Opinion ID: 1435649
Heading Depth: 2
Heading Rank: 2

Heading: The Citigroup Plan

Text: In 1998, Citicorp merged with Travelers Corporation. Authority to amend Citibank's pension plan was vested in the plan sponsor, Citigroup, by action of its Board of Directors. In 1999, at a meeting of the Board of Directors, Citigroup converted its traditional, final pay pension formula into a cash balance plan. The Citigroup Board adopted a series of resolutions in October of 1999 incorporating the cash balance design into the Plan. The conversion had an effective date of January 1, 2000. In May of 2001, the provisions of the newly adopted cash balance plan were set forth in Plan Article 4.1. Under the Plan, Citigroup created a hypothetical account for each participating employee, and then credited each account with two kinds of deposits  Benefit Credits and Interest Credits. Benefit Credits were awarded to participants as a percentage of that year's total compensation. Under the Plan's formula, Benefit Credits increased with age and years of service, ranging from two percent for participants under age twenty-five in their first ten years of service, to seven percent for participants fifty years or older with fifteen or more years of service. Interest credited to the account was awarded based on an extrinsic index rate  the thirty-year Treasury rate. At retirement, participants would be entitled to a lump sum payout based on the accumulated value of their accounts, or to an actuarially equivalent pension. Although the provisions of the amendments were not set forth in an executed Citibuilder Retirement Plan document until May of 2001, in the months leading up to the effective date Citigroup sent out a number of brochures and pamphlets concerning the changes to the structure of the benefit plan. Pursuant to ERISA § 204(h), official notice of the amendment was given to all Plan participants in a letter from Tim Peach, Director of Retirement Benefits, dated December 9, 1999. The letter was entitled: The Citigroup Pension Plan Notice of Significant Reduction in Benefit Accruals for Certain Employees of Citigroup Inc. and its Subsidiaries (the 1999 Notice). The 1999 Notice contained a general summary of how the new cash balance plan would work, as well as a table listing the percentages of salaries credited to accounts annually, as determined by an employee's age and years of service. The cover letter referenced ERISA § 204(h) and explained that, due to the forthcoming amendments to the pension plan, it was likely that some employees would see some level of reduction in total accumulations in the future. The documentation accompanying the letter, distributed to each affected employee, also outlined the mechanisms of a cash balance plan. It explained that under the Plan as amended, the company credits a percentage of your total compensation each year to a hypothetical account. That percentage generally increases with your age and service. The 1999 Notice also explained that the hypothetical account earns interest credits at a rate based on 30-year Treasury bonds. The 1999 Notice did not, however, indicate the formula that the Plan would apply in order to achieve compliance with statutory accrual principles. The Plan was again amended, effective January 1, 2002. This amendment incorporated the same cash balance regime adopted in 2000, but recalibrated the range of Benefit Credits allotted annually to employees' accounts. Pursuant to this amendment, Benefit Credits ranged from one and one-half percent for participants under age twenty-nine in their first five years of service, to six percent for those fifty-five or older with fifteen or more years of service. Citigroup employed a notification process similar to the process it utilized in 1999. Pursuant to ERISA § 204(h), an information package dated December 2001 was sent to Plan participants informing them of the amendment. As with the 1999 Notice, there was no mention of the means by which the Plan would ensure compliance with ERISA's accrual requirements.