Southern District of Ohio: Statute of Limitations Bars Claim For Pension Benefits

By: Ronald Kramer and James Goodfellow

A recent decision from the Southern District of Ohio, Gelesky v. AK Steel Corp. et. al, Case No. 1:10-cv-899, (S.D. Ohio, November 30, 2011), dismissed as time barred a putative class action in which plaintiff, a participant in his former employer’s cash balance pension, alleged that the Plan’s methodology for calculating benefits violated ERISA.

Plaintiff elected upon his retirement to receive a lump-sum payment of his Plan benefits. The payment he received equaled his hypothetical account balance. Plaintiff alleged that this payment violated ERISA, because the Plan had failed to perform the requisite “whipsaw” calculation. Under a whipsaw calculation, a participant’s hypothetical account balance is projected to normal retirement age by using the interest crediting rate found in the plan, and then discounting back to present value using rates published by the Internal Revenue Service.

Defendants moved to dismiss the complaint as time barred. Defendants argued that the appropriate statute of limitations was Ohio Revenue Code 2305.07, which provides a six year statute of limitations for actions based on statutory liability. They asserted that the limitations period began to run in 1999 when the plaintiff received his lump-sum payment. Plaintiff countered that the correct limitations period was Ohio’s fifteen year contract limitations period, and that the claim did not accrue until 2008, when plaintiff first learned of the “whipsaw” issue.

The Court agreed with defendants. It stated that although there is precedent for applying the longer breach of contract limitations period in ERISA cases, those cases involved actions where plaintiffs properly had alleged a breach of the plan terms, which is essentially a breach of contract claim. The Court concluded that, in this case, “[n]one of the plan terms Plaintiff cites support a plan-based claim for whipsaw benefits.” Instead, plaintiff was claiming that the plan terms themselves violated ERISA. Thus, “[b]ecause…Plaintiff’s claim is based upon ERISA’s statutorily-required actuarial equivalence and ‘whipsaw’ provisions…the most analogous statute of limitations is [the six year statute]…contained in Ohio Rev. Code 2305.07.”

The Court further concluded that the claim accrued when plaintiff received his lump-sum payment, and said that this conclusion was bolstered by the documents he received when he retired, which clearly and unambiguously stated that his lump-sum payment would be equal to his account balance. Said the Court: “[t]here is no question that Plaintiff’s election and acceptance of that lump sum payment is a clear repudiation by the Plan that he is entitled to anything further.” The Court also denied the plaintiff’s request to reform the plan.

This case is noteworthy, as it distinguishes between ERISA claims alleged as breaches of plan terms, and thus subject to what are generally longer statutes of limitations for contract breaches, and ERISA claims alleged as violations of ERISA itself, and thus subject to what are generally shorter statutes of limitations.