No Violation in DHL’s Retirement Plan Change

     SEATTLE (CN) – DHL’s decision to refuse certain retirement-plan transfers from former Airborne Express employees does not violate anti-cutback rules, the 9th Circuit ruled Monday.
     DHL, the world’s largest logistics provider, acquired Airborne in 2003. Airborne employees participated in a defined benefit plan and a defined contribution plan. Employees had the option to transfer funds from the contribution plan to the benefit plan, but DHL eliminated the right to make such transfers when it combined the companies’ retirement plans after buying Airborne.
     Former Airborne employees sued DHL in March 2012, alleging a violation of the “ant-cutback” rule under the Employee Retirement Income Security Act (ERISA), which prohibits any amendment of an employee benefit plan that would reduce the accrued benefit.
     DHL countered that the Treasury Department explicitly permits eliminating the transfer option.
     U.S. District Judge Marsha Pechman agreed, finding in November 2012 the Treasury regulation allowing a plan to eliminate the transfer of funds between accounts “means exactly what it says,” even if it incidentally reduces benefits.
     “Therefore, the 2004 plan amendment did not violate ERISA’s anti-cutback provisions, even if eliminating the transfer option reduced an accrued (but unclaimed) benefit,” she wrote.
     The employees appealed to the 9th Circuit, but a three-judge panel upheld the lower court’s ruling Monday, finding the case “fits squarely within the regulatory exception” for elimination an optional form of benefit.
     Despite the affirmation, the panel was “deeply troubled by this case,” Judge Marsha Berzon wrote for the court.
     DHL’s retirement system uses a complex set of “actuarial assumptions,” including the participant’s lifespan and market conditions, to calculate annuity values and the calculations are different between the two plans, according to the ruling
     “Within this system, it is clear why most, if not all, participants would have chosen to exercise the transfer option prior to its elimination,” the court found.
     “Notwithstanding our concerns, plaintiffs have not challenged the differential actuarial assumptions used by the two plans, and DHL’s 2004 amendment did not alter them,” Berzon added. “So what we see as the inequity occasioned by this procedure is of no legal significance in this case. For the reasons stated above, we must affirm the District Court.”

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