Amended Cash Balance Claim Filed Past Deadline

U.S. Magistrate Judge James D. Moyer of the U.S. District Court for the Western District of Kentucky ruled that the participants’ amended claims against the Hanover Insurance Group exceeded the  five-year statute of limitations for statutory liability claims.

According to Moyer, an interest crediting floor claim accrued in 1997, when the participants received a summary plan description that “clearly repudiated” the interest crediting floor claim by stating that the interest credits were investment experience dependent on market gains and losses. As such, this deadline period on this claim expired well before original and amended complaints were filed, the court said.

In December 2009, the participants filed an amended complaint challenging the plan’s method of crediting interest and also alleging violations of the Employee Retirement Income Security Act’s (ERISA) anti-cutback provision, which provides that the accrued benefits of a plan participant may not be decreased by a plan amendment. The participants argued that a 2004 plan amendment that eliminated investment-experience interest crediting was an impermissible cutback of their accrued benefits.

In finding that the new claims were time-barred, the court said the only remaining issue was the original whipsaw claim. The suit originated with a complaint by Jennifer Durand, a former Hanover Insurance Group Inc. employee and a participant in the First Allmerica Financial Life Insurance Co.'s cash balance plan. She challenged the plan's whipsaw calculation of her benefits, which required a projection to determine the benefit amount at normal retirement age and a discount to present value of that projected amount.

The plan used the 30-year Treasury bill rate in performing the whipsaw calculation. The plan then used the same rate to discount the projected balances back to their present values. Under the plan, a participant's interest credits were fixed or variable, depending on the market rate of investments a participant selected.

Durand, who elected to cash out of her plan in 2003, alleged that the calculation method violated ERISA and resulted in a partial forfeiture of her vested benefits. According to Durand, the plan's use of a uniform projection rate was not a fair estimate of her future interest credits. She claimed that the use of the 30-year Treasury projection rate as the discount rate resulted in a “wash,” and that a valid whipsaw calculation had to include an individualized projection rate.

The case is Durand v. Hanover Insurance Group Inc., W.D. Ky., No. 3:07-cv-00130-JDM.