IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CHARLES STEPNOWSKI : CIVIL ACTION

 :

v. :

 :

HERCULES, INC., et al. : NO. 04-02296-JF

SAMUEL J. WEBSTER : CIVIL ACTION

 :

v. :

 :

HERCULES, INCORPORATED, et al. : NO. 05-06404-JF

MEMORANDUM AND ORDER

Fullam, Sr. J. April 20, 2006

In these consolidated cases, the named plaintiffs,

together with a class of similarly situated persons (in Civil

Action No. 05-6404) seek to invalidate an amendment to the

Pension Plan of Hercules, Inc. which became effective as of

January 1, 2002, and which changed the interest rate to be used

in calculating the present value of pension benefits for purposes

of a lump-sum distribution upon retirement. Until December 31,

2001, the Plan used the interest rate specified by the Pension

Board Guaranty Corporation (“PBGC”); the amended Plan required

application of the 30-year Treasury Bill interest rate. 

Plaintiffs contend (1) that the amendment was not validly

adopted; and (2) that, in any event, it can only affect benefits

which accrued after December 31, 2001. All parties have moved

for summary judgment.

Case 2:04-cv-02296-JF Document 50 Filed 04/20/06 Page 1 of 5
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Plaintiffs contend that the amendment to the Plan was

not validly adopted, because it was adopted only by the Finance

Committee, and not by the Board of Directors of the corporation. 

I reject that contention. The Finance Committee passed a

resolution amending the Plan, reported that fact to the Board,

and its report was accepted with approval. It is probable that

the Board of Directors had validly delegated that authority to

the Finance Committee. At the very least, it is clear that the

Board of Directors ratified the Committee’s action and proceeded

on the assumption that the Plan had been amended. 

Plaintiffs are on firmer ground, however, in

challenging the retroactive application of the new interest rate

calculation to benefits accrued before December 31, 2001. While

it is true that the amendment does not violate the statutory

anti-cutback limitations in ERISA, its application to pre-2002

benefits constitutes a breach of contract. The Plan itself, in

Article VII, permits Plan amendments, but specifically provides:

“a) In the event this Plan ... is revised

or modified ... pension benefits to

Participants ... may not be reduced

... nor may future rights to benefits

accrued at the date of such revision

or modification be diminished or

terminated. For purposes of this

provision, the right to a 51% partial

cash payment ... and the interest or

actuarial assumptions specified herein

shall, without limitation, be

considered rights to benefits

accrued.”

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Thus, as a matter of ordinary contract law, plaintiffs

had a legally-enforceable right to insist that the change in

interest rate used in calculating present value cannot be

retroactively applied to benefits accruing before December 31,

2001.

The summary judgment record demonstrates that the

defendants repeatedly assured their employees on this subject. 

Indeed, Hercules’ own actuary advised the defendants that pre2002 present value calculations must use the more favorable PBGC

interest rate. Quite apart from the protections afforded by the

ERISA statute, the Pension Plan is enforceable according to its

terms, as a matter of contract. Kemmerer v. ICI Americas, Inc.,

70 F.3d 281 (3d Cir. 1995).

I therefore conclude that plaintiffs’ motion for

summary judgment must be granted, and defendants’ denied.

An Order follows.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CHARLES STEPNOWSKI : CIVIL ACTION

 :

v. :

 :

HERCULES, INC., et al. : NO. 04-02296-JF

SAMUEL J. WEBSTER : CIVIL ACTION

 :

v. :

 :

HERCULES, INCORPORATED, et al. : NO. 05-06404-JF

ORDER

AND NOW, this 20th day of April 2006, IT IS ORDERED:

1. Plaintiffs’ motion for summary judgment on Count I

of the respective complaints is GRANTED.

2. The Pension Plan of Hercules, Inc. is directed to

recalculate the lump sum pension benefit amounts owed to class

members by using the applicable PBGC interest rates for all

benefits accrued through December 31, 2001, and the applicable

30-Year Treasury Bill rate for all benefits accrued after

December 31, 2001. The lump sum payment to each class member

should be the sum of these amounts.

3. JUDGMENT is hereby ENTERED in favor of the class

representative, Samuel Webster, in the amount of $25,700.36.

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4. Plaintiff Charles Stepnowski shall, within 10

days, file with the court a calculation of the appropriate

judgment to be entered in his favor.

5. The parties shall calculate and, if possible,

agree upon the appropriate calculation of prejudgment interest. 

If unable to agree, the parties may further brief the issue

within 20 days.

BY THE COURT:

/s/ John P. Fullam 

John P. Fullam, Sr. J.

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