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Young’s e-mail address is gyoungnlj.com upholding most of a $300 million class action judgment, the 7th U.S. Circuit Court of Appeals on Aug. 1 held that provisions of Xerox Corp.’s cash-balance pension plan providing for reduced payments to employees who elected early lump-sum distributions violated the Employee Retirement Income Security Act (ERISA). Berger v. Xerox Corp. Retirement Income Guarantee Plan, No. 02-3674. A class of former Xerox workers who left the company between 1990 and 2000-and who chose to take lump-sum payments instead of waiting to begin receiving payments from the company’s cash-balance pension plan when they turned 65-sued. They argued that, even though they elected to take the lump sums upon leaving the company, the plan violated ERISA by not paying them the amount equivalent to what their estimated payout would have been had they waited until they turned 65. ERISA requires that any lump-sum substitute for an accrued pension benefit be the actuarial equivalent of that benefit. A district court entered a judgment for the class totaling approximately $300 million-the difference between what the class members received and what they would have received had the future value been calculated the way they were for employees who didn’t take the early lump sum. Xerox appealed. Affirming, the court held that Xerox’s method of calculating future value violated ERISA. The court differentiated between Xerox’s cash-balance pension plan and a defined contribution plan-where the employee’s only entitlement is to the amount in the employee’s account when he or she leaves or retires. The court said, “a cash balance plan is not a defined contribution plan; it is a defined benefit plan, and so triggers the congressional policy of requiring that a lump-sum distribution of pension benefits equal the value of the benefits if the employee decides to wait to the normal retirement age and take them then in the form of a pension.”

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