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Employer risks $1.67 billion in benefits lawsuit

Christian Schappel
by Christian Schappel
October 11, 2010
1 minute read
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Good news: Some courts know that to err is human — and they’re willing to give employers the opportunity to fix mistakes. That was music to the ears of this company, which made one whopper of a blunder.
When Verizon Communications, Inc., was moving workers’ funds from one pension plan to another, it inadvertently included the wrong formula for determining employee balances based on workers’ ages and years of service in its plan documents.
It would’ve increased the starting balances for nearly 14,000 plan participants. In many cases, workers’ starting balances would’ve been tripled — which could’ve cost the company $1.67 billion.
When the company went to correct the mistake, several employees sued, saying the company should be bound by the original language.
But a court said no way. “People make mistakes. Even administrators of ERISA (Employee Retirement Income Security Act) plans,” said one of the judges presiding over the case.
The judge went on to say that the law should let courts correct such errors when there is clear evidence that a plan does not reflect participants’ “reasonable expectations” of benefits.
Verizon was allowed to fix the mistake.
Cite: Cynthia Young v. Verizon’s Bell Atlantic Cash Balance Plan

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