In Laurent v. PricewaterhouseCoopers LLP, Docket No. 14-1179 (2nd Cir. 2015), former employees of PricewaterhouseCoopers LLP sued the company and its retirement plan, alleging that the plan violated ERISA. The plan defines “normal retirement age” as five years of service, so that it coincides with the time at which employees vest in the plan. Plaintiffs allege that this scheme deprives plan participants of so-called “whipsaw payments,” which guarantee that participants who take distributions in the form of a lump sum when they terminate employment will receive the actuarial equivalent of the value of their accounts at retirement. The district court denied defendants’ motion to dismiss, holding that the PricewaterhouseCoopers plan, a cash balance plan (the “Plan”) violated ERISA because: (1) five years of service is not an “age” under ERISA, (2) the plan violated ERISA’s antibackloading rules, and (3) the plan’s documents violated ERISA’s notice requirements.
In analyzing the case, the Second Circuit Court of Appeals (the “Court”) said that it agrees with the district court that the Plan violates ERISA, but for different reasons than those cited by the district court. The Court held that the Plan’s definition of “normal retirement age” as five years of service violates the statute, not because five years of service is not an “age,” but because it bears no plausible relation to “normal retirement.” As such, the Court affirmed the district court’s ruling.