District Court Upholds Whipsaw Calculation For Pre-PPA Distributions

In Traylor v. Avnet Pension Plan, a District Court ruled that the elimination of the so-called whipsaw calculation by the Pension Protection Act of 2006 (PPA) does not quash claims for additional benefits based on pre-PPA lump-sum distributions.

The PPA dispensed with the whipsaw calculation for distributions after the enactment date of Aug. 17, 2006. Participants in the Avnet, Inc., cash balance plan who received lump-sum distributions before that date challenged the plan, seeking additional benefits based on the whipsaw calculation. The plan argued that any additional payments sought by participants would constitute “distributions” after the PPA’s effective date and thus were not subject to whipsaw requirements.

The court disagreed, holding that the additional amounts were not a new distribution, but rather retrospective relief for a past violation of the law as it stood at the time of the original distribution. The interpretation urged by the plan would apply the PPA’s whipsaw elimination retroactively, despite clear statutory language to the contrary. The Avnet ruling is the second consideration of this issue by a court, with the 6th U.S. Circuit Court of Appeals reaching the same decision in West v. AK Steel Corp.