Prior To The Amendments Of 2006, ERISA Allowed A Defined-Benefit Pension Plan To Select Its Own Operative "Normal Retirement Age"
FRY v. EXELON CORPORATION CASH BALANCE PENSION PLAN (July 2, 2009)
Exelon Corporation created a defined-benefit pension plan in 2002. In order to be able to distribute the balance of employee's account as if the Plan were a defined-contribution plan, Exelon defined "normal retirement age" to be five years after commencement of employment. Exelon was thus able to avoid what it considered to be a problem with ERISA's treatment of defined-benefit plans (Congress fixed the problem in ERISA in 2006). Thomas Fry retired from Exelon in 2003 at age 55. Fry sued the Plan when it turned over only his account balance rather than his balance plus investment credits through age 65. The lower court held that the Plan satisfied ERISA. Fry appeals.
In their opinion, Chief Judge Easterbrook and Judges Evans and Sykes affirmed. The Court examined the statute. ERISA defines "normal retirement age" as either a) when an employee attains normal retirement age under the plan, or b) the later of i) age 65 or ii) the employee’s fifth anniversary in the Plan. The Court agreed with Exelon that its approach was allowable under the first prong of the definition. It concluded that ERISA did not require a retirement age to be actuarially accurate. Under the statute, an age is a "normal retirement age" if the plan says it is.
