The U.S. Supreme Court declined to grant certiorari to review a Seventh Circuit case permitting a plan sponsor to correct a drafting error in a cash balance plan. See Young v. Verizon's Bell Atlantic Cash Balance Plan, 2010 WL 3122795 (7th Cir. 2010). The case involved the conversion of Bell Atlantic's defined benefit pension plan to a cash balance plan. Under the new plan, a participant's old pension plan benefit was converted to a lump sum value and multiplied by a transition factor to determine the participant's opening account balance.  

In converting the pension plan to a cash balance plan, an error arose in the fourth draft of the plan restatement when an in-house attorney restructured the benefit calculation section to a more readable "A times B" format. The attorney inadvertently failed to delete the trailing clause from the previous draft that multiplies the benefit times the transition factor. A literal reading of this provision would require the lump sum value to be multiplied by the transition factor twice, creating a windfall to participants of over a billion dollars in additional benefits. The district court found that the second transition factor was a scrivener's error and granted Verizon's counterclaim for equitable reformation of the plan. The Seventh Circuit affirmed, holding that ERISA section 502(a)(3) authorizes the equitable reformation of a plan that is shown by clear and convincing, objective evidence to contain a scrivener's error that does not reflect the participants' reasonable expectations of benefits. The Supreme Court's decision not to review the case allows the Seventh Circuit's ruling to stand.  

Reinhart Comment: Verizon serves as a reminder to plan sponsors to carefully review plan documents and SPDs for accuracy. While the Seventh Circuit allowed Verizon to reform the plan terms, the court required clear and convincing, objective evidence of the intended plan language. This rigorous standard of proof is intended as a limitation on the availability of equitable reformation and other plan sponsors may not have sufficient evidence to support the correction of a scrivener's error.