Opinion ID: 152633
Heading Depth: 2
Heading Rank: 3

Heading: Discount Rate for Opening Cash Balances

Text: In addition to her argument regarding the second transition factor in § 16.5.1(a)(2), Young claimed that Verizon improperly applied the enhanced, 120% PBGC discount rate used in the 1995 BAMPP to calculate her opening balance under the Cash Balance Plan. Verizon's Review Committee denied Young's discount rate claim, and because the Plan grants the administrator broad discretion to interpret Plan provisions, we review the Committee's decision for an abuse of discretion. See Black v. Long Term Disability Ins., 582 F.3d 738, 744 (7th Cir.2009). The interpretation of ERISA plans is governed by federal common law, which draws on general principles of contract interpretation to the extent they are consistent with ERISA. Mathews, 144 F.3d at 465. Under these principles, contract language is given its plain and ordinary meaning. Pitcher v. Principal Mut. Life Ins. Co., 93 F.3d 407, 411 (7th Cir. 1996). Contracts must be read as a whole, and the meaning of separate provisions should be considered in light of one another and the context of the entire agreement. Taracorp, Inc. v. NL Indus., Inc., 73 F.3d 738, 745 (7th Cir.1996). Contract interpretations should, to the extent possible, give effect to all language without rendering any term superfluous, id. at 746, but if both a general and a specific provision apply to the subject at hand, the specific provision controls, Medcom Holding Co. v. Baxter Travenol Labs., Inc., 984 F.2d 223, 227 (7th Cir.1993). The use of a discount rate to calculate opening balances under the Cash Balance Plan occurs by operation of § 16.5.1(a)(2). That section defines opening cash balances as the product of two variables (assuming, of course, one ignores the second transition factor that we have disregarded as a scrivener's error): (A) the Participant's applicable Transition Factor described in Table 1 of this Section, times (B) the lump-sum cashout value of the Accrued Benefit payable at age 65 under the 1995 BAMPP Plan.... Under § 4.19 of the BAMPP, which was attached to the Cash Balance Plan as an appendix, lump-sum payments for employees who retired during the 1994-1995 cashout window were calculated using a discount rate of 120% of the applicable PBGC interest rate. Reading the language of § 16.5.1(a)(2) in the context of the entire Cash Balance Planincluding the attached 1995 BAMPPthe best interpretation is one that applies the 120% PBGC discount rate used in the 1995 BAMPP to calculate opening cash balances. The plain meaning of the (B) variable in § 16.5.1(a)(2)the lump-sum cashout value ... payable ... under the 1995 BAMPP Planis the lump-sum value as calculated under the 1995 BAMPP. Since the BAMPP used a 120% PBGC discount rate, that same methodology carries over to calculating opening balances under the Cash Balance Plan. Young points to the umbrella section 16.5.1, which provides that any present value that must be determined under this Section 16.[5] shall be determined ... using the PBGC interest rates which were in effect for September of 1995. Young would apply this present value definition, which uses a discount rate of simply 100% of the PBGC rate, to determine the lump-sum cashout value in § 16.5.1(a)(2). Young's interpretation ignores the explicit reference in § 16.5.1(a)(2) to the cashout value under the 1995 BAMPP Plan. Because § 16.5.1(a)(2) specifically uses the 1995 BAMPP formula for discounting lump-sum values, the more general present value formula in § 16.5.1 does not apply to that section. We also disagree with Young that incorporating the 1995 BAMPP, 120% PBGC formula into § 16.5.1(a)(2) in this manner renders the 100% PBGC formula in § 16.5.1 superfluous. The latter formula applies broadly to calculate present values under this Section 16.[5]. Notably, unlike § 16.5.1(a), provisions in § 16.5.2(a) use the present value term defined in § 16.5.1 to determine opening cash balances for employees covered by those sections. So it harmonizes all the language in § 16.5 to give effect to the 120% PBGC rate incorporated into § 16.5.1(a)(2) for that specific provision, while giving effect to the general 100% PBGC rate for other provisions in § 16.5. The most reasonable reading of § 16.5.1(a)(2) is one that applies the 120% PBGC discount rate to calculate opening cash balances. At the very least, Verizon's Review Committee did not abuse its discretion in adopting this interpretation.