Foot Locker Inc. has to pay higher pension benefits to correct payouts related to the conversion of the company’s pension plan in 1996 to a defined benefit plan with a cash balance formula.
A federal appeals court ruled that the retirement plan change that amounted to an impermissible and undisclosed benefit freeze, according to Bloomberg. Plaintiff in the class action lawsuit, Osberg v. Foot Locker Inc., alleged that, in connection with the 1996 conversion of the retirement plan to a defined benefit plan with a cash balance formula, Foot Locker and the retirement plan failed to properly advise plan participants of the “wear-away” effect of the conversion. . Plaintiff’s claims were for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974, as amended, and violation of the statutory provisions governing the content of the Summary Plan Description.
According to Bloomberg, the court said the workers weren’t required to show on an individual basis that they detrimentally relied on Foot Locker’s statements about their pensions.
In 2015, Foot Locker said it intended to appeal a U.S. District Court decision issued late yesterday in favor of the plaintiff in the case of Osberg v. Foot Locker, Inc.
Bloomberg said the July 6 decision by the U.S. Court of Appeals affected about 16,000 former Foot Locker workers.
In the third quarter of 2015, Foot Locker recorded a pre-tax charge of $100 million ($61 million after-tax) in connection with our pension litigation. In its most recent 10Q filing, Foot Locker that regardless of the outcome, it did not believe the legal proceedings “would have a material adverse effect on the company’s consolidated financial position, liquidity, or results of operations, taken as a whole, based upon current knowledge and taking into consideration current accruals.”
Photo courtesy Foot Locker
