The opinion of the court was delivered by: Denise Cote, District Judge
Defendants JPMorgan Chase Retirement Plan and JPMorgan Chase Director of Human Resources have moved to dismiss a complaint filed by Frank Bilello on behalf of himself and all others similarly situated. Bilello was an employee of JP Morgan Chase & Co. ("JPMC") and predecessor banks, including Chemical Banking Corporation ("Chemical"), from 1960 until his retirement in the Spring of 2008. Chemical's 1989 conversion to a cash balance pension plan and the subsequent plan amendments are the subject of this lawsuit.
Bilello filed his complaint on August 17, 2007. He alleges numerous violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., and the Internal Revenue Code. Defendants have moved to dismiss all counts of the complaint pursuant to Rules 8(a), 12(b)(1), and 12(b)(6), Fed R. Civ. P, because, among other reasons, Bilello's recent receipt of a lump-sum payout of his retirement benefits deprives him of standing to pursue any ERISA claim.*fn1 This Opinion finds that Bilello still qualifies as a participant in an ERISA plan who is entitled to bring claims for the payment of additional retirement benefits. Because the parties have not yet fully addressed the question of Bilello's exhaustion of his administrative remedies, it is premature to address the other issues raised by the defendants' motion to dismiss this lawsuit.
Following a description of the types of retirement plans governed by ERISA that are at issue here, this Opinion summarizes the allegations from the complaint that are material to the standing issue.
1. ERISA and Cash Balance Plans
ERISA recognizes two basic types of retirement plans:
"defined contribution plans" and "defined benefit plans." Under ERISA, a defined contribution plan (also known as an "individual account plan") is "a pension plan which provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant's account, and any income, expenses, gains and losses." 29 U.S.C. § 1002(34). A defined benefit plan is any pension plan that is not a defined contribution plan. 29 U.S.C. § 1002(35). An example of a conventional defined benefit plan is one that credits an employee with a percentage of her salary for each year of employment. The employee may then be given, for example, a pension equal to the accumulated percentage of either her final salary or the average of her salary in the last several years of employment. See Hirt v. The Equitable Retirement Plan for Employees, Managers, and Agents, 533 F.3d 102, 104-105 (2d Cir. 2008). Whereas the employee bears the investment risks in a defined contribution plan, defined benefit plans generally guarantee each participant a specific benefit, and the employer bears the risk of the plan's investment performance. Id. at 105.
Another type of defined benefit plan is a cash balance plan. It combines the features of defined benefit and defined contribution plans. Id. Under a cash balance plan, a hypothetical account is established in each participant's name to keep track of her accrued benefit. The accounts are hypothetical because they do not reflect actual contributions to accounts, but function as record-keeping tools. Typically, the account contains the employer's hypothetical contributions as well as earnings expressed as interest credits, which can either increase at a fixed rate or be tied to an extrinsic index, such as 30-year Treasury bonds. Id. The employer's contributions, usually based on a percentage of an employee's compensation, are known as "pay credits." Pay credits may cease to accumulate once an individual's employment ends, but interest credits continue to be allocated until benefits are distributed. See, e.g., Esden v. Bank of Boston, 229 F.3d 154, 160 (2d Cir. 2000). Cash balance plans may offer employees the option of a lump-sum payout upon termination of employment in lieu of an annuity.
2. The Chemical Retirement Plan
Conversion Chemical converted its conventional defined benefit retirement plan (the "Pre-1989 Plan") into a cash balance plan on January 1, 1991, retroactive to January 1, 1989 (the "1989 Plan"). Participants received information regarding the 1989 Plan in July 1990. Employees retiring prior to January 1, 1989 received benefits as provided by the Pre-1989 Plan. Employees retiring between January 1, 1989 and January 1, 1991 received the greater of either 1) their benefits recalculated under the 1989 Plan, or 2) their accrued benefit under the terms of the Pre-1989 Plan.
3. Retirement Plan Mergers
Chemical merged with Manufacturer's Hanover Corporation in 1991. Chemical next merged with the Chase Manhattan Corporation ("Chase") in 1996, and the two companies' plans were merged effective January 1, 1997 (the "1997 Plan"). Chase then merged with J.P. Morgan in 2000, creating JPMC. J.P. Morgan's cash balance pension plan merged into Chase's cash balance plan effective January 1, 2002 (the "2002 Plan"). A July 1, 2004 merger with Bank One Corporation resulted in a merger of the JPMC and Bank One plans effective January 1, 2005 (the "JPMC Plan"). The JPMC Plan is administered by defendant JPMorgan Chase Director of Human Resources (the "Plan Administrator").
The allegations in Bilello's complaint largely stem from the conversion of Chemical's Pre-1989 Plan to the 1989 Plan, which was a cash balance plan, and from defendants' communications regarding various changes in the retirement plans. Bilello began working at Chemical Bank in 1960 and was a participant in the Pre-1989 Plan. He remained a bank employee through the mergers described above until his retirement from JPMC in the Spring of 2008.
On August 17, 2007, Bilello filed a class action complaint against defendants JP Morgan Chase Retirement Plan and the Plan Administrator, defining the class as all participants who accrued benefits pursuant to the 1989 Plan and all subsequent amendments, as well as their beneficiaries and estates.*fn2 The case was assigned to the Honorable Richard J. Sullivan.
Defendants moved to dismiss the complaint on November 16, 2007. Before that motion was fully submitted, Bilello amended his complaint on December 21. Through nine claims for class-wide relief, he alleges the following violations of ERISA:
1) Benefits accrue at an impermissibly "backloaded" rate, in violation of ERISA Section 204(b)(1)(B), 29 U.S.C. § 1054(b)(1)(B) (Counts 1 and 6);
2) The plans provide a benefit that is subject to the discretion of the Plan Administrator and is not "definitely determinable" as required by Internal Revenue Code Section 401(a)(25) (Counts 2 and 3);
3) By failing to project future interest credits to retirement age for participants who take their benefits before age 65, the plans cause an illegal forfeiture of participants' accrued benefits in violation of ERISA Section 203(a), 29 U.S.C. § 1053(a) (Counts 4 and 5); and 4) Defendants did not provide adequate notice of changes to the retirement plans, either in connection with the original conversion to a cash balance plan or with subsequent plans, in violation of ERISA Sections 102(a), 104(b)(1), and 204(h), 29 U.S.C. §§ 1022(a), 1024(b)(1), 1054(h), which require notice of significant reductions in the rate of benefit accrual, provision of sufficiently accurate and clear summary plan descriptions ("SPDs"), and notices of material modifications (Counts 7, 8, and 9) (the "Notice Claims").
With respect to the Notice Claims, Bilello alleges that the defendants did not provide proper notice of a significant reduction in benefit accrual when implementing the 1989 Plan and the amendment effective January 1, 1997 (Count 7). He describes particular problems with 1994 and 1999 SPDs, in addition to stating that SPDs provided misleading descriptions of the cash balance formula (Count 8).*fn3
As an example of alleged failures to summarize material modifications adequately, Bilello asserts that defendants did not provide information regarding the interest rate that the Plan Administrator had discretion to set pursuant to the 1989 Plan and subsequent plans through December 31, 2008 (Count 9).
Bilello also brings two individual claims for failure to make requested disclosures of plan documents. Bilello describes two requests for plan documents and SPDs used to calculate his benefits, as well as for a statement of his benefits, that he submitted to the Plan Administrator pursuant to ERISA Section 105(a). Bilello alleges that the Plan Administrator refused to provide plan documents in effect prior to 2002 and that the records of Bilello's accrued benefit were not "written in a manner calculated to be understood by the average plan participant," in violation of ERISA Section 105(a)(2)(A)(iii); 29 U.S.C. § 1024(a)(2)(A)(iii). The second request, submitted to both the Plan Administrator and the Plan, yielded an identical response. In response to the alleged refusals to provide governing plan documents and complete calculation worksheets, ...