This week’s notable decision is Teufel v. Northern Trust Co., No. 17-1676, __F.3d__, 2018 WL 1734700 (7th Cir. Apr. 11, 2018). In Teufel, the Seventh Circuit considered whether an amendment to the Northern Trust pension plan decreased Teufel’s accrued benefit and harmed older workers relative to younger ones, in violation of ERISA’s anti-cutback rule and the Age Discrimination in Employment Act (ADEA).  

The gist of the amendment is as follows:  In 2012, Northern Trust changed its pension plan from a defined-benefit plan under which retirement income depended on years worked, times an average of each employee’s five highest-earning consecutive years, times a constant (“Traditional formula”) to a new PEP formula that multiplies the years worked and the high average compensation not by a constant but by a formula that depends on the number of years worked after 2012.  The parties agree that it reduces the pension-accrual rate.  For people hired before 2002, Northern Trust provided a transitional benefit that treated them as if they were still under the Traditional formula except that it would deem their salaries as increasing at 1.5% per year, without regard to the actual rate of change in their compensation. Continue Reading Expectation of Future Salary Increases Is Not An “Accrued Benefit” for Purposes of Anti-Cutback Rule