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# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 09

- 3637 G RANT M. W ALKER, i ndi vi dual l y a nd o n b eh alf ofall ot h er s s im ilar ly sit u at ed , et a l., P la intif fs-A pp ella nts, v. M ON S A NT O C O M PA NY P EN S I ON P LA N , et al., D efend a nts-A pp ellees.

A pp eal from the United S t ates Di strictC our t fo r the S outhernDi stricto f Illino is. No . 3:04 C 00436

—J. Phil Gilbert, Judge .
A RGUED A PRI L 20, 2010

— D ECI DE D J UL Y 30, 2010

B efore B AUER, F LA UM, a nd E VANS, C ircu it Judges . F LA UM, Cir cu i tJudg e . T h is is a cla ss a c tio n law su it ch al l en g i ngthe manne r i n whi chc er ta i n c r edi ts a cc r ue i n the M o ns an to Co m pany’s p en si o n pl ana s i nc o ns i st en t wi th a p r o v i s i o n o fth e E mp l o y e e R e t i r e me n tI n c o me Secu rity A ct (“E R I SA ”), 2 9 U
. S. C
. § 1054(b)(1)( H )( i) , w hi ch pro hibi ts defined benefi t pl ans fro m cea sin g o r r edu cinga n e m pl oyee ’ s be ne fi t ac cr ua l b ec au se o fthe2 N o. 09

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A fter the p en sion p lan w as restru ctu red , M on san to sp lit into 1 th re e se p a ra te co rp o ra tio n s: Pharm aci a Corp orati on, Solutia Inc., a n d a new ly- cre ated M onsanto Com pany . The d is tr ic t c ourt certified thre e s ep ara te classes, on e for eac h o f the corp or ate s pi n- off s . Bec aus e the pl ans r em ain id en t i c al i n a l l r el eva nt resp ects, w e d o n ot d isting u ish am on g th e p lan s or d efend an ts, a n d re fer to th e d efe n d a n ts c o lle ct iv el y as “M o n sa n to .” att ai nm ent o fany age . Find i n g th at the e m plo yee s’ r ate o fb e n e fi ta c c r u a l d o e s n o td e c r e a s e b e c a u s e o fag e, we affi r m the di st ric t co ur t’ s g r an t o fs um m ar y j udg m en t to the defendants.

I . B a c kg r o und This case h as i ts or i gi ns i n a 1 997 re str ucturi ng o f M onsant o Com pany’s pensi on pl an. M onsant o conve rt ed 1 i ts cl ass i c defi ned benefi t pl an i nto a “c as h bal ance pla n. ” In a typi cald efined bene fi t pl an, part i ci pants’ benefi ts ar e desc ribed as an annui ty to be pai d at r egul ar re tir em en t a ge . U n d er a c as h ba lan c e p l an , eac h p ar tic ipan t ha s a hy po th et i ca l a cc o unttha t r epres en ts the val ue o fhi s or h er p en si on be nefi t a s a l um p sum ( som e, butn ot all, pl an s g i ve pa r ti ci pan ts the o pti o n o ft ak i ng th i s l um p s um a t r et i r ementr athe r tha n r ec ei ving annuity pay m ents)
. The acc ou nt i s hypotheti calbec ause pla n part i ci pants do no t a ctual l y h ave i nd i vi du alacc ou n ts . Instea d, al l o fthe pla n’s as set s a re hel d i n tr ust f oral l part i ci pants, a nd the em plo yeri s r esponsibl e for ensuring tha t the as set s a re suffi ci ent t o pay the pro m i sed benefi ts. ERIS A tr eat s cash b al ance pl ans a s a ty pe of defi ne d b en efi t pl an .N o. 09

- 3637 3 A s part ofthe 1997co nver si on, M onsant o est abl i shed tw o differ ent c ash ba l ance a ccounts f orea ch ofi ts em p loy ee s. O n e a c c ou n t w as in t e n d ed to refle c t o n ly new bene fi ts ear ned afterco nver si on. The se cond w as i ntended to prese rv e the ag e- 65 benefi ts that em plo ye es ha d a l r ea dy ea r ne d a t the tim e o fc o nv er si o n. Onl y the se c on d ac c ou n t, c alle d th e “P rior P lan A c c ou n t” or “ P P A ,” i s a t i ssue i n thi s ca se. Pri orto co nver si on, the M onsant o re ti re m en t pl an w as not w hol l y s tandardi zed, m eani ng tha t the r eti re m en t o p tio n s o f ind ivid u al e m p loy ee s v ar ied . First, all em plo yee s e ar ned an ag e- 65 re ti re m en t benefi t, wh i ch w as express ed as a m onthl y a nnuit y b eg i nning at age 65
. F o r e xa m pl e, a n e m pl o y ee who r et i red ata g e 55 might be e nt i tl ed to r ecei ve a $ 1, 00 0 m o nthl y a nnui tyb eg i nni ng ata g e 65 unt i l s he di ed. S ec o nd, so m e o fthe pr i o r pl an s p r o v i d e d a d i s c o u n t e d e a r l y r e t i r e me n to p t i o n t o e mplo yee s. These em plo yee s co uld be gi n re cei vi ng annui ty p aym ents as ear l y a s a ge 55, al though the paym ents wo u l d b e d i s c o u n t e d b y 3 % fo r ea c h y e a r th a tth e e mp l o y e e ’ s a g e w a s l e s s th a n 6 5 t o r e fl e c tth e l o n g e r t i me ofpaym en t. Fin al l y, so m e o fthe pri orpl ans pro vi ded f or a s ubsi dized e arl y r eti re m ent o pti on. El i gibl e e m plo yee s c ou ld be gin rec eiv in g t h eir f u l l ag e-6 5 b en efitas ea rly as age 55 , witho ut tak i ng a disc ounted m onthl y pay m ent. The new PPA acc ounts w er e desi gn ed to pre ser ve e a c h e mpl o y e e ’ s a g e - 6 5 a c c r ue d b a l a nc e s , wh i l e s t a nd

a r di z i n gth e e a r l y r e t i r e me n to p t i o n s o fMo n s a n t o e mpl o y ee s. F i r st, the PP A ex ten d ed t o a l l e m pl o y ee s th e rig h t t o b eg in rec eiv in g fu ll ag e - 6 5 p ay m en ts as ea rly4 N o. 09

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as a g e 55 ( th e m o stg en er o us o fthe old e ar l y r eti r ement opti ons)
. S eco nd , the new pl an ga ve al l em plo yee s th e op p ortu n ity to begin receiving ben efi ts even before age 55
. I fan e m plo yee chos e thi s o pti on, hi s o r her benefi t would be di sco unted by 8
. 5% perye arf orea ch y ea r the pa r ti ci pan t was y o ung ertha n a g e 55
. I t i s th e m echanism thr ough which thi s di sco unt w as i m ple

m ented that i s a t the ce ntero fthi s l aw sui t. T o calcu late the op en ing ba lan ce of each pa rtici p an t’s PPA , M onsanto a pp l i ed a c onver si on f or m ula bywh i ch th e ac co untwas “ cr edi te d wi tha n a m o un t equa l t o the A ctu arialEq uivalen t lum p sum value of the Pa rtic ipan t’s Pr ede ce ss o r Pl anAccr ue d Be ne fi t . .
. di sc o unt ed us i ng ani nt er es t r at e o fe i g hta nd on e- ha l fpe r ce ntpe r a nnum f orea ch m onth, i f any, bywh i ch the Part i ci pant’s ag e a s of J a n u a r y 1 , 199 7 p re c ed es ag e 5 5.” (P lan § 6.2 (b )). In ot h er w or d s, ea c h em p loy ee ’s b en efitu n d er t h e o ld pla n, wh i ch had been express ed as an annui ty, would be conve rt ed to a l um p s u m equi val ent t o the c osto fthat annuity. That l um p sum would then be di sco unted by 8
. 5 % pe r y e a r f o r e a c h y e a r y o u n g e r th a n 5 5 th e e mpl o y ee was a t th e ti m e o fc o nv er si o n. Once est abl i shed, ea ch i nd i vi du al ’ s PPA i ncre ase s by w ay oftwo m onthl y “ cre dit s”: “p ay cre dit s” and “i nter est c r e d i t s . ” P a y c r e d i t s , w h i c h a r e i nt e nd e d t o r e wa r d e mpl o y ee s f o r the l en g tho fthe i r s er vi ce , a r e equa l t o the curr ent PPA bal ance m ult i pli ed by the m onthl y e quiva

l ent o f4% perannum . Em plo yee s co nti n ue to r ecei ve pay cr edi ts as l ong as they w or k forM onsant o, r ega rdl ess o f a g e . I n t e r e s t c r e d i t s a r e e q u a l t o th e c u r r e nt PP AN o. 09

- 3637 5 bal ance m ult i pli ed by th e m onthly equi val ent o f8. 5% pera nnum. I nt er es t cr edi ts c ea se o nc e “the Pa r tici pan t atta ins age 55.” ( Plan § 6. 2(d ))
. I n mi d- 19 96 , b efo r e th e ef fective da te o fthe pl anc o nver si on , M onsant o dist ributed l i ter atur e t o em plo yee s to e xpl ain the ne w pl an . The se c o m m uni ca ti o ns e xpl a i ne d tha tthe 8
. 5 % di s c o un ta pp l i e d t o the i ni t i al bal ance of e m plo yee s y oungerthan 55 and the co rr espo nd i ng 8
. 5 % c r e di t s the n a pp l i e d un t i l a g e 5 5
. Ea c h of these co m m un ica tio ns descr ibed the 8. 5% di sco unt as an ea rl y r eti rem en t benefi t a nd the 8. 5% i nter estcr edi ts a s n ec es sa ry to res to re th e fu ll p re vio u sly ac c ru ed be n efit to em plo yee s. On J un e 2 3 , 2 0 0 4 , p l a i nt i ff s fi l e d Walkerv. M onsanto Com panyPe ns i on Plan , N o. 04-436, in the Sou th ern Dis tr ict o fI l l i noi s. On Septe m ber1, 20 06, the dist ri ct cour t enter ed an or der conso l i dati n g t he Wa lk eract i on w ith th re e re lat e d ac tio n s: D a vis v . Solu tia, Inc. E m plo yees’ Pen s i on Plan , N o. 05 -73 6 (file d O c to b er 12 , 200 5); D onal ds on v. Phar m ac i a Pe ns i on Plan , N o. 06-3 ( fi led Janu ary 3, 2006 ); an d Ham m ond v. Sol ut i a, Inc . Em pl oye e s ’Pe ns i on Plan , N o. 06

- 139 ( fi l ed Feb ruar y 1 5, 20 06)
. The co nsol i dated co m pl ainta l l eg es , am o ngo th erthi ng s, tha t th e su bs ta nti vel y i denti calcas h bal ance define d b enefi t pl ans v i ol a t e E R I S A’ s p r o h ib i t i o n o n c e a s i n go r r e d u c i n ga n e mplo yee ’ s be nefi t a ccr ua l bec ause ofthe att ai nm ent o f any a ge. On M ay 22, 2008 , the dist ri ct cer ti fi ed thre e ide n ti cal “A ge 55 Cu t- offcl ai m s. ” On J une 11, 20 09, the dist ri ct co ur t g r an te d defen dan ts ’ m o ti o n f o r su m m ar y j udg m en t6 N o. 09

- 3637 on the A ge- 55 Cu t- offcl ai m s a nd deni ed pla i nti ff s’ cros sm oti on f orsum m ary j u d gm ent o n thos e s am e cl ai m s. A fter add iti ona l p roc e e d ings in w hich the p lai nt iffs pr e v a i l e d o n a n un r e l a t e d c l a i m ( not cha l l e ng e d o n a ppea l ) , th e di st r i ct co ur t en te r ed fi na l j udg m ent dispos i ng of a ll cl ai m s with re spect to al l part i es on S eptem ber29 , 2 0 0 9
. P l a i nt i ff s t i mel y a pp e a l e d.

I I . Discussi on Pl ai nti ff s’ ar gum ent i s that the pla n vi ol ate s ER I SA o n i ts f ace. Fi rst, th ey ar gue that the i nter estcr edi ts ar e par t o f a p ar ticipant’ s “ benefi t a ccr ual ” be cause they ar e a n inp ut cred ited b y the em p loyer to th e pa r t ic ip an t’s st at ed ac co untbalanc e. S ec o nd, the y a r g ue tha t th e express te rm s o fth e p lan t er m i nate thi s be nefi t when a par ti ci pant r eaches ag e 5 5. ERI S A pro hibi ts de fi ne d b en efi t pl an s f r o m r ed uc in g “a n e m pl o y ee ’ s r at e o fb en efi t ac cr ua l
. . . b ec au se o fthe a t t a i n me n to fa n y a g e . ” 2 9 U. S
. C
. § 1 05 4( b) ( 1 ) ( H) ( i )
. As an i nitial m att er, then, we m ust a dd re ss w hether i nter estcr edi ts, wh i ch ar e intended to re ver se the 8
. 5% pera nnum di sc o unta ppl ied to e m pl o y ee s’ o pen i ng b ala n c es , con st itu te “b en efitac c ru al.” E R ISA d oe s n otd e f in e t h e p h ra se , “b en efitac c ru al.” H owev er , we have consi dered i ts m eani ng pre vi ousl y. Se eCoope rv. IBM Pe rs onal Pe ns i on Plan , 45 7 F
. 3d 63 6 (7 th Ci r . 2 00 6)
. I n C o o per, the defe nd ant, I BM , r an a cash bal ance pensi on pl an thato perat ed in a m anner si m i l ar t o a de fi ne d c o nt r ib ut i o n pl a n. Ea c h em pl o y e e r e c e i v e d a 5% pay cre dit( base d on t he em plo yee ’ s cur re nt sa l ar y)N o. 09

- 3637 7

an d an interes t cred it ( e q u al to 1% above th e Trea su ry rate m ultiplied by the ac cou nt ’s balance ) each year. I nter estcr edi ts continued to acc rue unti l r eti re m ent a ge, whethe r o r no t th e par ti ci pan t ce as ed w orkin gf o r the com pany. A t re ti re m ent, an e m plo yee co uld e i therta ke th e b a l a n c e a s ca sh or ro ll it ov er int o a n an n u ity
. Id. at 63 7. The pl aint i ff s i n C o o pera l l e g e d th a tth i s p l a n d i s c r i mi nated ag ai nst olderworke rs . Because a y oungerworke r w oul d rec ei ve m or e years ofi nter estbefor e r eti re m ent, a year of service at age 3 5 w ou ld increa se an em p loyee’s to ta l a cc r ue d b en efi t m o r e t ha n a y ea r o fs er vi ce ( atthe sam e s al ar y) atag e 5 5. W e rejec ted the C o o per pla i nti ff s’ ar gu m en ts, not i ng tha t i t “ tr eat s the ti m e v al ue o fm oney as age di scr i m i natio n. ” Id. at 638. I nstea d, w e hel d that “b en efitac c ru al” ad d re ss es “ t h e r at e a t w h ich va lu e is add ed ( ori m pu ted) to an acco unt, r atherthan the a nnual pensi on a t r eti re m ent a ge. ” Id. at 63 9
. In rea c h in g t h is deci si on, we re l i ed on the f act that I BM ’ s m et h od o f c r e di t i ng r e t i r e men t a c c o un t s wo ul d c e r t a i nl y ha v e bee n p er m iss ible for a d efin ed c on tr ibu t i o n p lan
. Id. at 638; s e eal s o 29 U
. S. C. § 1 054(b) ( 2) ( A ) ( req uir i ng tha t, f or d e fi n e d c o n t r ib u t i o n p l a n s , “ a l l o c a t i o n s t o t h e e mplo yee ’ s a ccoun t ar e not ceas ed, and the ra te at w hi ch am ounts ar e a l l oca ted to the em plo yee’ s a ccount i s no t re du ced, bec ause ofthe att ai nm en t of any ag e. ”)
. Final l y, w e n ot ed th at a d r a f t T re as u ry reg u lat ion ac kn ow ledg ed th atfor c as h b al an ce pl an s th ato per at ed i n a m an n er s im ilar to a d efin ed co n tr ibu tio n p lan , “b en efit acc rua l” shou ld be treat ed as “th e ad d iti ons to the p art i c i pa nt ’ s h y po the t i c a l a c c o un tf o r the p l a n yea r. ” C o o per, 45 7 F .3d at63 9; s e eal s o 67 Fed. Reg. 76 , 123, 76 , 125 ( Dec. 11 , 2002 ).8 N o. 09

- 3637 Pl aint i ff s ar g ue tha t i n C o o per, we ado pte d a br i g ht

- l i ne rul e tha ta nyc r e di tt o a p a r t i c i pa nt ’ s c a s h b a l a nce acco unt am ounts to benefi t a ccr ual
. S i nce the i nter est cre dit s her e incre ase the sta ted cash b ala nce, theyar gue, they mus tb e b e ne fi ta c c r ua l s . De fe nd a nt s , o n the o ther h an d , arg u e t h at th e in te re st cr ed its ca n n otbe be n efit accr ual s be cause they do not i ncre ase the tot al“a ccr ued benefi t”

— th e amo un to fth e a n n u i t y t o w h i c h th e e mp loy ee i s e n tit led atn or m al re tir em en t a ge . See C o o per, 457 F.3d at 638; 29 U
. S. C
. § 1002(23)(A ). The dis agr eem ent s tem s fro m the fl exibl e nature of cash b al ance pl ans. The m ost c om m on type o fcas h bal ance p l an o perat es i n a m anner si m i l arto a defined co nt r ibut i o n pl an, as di d th e pl an at i ss ue i n C o o per . See a lso Berge rv. Xe r ox Corp. R e t i r e m e ntInc om eGuarant e ePla n , 338 F. 3d 755, 75 7 ( 7th Ci r. 20 03) ( describi ng a cash b al ance p lan th a t “ r e sem bles” a d efi ne d cont ribution p lan). For these cas h bal ance pl ans, wh i ch p ay part i ci pants a yea rl y inter estr ate o n thei r p lan b alances, we m ust l oo k to “the add i ti ons to the parti ci pant’s hypothe ti cal ac co untf o r the p lan y ea r ” to a vo i d t r ea tingc o m po und in te re st as ag e d isc rim in at ion
. See C o o per, 45 7 F
. 3d at 639 ( quoti ng 67Fe d. Reg. at76 , 126)
. Bu t p laintiff s poi nt to n o re q u ire m en t t h at a c as h ba lan c e p l an op er at e in th is w ay. The p lan a t i ssue i n thi s ca se i nstea d m i m i cs a defined benefi t p lan (l i kel y b ecause i t was i ntended to prese rv e the be nefi ts al re ady ea rned byem plo yee s under M ons an to’s ol d de fi ne d ben efi t plan ). Participa nt s are prom i sed a cer tai n benefi t a t re tir em ent, wh i ch i s descr ibed as a l um p-sum cas h bal ance. B ec au se thi s i s no t an “eligibl e ca sh bal ance pla n, ” see 67 Fed. Reg. atN o. 09

- 3637 9 76 ,12 5, th e g en er al m ec h an ism for d et er m in in g b en efit accr ual appli es

— “the i ncre ase in the par ti ci pant’s acc rued nor m al re ti re m ent f or the benefi t y ear . ” C o o per, 45 7 F
. 3d at 639 (qu oting 67 Fed
. Reg. at 76,125). Th e d raft Treasu ry Regul ati on m ake s cl earthatthi s g en eralm etho d m ay be used by al l defined benefi t pla ns ( i ncl ud i n g c ash ba l an ce pl an s) ; i t i s o nl y the meth o d us ed i n C o o perthat i s l i mi t e d t o c e r t a i n qu a l i fy i ng c a s h b a l a nc e p l a ns . 6 7F e d. Reg. at76 , 125 ( sta ti ng tha t the ge nera l r ule “m ay be use d by al l defi ned benefi t pla n s” wh i l e the “s eco nd approa ch m ay be u sed only by an eligible cash balanc e plan ”). One m i ght wonder how th es e tw o m echani sm s ca n coex ist. T h e rea son i s tha t w hile r etirem en t plan s are prohibit ed fro m di scr i m i nati ng ag ai nst o l der work er s, they ar e no t pr ohibi ted fro m f avo ring the m . Tra dit i onal defi ne d b e ne fi tp l a ns a nd the c a s h b a l a nc e p l a ns that m i m i c them tr eatyo unger w or ker s l ess f avo rabl y than ol der work er s. These pla ns do no t a dd re ss the f act that an em plo yerwil l have to sa ve m or e t o pay out a parti cul ar ac c ru ed ret ire m en t b en efitfor a n old er w or ke r (w h o is cl o se t o r et ir ement, g i vingthe e m pl o y erl es s co m po und i nter esto n th e savi ngs) than to pay thatsa m e be nefi t t o a y o u n ge r w or ke r (w h o is fu rt h er from ret ire m en t, all owing the e m plo yerto e ar n m or e co m pound inter esto n th e s av in gs ). See C o o per, 45 7 F
. 3d at 639 ( not i ng tha t trad iti ona l d efi ne d ben efi t plan s favor ol d er w orkers). I m agine two worke rs wh o, f ora g ive n ye ar, bo th ea rn a n id en tic al in c re as e in th eir m on th ly an n u ity atret ire m en t. If one w or keris a t re ti re m ent a ge, the em plo yerwil l have to setas i de the fullvalu e ofthatannui ty i m m edi ate l y. Bu t fora young w or ker, the prese nt va l ue o f the annuity10 N o. 09

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A ssu m ing tha t intere st is com p ou nd ed an nu ally , the d is- 2 c ount ed o pen i ng bal anc e i s ar ri ved a tby di vi di ng the l um p- s um accr u e d b e ne fitb y 1.085 ( on e p lus th e inter est rate) raised to th e fift h p o w er (th e n u m b er o f y ea rs o f d isc o u n tin g ). i s s i gni fi cantl y l ess , bec au se set ti ng as i de a s m al l er am ou n t of m on ey to ea rn in te re st for se ve ra l ye a r s w i ll suffi ce t o pay th e b en efi t. Because a pl an thati ncre ase s th e ac cr ue d b en efi t atr et i r emente qua l l y f o r y o unga nd o l d wor k er s ac tu al l y f av o r s th e o l derwor k er s, t r eati ng th e “rate of benefit accru al” as “the i nc rease in th e pa rti ci pan t’ s ac cr ued n or m alr et i r ementb en efi t f o r the yea r” wil l neve r m askag e di scr i m i nati on wh er e i t e xi sts
. L ooking at th e r ate of i nc rease in th e pa rtici p an t’s accr ued norm al re tirem ent b enefi t, i t be com es cl earthat th e in te re st cr ed its h er e a re n otbe n efitac c ru a l s . T h is is because theyneve r i ncre ase the accr ued benefi t a t r eti re m ent. I m agine, f orexam ple , a 50- yea r- ol d em plo yee w h o a c c ru ed p rior to co n ve rs ion a r e t i re m en t b en efit w or th $1 , 000 per m onth a t norm alr eti re m ent a ge. F ur th era ss um e th e va l ue o fthi s be ne fi t as a l um p s um i s $ 125, 000. U nd erthe new pl an, the em plo yee would be enti tled t o col l ect thi s be nefi t a t a ge 55. Thi s $ 125, 000 l um p sum i s di sco unted at the r ate 8. 5% f orthe fi ve yea rs l eft be f or e the worke r re aches age 55. In 1997, at ag e 50 , h er a cc o untb al an ce woul d b e $8 3, 13 1. Buti fs he 2 re tir ed atag e 5 0 a n d w ait ed to rec eiv e h er be n efit s u n til age 55 , she w ou ld r ecei ve fi ve yea rs o fi nter esto n thatN o. 09

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Th e va l ue o fthe a ge 5 0 ba l a nc e a ta ge 5 5 i s a r r ived atby 3 m ul t i pl yi ng the di s c ount ed o pen i ng ba l anc e by 1.0 85 ( one pl us th e i n t e r e s t r a t e ) r a i s e d t o th e fi fth p o we r ( th e n u mbe r of ye ars rem aini ng un t i l s he r ea c he s ag e 55 an d i s e l i gibl e f or th e fu ll r et ir em en t b en efi t). Thi s hypo the t ical i s a s i m pl i fi c at i on, be c aus e i ti gnor es the 4 4% annual “pay credit, ” w hich conti nues to a ccrue as long as the plan parti ci pant w orks for M onsanto. Plai nti ff s argue that e ve n i fthe 8
. 5 % i nter es t c r e di t s wou l d n oto the r wi s e be benefitaccru a ls, the y becom e benefitacc ruals because they also ap p ly to the 4 % p ay cred it. T his ar g u m e n t f ails as a m att er ofm a th em a ti cs . The 4% pay creditapp li es to balance ofthe PPA acc ount, w hich f or w orkers und er age 55, has al re ady be endi s c ount ed a ta ra t e of8. 5% per ye ar . Apply i ng the 4 % p ay cred it f or each new ye ar o f serv ice to th e d iscou nte d cash b ala nc e is equ iv alen t t o a p p lyin g the p ay cred it f or eac h new year of se rv ic e t o the accr ued benefitand then (co n tin u ed ...) bal ance, r esul ti ng i n a l um p sum o f$1 25, 000
. A t age 51, 3 h er account bal ance woul d i ncre ase by8. 5% , o r $7, 066, to $9 0,1 97 . B u t i fs h e re tir ed atag e 5 1 a n d w ait ed u n til n or m al re tir em en t a ge to co llec t h er be n efit, sh e w ou ld re c eiv e fou r m or e yea rs of in te re st c re d its , a g a in re sul ti ng i n a b al ance o f$1 25, 00 0. A nd i fshe w or ked beyon d age 55, heracc rued be nefi t would r em ai n at $1 25 , 00 0 ( i n the PP A ac co unt

— re m em b er th at sh e w ou ld c on tin u e t o e ar n n e w b e n efit s, b u t t h es e a re tra c ke d in a s epara te acco unt). Vi ew ed as the increa se i n her accr ued benefi t at nor m alr eti re m ent a ge, the hypotheti cal em p loyee’s r ate of b e n e fit accru al i s zero, both before an d a fte r r ea ch i nga g e 55
. The o nl y t i m e th e va l ue o fthe 412 N o. 09

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(
. . . c on t i nu e d) 4 d iscou ntin g the a ccru e d b en efit to a cash b ala nc e. An exam p le m ay be he l pful
. I fwe i nc l ude the pay c re dits, atag e 51 our hypothe t i c al e m pl oye e’ s c as h ba l anc e ac c ount wil l ha ve i ncre ase d to $ 9 3 , 805: $83, 131 ( the ini ti al balance) plus $3, 325 ( the pay c re di t ) pl us $7, 34 9 ( the i nt er es tc re di tonthe s um ofthe ini ti al balance and the pay cr edi t). T h is res ults i n an age- 55 b en efi t o f $1 3 0 ,00 0 ($9 3 ,80 5 tim es 1.0 8 5 to th e fo u rt h p o w er ). Al t e r na t e l y, o ne c ou l d a ppl y a 4 % pa y c r e di tt o the age- 55 balance of $125, 000. This equals an accr ued benefitof$130, 000; d iscou nte d b y the fou r y ear s rem ain ing u ntil ag e 5 5 , t his y ie l d s a c a sh b ala nc e of $93 ,805 ($1 30 ,000 d iv id ed b y 1.085 to t h e f o u r th p o we r )
. T h u s , a t a n y t i me , th e o n l y i n c r e a s e i n t he v al u e of an em p loy ees’ cash b ala nc e or accru ed b en efit is solely attrib u tab le to th e 4% p ay cred its, w hich d o n ot cea se up on reachi ng any age. acco unt at re ti re m ent wou ld b e d i ffer ent than $12 5, 000 i s i fthe em plo yee beg an r ecei vi ng paym ents befo re ag e 55

— i n other w or ds, i f s h e t oo k a dvantage o fthe discounted ea rl y r eti re m ent o pti on pro vi de d by M onsant o. P laintiff s’ ar gum ent, i fadopted, would tr eatal l di scounted ea rl y r eti re m ent p ro gr am s a s v i ol ati ons of § 1054 (b)( 1)(H )( i)
. I n thi s r espect, pl ai nti ff s’ a rgum ent i s qui te si m i l arto th e a rg um en t r ej ec te d b y the Ei g hth Ci r cui t i n Atk i n s v. N orthwestAirl ine s, Inc. , 967F.2d 11 97(8 th C ir. 19 92 ). In Atki ns , the defe nd ant a i rl i ne’ s r eti re m ent pl an o ffer ed a no rm alr eti re m ent b enefi t t o pil ots atag e 60 and an ear l y r eti re m ent b enefi t that was di scounted fo r pil ots yo u n ge r th an 60
. B ec au se of th e d isc ou n tin g, th e m on th lyN o. 09

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T he pe rc ei ved i ne qua l i t y was e xa c erbat ed i n A t k i ns becau se 5 the air li ne al so had a se rvice cap of 25 years ( w hich is perm it ted und er ER ISA). A p il ot wh o reac hed 25 years ofs er v ice before ag e 60 w ou ld see his “ b e n e fit ” inc rea se each ye ar u ntil he r e a c h e d 6 0 a s th e e a r l y r e t i r e me n t di s c o u n t p h a s e d o u t, but a pilo t w h o reached 25 years ofs ervic e after60 wo uld see no i nc re as e aft erthe 25 th ye ar ( bec aus e no ea rl y r et i re m en t d isc o u n t w o u ld ap p ly to h is p a y m en t). be ne fi t o fpi l o ts who di d n ot ta k e ea r l y r eti r ement w oul d app earto i ncre ase ea ch ye arthattheyp os tp oned r ec ei pt o fthe i r b en efi ts ( as e ac h pa ss i ngy ea r mean t o ne l ess ye aro fdi sco unti ng f orea rl y pay m en t); but atag e 6 0, th e i nc r ea se s ce as ed, a s th e pi l o t was the n e nt i tl ed to the ful l r et i r ementb en efi t. The pi l o ts a r g ue d tha t when th e 5 air lin e c ea se d giv i n g t h em inc re as es to rev er se th e e ar ly re ti re m ent di sco unt, i t had ce ase d thei r b enefi t a ccr ual o n a c c o un to fa g e and the r e b y v i o l a t e d 2 9 U. S
. C. § 10 54 ( b) ( 1) ( H ) ( i )
. The Ei g htCi r cui t r ej ec te d thi s ar g um ent, not i ng tha t ERI SA p er m i ts ear l y r etire m ent di sco unt s an d ho l di ngtha t be ca us e th eydo n ot af fec t th e pen si o n pa y m en t a r et i r ee r ec ei ve s at no r m alr eti r ement ag e, the r eve rs alo fea rl y r eti re m ent di sco unts ar e no t “accr ued benefi ts” under ERI SA. 967 F. 2d at 1201
. Pl aint i ff s’ a tt empts t o di st i ng ui sh Atki ns ar e unavai l i ng. They ar gue that unl i ke Atki ns , thi s ca se i nvol ves nei ther a s er vi ce c ap noran e ar l y r eti re m ent fe at u re . They do not ex plai n w hy the pr es en ce o fa s er vi ce c ap m ak es a ny differ ence, and w e s ee none. Thei r cl ai m that the pla n at iss u e h er e d oe s n otinc lu d e a n ea rly ret ire m en t b en efit i s m i sl eadi ng. W e hav e a l re ady expl ai ned w hy the m echa-14 N o. 09

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n i s m o fd i s c o u n t i n gth e o pe ni n gc a s h b a l a n c e o fe mplo yee s under age 55 and then cr edi ti ng ba ck that disc ount unti l th e em plo yee r eaches ag e 5 5 functi ons l i ke an ea rl y r eti re m ent di sco unt, n ev er changing the acc rued b en efit at n or m al ret ire m en t age b u t red u c in g t h e b en efit ifem p loyees ch oose to receive p aym en t early. Plaintiff s obj ect to the c h ar acte ri zati on o fthe 8. 5% i nter estcr edi ts as a r eve rs alo fthe ear l i er8. 5% di sco unti ng; theydi sm i ss i t as “ m athem ati cal l y c onveni ent” but unf ounded because ther e i s no cross- re fer ence between S ecti on 6
. 2( b) o fthe pl an, whi chdi sc o unt s th e o pen i ngb al an ce , a nd Se c tio n 6.2(d ), w h ich d e s c r ibe s t h e in te re st cr ed its . Th is ar gum en t is sp uri ous. W hethero r not ther e i s a cr oss r e fe r en c e , th e c o n c r e t e r e s u l to fa p p l y i n gth e t wo f o r mul a s i s tha t a pa r t i c i pa nt ’ s a c c r ue d b e ne fi tneve r changes
. M or eov er, i t i s undis pu ted thatthi s m echani sm w as des c rib ed to em plo yee s a s the way the disc ounted ea r l y r et i r ementfea tu r e w as b eingi m pl ement ed. The on ly ev id en c e p lain tiffs cit e in su p p or t o ft h eir cla im that the 8. 5% i nter est cre dit s w er e not part of a di sc ou n te d ear l y r eti re m ent o pti on i s a n excer pt fro m a 2002 subm i ssi on t o the I RS i n w hi ch M ons an to i nd i cate d that th er e i s no e ar l y r et i r ementb en efi t f o r m ul a i n the pl an . This sta tem ent was co rr ect

— bec au se the e ar l y r eti r ement di sc o untwas b ui l t i nt o the o pen i ngb al an ce of th e PPA ac c ou n ts , t h er e is n o s ep ar at e e ar ly re tir em en t fo rm u la i n the pla n. I n any eve nt, i t i s i rr el evant t o thi s a pp eal w hetherthe disc ount a nd subse quent cr ed its a re des c r ib e d a s an ear l y r e t i r e men tdi s c o un to r n o t
. T he a pp li cab l e st atut e m ak es no ment i o n o fe ar l y r eti r ement disc ounts but r atheras ks w hethera p arti ci pant’s r ate o fN o. 09

- 3637 15 be ne fi t ac cr ua l c ea se s o r i s r edu ce d on ac co unto fr ea ch i ng a c e r t a i n a g e . 2 9 U. S
. C. § 1 0 5 4 ( b ) ( 1 ) ( H) ( i )
. Li k e the c r e di ts t o r ev er se th e ear l y r et i r ementdi sc o unt s i n Atki ns , the inter estcr edi ts here have no im p ac t on the accr ued benefi t a t no rm alr eti re m ent a ge an d therefor e hav e n o e ffec t o n an em p loy ee ’s ra te of be n efitac c ru al. Pl ai nti ff s’ fi nal a rgum ent i s that the M onsant o pla n wor k s an“ i m per m i ss ibl e f o r fei tu r e” by no t ex te ndingthe i nt er es t cr edi ts t o a g e 65
. CitingI RS Not i ce 9 6- 8 an d Revenue Rul i ng 20 08- 7, theyar gu e th at al l cas h bal ance pla ns m ust a dd any “i nter est ” thro ugh a p lan ’ s no rm al re tir em en t a ge . See Rev. Rule 2008

- 7, 20 08- 7 I
. R. B. 419, 20 08 W L 27432 5 (“[I ]n d eterm ining th e ac c r ue d ben efi t of a parti ci pant und era cash b al ance pl an atany ti m e pr i or to nor m alr eti re m ent age , the bal ance in the cash b al ance pla n m ust be proj ec ted with i nter estcr edi ts to nor m al r e t i r e m e n t a g e . ” ) ; N o t i c e 9 6

- 8 , 1 9 9 6

- 8 I
. R
. B
. 2 3 , 1 9 9 6 WL 17 90 1 ( “Unde r a c as h b al an ce p l an, the r eti r ement benefi ts payabl e a t norm alreti re m ent age ar e dete rm i ned by re fer ence to the hy potheti calacc ount ba l ance a s o f n or m al re tir e m e n t a ge , in c lu d in g b en efit s a tt rib u ta b le t o i nt e r e s t c r e di t s t o tha t a g e . ” ) Th e s e r e g ul a t i o ns do not he l p pl aint i ff s’ c au se . The no ti ce a nd r ev en ue r ul i ng provi de onl y that when a p lan p ro m i ses i nter estcr edi ts pri or to nor m al re ti re m ent age that ar e not c ond i ti oned o n futur e empl o y m en t, the n th e pl anmusti nc l ude the v a l u e o fth e i n t e r e s tc r e d i t s w h e n c o n v e r t i n ga n e mp l o y e e ’ s a c c r u e d b e n e fi tt o a n i mme d i a t e l y p a y a b l e l u mp su m . See C o o per, 4 57 F .3d at64 0 ( N oti ce 9 6- 8 r equi re s that “a pl anmust
. . . a d d a l l the i nt er es t th atwoul d a cc r ue thro ugh age 65 , then
. . . di sco unt the re sultin g su m to i ts16 N o. 09

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In pa rt i c ul ar, pl ai nt i ff s do n otc l ai m thatthe 8. 5% ea rly 6 retirem en t d i scou nt ra te from ag e 55 w or k s an im p erm issible f orfei ture by und ers tat in g t h a t pres ent value ofthe parti cip a n t’s a cc ru ed b en efi t a t n o rm a l re tir e m en t a g e. C f
. B erger, 338 F. 3d at 759 ( “[ Plai nti ff s] conte nd thatthe am ount they rece iv ed w as no t th e a c t u a rial eq u iv alen t of w ha t they w ou ld (co n tin u ed ...) p re se n t v a l u e.” ); se e also Fry v. E xelon Corp. C ash Ba lance P ensio n P l an , 571 F.3d 64 4, 64 5 (7 th C ir. 20 09 ) (in c alcu lating l um p -sum distribu tions, p en sion p lans w ere r equi r ed to “ st ar t wi ththe c ur r en t b ala nc e an d a dd a ny contr actual l y pr om i sed i nter est( orany othe r f or m o f gu aran teed i nc reas e i n be ne fi ts) throu gh the em p loyee’s

‘ nor m alr eti re m ent a ge’ ” be f or e di sco unti ng the m to a pr es en t va lue )
. The se r egul at i o ns f o l l o w f r o m the pri nci ple that a l um p-sum substi tute f oran ac crued pensi on be nefi t m ust be the “actuari al equi val ent” ofthat b en efit
. See 29 U .S.C . § 10 54 (c )(3) ; B erger, 33 8 F
. 3d at 759. Thus, p r o m i se d futur e i nt er es t cr edi ts tha t i nc r ea se the ac cr ue d b en efi t m us t be i nc l ude d whenc alculati ngthe lu m p su m p aid to so m eo n e w h o c h oo se s t o t ak e t h eir b en efitbe f or e re gu lar ret ire m en t a ge . Id. at76 0. W e hav e al re ady expl ai ned th at the i nter estcr edi ts here , unl i ke th o se a t i ss ue i n B erger, do no t in c re ase the accr ued be ne fi t at no r m al r et i r ement ag e. Butpl aint i ff s’ a r g um en t al so f ai l s a t a m or e fund am entall eve l
. They a re not argui ng tha t the pl an f or fei ts re ti re m ent- age bene fi ts when a par ti cipa nt el ec ts t o t ak e a l um p- su m pa y m en t ea rl y; r ather, theyse ek to inc rease the re ti re m ent- age be ne fi t byr equi r i ngi nt er es t cr edi ts thr o ugh a g e 65
. But 6N o. 09

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(
. . . c on t i nu e d) 6 have r ece ived e ither as an annu ity or a lum p su m h a d the y w a ite d u n til ag e 6 5 .”); se e al so 29 U.S. C. § 1053( f ) ( no im perm i s s ibl e f or f e i t ur e whe n the pr e s e ntva l ue o fthe a c c r ued ben efi ti s , unde r the t er m s ofthe pl an, e qu al to th e am ount ex p re sse d as th e b a la n ce in th e c a sh b a la n ce ac co u n t).

7- 30- 10 the r egul ati ons do not pres cribe what benefi t a pl an m ust prom ise a parti ci pant at re ti re m ent a ge. They onl y r equi re thata parti ci pant r ecei ve the a ctuar i alequi val en t o ftha t be ne fi t i fthe part i ci pan t ta k es a l um p- su m p aym en t early. N otice 96-8 and Rev en ue Ru ling 2008-7 ar e thus w hol l y i rr el evantto pl ainti ff s’ cl ai m s.

I I I . Concl usio n W e A FFIRM the dist ri ct c ourt ’ s g ra nt o f s u m m ar y j ud gm ent t o the defendants.