Summary
This Eleventh Circuit opinion affirms a district court's summary judgment in favor of plaintiffs challenging NCR Corporation's termination of its "top hat" pension plans. The court held that NCR breached the plan terms by converting participants' guaranteed life annuities into actuarially equivalent lump-sum payments, as this action adversely affected the accrued benefits of at least some participants. The court upheld the district court's remedy requiring NCR to pay the difference between the lump sums distributed and the cost of replacement annuities, along with prejudgment interest.
Topics
Practice areas
Questions Presented
- Whether NCR's lump‑sum payments "adversely affect" the accrued benefits of any participant under the top‑hat plans
- Whether the use of a 5% discount rate in calculating the lump‑sum payments breaches the plan language
Holdings
- The lump‑sum payments "adversely affect" the accrued benefits of any participant when they reduce the amount of the promised life annuity for even a single participant, thereby breaching the plan language.
- The use of a 5% discount rate to calculate the lump‑sum payments breaches the plan language because it results in a reduction of the accrued benefits for participants.
Key quotations
“We hold that under the plans the lump‑sum payments “adversely affect[ed]” the “accrued benefits” of “any” participant if the lump sum led to a reduction in the amount of the life annuity of even a single participant.” (at 1300)
“The term “adversely affect” is a verb phrase which means to “influence or change in a negative or harmful way.”” (at 1303)
Factual background
NCR maintained five top‑hat defined‑benefit pension plans that promised participants a lifetime annuity. The plans allowed termination provided that no action would "adversely affect" any participant's accrued benefits. In 2013 NCR terminated the plans and paid lump‑sum amounts calculated using a 5% discount rate and mortality tables. Some participants would outlive the lump‑sum value, receiving less than the promised annuity.
Procedural history
The district court granted summary judgment in favor of the participants, finding that NCR's lump‑sum payments breached the top‑hat plan language. The participants were awarded the difference between the lump sums and the cost of replacement annuities, plus interest. NCR appealed.