JOHNSON v. DUKE ENERGY RETIREMENT CASH BALANCE PLAN et al

Filing 44

MEMORANDUM OPINION AND ORDER signed by CHIEF JUDGE WILLIAM L. OSTEEN JR. on 09/29/2014; that Defendants' Motion for Summary Judgment (Doc. 27 ) is GRANTED, that Plaintiff's Motion for Partial Summary Judgment (Doc. 25 ) is DENIED, and that this case is dismissed with prejudice. A Judgment dismissing this action will be entered contemporaneously with this Memorandum Opinion and Order. (Garland, Leah)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
THOMAS JOHNSON, on behalf of
himself and on behalf of a
class of persons similarly
situated,
Plaintiff,
v.
DUKE ENERGY RETIREMENT CASH
BALANCE PLAN and DUKE ENERGY
CORPORATION,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)

1:13CV156

MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Presently before the court are cross motions for summary
judgment.

Plaintiff Thomas Johnson (“Plaintiff”), asserting a

single claim under the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1001 et seq., has filed a partial motion
for summary judgment. (Doc. 25.) Defendants Duke Energy
Retirement Cash Balance Plan and Duke Energy Corporation
(collectively, “Defendants”) have responded in opposition (Doc.
34), and Plaintiff has replied (Doc. 35).

Defendants have filed

a motion for summary judgment. (Doc. 27.)

Plaintiff has

responded (Doc. 33), and Defendants have replied (Doc. 38).
These motions are now ripe for review, and, for the reasons that

follow, Defendants’ motion will be granted, and Plaintiff’s
motion will be denied.
I.

BACKGROUND
The following facts are undisputed.

During all times

relevant to the present matter, Plaintiff was a participant in
the Duke Energy Retirement Cash Balance Plan (the “Plan”).
(Complaint (“Compl.”) (Doc. 1) ¶ 7.)

Each participant in the

Plan is given a cash balance account, consisting of bookkeeping
entries representing the participant’s pension benefit
(expressed in dollars and cents).

(Id. ¶ 27.)

Pursuant to

§ 5.04 of the Plan, a participant is entitled to have his or her
cash balance account credited with an “Interest Credit” on a
monthly basis.

(Id., Ex. A, Duke Energy Retirement Cash Balance

Plan (“The Plan”) (Doc. 1-1) at 26 (Section 5.04).)1

“Interest

Credits” are calculated by multiplying the cash account balance
on the last day of the preceding month with the “Monthly
Interest Rate” for that month.

(Id.)

“Monthly Interest Rate,”

in turn, “means . . . one (1) plus the Interest Factor for such
month raised to the one-twelfth (1/12th) power, minus one (1).”2
All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
1

2

This formula can be expressed algebraically for any given
month as:
Monthly Interest Rate = (1 + Interest Factor)1/12 – 1.
-2-

(Id. at 14 (Section 2.41).)

As used in the formula, the

“Interest Factor” (for benefits accruing prior to January 1,
2013) was equal to the average yield on 30-year United States
treasury bonds.

(Id.

Section 2.39).)

Irrespective of the

actual 30-year Treasury bond yield, the Plan set a floor
(minimum) interest rate of 4% and a ceiling (maximum) interest
rate of 9% for pre-2013 benefits.

(Id.)

Benefits accruing on

or after January 1, 2013, were set at a fixed rate of 4%.3

(Id.)

Plaintiff does not allege that the Plan Administrator
miscalculated the Monthly Interest Rate; rather, Plaintiff
argues that Defendants impermissibly rounded the Monthly
Interest Rate to the nearest one-thousandth of a percent
(0.001%)4 before multiplying the Monthly Interest Rate by the
prior month’s cash balance.

(Compl. (Doc. 1) at 8-9.)

As an example, in February 2006 the Interest Factor was
4.60% and the cash account balance was $171,863.05. (See id.
(Doc. 1-2) at 1.)

The resulting Monthly Interest Rate (rounding

3

Inserting any potential value into the Monthly Interest
Rate’s algebraic formula necessarily produces a number with a
nonterminating decimal. For example, assuming the 10-year
treasury yield for any given month was 4.03%, the Monthly
Interest Rate would equal (1 + .0403)1/12 - 1 =
0.0032978537514263.
4

Rounding to the nearest one-thousandth of a percent
(.001%) is identical to rounding to the nearest one-hundredththousandth (0.00001) of a numeral.
-3-

to 17 decimal places) would be 0.00375481218114615.

Rounding to

the one-hundredth-thousandth, as was Defendants’ practice,
results in a Monthly Interest Rate of .00375.

Applying these

Monthly Interest Rates produces Interest Credits of $645.31 and
$644.49, respectively.5

Plaintiff argues that the rounding

discrepancies results in an underpayment of Interest Credits,
totaling $41.80 between January 2006 and October 2012.6

(Compl.

(Doc. 1) at 2.)
II.

POSTURE
Plaintiff filed the instant lawsuit with this court before

exhausting the formal channels of the Plan’s administrative
claims process.

(Mem. Op. & Order (Doc. 19) at 2–3.)

Article

XI of the Plan, setting forth the procedures for filing a claim,
bars a claimant from bringing suit before exhausting the twotiered administrative claims process.
47–49.)

(The Plan (Doc. 1-1) at

Defendants opted to treat the Complaint filed in this

case as a written claim for benefits under the Plan.

(Mem. Op.

5

Algebraically, .00375481218114615 × $171,863.05 = $645.31.
While .00375 × $171,863.05 = $644.49.
6

Plaintiff’s calculation of the total underpayment of
Interest Credits obviously omits those months when the
Defendants’ rounding convention worked in his favor, i.e., when
the Monthly Interest Rate was rounded up. This court further
recognizes that since all post-January 1, 2013 benefits will be
calculated using a set monthly interest rate of 4% (The Plan
(Doc. 1-1) at 14 (Section 2.39)), the resulting Monthly Interest
Rate will always be rounded down at the one hundredththousandth’s place.
-4-

& Order (Doc. 19) at 4.)

The Plan Administrator’s delegate and

record-keeper, Aon Hewitt, sent Plaintiff a letter notifying him
that his claim had been denied.

(Id.)

The letter further

informed Plaintiff that he had the right to appeal the denial of
benefits to the “Duke Energy Claims Committee,” the second and
final step in the administrative claims process.

While

Plaintiff’s appeal to the Duke Energy Claims Committee was under
consideration, this court granted Defendants’ motion to stay,
pending final resolution by the appeals committee. (Id. at 10.)
On September 19, 2013, the Duke Energy Claims Committee denied
Plaintiff’s appeal.

(Declaration of Richard P. Jefferies

(“Jefferies Decl.”), Ex. B (Doc. 29-2).)
Also of procedural relevance in the present matter is
Plaintiff’s participation in the settlement of George v. Duke
Energy Retirement Cash Balance Plan, No. 8:06-cv-00373-JMC,
filed in United States District Court for the District of South
Carolina. (See Defs.’ Mem. of Law in Supp. of Mot. for Summ. J.
(“Defs.’ Br.”), Ex. B, George Settlement (Doc. 28-2).)

In the

George Complaint, the class action plaintiffs alleged that
during 1997–1998, Duke Energy miscalculated the Interest Credits
under the Plan by changing the reference date for determining
the Interest Factor.
at 13–15.)

(Id., Ex. A, George Am. Compl. (Doc. 28-1)

In the George settlement, the class, which included
-5-

Plaintiff, broadly released “fully, finally and forever . . .
all causes of actions . . . known or unknown . . . that were
asserted or could have been asserted in the Complaint or Amended
Complaint regarding the Plan, including the design and adoption
of the Plan and the implementation of the Cash Balance Plan
Amendment . . . .”

(Id., Ex. B, George Settlement (Doc. 28-2)

at 13–15 (Section 1.45).)

However, the same settlement carved

out from the release:
[A]ny claim for an alleged vested benefit allegedly
due under the Plan pursuant to ERISA § 502(a)(1)(B)
where such claim is not related to (A) the terms of
this Settlement Agreement, or (B) the acts, omissions,
facts, matters, transactions, or occurrences that have
been or could have been alleged or referred to in the
Action.
(Id. at 13 (Section 1.45(d).)
the George settlement.

Plaintiff received $424.63 from

(Jefferies Decl. (Doc. 29) ¶ 23.)

III. LEGAL STANDARD
A motion for summary judgment is appropriately denied when
an examination of the pleadings, affidavits, and other proper
discovery materials before the court demonstrates a genuine
issue of material fact exists. Fed. R. Civ. P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). In considering a
motion for summary judgment, the court is not to weigh the
evidence, but rather must determine whether there is a genuine
issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
-6-

250 (1986). The court must view the facts in the light most
favorable to the nonmovant, drawing inferences favorable to that
party if such inferences are reasonable. Id. at 255. However,
there must be more than a factual dispute; the fact in question
must be material, and the dispute must be genuine. Id. at 248. A
dispute is only “genuine” if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Id.
“When faced with cross motions for summary judgment, as in
this case, the court must consider ‘each motion separately on
its own merits to determine whether either of the parties
deserves judgment as a matter of law.’” Pediamed Pharm., Inc. v.
Breckenridge Pharm., Inc., 419 F. Supp. 2d 715, 723 (D. Md.
2006) (quoting Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th
Cir. 2003).

“The court must deny both motions if it finds there

is a genuine issue of material fact, but if there is no genuine
issue and one or the other party is entitled to prevail as a
matter of law, the court will render judgment.” Id. (internal
quotation marks omitted).
IV.

ANALYSIS
Defendants have asserted three independent grounds for

summary judgment.

Specifically, Defendants argue that (1) the

adoption of the rounding convention was within the discretion of
-7-

the Plan Administrator, (2) the claim is barred by virtue of
being filed outside the Plan’s claim limitations period, and (3)
Plaintiff released his right to bring suit pursuant to the terms
of the George settlement.

The first argument — the propriety of

the rounding convention — can properly be considered the
determinative legal question.

Plaintiff contends that it is

entitled to judgment as a matter of law on the rounding
convention issue and that Defendants’ two affirmative defenses
fail.

Because this court finds that the Plan Administrator did

not abuse his discretion by adopting the decision to round,
summary judgment is appropriately granted in favor of
Defendants.

This court declines to address the two remaining

defenses asserted by Defendants.
Defendants argue that the decision to round was a matter of
discretion properly afforded to the Plan Administrator.
Plaintiff counters that mathematical formulas are not
discretionary functions under ERISA.
ERISA provides a claimant with a civil cause of action “to
recover benefits due to him under the terms of his plan, to
enforce his rights under the terms of the plan, or to clarify
his rights to future benefits under the terms of the plan.”
29 U.S.C. § 1132(a)(1)(B).

In Firestone Tire and Rubber Co. v.

Bruch, the Supreme Court held that courts reviewing the denial
-8-

of benefits under an ERISA plan should apply a de novo standard
“unless the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits or
to construe the terms of the plan.”

489 U.S. 101, 115 (1989).

In making this determination, “ERISA plans, as contractual
documents, are reviewed de novo by the court to determine the
degree of discretion afforded to the plan administrator.”

Hung

v. Guardian Life Ins. Co. of Am., 28 Fed. Appx. 268, 272 (4th
Cir. 2002) (citing Booth v. Wal-Mart Stores, Inc. Assocs. Health
& Welfare Plan, 201 F.3d 335, 341 (4th Cir. 2000)).

“Where

discretion is conferred upon the trustee with respect to the
exercise of a power, its exercise is not subject to control by
the court except to prevent an abuse by the trustee of his
discretion.”

Booth, 201 F.3d at 341 (internal quotation marks

omitted); see de Nobel v. Vitro Corp., 885 F.2d 1180, 1186 (4th
Cir. 1989) (“The threshold question for reviewing courts is now
whether the particular plan at issue vests in its administrators
discretion either to settle disputed eligibility questions or to
construe ‘doubtful’ provisions of the plan itself.”).
Here, the Plan explicitly confers the Plan Administrator
with the “full power, authority, and discretion to control and
manage the operation and administration of the Plan and to
construe and apply all of its provisions . . . .”
-9-

(The Plan

(Doc. 1-1) at 43 (Section 10.03).)

The same section goes on to

state that “[a]ll discretionary powers conferred upon the Plan
Administrator shall be absolute” including the power to
“construe and interpret the Plan and Trust Agreement and to
determine all questions arising in the administration,
interpretation and operation of the Plan . . . .”

(Id.)

This

court finds that the Plan unambiguously affords the Plan
Administrator with discretionary authority to construe the terms
of the Plan.

Nevertheless, two intertwined inquiries remain:

(1) whether the decision to round was discretionary and, if so,
(2) whether such a decision amounts to an abuse of discretion.
A.

Discretionary Function

Plaintiff argues that Defendants, “rather than directly
following [the Plan] formula” for Monthly Interest Rates,
instead “insert[ed] the additional step of rounding off the
Monthly Interest Rate to the nearest one-thousandth before
multiplying by the prior month’s account balance.”

(Pl.’s Br.

in Supp. of Mot. for Summ. J. (“Pl.’s Br.”) (Doc. 26) at 8.)

In

other words, Plaintiff argues that the decision to round was not
in the Plan Administrator’s discretion because “mathematical
formulas are not subject to discretion.”

(Id.)

“When an ERISA-governed policy's terms are unambiguous, the
plan administrator is compelled to give effect to the plan's
-10-

plain meaning, and a failure to do so is necessarily an abuse of
discretion.” Brunswick Surgical Ctr., LLC v. CIGNA Healthcare,
Civ. No. 09-5857, 2010 WL 3283541, at *4 (D.N.J. Aug. 18, 2010);
see Gosselink v. Am. Tel. & Tel., Inc., 272 F.3d 722, 727 (5th
Cir. 2001) (“[I]f an administrator interprets an ERISA plan in a
manner that directly contradicts the plain meaning of the plan
language, the administrator has abused his discretion.”); Admin.
Comm. of Wal-Mart Stores, Inc. v. Gamboa, 479 F.3d 538, 542 (8th
Cir. 2007); see also Williams v. Caterpillar, Inc., 944 F.2d
658, 661 (9th Cir. 1991) (“[W]here a court finds that a plan in
question leaves no room for fiduciary discretion, it must review
a fiduciary's interpretations . . . de novo . . . .”).

Thus, if

the decision to round was discretionary, then it is governed by
the abuse of discretion standard.

If the decision to round was

a non-discretionary “additional step,” then the Plan
Administrator’s failure to adhere to the Plan’s plain language
would constitute an abuse of discretion.
Here, this court finds that the decision to round was a
necessary step mandated by the Plan’s Monthly Interest Rate

-11-

formula, which, by definition, produces an irrational number.7
Within the confines of this step, this court further finds that
the specific rounding choice made by the Plan Administrator was
a discretionary function expressly conferred to him by the Plan.
Irrational numbers, such as pi, are by definition
nonterminating and nonrepeating decimals.8
Algebra II at 11 (2011).

See Carter et al.,

Because computers and calculators have

finite amounts of memory, it would be impossible to use
irrational numbers in any calculation without rounding (or

The parties do not seem to genuinely dispute the creation
of an irrational number from the formula. (See Defs.’ Mem.
(Doc. 28) at 13 (“The monthly interest rate formula always
generates a never-ending decimal . . . .”) and Pl.’s Br. in
Opp’n to Defs.’ Mot. for Summ. J. (“Pl.’s Br.”) (Doc 33) at 18
n.18 (“Plaintiffs do not concede that all possible Monthly
Interest Rates are irrational numbers.”).) Although Plaintiff
does not concede all possibilities, Plaintiff does not identify
any monthly interest rates that do not result in an irrational
number. More pointedly, Plaintiff has not identified any
historical calculations that did not result in an irrational
number.
7

8

For example, pi has been calculated to ten trillion
decimal places without terminating. See Charles Cooper, “Pi
Calculated to its Ten Trillionth Digit,” CBS News (Oct. 20,
2011), http://www.cbsnews.com/news/pi-calculated-to-its-tentrillionth-digit/.
-12-

truncating)9 the decimal at some point.

(See Defs.’ Br., Ex. E,

John Tabak, Numbers: Computers, Philosophers, and the Search for
Meaning at 56-57 (2004) (Doc. 28-5 at 4-5 (“These kinds of
numbers represent an additional challenge to computer designers
because they cannot be stored with perfect accuracy. There will
never be enough memory to do so.”); id., Ex. D, McCune et al.,
Algebra at 4 (1997) (Doc. 28-4 at 4) (“For computational
purposes we can only approximate irrational numbers.”).) While a
computer program such as Microsoft Excel does not show this
“extra” step of rounding, it implicitly rounds the irrational
number to use it in its calculation.10

In light of their

nonterminating nature, multiplying irrational numbers (the
Monthly Interest Rates) with rational numbers (the participants’
account balances) necessarily involves rounding the irrational
numbers. Indeed, both parties acknowledge that to use an
irrational number in a calculation, the number must be rounded.
(See Pl.’s Br. (Doc. 26) at 9–10 (“In order to achieve a correct
9

Like rounding, truncating limits the number of digits
after the decimal. Unlike rounding, truncating ignores the
value of the digit after the target decimal place. For example,
truncating .035659 at five decimal places would require ignoring
the value of the decimal’s sixth digit, resulting in a truncated
number of .03565. Thus, truncating has the same effect as
always rounding down. On the other hand, rounding to five
decimal places would result in .03566.
This fact is described in the affidavit of Michael Archer
(Declaration of Michael A. Archer (“Archer Decl.”) (Doc. 30) at
5) and is not disputed by Plaintiff.
10

-13-

result, the irrational number must be calculated to a number of
digits sufficient to achieve whatever level of precision is
required in the final answer.”); id. at 9 (“It is not necessary,
however, to stop calculating at the 6th, 7th, or any other
particular point so long as sufficient digits are calculated to
achieve a correct result.”) (emphasis added); Defs. Br. (Doc.
28) at 14 (noting that “no computer can calculate interest
credits without rounding or truncating,” instead “[t]he
calculator or computer system would simply round the interest
rate in the background using its own internal rounding
convention when carrying out the calculations”).)

This court

therefore finds that the decision to round is mathematically
required in some form to use the Monthly Interest Rate in the
Interest Credit calculation.
The crux of Plaintiff’s argument is that Defendants’
rounding convention does not retain enough significant digits to
ensure the result is accurate to the nearest penny.

(See Pl.’s

Br. (Doc. 26) at 9–10.) Although perhaps mathematically correct,
Plaintiff’s argument appears to assume a level of accuracy in
the method of calculation not required by the Plan.
Unlike Defendants who round to five decimal places,
Microsoft Excel automatically rounds nonterminating decimals to
17 digits. (Archer Decl. (Doc. 30) at 5.)
-14-

Plaintiff argues that

using such a high number of digits would increase the
calculation’s precision and perhaps, in certain instances, it
would.

However, for purposes of determining the standard of

review applicable to the Plan Administrator’s decision, the
determinative legal question is not whether the Plan
Administrator used certain best available technology to perform
the calculation, but, rather, whether he performed a
discretionary task.

As discussed below, this portion of

Plaintiff’s argument more appropriately relates to applying the
abuse of discretion standard rather than determining if the
standard applies.
Ultimately, the Plan is silent as to the amount of decimal
places that should be used to calculate the Monthly Interest
Rate. The Plan Administrator could have rounded the Monthly
Interest Rate to 1 decimal place, 10 decimal places, or 1,000
decimal places; it was a matter of discretion.

While the choice

itself was discretionary, the consequence of this choice, i.e.,
whether making such choice amounts to an abuse of discretion, is
a separate legal inquiry.
Before addressing the cases cited by Plaintiff in support
of his argument, this court notes that Plaintiff’s factual
argument is founded upon, and undermined by, a discretionary
determination as to the manner in which the interest credits are
-15-

calculated.

To illustrate, Plaintiff argues that “if Duke had

used the interest rates as calculated by computers to seventeen
decimal places, the resulting Interest Credits would have been
correct because the rounding off that computers perform is too
insignificant to affect the result.” (Pl.’s Br. (Doc. 33) at
19.)

Inherent in that assertion is a determination that the

interest rate should be calculated by a computer.

However,

there are no provisions in the Plan requiring calculations by a
specific method, whether by the use of a computer, a calculator,
an adding machine, a slide rule, or by hand.

By assuming a

level of precision available through computer calculations,
Plaintiff has assumed a discretionary fact not required by the
Plan, that is, the manner by which the calculations are to be
made.
Furthermore, even assuming computers are required to
perform the interest calculation, Plaintiff’s arguments reflect
the discretionary impact resulting from the selection of a
particular computer or computer program.

Plaintiff argues that

“the requisite level of precision is more than satisfied by the
15 significant figures Duke admits can be easily calculated
using computers.”

(Id. at 18.)

Plaintiff later asserts that

“if Duke had used the interest rates as calculated by computers
to seventeen decimal places . . . .” (Id. at 19.)
-16-

As described

in the record and hereinabove, the number of decimal places
selected by a particular computer or program is a matter
inherent within the operating system of the computer.

However,

there is nothing in the Plan to require a particular brand of
computer or computer program.
As Plaintiff’s arguments reflect, all calculations
involving irrational numbers inherently involve some
discretionary termination to the infinite combinations of digits
that comprise an irrational number, whether that occurs as a
result of a conscious choice or a particular device’s inherent
limitations. Because neither party has been able to identify a
required number of decimal places or a required method of
calculation, the calculation of interest by any method involves
a discretionary determination.

This court therefore finds that

Plaintiff’s argument requires an inherent factual assumption not
required by the Plan, that is, the use of a computer programmed
to perform calculations to fifteen or more decimal places to
conduct the interest calculation.
Plaintiff, objecting as a matter of law to the argument
that the rounding decision is a discretionary function, cites a
string of cases to support the blanket proposition that
“mathematical formulas are not subject to discretion.”

-17-

(Pl.’s

Br. (Doc. 26) at 8.)

This court disagrees with Plaintiff’s

characterization of these cases.
ERISA creates a cause of action for breach of fiduciary
duties with respect to the administration of an ERISA-governed
plan.

29 U.S.C. § 1132(a) (creating a cause of action under

ERISA); see 29 U.S.C. § 1104 (setting forth the fiduciary duties
under ERISA). The Supreme Court has held that “a person is a
fiduciary with respect to a plan, and therefore subject to ERISA
fiduciary duties, to the extent that he or she exercises any
discretionary authority or discretionary control respecting
management of the plan . . . .”

Varity Corp. v. Howe, 516 U.S.

489, 498 (1996) (internal quotation marks omitted).

In the

context of determining whether an act was discretionary and
thereby gives rise to fiduciary duties, several courts have
found that calculating ERISA benefits “pursuant to the terms of
the plan [is] a mathematical calculation that [does] not require
the exercise of discretion.”

E.g., Fitch v. Chase Manhattan

Bank, N.A., 64 F. Supp. 2d 212, 229 (W.D.N.Y. 1999); MacMillan
v. Provident Mut. Life Ins. Co. of Philadelphia, 32 F. Supp. 2d
600, 606 (W.D.N.Y. 1999) (holding discretionary authority “is
limited to discretion to determine eligibility for benefits, and
does not extend to the calculation of the amount of benefits”);
see Christensen v. Qwest Pension Plan, 376 F. Supp. 2d 934, 943-18-

44 (D. Neb. 2005) (collecting cases), aff'd, 462 F.3d 913 (8th
Cir. 2006).

These cases accord with guidance provided by the

Department of Labor:
[A] person who performs purely ministerial functions
such as the types described above [including the
calculation of benefits] for an employee benefit plan
within a framework of policies, interpretations,
rules, practices and procedures made by other persons
is not a fiduciary because such person does not have
discretionary authority or discretionary control
respecting management of the plan . . . .
29 C.F.R. § 2509.75–8.
These cases uniformly support the proposition that
performing benefit calculations is a ministerial task not giving
rise to fiduciary duties under ERISA.

These cases do not,

however, establish that a fiduciary lacks the discretion to
interpret a plan formula or set forth policies detailing how to
calculate benefits pursuant to a plan formula when the plan is
silent as to certain calculations inherent within the stated
formula.

Here, inserting numbers into a formula is a non-

discretionary act “within a framework of policies,
interpretations, rules,

practices and procedures . . . .”

Id.

Deciding where to round those numbers, on the other hand, is a
necessary, discretionary step in the process.

In other words,

the discretionary decision of where to round irrational numbers
is part of the greater framework of policies necessary to

-19-

implement and operate the Plan; the mechanical act of rounding
is a ministerial task within that framework.
Having concluded that the Plan confers the Plan
Administrator with discretion and that the rounding decision was
discretionary, this court next turns to whether such a decision
amounts to an abuse of discretion.
B.

Abuse of Discretion

The Fourth Circuit has held “that the abuse of discretion
standard, not the arbitrary and capricious standard, is the
appropriate one for judicial review of a fiduciary's
discretionary decision under ERISA.”

Booth, 201 F.3d at 341.

Under the abuse of discretion standard, a “discretionary
decision will not be disturbed if reasonable, even if the court
itself would have reached a different conclusion.”

Id.; see id.

at 344 (“Thus, we are confined to a review of whether a decision
. . . was an unreasonable exercise of its discretion . . . .”).
The Fourth Circuit has listed eight nonexclusive factors to
guide courts in determining if a plan administrator’s
discretionary decision was unreasonable:
(1) the language of the plan; (2) the purposes and
goals of the plan; (3) the adequacy of the materials
considered to make the decision and the degree to
which they support it; (4) whether the fiduciary's
interpretation was consistent with other provisions in
the plan and with earlier interpretations of the plan;
(5) whether the decisionmaking process was reasoned
and principled; (6) whether the decision was
-20-

consistent with the procedural and substantive
requirements of ERISA; (7) any external standard
relevant to the exercise of discretion; and (8) the
fiduciary's motives and any conflict of interest it
may have.
Booth, 201 F.3d at 342-43.
Here, with respect to the first factor, the Plan clearly
and broadly delegates authority to the Plan Administrator to
construe the terms of the Plan.

The Plan grants the Plan

Administrator the “full power, authority, and discretion to
control and manage the operation and administration of the Plan
and to construe and apply all of its provisions . . . .”
Plan (Doc. 1-1) at 43 (Section 10.03).)

(The

Because the Monthly

Interest Rate mathematically requires rounding and because the
Plan is silent as to the rounding convention to be used, this
court finds such decision properly falls within the broad
contractual grant of discretion.

See Demirovic v. Bldg. Serv.

32 B-J Pension Fund, 467 F.3d 208, 215 (2nd Cir. 2006) (“Where,
as here, the plan is silent on the issue of non-medical
vocational characteristics, the nature of this consideration
will be within the plan administrators’ broad
discretion . . . .”).
As for the second factor, the Supreme Court has noted that
ERISA represents a “careful balancing between ensuring fair and
prompt enforcement of rights under a plan and the encouragement
-21-

of the creation of such plans.”

Aetna Health Inc. v. Davila,

542 U.S. 200, 215 (2004) (internal quotation marks omitted).
The Supreme Court has further stated that the deference afforded
to plan administrators under its decision in Firestone strikes
the appropriate balance between “ensur[ing] that employees . . .
receive the benefits they [have] earned” on one hand and, on the
other, not creating a system “so complex that administrative
costs, or litigation expenses, unduly discourage employers from
offering [ERISA] plans in the first place.” Conkright v.
Frommert, 559 U.S. 506, 516-17 (2010) (citation omitted).
Therefore, Firestone deference appropriately accounts for the
overarching, competing goals of ERISA generally.
Looking at the goals of this particular Plan, the Duke
Energy Claims Committee noted that “[r]ounding is helpful to
participants who want to do their own benefit calculations
because it reduces the number of digits that the participant
must use.”

(Jefferies Decl., Ex. B (Doc. 29-2) at 6.)

Although

the Fourth Circuit has noted that “a major purpose of ERISA was
to aid employees’ knowledge and receipt of benefits,” Holland v.
Burlington Indus., Inc., 772 F.2d 1140, 1146 (4th Cir. 1985)
aff’d sub nom. Brooks v. Burlington Indus., Inc., 477 U.S. 901
(1986), this court does not find this rationale particularly
persuasive in the present case.

As previously discussed, a

-22-

basic computer program such as Microsoft Excel (rounding to 17
decimal places) would produce a different calculation for
benefits than a basic hand-held calculator (using the Plan’s
current rounding convention).

There is no indication in the

record that employees use basic calculators with a greater
frequency than computer programs, or vice versa.

Therefore, the

claim that rounding aids employees in understanding the Plan is
overstated on the facts before the court.

However, this court

certainly does not find that rounding hinders Plan
understanding; a definite rounding convention as opposed to an
unknown existing in a third-party computer program does promote
consistency and certainty.

Moreover, this court finds that

Firestone deference generally encompasses Plaintiff’s concern
that his benefits be calculated with exact precision.

As such,

this court does not weigh the second Booth factor heavily in its
analysis.

Even assuming the “errors” in calculation due to

rounding ran contrary to the Plan and its goals, this court
would not find such factor sufficient to sway the analysis in
favor of Plaintiff under the abuse of discretion standard.
The materials relied on to support the rounding convention
reinforce Defendants’ position.

First, it is undisputed that

the Plan itself is silent as to the rounding convention to be
used.

The Duke Energy Claims Committee noted that the Plan’s
-23-

Summary Plan Description (“SPD”)11 showed an example where the
Monthly Interest Rate was calculated to six decimal places.
(Jefferies Decl., Ex. B (Doc. 29-2) at 7-8.)

The SPD did not

detail how the sixth decimal place was being used.

As the Duke

Energy Claims Committee found, and this court agrees, an SPD
need not include every detail of a plan.

E.g., Heffner v. Blue

Cross & Blue Shield of Alabama, Inc., 443 F.3d 1330, 1341 (11th
Cir. 2006). And while “representations in a SPD control over
inconsistent provisions in an official plan document,” Aiken v.
Policy Mgmt. Sys. Corp., 13 F.3d 138, 140 (4th Cir. 1993) (per
curiam), here, the Plan does not address, and therefore does not
conflict, with the example shown in the SPD.

Moreover, in the

1997 “plan provisions document”12 a Monthly Interest Rate example
calculation is shown rounded to five decimal places.

(Jefferies

Decl., Ex. A, Excerpts from Administrative Record AR 1809 (Doc.
29-1) at 55; see Jefferies Decl. (Doc. 29) at 5.)

The 2012 plan

11

SPDs are ERISA-required documents that must be “provided
to plan participants and that must summarize the plan in easily
understood terms.” Brenner v. Johns Hopkins Univ., 88 Fed. Appx.
555, 556 (4th Cir. 2004); see 29 U.S.C. §§ 1022, 1024(b).
12

Mr. Jefferies, the Director of Retirement for Duke
Energy, described the purpose of the plan provisions document as
follows: “[T]he plan does not contain all of the numerous
operational record keeping steps for the Plan. Instead, these
steps are set forth in what are known as ‘plan provisions’
documents, which set forth specific procedures and provide
examples to be followed in calculating benefits under the Plan.”
(Doc. 29 at 3.)
-24-

provisions document contains a similar example, also rounding
the Monthly Interest Rate to five decimal places.

(Id., AR 577-

78 (Doc. 29-1) at 36–37; see Jefferies Decl. (Doc. 29) at 4.)
Based on these documents, this court finds that the Plan
Administrator’s interpretation had a basis in the collective
plan documents.

More importantly, the fact that the Plan

Administrator has consistently interpreted the rounding
convention throughout the Plan’s existence strongly contributes
to the reasonableness determination under Booth’s third and
fourth factors.
While not listed under any specific Booth factor, Plaintiff
essentially advances three arguments explaining why the decision
to round is inappropriate.

First, Plaintiff claims that

rounding is a separate mathematical operation (i.e., an “extra
step”) that changes the result.

(Pl.’s Reply in Supp. of Mot.

for Partial Summ. J. (Doc. 35) at 7.)

As discussed above, this

court finds such argument meritless.

By definition, the Monthly

Interest Rate produces an irrational number.

To utilize an

irrational number in multiplication, the irrational number must
be rounded.

While a computer program such as Microsoft Excel

does not show this “extra” step of rounding, it implicitly
rounds the irrational number to use it in its calculation.

The

fact that the Plan Administrator chose to explicitly round the
-25-

number rather than allow a program to implicitly perform this
step does not alter the fact that both methodologies require
rounding.

The discrepancy between the two methods is the

location of the rounding, not the rounding itself.
Second, Plaintiff contends that rounding is a mathematical
operation that changes the result of a calculation. Plaintiff’s
argument assumes that the Monthly Interest Rate produces one
“correct” answer.

Instead, the end-result of the calculation

will inevitably vary based on the number of decimal places the
irrational number extends.

Even assuming the rounding

convention utilized does not produce the most accurate answer in
terms of mathematical calculations in each individual instance,
that finding is not equivalent to Defendants performing a
separate calculation altering the end-result.
Lastly, Plaintiff argues that Defendants’ rounding is not
neutral in effect.

Here, Plaintiff presents a strong argument.

Defendants claim that rounding, by its very nature, would
produce numbers that round up evenly with numbers that round
down over an extended time horizon.

In other words, Defendants

contend rounding is a randomized process and only though blind
chance has Plaintiff allegedly been injured.

Defendants’

premise is true, but it ignores two key points.

First, over the

course of the Plan, low Treasury yields have created many months
-26-

where the Monthly Interest Rate falls below the 4% floor.
Pursuant to the Plan, this 4% floor acts as the minimum Monthly
Interest Rate.

Inserting 4% into the Monthly Interest Rate

formula produces a number that always rounds down.

Over the

life of the Plan, this frequent occurrence has resulted in
Plaintiff’s Monthly Interest Rate being rounded down more
frequently than rounded up.

Second, the Plan has been amended

to a fixed rate of 4% for non-collective bargaining Plan
participants after January 1, 2013, thus perpetuating the
rounding down of Monthly Interest Rates for this category of
employees.
While this court is sympathetic to Plaintiff’s nonneutrality rounding argument, it does not render the process
used by the Plan Administrator unprincipled or unreasoned under
the fifth Booth factor, nor does it render the decision
unreasonable as a whole.

While Defendants assert post hoc

rationalizations for why the Plan Administrator may have
initially made the decision to round (e.g., to aid in employee
understanding), neither party has presented any evidence of the
actual rationale used.

Without any information on the actual

reasoning employed by the Plan Administrator, this court is

-27-

unable to make a finding benefiting either party on the fifth
Booth factor.13
Specifically addressing Plaintiff’s non-neutrality
argument, this court finds that the harm suffered does not
amount to an abuse of discretion.

Two undisputed facts undercut

Plaintiff’s non-neutrality argument.

First, when faced with

randomized treasury yields (as was the case when the Plan was
adopted), rounding will be net neutral in its effect.

In other

words, rounding random numbers will produce half the number set
rounding up and half rounding down.
is more fair than truncating.

Second, generally, rounding

If the Plan Administrator had

decided to truncate the decimal after five digits it would have
the practical effect of always rounding the Monthly Interest
Rate down.
More fundamentally, the relevant ERISA analysis is one of
administrator discretion, not whether “the court itself would
have reached a different conclusion.”

Booth, 201 F.3d at 341.

The mere fact that the Plan Administrator made a discretionary
decision that did not benefit Plaintiff does not, by itself,
render that decision unreasonable.
Furthermore, the decision to set a floor of 4% in the
face of low interest rates was a benefit to the employees. The
fact that Duke then continued its existing rounding practice
(see Defs.’ Mem. (Doc. 28) at 19; Jeffries Decl. (Doc. 29) ¶ 20)
after setting a minimum interest rate does not suggest an abuse
of discretion.
13

-28-

This court does not find the remaining Booth factors
influential in the present case.14

Based on the foregoing

elements and undisputed facts, on balance, this court concludes
that the discretionary decision by the Plan Administrator to
round at five decimal places was reasonable.

That is, this

court does not find that the Plan Administrator abused his
discretion.

Because the actions taken were not an abuse of

discretion, this court is without authority to upset the Plan
Administrator’s decision.

Therefore, Defendants’ Motion for

Summary Judgment must be granted, and Plaintiff’s Motion for
Summary Judgment must be denied.

In light of the foregoing,

this court declines to address Defendants’ two affirmative
defenses.
V.

CONCLUSION
For the reasons set forth herein, IT IS HEREBY ORDERED that

Defendants’ Motion for Summary Judgment (Doc. 27) is GRANTED,
that Plaintiff’s Motion for Partial Summary Judgment (Doc. 25)
is DENIED, and that this case is dismissed with prejudice.
Judgment dismissing this action will be entered
contemporaneously with this Memorandum Opinion and Order.

14

As to the eighth Booth factor, Plaintiff has not
presented any evidence of a conflict of interest which would
impact this analysis.
-29-

A

This the 29th day of September, 2014.

_______________________________________
United States District Judge

-30-