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In Re Citigroup Pension Plan Erisa Litig.

December 19, 2006


The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.




Michael Lonecke, Raymond Duffy, Anne Nelson, Robert S. Fash and Craig A. Harris, on behalf of themselves and a class of similarly situated individuals ("plaintiffs"), filed consolidated actions against Citigroup Inc., and its Plans Administration Committee ("defendants"), alleging that the Citibuilder Cash Balance Plan ("Plan") violates the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq. This ruling assumes familiarity with the Court's previous ruling on the parties' cross-motions for summary judgment, which describes the ways in which the Plan's design and execution violate ERISA.*fn1 By Opinion and Order, the Court granted summary judgment in plaintiffs' favor on Counts I, III, V and VII of their Consolidated Class Action Amended Complaint ("Complaint"),*fn2 denied defendants' motion for summary judgment, and directed defendants to reform the Plan to comply with ERISA.

In this Opinion, I address plaintiffs' motion for class certification, filed August 25, 2006. For the reasons stated, class certification is granted.


A. Citigroup's Cash Balance Plan*fn3

Both parties have agreed to all material facts.*fn4 The named plaintiffs are present or former employees of either Smith Barney or Citibank, N.A., both of which are divisions of Citigroup Inc. ("Citigroup").*fn5 They all accrued benefits under the Plan during all or part of the period since January 1, 2000 ("class period").*fn6 Two named plaintiffs were vested participants at the time their employment terminated.*fn7

1. January 1, 2000 Cash Balance Amendment

In a meeting on October 19, 1999, Citigroup's Board of Directors ("the Board") voted to incorporate a "cash balance design" into the Citigroup Pension Plan.*fn8 At this meeting, the Board did not discuss specific provisions of the newly adopted cash balance amendment ("CBA"), such as how it would calculate benefits. In fact, provisions of the amendment setting forth the Plan's formula in detail were not produced in an executed Citibuilder Retirement Plan document until May 27, 2001.*fn9

However, after the Board's vote, and prior to the CBA's effective date of January 1, 2000, plan participants did receive a summary notice of the new pension formula.*fn10 This notice was a letter mailed to all effected employees dated December 9, 1999, from Tim Peach, Director of Retirement Benefits.*fn11 Attached to the letter was a document entitled - in large boldfaced letters - "The Citigroup Pension Plan Notice of Significant Reduction in Benefit Accruals for Certain Employees of Citigroup Inc. and its Subsidiaries."*fn12 The document contained an overview of how the cash balance formula would work, as well as a table listing the percentages of salaries that would be credited to accounts annually, based on an employee's age and years of service.*fn13 Most importantly, the notice neither included nor summarized Plan Article 4.1(e), which adopts the "fractional rule" as the Plan's mechanism for complying with ERISA's minimum benefit accrual rates, and is the linchpin of plaintiffs' actuarial claims.*fn14

2. January 1, 2002 CBA

The 2002 CBA incorporated the same cash balance regime adopted in 2000, but recalibrated the range of benefit credits that would be allotted annually to employees' hypothetical accounts. Specifically, it lowered the floor from 2% to 1.5% of compensation for participants under age twenty-nine in their first five years of credited service. It also lowered the ceiling from 7% to 6% of compensation for participants fifty-five years or older with fifteen or more years of credited service ("2002-Present Benefit Credits").*fn15 The application of the fractional rule under Article 4.1(e) remained unchanged.

The first and only communication about this amendment to Plan participants which preceded its effective date, January 1, 2002, and which conceivably met statutory notice requirements, was an information package dated December 2001.*fn16 However, as with the December 1999 section 204(h) notices, there is no mention of the Plan's application of the fractional rule.*fn17 The named plaintiffs do not recall receiving these packages, nor do they recall being aware in December 2001 that the 2002 CBA "might substantially reduce benefit accruals for themselves or others."*fn18

Plaintiffs filed their Complaint on September 21, 2005, alleging numerous ERISA violations. Their prayer for relief includes injunctive and declaratory relief as well as monetary damages.*fn19


A. Plan "Participants" ...

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