account balances based on a more favorable age-62 subsidized benefit and using a more favorable (lower) interest rate. DFF ¶ 62. In addition, Mr. Poulin and Defendants' expert, Larry Sher, agreed that an older employee's opening account balance will always be higher than the account balance of a similarly situated younger employee (with the same years of service and earnings history before 1998), even in the absence of the age-favored opening account balance provision in Part B. DFF

5

Mr. Poulin was testifying about the 30-year Treasury rate, which usually is slightly higher than the five-year Treasury rate. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007) (quoting Claude Poulin when testifying about the 30-year Treasury rate, which usually is slightly higher than the 5-year Treasury rate); DFF ¶ 52.

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¶ 63. In other words, in any given year, the older employee's cash balance benefit will equal or exceed the benefit payable to a similarly situated younger employee. This result, of course, cannot be described as age discrimination. An example helps to illustrate the point. Consider two employees who started work at CIGNA at the beginning of 1998 when the cash balance conversion occurred -- Employee Y, who was age 45 at the time, and Employee O, who was age 50. Assume that both employees receive the same salary until the end of 2002 (assumed to be $30,000 in 1998 and growing 4.5% each year) and then leave for other jobs. During the five-year period, both employees will receive the same benefit credits (based on 5% of pay since all of their pay will be under the Social Security integration level), the same interest credits (based on the actual rates in effect those years) and the same account balance. The table below, which applies equally to both employees, shows the development of their benefit credits, interest credits and account balances as of the end of each year.6 Year 1998 1999 2000 2001 2002 2012 2017 DFF ¶ 114.
6

Pay 30,000 31,350 32,761 34,235 35,776 ---

Benefit Credits 1,500 1,568 1,638 1,712 1,789 ---

Interest Credits 0 72 195 296 314 5,023 3,473

Account Balance at End of Year 1,500 3,140 4,973 6,981 9,084 14,107 17,580

For simplicity of illustration, the table adds interest credits at the end of the year and assumes a flat benefit credit rate. In reality under Part B, the benefit credits of the older employee, and hence the account balance of the older employee, would be higher than that of the younger employee. DFF ¶ 114 n.5.

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At the end of 2002, both employees have the same account balance of $9,084, and Employee Y is then age 50 and Employee O is age 55. Next, assume that the account balances, if left untouched, will grow at a 4.5% interest-credit rate (the minimum under Part B) as follows: Year 2002 (both depart) 2012 (Employee O turns 65) 2017 (Employee Y turns 65) Account Balance (rounded) $ 9,100 $14,100 $17,600

Both of these employees can elect to receive their benefits at the same time and, if they do so, the older employee will always receive the same, or more, money than the younger employee. Similarly, Employee O could take his money out of the plan in 2012 and earn the same market rate of interest that Employee Y earns in the Plan. DFF ¶ 114. Regardless of the circumstances, it is undisputed that Employee O is at least as well off economically as Employee Y and has suffered no detriment because of his age. Notably, Mr. Poulin never even tried to suggest otherwise, nor did he address this fundamental point in his report or at trial. By contrast, Mr. Sher described several ways that one could measure whether Part B is age discriminatory. Using each methodology, Mr. Sher concluded that Part B is not age discriminatory. DFF ¶¶ 95-109. Mr. Sher also explained several flaws in Mr. Poulin's age discrimination analysis, including Mr. Poulin's failure to be actuarially or economically consistent. DFF ¶¶ 110-150. For example, Mr. Poulin compared an employee's benefit payable at some point in the future (age 65) in dollars payable in the future, with the employee's salary earned today in today's dollars, without adjusting for the time value of money. Further compounding the problem, Mr. Poulin then compared the results for two different employees without accounting for the fact that the future benefits he is comparing are payable at two -9-

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different times, e.g., when each employee turns age 65. This type of analysis violates fundamental principles of the time value of money -- principles that Mr. Poulin ultimately acknowledged at trial: Q. Now, you agree, Mr. Poulin, that it's a fundamental principle in the theory of interest that the value of an amount of money at any given point in time depends upon the time elapsed since the money was paid in the past or upon which the time will elapse in the future before it is paid? A. I believe that this seems to be a standard definition. Q. Do you agree with it? A. Well, yes. * * *

Q. The follow-up question was: And do you see that the next paragraph, the first sentence, "As a consequence of the above principle, it is obvious that two or more amounts of money payable at different points in time cannot be compared until all the amounts are accumulated or discounted to a common date?" Do you see that statement? And your answer to that question was? A. Yes. DFF ¶ 117. As Mr. Sher explained, by correcting for those flaws, even Mr. Poulin's analysis would confirm that Part B was not age discriminatory. DFF ¶ 124. Importantly, Mr. Poulin did not dispute Mr. Sher's age discrimination analysis or Mr. Sher's criticisms of Mr. Poulin's analysis. Nor did Mr. Poulin testify that older employees were economically disadvantaged vis-à-vis similarly situated younger employees. Instead, Mr. Poulin's only response to Mr. Sher was one of statutory interpretation ­ he argued that ERISA requires one to test for age discrimination (at least before age 65) with respect to the "accrued benefit" expressed in the form of an annuity commencing at age 65. DFF ¶ 111. Effectively, Mr. Poulin believes that ERISA requires one to compare the $14,100 "age-65 benefit" that the older Employee O will have in 2012 with the $17,600 "age-65 benefit" that the - 10 -

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younger Employee Y will have in 2017, even if that analysis does not make economic or actuarial sense. Because $17,600 is nominally larger than $14,100 (although not more economically valuable because of when the benefit is payable), Mr. Poulin bizarrely concluded that discrimination results and that younger Employee Y had a higher rate of benefit accrual than older Employee O from 1998 through 2002. As explained at trial, the differences that Mr. Poulin and Plaintiffs try to attribute to age discrimination merely reflect the time value of money, a well-settled economic principle routinely recognized and applied by courts.7 Mr. Poulin's analysis is nonsensical and not consistent with, let alone compelled by, the terms of the statute upon which Plaintiffs rely. C. The Decisions Finding That Cash Balance Plans Are Age Discriminatory Are Flawed.

Pursuant to the Court's instruction at trial, Defendants will not repeat the rationale of each court, see supra, page 6, that has found that cash balance plans are not age discriminatory and do not violate ERISA Section 204(b)(1)(H). The decisions holding that cash balance plans are age discriminatory, however, are flawed for several reasons, now described.

7

See, e.g., Metz v. United Techs. Corp., 754 F.2d 63, 66 (2d Cir. 1985) ("[I]n computing the damages recoverable for the deprivation of future benefits, the principle of limiting the recovery to compensation requires that adequate allowance be made, according to circumstances, for the earning power of money; in short, that when future payments or other pecuniary benefits are to be anticipated, the verdict should be made up on the basis of their present value only.") (citations omitted); Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 536-37 (1983) ("In all cases where it is reasonable to suppose that interest may safely be earned upon the amount that is awarded, the ascertained future benefits ought to be discounted in the making up of the award.") (internal quotations omitted).

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1.

The Phrase "Rate Of An Employee's Benefit Accrual" Does Not Refer To The "Accrued Benefit."

The statute that Plaintiffs maintain Part B violates is ERISA Section 204(b)(1)(H)(i), which provides in relevant part that: a defined benefit plan shall be treated as not satisfying the requirements of this paragraph if, under the plan, an employee's benefit accrual 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)(1)(H)(i). The three district court judges who have found that cash balance plans are age discriminatory have based their decisions exclusively on a determination that the term "benefit accrual" in Section 204(b)(1)(H) unambiguously means the same thing as the "accrued benefit" -- a defined term in ERISA8 -- and that any age discrimination analysis therefore must compare the normal retirement annuity benefits payable to participants at different periods of time. FleetBoston I, 427 F. Supp. 2d at 164-65; Parsons, 2006 WL 3826694, at *1; J.P. Morgan I, 460 F. Supp. 2d at 485-88; Citigroup I, 470 F. Supp. 2d at 341-44. None of these courts has even considered the purpose of the statutory section at issue or the reasonableness of their conclusions, except to note that they are bound to apply the unambiguous words regardless of the consequences. FleetBoston I, 427 F. Supp. 2d at 164-65; Parsons, 2006 WL 3826694, at *1; J.P. Morgan I, 460 F. Supp. 2d at 489; Citigroup I, 470 F. Supp. 2d at 34445. Respectfully, this interpretation is wrong. As an initial matter, for a statute to meet the high threshold of being "unambiguous," it must be susceptible to only one reasonable interpretation. Rabin v. Wilson-Coker, 362 F.3d 190, 196 (2d Cir. 2004) ("A statute is ambiguous if its terms are susceptible to two or more reasonable

8

See 29 U.S.C. §§ 1002(23), 1054(c)(3).

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meanings."). Here, there is no basis for concluding that the phrase "rate of an employee's benefit accrual" unambiguously refers to the specifically defined term "accrued benefit." Indeed, the only two courts of appeals to have addressed this question have ruled to the contrary. That these six reasonable and well-respected appellate judges (along with numerous district court judges) have concluded that "rat