Cash balance plan class action certified, despite Dukes concerns

A district court properly certified under Federal Rule of Civil Procedure Rule 23(b)(2) a class of 4,000 former and current cash balance plan participants who seek a declaratory judgment that over a 23-year period they were not credited with all the benefits to which they were entitled, the U.S. Court of Appeals in Chicago (CA-7) has ruled. The Seventh Circuit rejected the employer’s contention that class certification would run afoul of the Supreme Court’s ruling on class action suits in Wal-Mart Stores, Inc. v. Dukes.


The district court divided the 4,000 participants into 10 groups, each of which was certified as a separate subclass under Rule 23(b)(2), which authorizes declaratory or injunctive relief on grounds that apply generally to the class.

The different subclasses made various claims associated with the operation of the cash balance plan over the 23-year period. For example, some participants argued that “wear away” provisions violated ERISA; others claimed that a change in the index rate used in the calculation of benefits amounted to a cutback in violation of ERISA §204(g).

The appellate court rejected the employer’s argument that because the subclasses make so many different claims, they don’t meet the “grounds that apply generally” requirement of Rule 23(b)(2). In this instance, the requirement applies to the subclasses, rather than to the entirety of the class out of which the subclasses were created, the court explained.

Dukes decision

The employer further argued that the Supreme Court’s decision in Dukes, which related to a proposed class alleging Title VII gender discrimination, precludes a Rule 23(b)(2) class action in the pension context in which monetary as well as declaratory or injunctive relief is sought.

The Seventh Circuit noted that the High Court limited this preclusion to situations where “the monetary relief is not incidental to the injunctive or declaratory relief.”

The appellate court then explained that all the subclasses seek is a declaratory judgment requiring the reformation of the cash balance plan. Assuming that the award of monetary relief following the declaratory judgment is simply a matter of comparing each participant’s current benefit amount with the amount to which they are actually entitled, and then remitting any difference, any monetary relief would be merely incidental to the declaratory relief, and thus would not run afoul of Dukes.

Source: Johnson v. Meriter Health Services Employee Retirement Plan (CA-7).

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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