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Member, Beacon International Group, Ltd.
WASHINGTON—The U.S. Supreme Court on Monday declined to review and thus let stand lower court rulings that said Verizon Communications Inc. in New York was not responsible for as much as $1.7 billion in additional pension benefits because of an attorney's mistake in a cash-balance pension plan conversion for one of the telecommunications giant's predecessor companies.
Bell Atlantic Cash Balance Plan, when it was converted from a traditional defined benefit plan in 1996, had improperly applied a single transition factor and not the 120% Pension Benefit Guaranty Corp.'s discount rate to calculate the opening cash balance plan account for plaintiff Cynthia N. Young, who filed the original lawsuit in 2005.
In 2009, a U.S. District Court in Chicago ruled that while there had been “a devastating drafting error” at the time the company was calculating the transition factor for employees near retirement, the company should not be forced to give “greater benefits than they expected.” The court affirmed that Employee Retirement Income Security Act rules “are not so strict as to prevent equitable reformation of a plan that is shown, by clear and convincing evidence, to contain a scrivener's error that is inconsistent with participants' expected benefits.”
That ruling later was upheld by the 7th U.S. Circuit Court of Appeals in Chicago.
Bell Atlantic, merged with GTE Corp., became Verizon in 2000.
Hazel Bradford is a reporter for Pensions & Investments, a sister publication of Business Insurance.