Court Certifies Class in Cash Balance Benefit Calculation Suit

The court determined that the number of approximately 60 beneficiaries or former participants was sizable enough to warrant class certification. Further, according to the opinion, there are questions of law or fact common to the class, the claims of beneficiary Ann W. Humphrey are typical of the claims or defenses of the class and Humphrey will fairly and adequately protect the interests of the class.

Until 1996, United Way of the Texas Gulf Coast sponsored a traditional defined benefits pension plan (the 89 plan), which offered early retirement at age 55 with no reduction in benefits. Concerned about benefit obligations, United Way converted to its cash balance plan in 1996. The cash balance plan also allowed qualified participants to take early retirement and provided that participants electing early retirement would collect benefits consisting of what they would have been entitled to under the 89 Plan plus what they are entitled to under the cash balance plan.

The plan was amended in 1997 to change the language pertaining to the benefit calculation, but it continued to guarantee every plan participant who elected early retirement at least the pension benefits derived from the calculation under the 89 plan plus the pension earned under the cash balance plan, the opinion said. United Way finally deleted the “plus” language in 2002, but Humphrey claimed the sponsor violated the Employee Retirement Income Security Act (ERISA) by not informing participants of the amendments.

Before his retirement, Fredrick B. Blackmer had already disputed the amount of his pension and exhausted his administrative remedies. Blackmer’s dispute did not involve whether the benefits under the 89 plan should be added to the benefits under the cash balance plan. However, Humphrey, Blackmer’s beneficiary, filed suit after he died seeking an order enforcing the “plus” methodology, granting the appropriate payment of benefits under the cash balance plan, and finding that defendants violated ERISA § 204 when they amended the cash balance plan in 2002 without sending notice to the plan’s beneficiaries.

United Way opposed the class certification and said the “plus” language was an error. The “greater of” methodology it used to calculate pension benefits had always been the intended and correct calculation under the cash balance plan, the organization said.

The case is Humphrey v. United Way of the Gulf Coast, S.D. Tex., No. H-05-0758, 8/14/07.