Caufield et al v. Colgate-Palmolive Co et al

Filing 284

OPINION, ORDER AND FINAL JUDGMENT re: 278 MOTION for Summary Judgment as to Count II, Errors 1 and 3 of the Complaint, and for Entry of Final Judgment under Rule 54(b). filed by Rebecca McCutcheon, Paul Caufield. For the foregoing r easons, Plaintiffs motion is GRANTED. The relief provided in this Opinion, Order and Final Judgment is stayed to allow the parties to pursue an appeal. Defendants' request for oral argument (Dkt. No. 283) is DENIED as moot. The Clerk of Court is respectfully directed to close the motion at Docket No. 278. (As further set forth in this Order.) (Signed by Judge Lorna G. Schofield on 8/24/2020) (cf) Transmission to Orders and Judgments Clerk for processing.

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------ X
:
REBECCA MCCUTCHEON, et al.,
:
Plaintiffs, :
:
:
-against:
:
COLGATE-PALMOLIVE CO., et al.,
:
Defendants. :
------------------------------------------------------------ X

16 Civ. 4170 (LGS)
OPINION, ORDER
AND FINAL
JUDGMENT

LORNA G. SCHOFIELD, District Judge:
Plaintiff and class representative Rebecca McCutcheon 1 brings this action, on behalf of
herself and others similarly situated, under the Employee Retirement Income Security Act of
1974, 29 U.S.C. § 1001 et seq. (“ERISA”), against Defendants Colgate-Palmolive Co.
(“Colgate”), Colgate-Palmolive Co. Employees’ Retirement Income Plan (the “Plan”), Laura
Flavin, Daniel Marsili and the Employee Relations Committee of Colgate-Palmolive Co. (the
“Committee”).
In its Opinion and Order of July 10, 2020 (Dkt. No. 265), the Court granted Defendants
summary judgment on Count I, Count II, Error 2 and Count II, Error 4 as to the Class but not as
to Plaintiff McCutcheon. McCutcheon v. Colgate-Palmolive Co., No. 16 Civ. 4170, 2020 WL
3893303, at *16 (S.D.N.Y. July 10, 2020). At the same time, the Court denied Defendants
summary judgment on Count II, Error 1 and Error 3. Id.; see also 7/29/20 Order (Dkt. No. 274)
(supplementing McCutcheon, 2020 WL 3893303 with inadvertently omitted additional reasons
for denying Defendants summary judgment on Error 1). Plaintiffs now move for summary

1

The Plaintiffs are McCutcheon and her former husband, Paul Caufield. Only McCutcheon is a
class representative. She brings claims under Counts I and II. Caufield seeks relief on Count II,
but not Count I.

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judgment on Count II, Errors 1 and 3 and for entry of final judgment under Rule 54(b). This
Opinion largely mirrors the language of the decision on Defendants’ motion for summary
judgment on the same issues, with the addition of citations and with minor modifications or
clarifications, many of which were proposed by Plaintiffs in their proposed order, which the
Court requested. For the following reasons, Plaintiffs’ motion is granted.
BACKGROUND
The facts below are drawn from the record and are undisputed or there is no genuine
issue as to any of the following material facts.
A.

History of the Plan
a. Colgate-Palmolive Company and the Committee
Defendant Colgate is a global consumer products company and is the sponsor of the Plan.

Ans. (Dkt. No. 49) (“Ans.”) ¶ 36; Defs. Rule 56.1 Stmt of Facts (Dkt. No. 237) (“Defs. SOF”) ¶¶
8-9. At all relevant times, Defendant Plan was an “employee pension benefit plan” and a defined
benefit plan within the meaning of ERISA; Defendant Committee was the “plan administrator,”
and, along with non-party the Pension Fund Committee, was a “named fiduciar[y]” of the Plan.
Ans. ¶¶ 35, 40, 111; Defs. SOF ¶¶ 10-11. Defendants Daniel Marsili (Senior Vice President of
Global Human Resources) and Laura Flavin (Vice President for Global Employee Compensation
and Benefits) were members of the Committee. Ans. ¶¶ 46-47.
b. Conversion to Cash Balance Plan as of 1989
The Plan originally operated as a traditional defined benefit plan, which guaranteed that
each member (or “Participant”) receive an “accrued benefit” expressed as an annuity upon
reaching “normal retirement age,” here, age sixty-five. Ans. ¶¶ 35, 55; Defs. SOF ¶¶ 9, 11.
Prior to July 1, 1989, the Plan determined the level of benefits using a final average pay formula
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(the “Grandfathered Formula”), based on a Participant’s final average earnings and years of
credited service. Participants received their Plan benefits only in the form of an annuity. Defs.
SOF ¶ 12-13.
The Plan was amended in 1994, effective as of July 1, 1989, and reflected the terms of
the Plan in effect and applicable to all Class Members paid between July 1, 1989, and the
effective date of the 2003 Plan, including Plaintiff. 30(b)(6) Deposition Transcript (“30(b)(6)
Tr.”), Ex. 1C (Dkt. No. 242-1) 78:23-81:15, 85:23-87:20, 232:16-20; Ans. ¶ 59; Defs. SOF ¶ 34;
Pls. SJ Opp (Dkt. No. 241) (“Pls. Opp.”) at 3. Effective July 1, 1989, the Plan was converted to
a cash balance plan. Ans. ¶ 59; Defs. SOF ¶ 11. As a cash balance plan, each Participant had a
“cash balance” account called the Personal Retirement Account balance, which reflected a set
percentage of yearly pay plus interest (the “PRA Formula”). Defs. SOF ¶ 16. Unlike the prior
version of the Plan using the Grandfathered Formula, the cash balance plan allowed Participants
to elect to receive their benefits either as a lump sum or an annuity beginning on the “benefit
commencement date” (i.e., the first date of the first period when a Participant is paid). Id.
Because the Plan is considered a defined benefit plan under applicable law, Internal
Revenue Code (“IRC”) § 417(e) and ERISA § 205(g) require any lump sum payment to be no
less than the actuarial equivalent of the Participant’s accrued benefit expressed as a single life
annuity payable at normal retirement age. I.R.C. § 417(e); ERISA § 205(g), 29 U.S.C. §
1055(g); accord Esden v. Bank of Bos., 229 F.3d 154, 164 (2d Cir. 2000); Ans. ¶ 57; Defs. SJ Br.
(Dkt. No. 236) at 25; Defs. SOF ¶ 18; 9/4/19 Collins Decl. (Dkt. No. 238) ¶ 42); 6/17/19 Expert
Report of Jeff Leonard (Dkt. No. 259) (Leonard Rep.) ¶¶ 42, 46-47. If a benefit is paid even
partially as a lump sum, IRC § 417(e) applies, with the result that the total value of the benefit
paid cannot be less than the value of the accrued benefit determined using IRC § 417(e). See
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Rev. Rul. 89-60; Treas. Reg. § 1.417(e)-1(d); Defs. 6/4/15 Ltr. (Dkt. No. 21-6) at 13-14; Ans. ¶
57. To determine actuarial equivalence, a plan administrator projects the cash balance forward to
normal retirement age, converts that cash balance to an age sixty-five annuity and then converts
that age sixty-five annuity to a lump sum and discounts back the lump sum to present value.
Defs. SOF ¶ 18; Leonard Rep. ¶ 46. A plan can select a different rate to project the cash balance
forward into an age sixty-five single-life annuity, but the discount rate to determine the present
value of the accrued benefit (annuity) is prescribed by IRC § 417(e). See I.R.C. § 417(e); Esden,
229 F.3d at 164; accord Defs. SOF ¶ 19; Leonard Rep. ¶ 47.
For Class Members who, like McCutcheon, received their benefit between 1989 and
2002, the Plan document used a projection rate of the 20-year Treasury bill interest rate plus 1%
(“20+1% rate”). 1994 Plan (Dkt. No. 21-9) § 1.3; 2003 Plan § 1.3 (as in effect through February
28, 2002) (Dkt. No. 21-48); 5/16/19 Expert Report of Lawrence Deutsch (Dkt. No. 261)
(“Deutsch Rep.”) at 4. This projection rate, used to convert the cash balance into an age sixtyfive annuity (for Participants younger than sixty-five), was dictated by § 1.3 of the Plan, which
defined “Actuarial Equivalent” and in its first paragraph states that “for purposes of converting a
Member’s Account into a single life annuity payable for the life of the Member starting at
Normal Retirement Date” (i.e. age 65) the 20+1% rate is applied. 1994 Plan § 1.3; 2003 Plan §
1.3 (as in effect through February 28, 2002). The discount rate to determine the present value of
the accrued benefit (annuity) as prescribed by IRC § 417(e) at the time of the adoption of the
Plan in 1989 until February 28, 2002 (i.e. the day before the effective date of the 2003 Plan), was
a blend of interest rates equal to the Pension Benefit Guaranty Corporation (“PBGC”) rate.
I.R.C. § 417(e)(3)(A)(ii)(II) (current version at I.R.C. § 417(e)(3)(C)); I.R.S. Notice 87-20, 19871 C.B. 456 (Feb. 9, 1987); Deutsch Rep. ¶ 24. The 20+1% rate from 1989 through February 28,
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2002 was consistently and substantially higher than the PBGC rate. Morgan Tr., Ex. 1A (Dkt.
No. 242-1) 550:19-23; Deutsch Rep. ¶¶ 37(2)-(3), 45.
c. Plan Appendices -- Preservation of Benefits Under Grandfathered Formula
When the cash balance plan and PRA Formula were adopted as of 1989, employees who
were then still employed by Colgate were given the option to continue benefits under the
Grandfathered Formula as set forth in Appendices A through D of the Plan. 1994 Plan,
Appendix C § 2; Defs. SOF ¶ 20; Defs. SJ Br. at 1; Pls. Opp. at 7. The Appendices offered
protection to Participants, like McCutcheon, who worked at Colgate prior to 1989, remained
employed after the conversion to the cash balance plan but had accrued benefits under the
previous Grandfathered Formula. Id. Under Appendix C, these Participants could elect to make
contributions to continue to accrue benefits under the Grandfathered Formula. 1994 Plan,
Appendix C § 2; Defs. SOF ¶ 24; Defs. SJ Br. at 18; Leonard Rep. ¶ 14 (“employee
contributions allowed [those] individuals to continue to accrue benefits under the Grandfathered
Formula”). If a Participant elected to make these contributions, and did so until her separation
from service, she would be entitled to a benefit no less than her accrued benefit under the PRA
Formula plus her employee contributions to maintain the Grandfathered Formula, in the form of
either a lump sum or an annuity. 1994 Plan, Appendix C § 2; Defs. 3/24/17 Ltr. (Dkt. No. 47) at
2-3; Defs. 6/4/15 Ltr. at 7, 13; Ans. ¶¶ 211, 214; Defs. SJ Br. at 18; Defs. SOF ¶¶ 26, 28-29.
d. The Residual Annuity Amendment and 2005 Implementation
In 2004, it came to Colgate’s attention that the lump sum payments that the Plan had been
paying to Participants -- who continued making contributions to maintain Grandfathered
Formula benefits -- were less than the Participants would have otherwise received had they
elected to receive an annuity. Defs. 6/4/15 Ltr. at 11; Ans. ¶¶ 68-69, 107; Defs. SJ Br. at 6-7, 205

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22, 27; Leonard Rep. ¶¶ 102-03, 105, 108, 164-65; Defs. SOF ¶¶ 48-51, 54, 57, 59; 5/11/14
Mellon Presentation (Dkt. No. 238-1) at 12-16, 21; see also April 2002 Risk Assessment (Dkt.
No. 242- 2) at COL_STALEY000024984. On March 30, 2005, the Committee adopted the RAA
to address the potential unlawful forfeiture of benefits. Defs. 6/4/15 Ltr. at 11; Defs. 5/22/17 Ltr.
(Dkt. 57) at 3; Ans. ¶¶ 69, 74, 107, 180.
The RAA amended the Plan and granted a residual annuity (the “RAA Annuity”) to any
Participant who elected a lump sum payment upon separation, who met a threshold eligibility
requirement (discussed further below) and whose age sixty-five single life annuity benefit
otherwise payable to the Member under Appendices B, C or D, as applicable, was greater than
the age sixty-five single life annuity actuarial equivalent of a Participant’s lump sum payment
(the “Age 65 AE of LS paid”). Residual Annuity Amendment (Dkt. No. 21-3) (“RAA”) ¶ 5.
The amount of the RAA Annuity was the delta between the two amounts. After the Committee
adopted the RAA in 2005, it was implemented only for prospective retirees, i.e., those
Participants who retired after March 2005, even though the RAA was effective as of July 1,
1989. Defs. 8/29/16 MTD (Dkt. No. 26) at 2; Defs. SJ Br. at 2-3, 18; Ans. ¶¶ 9, 18; Defs. SOF
¶¶ 62, 75, 78; Leonard Rep. at 62 n.18. Retroactive implementation of the RAA did not occur at
that time for Participants who had retired between July 1989 and February 2005, such as
McCutcheon. Id.
e. Colgate I Settlement and Retroactive Implementation of the RAA
In 2007, a class action was commenced on behalf of several thousand Participants against
Colgate, alleging that their pension benefits had been miscalculated. See In re ColgatePalmolive Co. ERISA Litig. (“Colgate I”), 36 F. Supp. 3d 344 (S.D.N.Y. 2014). In May 2010,
the parties in Colgate I reached an agreement in principle to settle that case. Ans. ¶ 128. Up to
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that point, counsel for the plaintiffs in Colgate I had not been aware of the RAA. See Ans. ¶
131; 2/24/17 Order (Dkt. No. 35) at 4. Once plaintiffs’ counsel received a copy of the RAA in
July 2011, all RAA-related claims were carved out of the settlement agreement. Ans. ¶ 132;
2/24/17 Order at 4. The Court approved the final settlement agreement on July 8, 2014. Ans. ¶¶
144-148.
After the Colgate I settlement, Defendants retroactively applied the RAA, granting
millions of dollars of additional annuity benefits to a few hundred Participants who had taken a
lump sum payment between 1989 and 2005, see Defs. SOF ¶ 86, the vast majority of whom had
elected to make contributions to maintain the Grandfathered Formula. Deutsch Rep. at 64 ¶¶
202, 205. Defendants contend that all Participants entitled to an RAA Annuity received one at
that time. Ans. ¶ 3; Defs. SJ Br. at 7. Plaintiffs dispute this.
B.

McCutcheon’s Administrative Claim and Appeal
McCutcheon was employed by Colgate from 1979 to 1994, and participated in the Plan

during that time. Ans. ¶ 32; Defs. SOF ¶ 5. After the Plan converted in 1989, she made
contributions to continue the Grandfathered Formula until she resigned from the company at the
age of thirty-seven in 1994. Ans. ¶ 86; Defs. SOF ¶ 5; Defs. 11/4/14 Ltr. (Dkt. No. 21-5). She
elected to receive her pension benefit as a lump sum distribution of $22,425.64. 1994
Worksheets (Dkt. No. 21-32) at 1-2. She did not receive any benefit under the RAA when it was
enacted in 2005. Defs. SJ Br. at 2-4; 2/24/17 Order at 4. On July 30, 2014, she submitted a
claim letter to the Committee, stating that she was entitled to an RAA Annuity, in addition to the
lump sum payment she had received in 1994. McCutcheon 7/30/14 Ltr. (Dkt. No. 21-8). She
requested that Defendants begin paying her an RAA Annuity, and provide an explanation of how
it was calculated. Id.
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Defendant Flavin responded on behalf of the Committee and denied McCutcheon’s
claim, by letter dated November 4, 2014. Defs. 11/4/14 Ltr. Because her Grandfathered Benefit
(calculated as $699.58) was less than her Age 65 AE of LS paid (calculated as $752.84), the
Committee concluded that McCutcheon was not entitled an RAA Annuity. Id. at 3. On January
6, 2015, McCutcheon sent a letter to the Committee, requesting, among other things, certain
documents, information and responses to questions described in the letter. McCutcheon 1/6/15
Ltr. (Dkt. No. 21-28). On March 5, 2015, Defendant Flavin responded to McCutcheon on behalf
of the Committee, attaching some, but not all, of the documents McCutcheon had requested.
Defs. 3/5/15 Ltr. (Dkt. No. 21-11).
McCutcheon formally appealed the Committee’s benefit denial decision in a letter dated
April 6, 2015, identifying four errors (“Errors”) that the Committee allegedly committed in the
course of calculating her RAA Annuity. McCutcheon 4/6/15 Ltr. (Dkt. No. 21-4). The four
Errors are the basis for the denial of benefits claim in Count II. Two of these Errors -- Errors 1
and 3 -- and are discussed in detail below. On June 4, 2015, in a sixteen-page letter signed by
Defendant Marsili, the Committee denied McCutcheon’s appeal. Defs. 6/4/15 Ltr.
C.

Relevant Procedural History
McCutcheon commenced this action on June 3, 2016, asserting five causes of action.

The Magistrate Judge overseeing pre-trial proceedings bifurcated the case and ordered only
Counts I and II to proceed. Count I is not a class claim. Count I alleges that Defendants violated
29 C.F.R. § 2560.503-1 by failing to produce all relevant documents and information during
McCutcheon’s claim and appeal. Count II alleges that Plaintiffs were wrongfully denied residual
annuity benefits under the Residual Annuity Amendment (the “RAA”) and incorporated Plan
provisions.
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On July 27, 2017, the Court granted Plaintiffs’ motion for class certification as to Count
II and appointed McCutcheon as class representative of a class consisting of:
any person who, under any of Appendices B, C or D of the Plan, is entitled to a
greater benefit than his or her Accrued Benefit as defined in Plan § 1.2, provided
such person received a lump sum payment from the Plan, and the beneficiaries and
estates of any such person.
Caufield v. Colgate-Palmolive Co., No. 16 Civ. 4170, 2017 WL 3206339, at *8 (S.D.N.Y. July
27, 2017). Given this class definition, each Class Member (1) was a Colgate employee in July
1989, (2) received a lump sum payment from the Plan and (3) is entitled to a greater benefit
under any of Appendices B, C or D than his or her Accrued Benefit as defined in Plan § 1.2,
which defines Accrued Benefit in part as the “Actuarial Equivalent of the Member’s Account.”
Plaintiffs estimate that the Class consists of approximately 1,200 individuals, id. at *4, with
claims totaling approximately $300,000,000. Deutsch Rep. at 69 ¶ 230.
As noted above, the Court granted in part and denied in part Defendants’ motion for
summary judgment. Plaintiffs then filed a letter motion seeking leave to file a motion that would
(1) allow Plaintiffs to voluntarily dismiss with prejudice Counts III-V of the Complaint, (2) grant
summary judgment as to the remaining surviving claims and (3) ask the Court to enter final
judgment under Federal Rule of Civil Procedure 54(b). (Dkt. No. 267). The Court granted
Plaintiffs’ requests, dismissed Counts III-V with prejudice, and set a briefing schedule for this
motion. (Dkt. No. 275). Plaintiffs now seek summary judgment on Count II, Errors 1 and 3.
LEGAL STANDARD
Summary judgment is appropriate if the record establishes that there is no “genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). “A genuine issue of material fact exists if ‘the evidence is such that a
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reasonable jury could return a verdict for the nonmoving party.’” Nick’s Garage, Inc. v.
Progressive Cas. Ins. Co., 875 F.3d 107, 113 (2d Cir. 2017) (quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)). The moving party “bears the burden of ‘demonstrat[ing] the
absence of a genuine issue of material fact.’” Id. at 114 (quoting Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986)) (alteration in original). The evidence is construed in the light most
favorable to, and all reasonable inferences are drawn in favor of, the nonmoving party. Id. at
113. “Summary judgment should be denied where there are genuine issues of material fact ‘that
properly can be resolved only by a finder of fact because they may reasonably be resolved in
favor of either party.’” Davis-Garett v. Urban Outfitters, Inc., 921 F.3d 30, 45 (2d Cir. 2019)
(quoting Anderson, 477 U.S. at 250).
DISCUSSION
Plaintiffs’ denial of benefits claim in Count II is based on four alleged Errors Defendants
made when interpreting and calculating benefits under the RAA. Plaintiffs seek summary
judgment on Errors 1 and 3. As explained below, summary judgment is granted to Plaintiffs on
these two aspects of Count II.
A.

Error 1
As Error 1, Plaintiffs assert that Defendants miscalculated the RAA benefit, causing an

impermissible forfeiture of benefits by Class Members. For the following reasons, summary
judgment is granted to Plaintiffs on Error 1, because, regardless of the standard of review, based
on the unambiguous terms of the Plan, Defendants’ interpretation is erroneous as a matter of
law.

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1. Legal Principles for Construing a Plan
When a plan is construed in ERISA cases involving claims under § 1132(a)(1)(B), courts
interpret the plan according to “federal common law,” which is “largely informed by state law
principles.” Lifson v. INA Life Ins. Co. of New York, 333 F.3d 349, 352-53 (2d Cir. 2003);
accord Stets v. Securian Life Ins. Co., No. 17 Civ. 09366, 2020 WL 1467395, at *5 (S.D.N.Y.
Mar. 25, 2020). Courts first look to determine if the Plan’s terms are ambiguous. See O’Neil, 37
F.3d at 58-59; accord Verdier v. Thalle Constr. Co., Inc., No. 14 Civ. 4436, 2017 WL 78512, at
*4 (S.D.N.Y. Jan. 5, 2017), aff’d, 771 F. App’x 20 (2d Cir. 2019). “Whether ERISA plan
language ‘is ambiguous is a question of law that is resolved by reference to the contract alone.’”
Strom v. Siegel Fenchel & Peddy P.C. Profit Sharing Plan, 497 F.3d 234, 244 n.6 (2d Cir. 2007)
(quoting O’Neil, 37 F.3d at 59); accord Verdier, 2017 WL 78512, at *4. “Language is
ambiguous when it is capable of more than one meaning when viewed objectively by a
reasonably intelligent person who has examined the context of the entire integrated agreement.”
Strom, 497 F.3d at 244 n.6 (internal quotation marks omitted); accord Verdier, 2017 WL 78512,
at *4.
If the terms of the Plan are unambiguous, they are enforced according to their terms.
“Where . . . plan language categorically states that certain benefits will be provided, de
novo review is appropriate because unambiguous language leaves no room for the exercise of
discretion.” O’Neil, 37 F.3d at 59; accord Strom, 497 F.3d at 244 n.6 (“[U]nambiguous
language in an ERISA plan must be interpreted and enforced in accordance with its plain
meaning.”). The court is to “review the Plan as a whole, giving terms their plain meanings.”
Fay v. Oxford Health Plan, 287 F.3d 96, 104 (2d Cir. 2002); accord Jarosz v. Am. Axle & Mfg.,
Inc., 372 F. Supp. 3d 163, 178 (W.D.N.Y. 2019); see Brass v. Am. Film Techs., Inc., 987 F.2d
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142, 148 (2d Cir. 1993) (“Where the [contract] language is plain and unambiguous, a court may
construe the contract and grant summary judgment.”).
If the terms of the Plan are ambiguous, the denial of benefits is considered under the
arbitrary and capricious standard where the party making the interpretation has discretion to
interpret the terms. O’Neil, 37 F.3d at 59; accord Jarosz, 372 F. Supp. 3d at 175. A denial of
benefits is “arbitrary and capricious only if the decision is without reason, unsupported by
substantial evidence or erroneous as a matter of law.” Fay, 287 F.3d at 104 (internal quotation
marks omitted); accord Jarosz, 372 F. Supp. 3d at 175. “‘[W]here the trustees of a plan . . .
interpret the plan in a manner inconsistent with its plain words, or by their interpretation render
some provisions of the plan superfluous, their actions may well be found to be arbitrary and
capricious.’” DeCesare v. Aetna Life Ins. Co., 95 F. Supp. 3d 458, 481 (S.D.N.Y. 2015) (quoting
O’Shea v. First Manhattan Co. Thrift Plan & Tr., 55 F.3d 109, 112 (2d Cir. 1995)). But where
both the interpretation proffered by the administrator and the interpretation proffered by the
claimant are reasonable, the administrator’s interpretation will not be disturbed. Novella v.
Westchester Cty., 661 F.3d 128, 140 (2d Cir. 2011); accord Jarosz, 372 F. Supp. 3d at 175.
“It is axiomatic that where the language of a contract [at issue in a § 1132(a)(1)(B) claim]
is unambiguous, the parties’ intent is determined within the four corners of the contract, without
reference to external evidence.” Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1202, 1210 (2d
Cir. 2002); accord Halpern v. Blue Cross/Blue Shield of W. New York, No. 12 Civ. 407, 2014
WL 4385759, at *10 (W.D.N.Y. Sept. 4, 2014); Brooks v. Macy’s, Inc., No. 10 Civ. 5304, 2011
WL 1793345, at *2 (S.D.N.Y. May 6, 2011). By contrast, when a plan’s terms are ambiguous,
“an employer is entitled to summary judgment if it presents extrinsic evidence sufficient to
remove the ambiguity and that evidence is not contradicted by opposing evidence.” Gilbert v.
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Related Mgmt. Co., L.P., No. 95 Civ. 9610, 1998 WL 99801, at *4 (S.D.N.Y. Mar. 4, 1998),
aff’d sub nom., 162 F.3d 1147 (2d Cir. 1998) (collecting cases).
2. Construing the RAA
In broad terms, Error 1 involves how to determine who is entitled to an RAA Annuity
benefit, and the amount of any such benefit. Plaintiffs seek summary judgment, arguing that
eligibility is determined by comparing the Appendix benefit (which is the greater of the
Grandfathered benefit or the sum of the Accrued Benefit as defined in Plan § 1.2 and any
Employee Contributions) to the Accrued Benefit as defined in Plan § 1.2 (with the outcome that
if either the Grandfathered benefit exceeds the Accrued Benefit as defined in Plan § 1.2 or the
participant elected to make Employee Contributions, then the participant will be entitled to a
Residual Annuity). Plaintiffs further argue that the amount of the Residual Annuity is
determined by comparing the Age 65 AE of LS paid (defined above as the “Age 65 actuarial
equivalent of the lump sum paid”) with the greater of the Grandfathered Benefit or the
Member’s Accrued Benefit as defined in Plan § 1.2 plus Employee Contributions (which is then
adjusted for payment prior to age 65 and potential conversion to a Joint and Survivor benefit
form). Defendants argue that both eligibility and the amount of the residual annuity is
determined by comparing the Age 65 AE of LS paid with only the Grandfathered Benefit. All
agree that if the Age 65 AE of LS paid is smaller than the second amount, then the difference is
the RAA Annuity benefit. Based on a plain reading of the RAA, Plaintiffs are correct.
The RAA states, regarding eligibility to receive the RAA Annuity, that
[e]ffective as of July 1, 1989, a Member who, under any of Appendices B, C or D,
is entitled to a greater benefit than [her] Accrued Benefit . . . and who chooses to
receive [her] benefit under this Lump Sum Payment Option, which is the Actuarial
Equivalent of [her] Accrued Benefit . . . shall receive in addition to such lump sum
payment an additional benefit, commencing at the same time and payable in the
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standard form applicable to such Member . . . . A Member may not elect any other
form of payment option with respect to this additional benefit.
(Dkt. No. 21-3 at 4/8). But the following provision of the RAA directs how to compute
the RAA Annuity:
Such additional benefit shall be computed by subtracting the age 65 single life
annuity Actuarial Equivalent amount of the Member’s lump sum payment [i.e., the
Age 65 AE of LS paid] from the age 65 single life annuity benefit otherwise payable
to the Member under Appendices B, C or D, as applicable . . . .
(Dkt. No. 21-3 at 4/8) (emphasis added).
The parties agree that Appendix C § 2(b) is the Appendix applicable to McCutcheon. It states:
If [she] elects to receive an annuity settlement instead of a single lump sum
payment, [she] shall be eligible for an annuity pursuant to Section 6.2 . . . , Section
6.3 . . . or Section 6.4(a)(ii) . . . of the Plan that provides for [her] to receive the
larger of:
(i)

the benefit that [she] would have received had [she] continued under the
Plan as in effect prior to July 1, 1989, pursuant to Appendix B . . . or

(ii)

the benefit payable pursuant to Section 6.2 . . . Section 6.3 . . . or Section
6.4(a)(ii) . . . of the Plan, which is the Actuarial Equivalent of the Member’s
Accrued Benefit . . . plus [her] Contributions to Maintain Prior Plan Benefits
with interest . . . at [her] Benefit Commencement Date.

(Dkt. No. 21-10 at 18-19/71). Defendants argue that only § 2(b)(i) (which is the
Grandfathered Benefit) should be compared to the Age 65 AE of LS paid. Plaintiffs
argue that the greater of § 2(b)(i) (the Grandfathered Benefit) or § 2(b)(ii) above should
be compared to the Age 65 AE of LS paid.
The Plan plainly states that Participants are entitled “to receive the larger of” the two
amounts, paragraph (i) the Grandfathered Benefit, and paragraph (ii) another amount discussed
below. The Plan unambiguously directs that both amounts must be considered, as Plaintiffs

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assert. Defendants’ interpretation to the contrary is erroneous as a matter of law. 2
Defendants agree that the language governing determination of the RAA Annuity
payments is clear and unambiguous, but argue that the RAA dictates a comparison between the
PRA lump sum payment (expressed as an annuity) and the Grandfathered Formula annuity only.
Defendants assert that “the age 65 single life annuity benefit otherwise payable to the Member
under Appendices B, C or D, as applicable” refers only to the Grandfathered Benefit. The other
benefit, in Appendix C § 2(b)(ii), they argue is not “otherwise payable” because it is the same as
the PRA lump sum payment, which was already paid.
This argument is unpersuasive because the PRA lump sum is not the same as the
Appendix C § 2(b)(ii) benefit. The PRA lump sum is more precisely “the age 65 single life
annuity Actuarial Equivalent amount of the Member’s lump sum payment” (i.e., the Age 65 AE
of LS paid) from the RAA. That amount is different from “the benefit payable pursuant to
Section 6.2 . . . Section 6.3 . . . or Section 6.4(a)(ii) . . . of the Plan, which is the Actuarial
Equivalent of the Member’s Accrued Benefit . . . plus [her] Contributions to Maintain Prior Plan
Benefits with interest” from Appendix C § 2(b)(ii).
First, on the most basic level, the words are different, suggesting that the drafters of the
Plan meant to indicate two different things. Second, the Age 65 AE of LS paid is a
computational construct created solely to facilitate the computation under the RAA. It is not a
Plan benefit; there is no such benefit in the Plan. In contrast, Appendix C § 2(b)(ii) creates by its
terms an actual Plan benefit, established when the Plan was converted from a defined benefit

2

Defendants’ additional arguments regarding the meaning of the “as applicable” language in the
RAA are rejected. (Dkt. No. 281 at 7-9/14). The “as applicable” language in the RAA is an
unambiguous direction to the Plan Administrator to determine and identify which part of the
Appendix applies to a given Participant before calculating her RAA Annuity.
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plan to a PRA cash balance plan.
Third, a critical difference that flows from this distinction, and the reason the amounts
are not the same, is that they are based on different interest rate assumptions. The Age 65 AE of
LS paid is based on a PBGC interest rate, while the Appendix C § 2(b)(ii) benefit uses the higher
20+1% rate. The Age 65 AE of LS paid is based on a PBGC interest rate because, at the time of
the adoption of the Plan in 1989, until February 28, 2002, the interest rates that IRC § 417(e)
required the Plan to use in present valuing benefits were a blend of interest rates equal to the
PBGC rate for immediate or deferred annuities. I.R.C. § 417(e)(3)(A)(ii)(II) (current version at
I.R.C. § 417(e)(3)(C)); I.R.S. Notice 87-20, 1987-1 C.B. 456 (Feb. 9, 1987). Defendants admit
in their reply memorandum that the Committee “uses the PBGC rates to convert the PRA
Formula lump sum into an annuity for purposes of comparison with the Grandfathered Formula
annuity.” Defs. SJ Reply (Dkt. No. 249) (“Defs. SJ Reply”) at 10 n.5.
In contrast, the Appendix C § 2(b)(ii) benefit, which is an actual benefit, is based on the
higher 20+1% rate because that is the interest rate assumption in the Plan that Defendants
actually used (for Participants paid before March 1, 2002) to project to an age sixty-five account
value and then convert it to an age sixty-five annuity. As reflected in the 2003 Plan document,
the Plan required the use of 20+1% rate to convert a Participant’s Account into a single life
annuity in § 1.3, before the year 2000 (and, indeed, through February 28, 2002, as explained
above). Throughout the relevant period, this rate was always greater -- i.e., not the same as -the PBGC rates.
Defendants’ argument in response falls short. They assert that the Age 65 AE of LS paid
and Appendix C § 2(b)(ii) benefit are one and the same. Defs. SJ Reply at 10-11; Defs. SOF ¶¶
29-30 and 32. They do not explain how this can be, given that the two amounts are based on
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different interest rates, nor do they appear to challenge that they use the PBGC rate for the
former, while the Plan throughout the relevant period dictates use of the 20+1% rate for the
latter. Defendants also cite evidence to show that the RAA’s purpose and intent was to ensure
that Participants were “made whole” by comparing their Age 65 AE of LS paid just to the
Appendix C § 2(b)(i) Annuity Benefit (to preserve the Grandfathered Formula benefit). They
similarly argue that the Committee’s past practice is consistent with their interpretation. But the
unambiguous language of the RAA and Appendix C forecloses consideration of extrinsic
evidence such as intent and purpose or past practice. See Aeronautical Indus. Dist. Lodge 91 of
Int’l Ass’n of Machinists & Aerospace Workers, AFL-CIO v. United Techs. Corp., Pratt &
Whitney, 230 F.3d 569, 576 (2d Cir. 2000) (“Only when provisions are ambiguous may courts
look to extrinsic factors . . . such as bargaining history, past practices, and other provisions . . . to
interpret the language in question.”); DeVito v. Hempstead China Shop, Inc., 38 F.3d 651, 654
(2d Cir. 1994) (noting that “[t]o the extent that [an] ambiguity exists, a textual analysis of the
Agreement may be supplemented by an exploration of extrinsic evidence concerning the parties’
intent” (emphasis added)).
Even if not foreclosed by the Plan’s unambiguous language, Defendants cannot support
their argument regarding consistent prior practice, see Defs. SJ Reply at 9-10, since they
admitted that there was no practice regarding the determination of the Residual Annuity for
participants who were paid prior to the effective date of the 2003 Plan when the actuarial basis
for determining the Account plus Employee Contributions benefit differed from the actuarial
basis for determining the Age 65 AE of LS paid (i.e. when the Plan § 1.3 actuarial equivalence
20+1% interest rate exceeded the applicable IRC § 417(e) rate). See Leonard Rep. ¶ 191 & n.18,
and the sole evidence that Defendants cite in their reply to support their argument is a set of
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calculations that predate the RAA by almost a year and hence are not actual RAA benefit
calculations.
Defendants also argue that different interest rates (in this case the PBGC rate on the one
hand and the 20+1% rate on the other) cannot be used in the same benefit calculation. Defs. SJ
Br. at 24-25. But Defendants have admitted that it is standard practice in a cash balance plan to
use a different rate for projecting the account to age 65 than is used for calculations that are
subject to IRC § 417(e). Defs. SJ Br. at 25-26; Defs. SOF ¶¶ 18-19; Leonard Rep. ¶¶ 47, 49.
Defendants’ expert argues that IRC § 417(e) does not apply here because IRC § 417(e)
does not apply at all when the benefit is partially paid as a lump sum and partially paid as an
annuity. Leonard Rep. ¶¶ 22, 178-79. This argument is unpersuasive because he relies on an
IRS notice that was issued after the calculations in question were performed. See I.R.S. Notice
2017-44. Also, the IRS notice by its terms (and as explained by Plaintiffs’ expert) does not
appear to apply to the benefit here. See 6/24/19 Reply Report of Lawrence Deutsch (Dkt. No.
262) (“Deutsch Reply Rep.”) at 15 (explaining that the notice also would have required that the
Plan be timely amended, to apply to benefits that commenced prior to 2017, which the Plan was
not). Plaintiffs’ expert further pointed out that application of the IRS Notice would actually
serve to increase, rather than decrease, the amount of the Residual Annuity. Id. at 17.
Defendants raised reformation as a defense in their Answer (see Dkt. No. 49 at 123/125)
and in their summary judgment motion (see Dkt. No. 236 at 33/42), arguing that the Plan should
be reformed to produce the desired result. Defendants’ reformation defense is rejected as a
matter of law. Defendants seek to reform the Plan to “reflect the drafters’ intent” that the
Residual Annuity be based only upon the Grandfather benefit and say what they argued in their
summary judgment motion, which the Court rejected as contrary to the plain meaning of the
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Plan: if the value of a Participant’s Appendix C § 2(b)(i) annuity benefit (which is the
Grandfathered Benefit) was greater than the value of the annuitized form of her PRA lump sum
payment, the Participant would receive an RAA Annuity in the amount of the difference (see
Dkt. No. 236 at 33-34/42). This argument is rejected because, so reformed, the Plan would be in
violation of IRC § 417(e), which requires any lump sum payment to be no less than the actuarial
equivalent of the Participant’s accrued benefit expressed as a single life annuity payable at
normal retirement age. I.R.C. § 417(e); accord Esden, 229 F.3d at 164. As explained above, the
discount rate to determine the present value of the accrued benefit (annuity) is prescribed by IRC
§ 417(e), which at the relevant time was the PBGC rate. See Dkt. No. 265 at 22/32. If reformed
as Defendants request, this discount rate would be the 20+1% rate, which at the relevant time
was higher than the PBGC rate and therefore, if applied, would be in violation of IRC § 417(e).
The Court declines to reform a plan provision that conforms to controlling law into a plan
provision that would violate the law. In no case that Defendants cited were the relevant plan
terms after reformation contrary to law.
Reformation is unavailable to Defendants for the additional reason that reformation is not
a defense but rather an affirmative claim that Defendants failed raise as a counterclaim. See 29
U.S.C. § 1132(a)(3) (“A civil action may be brought . . . by a . . . fiduciary . . . to obtain other
appropriate equitable relief.” (emphasis added)); In re DeRogatis, 904 F.3d 174, 199 (2d Cir.
2018) (noting that “plaintiffs asserting a claim under [ERISA] section 502(a)(3) may seek
remedies such as . . . equitable reformation of plan terms” (emphasis added)); Scarangella v.
Grp. Health, Inc., 731 F.3d 146, 149 (2d Cir. 2013) (discussing the three counterclaims, brought
by defendant in response to plaintiff’s complaint, “seeking rescission and/or reformation” of the
plan (emphasis added)); see also Powermat Techs., Ltd. v. Belkin Int’l Inc., No. 19 Civ. 878,
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2020 WL 2892385, at *7 (S.D.N.Y. Apr. 2, 2020) (addressing whether, under New York law,
defendant had adequately pleaded reformation as a counterclaim and the corresponding defense
of mutual mistake). Defendants have not identified any Second Circuit case that supports
asserting reformation only as a defense, nor have they identified any persuasive out-of-Circuit
case where a court has allowed a defendant to reform an ERISA plan in this context in the
manner they suggest.
Second, while Defendants suggest reformation is an absolute plan sponsor right under
ERISA, see, e.g., Defs. 7/27/20 Ltr. at 1 (Dkt. No. 273), reformation is appropriate only in
extreme cases, and in substantiating an intent contrary to the clear and unambiguous plan’s
terms, the defendant must meet the high bar of clear and convincing evidence relying only on
objective, written evidence that is “not dependent ‘on the credibility . . . of an interested party.’”
Young v. Verizon’s Bell Atlantic Cash Balance Plan, 615 F.3d 808, 820 (7th Cir. 2010).
Defendants fail to explain how the situation here is an extreme case: Defendants claim
“windfall,” Dkt. No. 273 at 2, but it is no windfall for participants to receive a make-whole
payment following a forfeiture of their legally indefeasible benefits. Moreover, Defendants
point to no objective, written extrinsic evidence showing that, when Colgate adopted the RAA in
March 2005, the intention was to cure the IRC § 417(e) violations visited upon a specific group
of Appendix benefit participants (those with greater Grandfathered formula benefits) but to
repeat the IRC § 417(e) violations inflicted on the other Appendix benefit participants (those
with greater Appendix C § 2(b)(ii) benefits). The evidence to which Defendants point includes
the December 2004 Committee minutes, which indicate that Colgate’s intent included
compliance with the regulation, which would require basing the Residual Annuity upon the
entire benefit, not just the Grandfather benefit. Thus, Defendants have not identified admissible
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evidence that creates a genuine issue of material fact establishing that Colgate had, as of the
March 2005 adoption date, an affirmative intention to repeat its prior Appendix Account-based
underpayments.
Accordingly, Plaintiffs are entitled to summary judgment on Error 1.
B.

Error 3
In Error 3, Plaintiffs argue that Defendants improperly used a pre-retirement mortality

discount (“PRMD”) to determine a Class Member’s RAA Annuity in the calculation of the age
sixty-five actuarial equivalence for the period prior to age sixty-five (normal retirement age).
Unlike Error 1, which applies only to Class members paid prior to the effective date of the 2003
Plan, Error 3 applies to all calculations under the RAA, including participants who were paid a
Residual Annuity prior to 2014. Plaintiffs do not dispute that the PRMD is called for by the
Plan. Instead they argue that Defendants’ use of PRMD violates the law -- ERISA § 203(a)(2)
and IRC § 417(e)’s actuarial equivalence rules. As a question of law, the Court reviews Error 3
de novo. See Wilkins v. Mason Tenders Dist. Council Pension Fund, 445 F.3d 572, 581 (2d Cir.
2006) (“The interpretation of ERISA, a federal statute, is a question of law subject to de
novo review.”); accord Munnelly v. Fordham Univ. Faculty, 316 F. Supp. 3d 714, 727 (S.D.N.Y.
2018). For the following reasons, summary judgment is granted to Plaintiffs on Error 3.
As a threshold matter, Defendants do not oppose Plaintiffs’ arguments regarding Error
3 in their opposition brief. (See Dkt. No. 281). Summary judgment is granted on this ground
alone. See Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004)
(“[I]f a non-moving party fails to oppose a summary judgment motion, then summary
judgment, if appropriate, shall be entered against him.” (internal quotation marks omitted)).
A mortality discount factors into the present value of a benefit -- here an age sixty-five
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single life annuity -- the possibility that the participant might die before the projected end date of
the benefit, here age sixty-five. For example, a plan could determine the present value of a
benefit by projecting the cash balance account forward to age sixty-five and then discounting the
account back to the participant’s current age, and then applying a further mortality discount.
The amount of the discount is taken from the plan’s applicable mortality table. 3
Plaintiffs argue that a mortality discount should not be used to determine the present
value of a normal retirement annuity when, as prescribed by the Plan, the ultimate benefit paid
does not significantly decrease if the participant dies before normal retirement age (i.e., the
benefit payable to the beneficiary upon death is not significantly less than what would have been
paid to the participant upon survival), as is the case here. Plaintiffs cite multiple out-of-Circuit
cases, which have found an IRC § 417(e) violation in similar circumstances. See West v. AK
Steel Corp., 484 F.3d 395, 411 (6th Cir. 2007) (agreeing with the district court that applying a
mortality discount to reduce the present value of a pre-retirement lump-sum distribution where
the death benefit is equal to the participant’s pension benefit would create an impermissible
forfeiture under ERISA); Berger v. Xerox Corp. Ret. Income Guarantee Plan, 338 F.3d 755, 764
(7th Cir. 2003) (affirming and observing that the use of a pre-retirement mortality discount was
“unfathomable” because the participant’s death would not reduce his benefits); Ruppert v.
Alliant Energy Cash Balance Pension Plan, No. 08 Civ. 127, 2010 WL 5464196, at *2, 16-18
(W.D. Wis. Dec. 29, 2010); Crosby v. Bowater Inc. Ret. Plan For Salaried Emps. of Great N.
Paper, Inc., 212 F.R.D. 350, 360-62 (W.D. Mich. 2002), vacated on other grounds, 382 F.3d
587 (6th Cir. 2004). The rationale is that “applying a pre-retirement mortality discount to a

3

This example is merely illustrative and focuses on an individual who, like McCutcheon,
received benefits prior to 2006 and the enactment of the Pension Protection Act.
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retirement benefit that does not decrease if the participant dies would result in a lump sum that
was less than the actuarial equivalent of the annuity it [was] supposed to replace” and therefore
would “result in a forfeiture prohibited by ERISA.” West v. AK Steel Corp. Ret. Accumulation
Pension Plan, No. 02 Civ. 0001, 2005 WL 3465637, at *5 (S.D. Ohio Dec. 19, 2005) (internal
quotation marks omitted), aff’d sub nom., West, 484 F.3d 395.
This reasoning is persuasive. As applied to this case, no PRMD should be used to
determine a Class Member’s RAA Annuity in the calculation of the age sixty-five actuarial
equivalence for the period prior to age sixty-five because the death benefit is defined as “the
Actuarial Equivalent of the Accrued Benefit” in § 5.1(a) of the Plan. Under 26 C.F.R. §
1.417(e)-1, “[t]he present value of any optional form of benefit cannot be less than the present
value of the normal retirement benefit determined in accordance with the preceding sentence.”
26 C.F.R. § 1.417(e)-1. Here, a PRMD is used to determine the present value of the Age 65 AE
of LS paid -- a benefit that must be paid in all events and does not decrease if the Participant dies
prior to reaching age sixty-five. This results in a present value that is less than the
corresponding normal retirement benefit and therefore violates 26 C.F.R. § 1.417(e)-1. See
West, 484 F.3d at 411; Berger, 338 F.3d at 764. Therefore, a PRMD should not be applied.
Defendants argue that a proposed 2016 IRS regulation explicitly rejects Plaintiffs’
argument regarding the unlawful use of a PRMD in this context, with citation to the same cases
upon which Plaintiffs rely. See Update to Minimum Present Value Requirements for Defined
Benefit Plan Distributions, 81 Fed. Reg. 85,190 (proposed Nov. 25, 2016) (to be codified at 26
C.F.R. pt. 1). Defendants also argue that the IRS approved the Plan’s use of PRMD in 2003,
when it qualified the Plan, that this interpretation should be entitled to deference, and that the
Second Circuit has separately held that IRS interpretations are entitled to deference.
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While Defendants are correct that proposed regulations may provide guidance, they are
not binding. 4 See LeCroy Research Sys. Corp. v. Comm’r, 751 F.2d 123, 127 (2d Cir. 1984)
(“Proposed regulations are suggestions made for comment; they modify nothing.”); accord
Sweet v. Sheahan, 235 F.3d 80, 87 (2d Cir. 2000) (“Implicit in our argument is the established
point of law that proposed regulations . . . have no legal effect.”). The Second Circuit case on
which Defendants rely for the proposition that IRS interpretations are entitled to deference
involves an IRS regulation that was adopted, rather than merely proposed. See Hurwitz v. Sher,
982 F.2d 778, 782 (2d Cir. 1992) (addressing 26 C.F.R. § 1.401(a)-20, effective March 24,
2006).
Further, the proposed regulations cited by Defendants appear to support Plaintiffs’
position. They would update existing regulations for minimum present value requirements for
defined benefit plan distributions, including the treatment of preretirement mortality discounts in
determining the minimum present value of accrued benefits. See Update to Minimum Present
Value Requirements for Defined Benefit Plan Distributions, 81 Fed. Reg. at 85,192. As relevant
here, according to the proposed regulations, the probability of death (under the applicable
mortality table) during an assumed deferral period, if any, would not be taken into account for
purposes of determining the present value under IRC § 417(e)(3) of an accrued benefit derived
from contributions made by an employee. Id. This is because, according to the proposed
regulations, an employee’s rights in the accrued benefits from the employee’s own contributions

4

The proposed regulations were published on November 25, 2016, and have not become final
since. See Update to Minimum Present Value Requirements for Defined Benefit Plan
Distributions, 81 Fed. Reg. 85,190 (proposed Nov. 25, 2016) (to be codified at 26 C.F.R. pt. 1).
Written and electronic comments were submitted by February 23, 2017, and discussed at a public
hearing on March 7, 2017. Id.
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are non-forfeitable under IRC § 411(a)(3)(A), and the exception for death under IRC §
411(a)(3)(A) to the non-forfeitability of accrued benefits does not apply to the accrued benefit
derived from employee contributions. Id. In other words, the proposed regulation appears to
forbid the application of a PRMD to determine the present value of the entire accrued benefit if
any portion of the accrued benefit is derived from contributions made by the employee, as is the
case here.
For these reasons, summary judgment is granted to Plaintiffs on Error 3.
ORDER DIRECTING RECALCULATION OF BENEFITS
Having found Plaintiffs entitled to summary judgment on Errors 1 and 3, but Defendants
entitled to judgment on Errors 2 and 4, the Court directs Defendants to calculate or recalculate, in
a manner consistent with this Opinion, all Residual Annuities for each member of the Class and
pay the corrected Residual Annuity. For avoidance of doubt, Defendants’ arguments objecting
to the use of the 20+1% interest rates to determine the Projection rate, and the use of the PBGC
rates to determine the Age 65 AE of LS paid, are rejected for the reasons discussed above.
Accordingly,
•

The Projection Rate (used to convert the cash balance into an age sixty-five
annuity for Participants younger than sixty-five) is the 20+1% rate if the
Original Payment Date is prior to March 1, 2002.

•

The IRC § 417(e) Rates shall be used in calculating the Age 65 AE of LS paid
(“the age 65 single life annuity Actuarial Equivalent amount of the Member’s
lump sum payment” per the RAA) and are the PBGC interest rates in effect on
the Original Payment Date if the Original Payment Date is prior to March 1,
2002. 5

5

Defendants assert that the PBGC rates should cease to apply as of January 1, 2000, based on an
effective date of a cited change to IRC § 417(e). This argument is rejected. The change,
effective January 1, 2000, did not prohibit the use of the PBGC rates past that date, but rather
allowed the Plan to be amended as of that date to replace the PBGC rates; and if the Plan failed
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ENTRY OF JUDGMENT UNDER RULE 54(b)
As with Error 3, Defendants do not oppose Plaintiffs’ entry of judgment under Rule
54(b) of the Federal Rules of Civil Procedure and therefore summary judgment is granted on
this ground alone. See Vermont Teddy Bear Co., 373 F.3d at 244. In the alternative, summary
judgment is also granted to Plaintiffs on the merits of the argument.
Rule 54(b) permits entry of a final judgment as to fewer than all claims or parties if the
court finds that “there is no just reason for delay.” Fed. R. Civ. P. 54(b). That is the case here
because while there is one technically unadjudicated claim -- Plaintiff McCutcheon’s individual
Count II, Error 4 anti-cutback claim, to be reviewed de novo, see McCutcheon, 2020 WL
3893303, at *16 (noting that the Court has not decided “which party has the better argument” on
her individual claim, reviewed de novo) -- that too has effectively been resolved with the Court’s
grant to Defendants of summary judgment on the Class’s Error 4 claim (reviewed deferentially)
because, as discussed in Plaintiffs’ July 21 letter to the Court (Dkt. No. 267), Plaintiff waives any
right to de novo review of her Error 4 claim based on Defendants’ mishandling of her
administrative claim and appeal, and, like the Class, limits her contention to that which the Class
would make on appeal, namely, that her/their entitlement to de novo review of her/their Error 4
cutback claim is because it centers on a question of law rather than an interpretation of the Plan.
In other words, by her agreement, Plaintiff’s individual Error 4 claim merges in its entirety into

to be amended by January 1, 2000, then the Plan was required to provide the better of the PBGC
rate and the 30-year Treasury rate. See Pub. L. 103-465 § 767(a)(2); Deutsch Rep. ¶¶ 25-26.
Since the Plan was not amended until 2002, the Plan was required to pay no less than the better
of the benefit determined using PBGC rates and the 30-year Treasury Rate.
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the Class’s claim in all respects including for purposes of appeal, leaving nothing more to be
decided here.
This case is thus suitable for certification under Rule 54(b) because this case is, in every
practical sense, at an end and ready in its entirety for appellate review, there is no need for the
Court to reach the merits of Error 4 reviewed de novo and there is no chance of piecemeal
appeals. This makes certification under Rule 54(b) in the “interest[s] of sound judicial
administration and efficiency.” Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 8 (1980);
accord Harriscom Svenska AB v. Harris Corp., 947 F.2d 627, 629 (2d Cir. 1991).
CONCLUSION
For the foregoing reasons, Plaintiffs’ motion is GRANTED. The relief provided in this
Opinion, Order and Final Judgment is stayed to allow the parties to pursue an appeal.
Defendants’ request for oral argument (Dkt. No. 283) is DENIED as moot.
The Clerk of Court is respectfully directed to close the motion at Docket No. 278.
Dated: August 24, 2020
New York, New York

27