PwC Denied Summary Judgment on Whipsaw Calculation Claim

In Laurent v. PricewaterhouseCoopers LLP, former participants of the firm’s Retirement Benefit Accumulation Plan (RBAP) argued their distributions using a whipsaw calculation improperly used the 30-year Treasury rate to project their benefits to age 65 when a set rate between 7% and 9% would have been more accurate. Under ERISA, a whipsaw calculation must use a “fair estimate” of the rate of return an average participant would have received had he remained in the plan until normal retirement age to project benefits to that age then pay out benefits at the present value of that projection. 

District Judge George B. Daniels of the U.S. District Court for the Southern District of New York found that PwC’s expert witness did not offer proof that the 30-year Treasury rate was a “fair estimate” of the rate of return an average participant would have received. PwC argued the participants’ proposed rate ignored the degree of risk associated with future credits to their accounts, and contended that the only reasonable projection rate is a rate no greater than the risk-free rate of return such as the Treasury rate. 

However, Daniels noted the expert witness never quantified the risk-free rate of return as being equivalent to the Treasury rate, and the expert focused on the question of today’s worth of the current account balance instead of the future worth of the current account balance.Daniels pointed out the expert concluded under no circumstances can the plan participant be entitled to more than his current account balance. Daniels said a required proper whipsaw calculation provides that a plan participant is entitled to the future account balance discounted back to present value regardless of whether that exceeds the current account balance.
 
The judge concluded PwC’s evidence does not show that there is no genuine dispute as to any material issue of fact and it is entitled to summary judgment as a matter of law.