Free Proposed Findings of Fact and Conclusions of Law - District Court of Connecticut - Connecticut

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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT -----------------------------------------------------X : JANICE C. AMARA, GISELA : R. BRODERICK, 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 PROPOSED CONCLUSIONS OF LAW

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 I. PART B IS NOT AGE DISCRIMINATORY ................................................................... 1 A. B. C. The Current State Of The Law Regarding Cash Balance Plans ............................ 1 Part B Treats Older Employees At Least As Well As It Treats Younger Employees.............................................................................................................. 3 The Decisions Finding That Cash Balance Plans Are Age Discriminatory Are Flawed............................................................................................................. 5 1. 2. The Phrase "Rate Of An Employee's Benefit Accrual" Does Not Refer To The "Accrued Benefit." .............................................................. 5 The Term "Benefit Accrual" Cannot Refer To The "Accrued Benefit" Because That Interpretation Cannot Be Applied Consistently At All Ages. ........................................................................ 11 The Second Circuit's Decision In Esden v. Bank of Boston Does Not Address Age Discrimination Or The Meaning Of The Term "Benefit Accrual.".................................................................................... 13 The Economic Effects That Plaintiffs Challenge Here Are Lawful In Other Contexts, Including With Traditional Defined Benefit Plans......................................................................................................... 15 The Treasury Department Has Consistently Endorsed Cash Balance Plans As Not Being Age Discriminatory ................................... 16

3.

4.

5. D. E. II.

Plaintiffs' Argument That Wear-Away Is Age Discriminatory Is A Distortion Of The Facts and Governing Law ...................................................... 19 Plaintiffs' Age Discrimination Claim Is Time-Barred......................................... 21

PART B DOES NOT VIOLATE ERISA'S NONFORFEITABILITY RULE OR ERISA'S 133% ANTI-BACKLOADING RULE ........................................................ 24 A. B. C. The Plan Does Not Violate ERISA's 133% Rule............................................. 25 The Plan Does Not Cause Any Impermissible Forfeitures.................................. 29 Count 1 Also Is Time-Barred............................................................................... 34

III.

PLAINTIFFS WERE NOT LIKELY OR ACTUALLY HARMED, AND THE WRITTEN DISCLOSURES SATISFIED ERISA'S DISCLOSURE REQUIREMENTS........................................................................................................... 35 A. The Opening Account Balance Information, Total Compensation Reports And Annual Account Statements Distributed To Plan Participants Foreclose Any Liability On Plaintiffs' Disclosure Claims .................................. 35

i

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TABLE OF CONTENTS (continued) Page 1. The Plan Administrator Provided Part B Participants With Complete And Timely Information Regarding The Exact Amount Of Their Cash Balance Accounts............................................................. 35 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 .................................................. 37 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 ......................................................................................... 42 The Part B SPD Met The Requirements Of ERISA Section 102 ............ 43 The Part B SPD Was Not Required To Disclose A Reduction In The Rate Of Benefit Accrual With Age................................................... 44 The Part B SPD Was Not Required To Provide A Comparison To Benefits That Participants Would Have Earned Under The Old Plan .......................................................................................................... 45 The Part B SPD Was Not Required To Disclose The Potential Wear-Away Effect ................................................................................... 46 a. The Wear-Away Effect Did Not Cause Any Reduction In Plan Benefits, And Was Not The Result Of A Plan Provision ...................................................................................... 49 The Wear-Away Effect Was Caused By Falling Interest Rates After The Conversion, Which The Plan Administrator Could Not Anticipate............................................ 50 The Wear-Away Effect Attributable To The Early Retirement Subsidy Could Only Possibly Affect A Small Subset Of Participants.................................................................. 51 (1) The Wear-Away Effect Attributable To The Early Retirement Subsidy Could Result Only For Eligible Employees During The Early Retirement Window ......... 52 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................ 52

2.

3.

B.

The Part B SPD Met ERISA's Disclosure Requirements.................................... 42 1. 2. 3.

4.

b.

c.

(2)

5.

The Part B SPD Was Not Required To Disclose All Of The Factors In The OAB Calculation. ......................................................................... 52 ii

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TABLE OF CONTENTS (continued) 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................................................................................... 56

C.

The Plan Administrator Provided Adequate Notice Under ERISA Section 204(h)................................................................................................................... 58 1. 2. Only The Amendment Freezing Accruals Under Part A Required A Section 204(h) Notice, Which The Plan Administrator Provided ....... 59 Even If A 204(h) Notice Was Required For The Cash Balance Adoption, The Plan Administrator Fulfilled That Requirement.............. 60 a. Section 204(h) As It Existed At The Time Part B Was Created Provides The Applicable Requirements For The Allegedly Required Notice .......................................................... 61 The Plan Administrator Provided A Proper Section 204(h) Notice To Active Employees ....................................................... 63

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....................................................................... 67

D. E.

Plaintiffs Do Not Have A Pending Claim For An Inadequate Summary Of Material Modification Regarding The Cash Balance Conversion....................... 69 Plaintiffs' Disclosure Claims Are Time-Barred .................................................. 71 1. 2. Plaintiffs' SPD Claim Is Time-Barred..................................................... 71 Plaintiffs' Section 204(h) Claim Is Time-Barred..................................... 73

F. IV.

Any Disclosure Claims Would Lie Against The Plan Administrator, Who Is Not A Party ...................................................................................................... 74

DEFENDANTS' FAILURE TO PROVIDE PRESENT-VALUE DISCLOSURES OF THEIR DIFFERENT BENEFIT OPTIONS PRIOR TO OCTOBER 2004 DID NOT VIOLATE ERISA .................................................................................................. 77 A. B. C. D. E. Part B Does Not Violate ERISA's Anti-Cutback Rule In Section 204(g)........... 77 Plaintiffs Amara, Broderick And Glanz Do Not Have Standing To Pursue A Present-Value Disclosure Claim ...................................................................... 79 Pre-October 2004 Treasury Regulations Did Not Require Disclosure Of The Present Value Of Benefit Options ................................................................ 80 Any Present-Value Disclosure Claims Would Lie Against The Plan Administrator, Who Is Not A Party ..................................................................... 84 Plaintiffs' Present-Value Disclosure Claim Is Time-Barred ............................... 85 iii

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TABLE OF CONTENTS (continued) Page V. VI. PLAINTIFFS AND THOUSANDS OF CLASS MEMBERS SIGNED RELEASES THAT BAR THEIR CLAIMS .................................................................... 85 EVEN IF PLAINTIFFS PROVE ERISA VIOLATIONS, THEIR REMEDIES ARE LIMITED ................................................................................................................ 87 A. B. C. Monetary Damages Generally Are Unavailable Under ERISA Section 502(a)(3) ................................................................................................. 87 Plaintiffs Are Not Entitled To Retroactive Relief................................................ 91 Any Relief Must Be Limited By The Pension Protection Act Of 2006............... 94

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Defendants CIGNA Corporation ("CIGNA") and the CIGNA Pension Plan (the "Plan") (together "Defendants") propose the following conclusions of law: I. 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 hereby joins the majority of courts that have addressed this issue and concludes that Part B, like other cash balance plans, is not age discriminatory. A. 1. The Current State Of The Law Regarding Cash Balance Plans There is a split of legal authority on the question of whether cash balance plans

are inherently age discriminatory. 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), 29 U.S.C. § 1054(b)(1)(H). 2. 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. 0501153, 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, et al. v. The Equitable Ret. Plan for Employees, Managers and Agents, 441 F. Supp. 2d 516 (S.D.N.Y. -1-

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2006) (Hellerstein, J.) (same); 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). 3. Hirt v. Equitable 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, but no argument date has been set. 4. In reaching their conclusion that cash 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. 5. Three district court judges have held that cash balance plans are age

discriminatory. See Richards v. FleetBoston Fin. Corp., 427 F. Supp. 2d 150 (D. Conn. 2006) ("FleetBoston I") (Hall, J.); Parsons v. AT&T Pension Benefit Plan, 3:06CV552 (JCH), 2006 WL 3826694 (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"). 6. In August 2006, the Pension Protection Act ("PPA") was enacted. Among other

things, the PPA 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. 109280, 120 Stat. 780. 7. 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 -2-

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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. See FleetBoston I, 427 F. Supp. 2d 150; Parsons, 2006 WL 3826694; J.P. Morgan I, 460 F. Supp. 2d 479; Citigroup I, 470 F. Supp. 2d 323. B. 8. 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. 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. 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. 9. Notably, Plaintiff's 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) (quoting Claude Poulin). 10. Third, the calculations used to set opening account balances favored older

employees. 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 open account balance provision in Part B. 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. 11. Defendants' expert Lawrence Sher described several ways that one could measure -3-

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whether Part B is age discriminatory, and using each methodology, Part B is not age discriminatory. 12. Plaintiffs' expert Claude Poulin's age discrimination analysis was not actuarially

or economically consistent. For example, Mr. Poulin compares 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 compares the results for two different employees without accounting for the fact that the future benefits he is comparing are payable at two different times, e.g., when each employee turns age 65. This type of analysis violates fundamental principles of the time value of money. 13. The differences that 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. 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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C.

The Decisions Finding That Cash Balance Plans Are Age Discriminatory Are Flawed. 1. The Phrase "Rate Of An Employee's Benefit Accrual" Does Not Refer To The "Accrued Benefit."

14.

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). 15. In contrast, the three district court judges that 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 ERISA (see 29 U.S.C. §§ 1002(23), 1054(c)(3)) ­ 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. 16. 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 45. 17. 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 -5-

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(2d. Cir. 2004) ("A statute is ambiguous if its terms are susceptible to two or more reasonable meanings."). 18. 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 "rate of an employee's benefit accrual" does not refer to the "accrued benefit" demonstrates at a minimum that the phrase cannot unambiguously mean what Plaintiffs contend. 19. Moreover, the courts that have held that "rate of an employee's benefit accrual"

unambiguously means the "accrued benefit" have rooted their interpretation in the principle of statutory construction that words used in one part of statute must be interpreted to have the same meaning in other parts of the same statute. FleetBoston I, 427 F. Supp. 2d at 164-65; Parsons, 2006 WL 3826694, at *1; J.P. Morgan I, 460 F. Supp. 2d at 485-86; Citigroup I, 470 F. Supp. 2d at 342. This reliance was misplaced. 20. First, this principle only applies where the same word or phrase is used in both

parts of the statute. See United States v. Maria, 186 F.3d 65, 71 (2d Cir. 1999) ("As a general matter, the use of different words within the same statutory context strongly suggests that different meanings were intended."). 21. As the Ninth Circuit explained: Congress's explicit decision to use one word over another in drafting a statute is material. It is a decision that is imbued with legal significance and should not be presumed to be random or devoid of meaning. Even words with remarkably similar definitions can still convey a unique or distinct meaning or flavor from words that are similar or even synonymous in nature because -6-

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of their differing tone or usage within a sentence. S.E.C. v. McCarthy, 322 F.3d 650, 656 (9th Cir. 2003) (internal citations omitted). Yet Section 204(b)(1)(H) does not use the term "accrued benefit." 22. There is no reason to conclude that different words in different parts of a statute

must be interpreted to mean the same thing. To the contrary, that Congress chose not to refer to the "accrued benefit" in ERISA Section 204(b)(1)(H), but instead used different words, reflects that Congress intended a different meaning. 23. Ample evidence exists that Congress understood specifically how to require

testing based on age-65 annuity benefits. ERISA's 133% anti-backloading rule explicitly refers to the "accrued benefit payable at the normal retirement age." 29 U.S.C. § 1054(b)(1)(B) (emphasis added). 24. Congress added Section 204(b)(1)(H) in 1986, twelve years after the anti-

backloading rules were enacted. If Congress intended for age discrimination to be tested the same way ERISA's 133% anti-backloading rule was tested, it easily could have used the same language. That different language was used ­ "rate of benefit accrual" and without any reference to normal retirement age ­ confirms that a different meaning was intended. See also Mohegan Tribe v. State of Connecticut, 483 F. Supp. 597, 600 (D. Conn. 1980) ("It is a canon of statutory construction that where as here the words of a later statute differ from those of a previous one on the same or a related subject, the legislature must have intended them to have a different meaning."). 25. Even where the same word appears multiple times in a statute, the word can have

different meanings depending on context. In 2004, the Supreme Court recognized this canon in a case particularly germane to Plaintiffs' age discrimination claims here. In Gen. Dynamics Land -7-

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Sys., Inc. v. Cline, 540 U.S. 581 (2004), the Supreme Court held that the word "age" had different meanings in different parts of the Age Discrimination in Employment Act ("ADEA"). Id. at 595-96. 26. In rejecting the plaintiff's argument that the word "age" must mean the same

thing throughout the ADEA, the Court held: The argument rests on two mistakes. First, it assumes that the word "age" has the same meaning wherever the ADEA uses it. But this is not so, and [plaintiff] simply misemploys the presumption that identical words used in different parts of the same act are intended to have the same meaning. [Plaintiff] forgets that the presumption is not rigid and readily yields whenever there is such variation in the connection in which the words are used as reasonably to warrant the conclusion that they were employed in different parts of the act with different intent. * * * So it is easy to understand that Congress chose different meanings [of the word "age"] at different places in the ADEA, as the different settings readily show. Hence the second flaw in [plaintiff's] argument for uniform usage: it ignores the cardinal rule that statutory language must be read in context since a phrase gathers meaning from the words around it. The point here is that we are not asking an abstract question about the meaning of "age"; we are seeking the meaning of the whole phrase "discriminate . . . because of such individual's age." Id. (internal citations and punctuation omitted, emphasis added, ellipsis in original). 27. Thus, the Supreme Court held in Cline that the word "age" in sub-paragraph (a) of

29 U.S.C. § 623 did not mean the same thing as the word "age" in subparagraph (f) of that same section, because of the different contexts in which the word was used. Id. 28. In this case, the inquiry is to determine the meaning of the phrase "rate of an

employee's benefit accrual," which, unlike the term "accrued benefit," has no specific definition under ERISA.

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29.

In Cent. Laborers' Pension Fund v. Heinz, 541 U.S. 739 (2004), the Supreme

Court defined the phrase "benefit accrual" as "the rate at which an employee earns benefits to put in his pension account." Id. at 749. This, not surprisingly, is the same definition used by the Seventh Circuit in Cooper and the Third Circuit in Register. Although the Supreme Court in Heinz was not interpreting the phrase in the specific context of ERISA's age discrimination provision, the Court's common-sense interpretation of the phrase is further evidence that Plaintiffs' analysis is incorrect. 30. There are many ways to calculate a rate of benefit accrual, depending on the

context and the purpose of the calculation. The Eaton court held: The concept of the "benefit accrual rate" does not have a single, self-evident meaning, especially in the world of pension plan regulation. The term is used and defined in different ways and for different purposes under ERISA and the Internal Revenue Code. * * * The argument distinguishing between "accrued benefit" and "rate of benefit accrual" may seem like pretty fine hair splitting. Nevertheless, pension law is a highly technical field where hairs are split with ever finer razors. 117 F. Supp. 2d at 830 and n.8 (collecting examples, internal parenthetical omitted). 31. The three district court judges that concluded that cash balance plans are age

discriminatory failed to consider the purpose or context of the analysis, i.e., to determine whether older employees are worse off than similarly-situated younger employees under a pension plan. This was error. See Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997) ("The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole."). 32. In a similar vein, some courts have suggested that if defined benefit plans were

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supposed to be tested for age discrimination based on the allocation to the employee's account ­ the way defined contribution plans are tested ­ Congress would have used the same language for prohibiting age discrimination in a defined benefit plan that it used to prohibit age discrimination in a defined contribution plan. Compare 29 U.S.C. § 1054(b)(1)(H) with 29 U.S.C. § 1054(b)(2). 33. This argument reflects an apparent misunderstanding of the definition of a defined

benefit plan. Specifically, a defined benefit plan is defined as any plan other than an individual account plan, i.e., a defined contribution plan. Compare 29 U.S.C. § 1002(34) with 29 U.S.C. § 1002(35). There are many different types of defined benefit plans, which accrue benefits in different ways. Congress could not test age discrimination for all defined benefit plans in terms of an account balance (like it did for defined contribution plans) because most defined benefit plans do not even have "accounts." By contrast, all defined contribution plans are individual account plans. See 29 U.S.C. § 1002(34). Thus, it made sense for Congress to define the accrued benefit in a defined contribution plan as the account balance. For a defined benefit plan that mirrors an individual account plan (e.g., a cash balance plan), however, the rate of benefit accrual should be measured in terms of the way benefits actually are accrued, i.e., earned, in the plan ­ based on allocations to the employee's account. 34. Age discrimination requires a meaningful analysis of whether older participants

are worse off than similarly-situated younger participants. As explained above, under Part B, older participants are treated as well as, or better than, similarly-situated younger participants. Thus, Part B is not age discriminatory. 35. The phrase "rate of an employee's benefit accrual" does not refer to the "accrued

benefit" and does not require testing based on the statutorily defined term "accrued benefit." Even if the Section 204(b)(1)(H) used the words "accrued benefit," however, nothing in ERISA - 10 -

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would require that such a benefit be expressed in the form of an age-65 annuity. ERISA Section 3(23) defines "accrued benefit" as "the individual's accrued benefit determined under the plan and, except as provided in section 1054(c)(3) of this title, expressed in the form of an annual benefit commencing at normal retirement age." 29 U.S.C. § 1002(23)(A) (emphasis added). 29 U.S.C. § 1054(c)(3), in turn, provides: For purposes of this Section, in the case of any defined benefit plan, if an employee's accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age. . . the employee's accrued benefit . . . shall be the actuarial equivalent of such benefit. 29 U.S.C. § 1054(c)(3) (emphasis added). Thus, ERISA specifically permits an accrued benefit "to be determined as an amount other than an annual benefit commencing at" age 65. Id. 2. The Term "Benefit Accrual" Cannot Refer To The "Accrued Benefit" Because That Interpretation Cannot Be Applied Consistently At All Ages.

36.

According to Plaintiffs, as well as Judges Hall, Baer and Scheindlin, ERISA

Section 204(b)(1)(H) requires that age discrimination always be tested exclusively with reference to employees' age-65 annuity benefits and does not allow for any variation. FleetBoston I, 427 F. Supp. 2d at 162-68; Parsons, 2006 WL 3826694, at *1; J.P. Morgan I, 460 F. Supp. 2d at 48588; Citigroup I, 470 F. Supp. 2d at 62-68. 37. Section 204(b)(1)(H) also provides, however, that an employee's rate of "benefit

accrual" cannot be reduced "because of the attainment of any age." 29 U.S.C. § 1054(b)(1)(H)(emphasis added). Relying on this underlined language, many courts have held that Section 204(b)(1)(H) applies equally at all ages, both before and after age 65. 38. Indeed, Congress's principal purpose in enacting Section 204(b)(1)(H) was to

protect employees who continued to work after normal retirement age. See Eaton, 117 F. Supp. - 11 -

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2d at 826-29 ("[The legislative history] provides considerable support for defendants' argument that Congress did not intend for the pension age discrimination provisions to apply to the rate of benefit accrual for participants under the age of 65."); Tootle v. ARINC, Inc., 222 F.R.D. 88, 93 (D. Md. 2004) ("[L]egislative history and statutory language provide strong evidence that [ERISA's age discrimination provisions are] not intended to protect workers until after they have attained normal retirement age."). 39. Congress enacted ERISA Section 204(b)(1)(H) out of concern for the way

employees over 65 were being treated, yet Plaintiffs' analysis affords lesser protection to that group. Whatever the phrase "benefit accrual" means, that same definition must apply at all ages, both before and after 65. 40. Plaintiffs offer no basis for interpreting the term "benefit accrual" to mean one

thing for employees under age 65 and another thing for employees after age 65, particularly if the term unambiguously refers to the "accrued benefit" as Plaintiffs' claim. 41. Plaintiffs' purportedly unambiguous definition of "benefit accrual" (i.e., for

employees under age 65) is inconsistent with the legislative history. Specifically, when Congress enacted Section 204(b)(1)(H)(i), it provided an example in its Conference Report of how the statute should work to ensure that plans were not discriminating based on age. See Eaton, 117 F. Supp. 2d at 830 (citing H.R. Conf. Rep. 99-1012, 1986 U.S.C.C.A.N. 3868, 4026). The Conference Report is "the most authoritative source [] on the meaning of legislation." Chen v. U.S. Dep't of Justice, 434 F.3d 144, 153 (2d Cir. 2006). Yet if Plaintiffs' unambiguous definition of "benefit accrual" (at least before age 65) were correct, the example in the Conference Report would itself be illegal because the accrual formula it describes ­ when measured in terms of an age-65 annuity ­ actually decreases with age. See also, e.g., Eaton, 117 - 12 -

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F. Supp. 2d at 830. 42. These same mathematical principles would cause the accrual pattern for many

common and traditional defined benefit plans to be age discriminatory with respect to benefits earned by employees who work after normal retirement age. Indeed, even traditional career pay plans and final average pay plans (the most common plan designs for non-union employees in the United States) would be age discriminatory under Plaintiffs' approach for accruals after age 65. 43. Moreover, applying different tests for age discrimination before and after 65 is

particularly illogical here, because Part B utilizes the same formula both before and after age 65. 44. Because Plaintiffs' interpretation of the term "benefit accrual" does not work at

all ages, it cannot be correct. See United States v. Am.Trucking Ass'ns, 310 U.S. 534, 542-44 (1940) ("When [a literal interpretation of a statute] has led to absurd or futile results, however, this Court has looked beyond the words to the purpose of the act. Frequently, however, even when the plain meaning did not produce absurd results but merely an unreasonable one plainly at variance with the policy of the legislation as a whole this Court has followed that purpose, rather than the literal words."). 3. The Second Circuit's Decision In Esden v. Bank of Boston Does Not Address Age Discrimination Or The Meaning Of The Term "Benefit Accrual."

45.

Plaintiffs' suggestion that the Second Circuit's decision in Esden v. Bank of

Boston, 229 F.3d 154 (2d Cir. 2000), compels a conclusion that cash balance plans are age discriminatory is wrong. 46. Esden involved a very narrow issue not present in this case: the process for

calculating lump sum benefits in a cash balance plan known as "whipsaw." Esden, 229 F.3d at - 13 -

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158-59. The Second Circuit held that cash balance plans must engage in the whipsaw process when calculating lump sum benefits under certain circumstances because of the specific statutory definition of the phrase "accrued benefit" and IRS Notice 96-8, which describes whipsaw. Id. at 163-168 (quoting definition of "accrued benefit" and citing Notice 968). 47. The Second Circuit's decision in Esden relied on the statutory definition of the

term "accrued benefit" because that exact term was used by Congress in the statutory provision at issue in that case. Esden, 229 F.3d at 158. By contrast, as explained above, the term "accrued benefit" does not appear in ERISA's age discrimination provision and the phrase "rate of an employee's benefit accrual" in Section 204(b)(1)(H) does not ­ and cannot ­ refer to the "accrued benefit" for all the reasons described above. 48. Thus, Esden does not support Plaintiffs' position that cash balance plans are age

discriminatory. 49. Indeed, in Berger v. Xerox Corp. Ret. Income Guarantee Plan, 338 F.3d 755 (7th

Cir. 2003), the Seventh Circuit agreed with the Esden court's conclusions regarding whipsaw based on the definition of the term "accrued benefit." Berger, 338 F.3d at 759. Yet the Seventh Circuit in Cooper nevertheless held that cash balance plans are not age discriminatory. 50. In Cooper, the Seventh Circuit specifically rejected the argument that its earlier

decision regarding whipsaw in Berger (and the Second Circuit's decision in Esden) compelled a finding that cash balance plans are age discriminatory. As the Seventh Circuit explained: To derive the "actuarial equivalent" of a pension at age 65, a plan must (a) add all interest that would accrue through age 65, then (b) discount the resulting sum to its present value. Berger v. Xerox Corp. Retirement Income Guarantee Plan, 338 F.3d 755, 762-63 (7th Cir. 2003). Plaintiffs characterize step (a) as extra interest credits for the young, but they ignore step (b). The discount rate may be close to (if it does not exceed) the rate at which interest is imputed, so the amount paid out in cash may be close to if not - 14 -

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below the nominal balance in the account. Berger did not consider § 204(b)(1)(H)(i) and does not hold that the process of grossing up the balance and then discounting is a form of age discrimination. To the contrary: Berger described this process as the means to avoid age discrimination. As far as we can see, ours is the first appellate decision to address the status of cash-balance plans under § 204(b)(1)(H)(i). The class directs our attention to two decisions from other circuits that it says supply helpful analysis. Miller v. Xerox Corp. Retirement Income Guarantee Plan, 447 F.3d 728 (9th Cir. 2006); Esden v. Bank of Boston, 229 F.3d 154 (2d Cir. 2000). As the class reads them, these opinions stand for two important propositions. First, that an "accrued benefit" in a cash-balance plan is an annuity at normal retirement age. Second, that there is a "fundamental" distinction between defined-contribution and defined-benefit plans. Both of these propositions are correct, and both of them are irrelevant. Start with the first proposition. What the true meaning of "accrued benefit" may be is not controlling; § 204(b)(1)(H)(i) does not use that phrase, and we have explained why "benefit accrual" means something other than "accrued benefit." Once we start to calculate accrued benefits for people who quit or retire early, it is necessary to impute extra interest and discount. Berger describes how this is done. But "benefit accrual" refers to the annual addition to the pot, not to the final payout. The holding of Esden, see 229 F.3d at 168, mirrors that of Berger and requires no further comment. Cooper, 457 F.3d at 640-41. 51. Esden (and Berger) also confirm that, contrary to Plaintiffs' position throughout

this litigation, the time value of money is a fundamental principle under ERISA. Esden, 229 F.3d at 161; Berger, 338 F.3d at 63. Esden specifically describes how to calculate an "accrued benefit" expressed as a lump sum in present day dollars. Esden, 229 F.3d at 161. 52. In short, and as reflected in Cooper, the Second Circuit's decision in Esden does

not compel ­ or even support ­ the conclusion that cash balance plans are age discriminatory. 4. 53. The Economic Effects That Plaintiffs Challenge Here Are Lawful In Other Contexts, Including With Traditional Defined Benefit Plans.

The Seventh Circuit in Cooper and the Third Circuit in Register both recognized - 15 -

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that differences in the age-65 annuity benefits of older and younger participants that Plaintiffs challenge are due exclusively to differences in the number of years to payout of the benefit and the time value of money, not to age discrimination. Cooper, 457 F.3d at 683-40; Register, 477 F.3d at 70. 54. As an economics matter, the interest earned in cash balance plans over time is no

different than the effects of interest on defined contribution plans, or of cost of living increases under the Social Security system, both of which are entirely lawful. These same economic effects ­ cited as evidence of age discrimination by Plaintiffs ­ are common and lawful in traditional final average pay plans. 5. 55. The Treasury Department Has Consistently Endorsed Cash Balance Plans As Not Being Age Discriminatory.

Plaintiffs' interpretation of ERISA Section 204 (b)(1)(H)(i) also ignores the

Treasury Department's repeated formal pronouncements that cash balance plans are not inherently age discriminatory. 56. The Second Circuit in Esden explained that a "consistent and reasonable

interpretation by the responsible agency is entitled to deference, regardless of its form of publication." Esden, 229 F.3d at 169. See also Auer v. Robbins, 519 U.S. 452, 462 (1997) (agency's interpretation set forth in amicus brief was entitled to deference where "[t]here is simply no reason to suspect that the interpretation does not reflect the agency's fair and considered judgment on the matter in question"). See also Marcella v. Capital Dist. Physicians' Health Plan, Inc., 293 F.3d 42, 48 (2d Cir. 2002) ("Even though not formally promulgated as regulations, these opinion letters, as the views of the agency charged with implementing ERISA, are at least a body of experience and informed judgment to which courts and litigants may properly resort for guidance, and we have often relied on them for guidance.") (internal - 16 -

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quotations and citations omitted). 57. The Treasury Department is the agency responsible for interpreting and issuing

regulations under ERISA. See 29 U.S.C. § 1001nt (Section 101(a) of the Reorganization Plan No. 4 Of 1978 gives the Secretary of the Treasury authority to issue regulations under ERISA). Its endorsement of cash balance plans is clear. 58. In 1991, the Treasury Department published safe harbor regulations for cash

balance plans. See Treas. Reg. § 1.401(a)(4)-8(c)(3)(iii)(B). In the preamble to the regulations, the Treasury Department stated that "[t]he fact that interest adjustments through normal retirement age are accrued in the year of the related hypothetical allocation [i.e., the pay credit] will not cause a cash balance plan to fail to satisfy the requirements of section 411(b)(1)(H), relating to age-based reductions in the rate at which benefits accrue under a plan." 56 Fed. Reg. 47,524 (Sept. 19, 1991) (codified at 26.C.F.R. pt. 1). 59. This is an explicit rejection of Plaintiffs' theory that cash balance plans are

inherently age discriminatory because of the increased time that younger participants have to earn interest. The Second Circuit in Esden cited approvingly to these safe harbor regulations. Esden, 229 F.3d at 169-70. 60. In 1996, the Treasury Department published IRS Notice 96-8, approving cash

balance plan designs with interest credits that accrue up-front (like Part B) and describing how lump sum benefits in a cash balance plan should be determined. See IRS Notice 96-8, Part III.A. It is implausible that the Treasury Department would have issued rules describing how to calculate lump sums in a cash balance plan if its interpretation of ERISA would render all cash balance plans inherently illegal. 61. In 2002, the Treasury Department proposed regulations that squarely rejected the - 17 -

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notion that cash balance plans are inherently age discriminatory. See 67 Fed. Reg. 76,123-01 (Dec. 11, 2002). 62. In its revenue proposals for 2005, 2006, and 2007, the Treasury Department

confirmed that "cash balance plans and cash balance plan conversions are not inherently age discriminatory." See Department of Treasury, General Explanation of the Administration's Fiscal Year 2005 Revenue Proposals 104 (2004); Department of Treasury, General Explanation of the Administration's Fiscal Year 2006 Revenue Proposals 82 (2005); Department of Treasury, General Explanation of the Administration's Fiscal Year 2007 Revenue Proposals 66 (2006). 63. In short, as the Register court held, "[t]he Department of Treasury has

consistently stated that cash balance plans are not age discriminatory." Register v. PNC Fin. Servs. Group, Inc., 04-CV-6097, 2005 WL 312268 268, *7 (E.D. Pa. Nov. 21, 2005). 64. The Department's formal pronouncements, which are consistent with the

legislative history and the economic reality of the cash balance plan design, are entitled to deference. 65. Plaintiffs mistakenly rely on the Treasury Department's interpretation of ERISA

Section 204(h) (regarding certain disclosure requirements) to support their interpretation of the age discrimination prohibition in ERISA Section 204(b)(1)(H). This is incorrect because ERISA's age discrimination provision has a different purpose than ERISA's Section 204(h) notice provision, so it is reasonable for the Treasury Department to interpret these two provisions differently, consistent with their respective (and different) purposes. 66. Thus, although the Treasury Department may have determined that it was

appropriate to measure rates of benefit accrual one way for purposes of ERISA Section 204(h) notice requirements, the Treasury Department has determined that a different interpretation is - 18 -

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appropriate for purposes of ERISA's age discrimination provision. As the Eaton court held: The concept of the "benefit accrual rate" does not have a single, self-evident meaning, especially in the world of pension plan regulation. The term is used and defined in different ways and for different purposes under ERISA and the Internal Revenue Code. Eaton, 117 F. Supp. 2d at 830 (also collecting examples). D. 67. Plaintiffs' Argument That Wear-Away Is Age Discriminatory Is A Distortion Of The Facts and Governing Law. "Wear-away" is a period of time during which a participant accrues new benefits

under one benefit formula, but because those benefits are less than benefits earned under a different formula, the overall amount of benefits does not change for a period of time. See Richards v. FleetBoston, 235 F.R.D. 165, 168 (D. Conn. 2006) ("FleetBoston II") ("The idea that an employee covered by these terms does not actually accrue any new benefits under the Amended Plan until the value of the hypothetical cash balance account exceeds that of the frozen Traditional Plan benefit is known as the `wear-away' effect.") 68. The Treasury Department has issued regulations that specifically acknowledge

and endorse wear-away periods, including with respect to cash balance conversions. For example, the regulations provide safe harbors from certain ERISA requirements for plans that have particular types of wear-away periods. See 26 C.F.R. § 1.401(a)(4)-13 (describing safe harbor "formula with wear-away" and "formula with extended wear-away"); 26 C.F.R. § 1.410(b)-3(a)(2)(iii)(C) (permitting plans where "the plan is applying the wear-away formula . . . and the employee's frozen accrued benefit exceeds the benefit determined under the current formula"). 69. Current regulations under ERISA Section 204(h), 29 U.S.C. § 1054(h), further

provide that a Section 204(h) notice is required for a plan amendment after September 2, 2003 - 19 -

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"that results in a wear-away period" and describe in detail how notice should be provided when a wear-away results from the conversion of a traditional plan to a cash balance plan. See 26 C.F.R. § 54.4980F-1 Q&A 11(a)(4)(ii). 70. 71. Thus, the existence of a wear-away period is not inherently unlawful. Plaintiffs' argument that Part B is age discriminatory not only based on its

fundamental design, but also because the wear-away period can be longer for some older employees than for some younger employees, reflects a fundamental distortion of the facts and the legal principles governing age discrimination. 72. Plaintiffs' claim that wear-away periods were longer (in hindsight) for some older

employees than for some younger employees does not constitute age discrimination. What Plaintiffs call age discrimination is merely the transition from a plan that was heavily agefavored (Part A) to a plan (Part B) that is still age-favored, but merely less so. As the Seventh Circuit explained in Cooper, that is not age discrimination. 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."). 73. Plaintiffs' reliance on the availability of subsidized early retirement benefits for

older participants to prove age discrimination underscores the deficiencies in their wear-away analysis because ERISA's age discrimination provision provides that "the subsidized portion of any early retirement benefit is disregarded in determining benefit accruals." 29 U.S.C. § 1054(b)(1)(H)(v) (emphasis added). 74. In addition, because they are eligible for a subsidized early retirement, older

participants are better off than similarly-situated younger participants who are not eligible for - 20 -

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early retirement and have a more valuable benefit. Thus, even assuming that an older participant may have a longer wear-away period vis-à-vis his or her subsidized early retirement benefit, this is only because the subsidized minimum benefit to which the older participant is entitled is higher than the unsubsidized minimum benefit available to the younger participant. In all cases, the older participant is better off than a similarly-situated younger participant. That is not age discrimination. E. 75. barred. 76. A statute of limitations "inevitably reflects a value judgment concerning the point Plaintiffs' Age Discrimination Claim Is Time-Barred. Plaintiffs' claim that Part B was age discriminatory also fails because it is time-

at which the interests in favor of protecting valid claims are outweighed by the interests in prohibiting the prosecution of stale ones." Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 463-64 (1975). 77. Statutes of limitation serve several important policies, including rapid resolution

of disputes, repose for those against whom a claim could be brought, and avoidance of litigation involving lost evidence or distorted testimony of witnesses. See, e.g., Ledbetter v. Goodyear Tire & Rubber Co., Inc., 127 S. Ct. 2162, 2177 (2007); Wilson v. Garcia, 471 U.S. 261, 271 (1985). For these reasons, strict adherence to limitation periods "is the best guarantee of evenhanded administration of the law." Mohasco Corp. v. Silver, 447 U.S. 807, 826 (1980). 78. Where an ERISA provision does not contain its own statute of limitations for a

particular claim, the most analogous state statute of limitations governs. See Sandberg v. KPMG Peat Marwick, LLP, 111 F.3d 331, 333 (2d Cir. 1997) ("When Congress fails to provide a statute of limitations for claims arising under federal statutes, a court must apply the limitations period - 21 -

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of the state-law cause of action most analogous to the federal claim."). 79. Here, Plaintiffs' ERISA Section 204(b)(1)(H)(i) claim alleging age discrimination

is most analogous to Connecticut's statutory provisions prohibiting age discrimination and the corresponding 180-day statute of limitations that applies to such claims. See Conn. Gen. Stat. Ann. § 46a-82 (stating age discrimination complaint "must be filed within 180 days after the alleged act of discrimination"); Williams v. Comm'n on Human Rights and Opportunities, 786 A.2d 1283 (Conn. App. Ct. 2001) (holding plaintiff's discrimination claim barred by 180-day statute of limitations). 80. Judge Hall rejected the 180-day age discrimination statute of limitations in favor

of the breach of contract statute of limitations in Parsons, 2006 WL 2826694, at *2. However, this Court finds unpersuasive Parsons' reasoning that an ERISA age discrimination claim "deals with determining specific benefits, and thus is about a contract." Id. See also J.P. Morgan I, 460 F. Supp. 2d at 483 (applying statute of limitations for breach of contract claims to ERISA age discrimination claim simply because "[e]mployee benefit plans are contracts"). 81. Rather, because Connecticut's specific statute of limitations for age

discrimination is more analogous, this Court does not rely on the breach of contract statute of limitations. See Syed v. Hercules Inc., 214 F.3d 155, 159 (3d Cir. 2000) (applying "more specific statute of limitations covering employment disputes [which provides] for recovery upon a claim of wages, salary, or overtime for work, labor or personal services performed, . . . or for any other benefits arising from such work, labor or personal services performed" as opposed to statute of limitations "for general actions on a promise") (internal emphasis omitted). 82. The accrual of ERISA claims is governed by "federal common law." Daill v.

Sheet Metal Workers' Local 73 Pension Fund, 100 F.3d 62, 65 (7th Cir. 1996) ("[W]e look to - 22 -

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federal common law for purposes of determining the accrual date of a cause of action under a federal statute such as ERISA."). Under federal common law, "[i]t is the standard rule that [accrual occurs] when the plaintiff has a complete and present cause of action, that is, when the plaintiff can file suit and obtain relief." Wallace v. Kato, 127 S. Ct. 1091, 1095 (2007) (internal quotations and citations omitted). See also Graham County Soil & Water Conservation Dist. v. United States, 545 U.S. 409, 418 (2005) (recognizing the standard federal rule "that the limitations period commences when the plaintiff has a complete and present cause of action.") (internal quotations omitted); Ledbetter, 127 S. Ct. at 2171 (plaintiff's "cause of action was fully formed and present at the time that the discriminatory employment actions were taken against her, at which point she could have, and should have sued"). 83. While certainly at the time the Plan document was published, participants had a

complete cause of action, Count 3 may have accrued even earlier, since active employees were notified about the forthcoming cash balance plan in November 1997, and Part B was effective on January 1, 1998 for non-rehired employees. Plaintiffs' age discrimination claim accrued no later than December 21, 1998, when the Part B Plan amendment was signed. 84. Yet Plaintiffs did not file their amended Complaint alleging their age

discrimination claim until April 12, 2002. The age discrimination claim does not relate back to Plaintiffs' original Complaint because the claim does not arise out of the same factual allegations. See, e.g., Gomes v. Avco Corp., 964 F.2d 1330, 1334 (2d Cir. 1992) (finding that a Section 1981 claim based on discriminatory refusal to process a grievance did not relate back to the plaintiff's original claim, which only mentioned one of the grievances because the second grievance was considered a separate transaction not contained in the original complaint). 85. Even if the age discrimination claim were to relate back, however, it would still - 23 -

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be untimely, as Plaintiffs' original Complaint was filed on December 18, 2001. Accordingly, Plaintiffs' age discrimination claim is untimely. 86. Even if the Court had concluded that the 180-day statute of limitations did not

apply, the other most analogous statute of limitations in Connecticut would be the two-year statute applicable to a "[c]ivil action to collect wage claim [or] fringe benefit claim." Conn. Gen. Stat. Ann. § 31-72; Conn. Gen. Stat. Ann. § 52-596. 87. Section 72 of Title 31 applies to statutory wage and fringe benefit violations, such

as minimum wage violations (see Conn. Gen. Stat. Ann. §§ 31-58 to 31-62b), and violations of the Connecticut Prevailing Wage Law (see Conn. Gen. Stat. Ann. § 31-53). See Conn. Gen. Stat. Ann. § 31-72. See also Syed, 214 F.3d at 160-61 (holding that Delaware's one-year statute of limitations for claims to recover wages and benefits applied to plaintiff's ERISA claims). 88. Plaintiffs are plainly attempting to "collect" additional "fringe benefits" --

specifically, greater pension benefits -- in Count 3. That claim is not grounded in contract or in an interpretation of Part B, and therefore is not subject to any contractual limitations period. 89. Thus, regardless of whether the 180-day or two-year limitations period applies,

Plaintiffs' age-discrimination claim is time-barred. II. PART B DOES NOT VIOLATE ERISA'S NONFORFEITABILITY RULE OR ERISA'S 133% ANTI-BACKLOADING RULE. 90. At a fundamental level, Plaintiffs' challenges to the formula for calculating

opening account balances fail because: [C]urrent federal law does not govern how plan sponsors set opening hypothetical account balances for cash balance plans, provided that a plan ensures that participants do not receive less than the present value of prior accrued benefits if they separate from the employer. Ex. 533, United States General Accounting Office, Report to Congressional Requesters, Private - 24 -

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Pensions, Implications of Conversions to Cash Balance Plans, September, 2000, at 30 (emphasis added). 91. Here, Part B does exactly what is required by providing a minimum benefit which

protects the benefits to which an employee was entitled under the prior formula. There is no impermissible forfeiture and no violation of ERISA's backloading rules. 92. Plaintiffs rely on ERISA Sections 203(a), 29 U.S.C. § 1053(a), and 204(b)(1)(B),

29 U.S.C. § 1054(b)(1)(B), to attack the calculation of opening account balances under Part B. Each court to have addressed these issues has squarely rejected claims identical to those asserted here, both in the cash balance context and otherwise. See, e.g., Register, 477 F.3d at 70-72; FleetBoston I, 427 F.Supp.2d at 168-70. A. 93. The Plan Does Not Violate ERISA's 133% Rule. Plaintiffs' suggestion that the Plan violates ERISA's 133% anti-backloading

rule because of the "wear-away" effect that exists for some employees related to the minimum benefit "greater-of" protection in Part B is incorrect. 94. ERISA's anti-backloading rules in Section 204(b)(1) limit a defined benefit plan's

ability to "backload" certain retirement benefits to later years of service. The Second Circuit explained in Langman v. Laub, 328 F.3d 68 (2d Cir. 2003), that Congress enacted the antibackloading rules: 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 (quoting H.R.Rep. No. 93-807 (1974), reprinted in 1974 U.S.C.C.A.N. 4639, 4688); see - 25 -

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also Register, 477 F.3d at 71 (same). 95. In order to satisfy the anti-backloading rules, a defined benefit plan need only

meet one of three separate tests: (1) the "3% method;" (2) the "133% rule;" or (3) the "fractional rule." See 29 U.S.C. § 1054(b)(1)(A)-(C); 29 C.F.R. § 1.411(b)-1(a); 29 C.F.R. § 1.411(b)-1(b)(1), (2) and (3) (describing each test). The challenges to cash balance plans in this case (as in other cases) involve application of the 133% rule, which generally requires that: 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 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 29 C.F.R. § 1.411(b)-1(b)(2) (providing examples). 96. Critically, ERISA requires that the 133% rule be examined without

consideration of any prior benefit formulas or prior plans. Section 204(b)(1)(B)(i) specifically provides that when testing for compliance with the 133% rule, "any amendment 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)(1)(B)(i). See also Langman, 328 F.3d at 71. This means that the current operative plan is assumed to have existed for all time; it is impermissible to compare benefits under the current formula with benefits under a prior formula when testing for compliance under the rule. See Register, 477 F.3d at 71-72 (alleged violation of the 133% rule cannot be based on comparison of the minimum protected benefit earned under the prior formula to the current cash balance formula). 97. Plaintiffs' argument that Part B violates the 133% rule depends on exactly such

a prohibited comparison. The minimum benefit protection under Part B is based exclusively on the prior plan's benefit formula, which cannot be considered for purposes of anti-backloading - 26 -

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testing. 29 U.S.C. § 1054(b)(1)(B)(i). 98. court held: [O]nce there is an amendment to the prior plan, only the new plan formula is relevant when ascertaining if the plan satisfies the 133 % test. A participant's election to retain his early retirement benefits from the old plan is not relevant to this calculation. If we treat the amended plan as in effect for all other plan years, as Congress directs us to do, appellants never would have accrued a benefit under the old plan and would have started to accrue benefits under the cash balance formula from the beginning of their employment. Accordingly, there is no violation of the antibackloading provisions under appellants' aggregate-formula theory. Moreover, the objective of the anti-backloading provisions, to prevent a plan from being unfairly weighted against shorter-term employees, simply is not implicated by the [cash balance] conversion. Register, 477 F.3d at 72 (internal citation and quotations omitted). 99. holding: If the Amended Plan is treated as having been in effect for all plan years, 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. 427 F. Supp. 2d at 170-71 (rejecting claim that cash balance conversion violated the 133% rule); see also Richards v. FleetBoston, No. 04-1638, 2006 WL 2092086, *3 (D. Conn. July 24, 2006) ("FleetBoston III") (affirming holding that cash balance plan wear-away does not violate the 133% rule). 100. Plaintiffs also cannot premise any purported violation of the 133% by relying on Likewise, Judge Hall in the FleetBoston I case reached the same conclusion, These are the same circumstances the Third Circuit faced in Register, wherein the

the wear-away of early retirement benefits. The 133% rule explicitly precludes testing for - 27 -

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compliance by looking at early retirement benefits. See 29 U.S.C. § 1054(b)(1)(B)(iii) ("[T]he fact that benefits under the plan may be payable to certain employees before normal retirement age shall be disregarded."). Instead, the 133% rule is tested only with respect to benefits payable at "normal retirement age." 29 U.S.C. § 1054(b)(1)(B). 101. Perhaps recogniz