A federal judge agreed with a class of retirees who say that a calculation error occurred with the benefits they earned from a retirement plan offered by Colgate-Palmolive. The judge explained in her decision that the retirement plan in question began as a traditionally designed benefits plan.
The plan promised participants they would receive the benefits of participation once they reached the age of 65. The retirement plan delivered these benefits in annuity payments, and the amount of the annuity payments was calculated by taking the final average pay of the participant and factoring in the years of services credited to them. The calculation method changed in 1989, and participants could then choose whether they received an annuity or lump sum as part of a new cash balance plan.
The judge noted that ERISA regulations make it necessary for a lump-sum payment to be equal to or more than a single-life annuity paid to the participant once he or she reaches the age of retirement. The company discovered in 2004 that retirees who opted for the lump-sum payment received less money than they would have if they received their retirement benefits in the form of an annuity.
The company sought to remedy the problem with an amendment to the plan in 2005. However, the residential annuity amendment drafted only addressed the needs of workers who retired after March 2005. Retroactive application of the amendment was not available to participants who retired from the initiation of the retirement plan in 1989 until February 2005.
The codes and regulations that govern both retirement plans and disability benefits are extensive and can change without notice. Retirees who have used a portion of their life’s earnings to fund a retirement plan know the importance of making the most informed decisions possible concerning these matters. Individuals with questions regarding retirement or disability benefits may find the answers they need by having a conversation with an attorney.
