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Lump-Sum Benefits Must Include Cost-of-Living Adjustments


The U.S. Supreme Court has let a Seventh Circuit Court of Appeals decision stand. The Court of Appeals for the Seventh Circuit ruled that when a pension plan calculates the amount of a retiree’s lump-sum distribution, the plan must take into account the cost-of-living-adjustments (COLAs) that would have been included if the pension had been paid as a lifetime monthly annuity.

In Williams v. Rohm and Haas Pension Plan, Gary Williams elected to receive his pension in the form of a lump-sum distribution. Six years later, he sued the plan because he had discovered that his lump-sum distribution did not include the cost-of-living-adjustments that the plan routinely provided participants who elected to receive their pension benefit in the form of an annuity.

The Seventh Circuit found that pension plans that provide COLAs to participants are required to include these COLAs in the calculation of both lump-sum distributions and annuities. On March 17, 2008 the Supreme Court denied the company’s request for the court to address the issue.

Read the Seventh Circuit’s decision in Williams v. Rohm and Haas Pension Plan.

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