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Mezyk v. U.S. Bank Pension Plan

November 18, 2009

JOSEPH J. MEZYK, ET AL., PLAINTIFFS,
v.
U.S. BANK PENSION PLAN AND U.S. BANCORP, INC., DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on the motion to dismiss or, in the alternative, to transfer venue pursuant to Federal Rule of Civil Procedure 12(b)(3) and (6) and 28 U.S.C. § 1406(a) filed by defendants U.S. Bank Pension Plan ("Plan") and U.S. Bancorp, Inc. (collectively, "U.S. Bank") (Doc. 14). The plaintiffs have responded to the motion (Doc. 18), and U.S. Bank has replied to that response (Doc. 20). The Court also considers U.S. Bank's motion for oral argument (Doc. 21), to which the plaintiffs have responded (Doc. 22).

I. Background

This matter involves a provision in the Plan*fn1 that governed the transition between a traditional defined benefit pension plan to a cash balance defined benefit pension plan on January 1, 1999. In Walker v. Monsanto Company Pension Plan, the Court explained the difference between the two types of plans.

In a traditional defined benefit plan, a participant is entitled to a certain benefit upon retirement such as, for example, a monthly annuity equal to a certain percentage of his highest annual earnings. A traditional defined benefit plan must provide that benefit regardless of the cost to the plan, so the employer bears the risk that the plan will not be adequately funded to pay the benefits. In a cash-balance defined benefit plan, each participant maintains a cash balance account on the books only -- thus, it is often referred to as a "notional" account -- to which credits can be added through the participant's working period. . . . Because the account is notional and contains no real dollars, the employer still bears the risk of not having sufficient assets to cover pension obligations . . ..

Walker v. Monsanto Co. Pension Plan, 636 F. Supp. 2d 774, 777 (S.D. Ill. 2009).

In an effort to accomplish the conversion from the traditional plan to the cash balance plan without reducing the benefits participants had already accrued prior to January 1, 1999, the Plan calculated the actuarial value of a participant's accrued benefit under the prior plan and used that as the beginning balance of the participant's new account under the cash balance plan. To do this, the Plan first projected out the annuity to which the participant would have been entitled under the prior plan at age 65 (the Plan's normal retirement age) using the statutory annual interest rate of 5.05%. It then discounted that sum to its present value. This dispute arose because the Plan used a different discount rate for participants 45 and older (8%) than it did for participants younger than 45 (7%).

The plaintiffs in this case were 45 or older at the time of conversion. Thus, the Plan applied the deeper discount rate to them when it calculated the beginning balance of their cash balance accounts. Subsequently, plaintiffs Joseph L. Mezyk and Mary P. Mulqueeny retired and elected to take their benefits in the form of a lump sum, while plaintiffs Doris L. Carthy, Peggy B. Raymond and Shirley Chatman retired and elected to take their benefits in the form of an annuity. All of the retirements occurred between June 2000 and December 2002.

In this lawsuit, filed May 21, 2009, they claim the application of differing discount rates violates the prohibition on decreasing a participant's accrued benefit by a plan amendment in § 204(g) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1054(g) (Count I) and the prohibition on age discrimination in § 204(b)(1)(H)(i) of ERISA, 29 U.S.C. § 1054(b)(1)(H)(i) (Count II). They also allege the Plan failed to give adequate notice of the change to a cash benefit plan as required by § 204(h) of ERISA, 29 U.S.C. § 1054(h), for amendments that provide for a significant reduction in the rate of future benefit accruals (Count III). Finally, and alternatively, they claim they are entitled to benefits under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), that they did not receive as a result of the application of the higher discount rates (Count IV).

U.S. Bank asks the Court to dismiss or, in the alternative, transfer this case to the United States District Court for the District of Minnesota. It relies on three Plan provisions to support its request. The first, § 11.6, requires any legal action to recover benefits or enforce rights under the Plan to be commenced within 30 months of when a party knew or reasonably should have known of the principal facts on which the claim is based.*fn2 This provision was approved and became part of the Plan on December 27, 2002. The second, § 11.9, is a forum selection clause requiring all litigation related to the Plan to be filed in the United States District Court for the District of Minnesota. The third, § 11.8, is a choice of law clause requiring the Plan to be construed in accordance with Minnesota law except where federal law governs. The forum selection and choice of law clauses were effective in January 1, 2009.

The plaintiffs argue that none of the three provisions apply to them because they were not reasonably notified of the amendments to the Plan that implemented the limitations period, forum selection or choice of law clauses.

II. Analysis

In examining the issues before it, the Court is mindful that ERISA is a remedial statute and should be liberally construed in favor of participants and beneficiaries. See Kross v. Western ...


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