Full opinion text
ENTRY ON MOTIONS FOR SUMMARY JUDGMENT HAMILTON, District Judge. Like many employers in recent years, defendant Onan Corporation converted its defined benefit retirement plan to a design known as a “cash balance” design. In this case, Onan employees and retirees have raised a claim of age discrimination that could result in a finding that cash balance plans are essentially per.se illegal. The question is one of first impression in the courts: whether a cash balance defined benefit pension plan violates federal prohibitions on age discrimination in pension plans on the theory that the “rate of benefit accrual” declines with an employee’s age. See 29 U.S.C. § 623(i) (for defined benefit plans, prohibiting “cessation of an employee’s benefit accrual, or the reduction of the rate of an employee’s benefit accrual, because of age”) & 29 U.S.C. § 1054(b)(1)(H) (defined benefit plan violates law if “an employee’s benefit accrual is ceased, or the rate of an employee’s benefit accrual is reduced, because of the attainment of any age”). That question has been left unanswered by the Internal Revenue Service and the Equal Employment Opportunity Commission since the relevant statutory language was enacted in 1986. As explained below, the court finds that the cash balance plan at issue here does not violate those prohibitions on age discrimination in terms of the rate of benefit accrual. Plaintiffs have also raised a number of related claims more specific to the particular plan in this case, three of which cannot be resolved as a matter of law on the parties’ motions for summary judgment. I. Background and Summary Plaintiffs here are participants in the Onan Pension Plan sponsored by defendant Onan Corporation, a wholly-owned subsidiary of Cummins Engine Company, Inc. Plaintiffs assert claims under the Age Discrimination In Employment Act of 1967 (ADEA), 29 U.S.C. § 621 et seq., against defendant Onan Corporation, and under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., against defendants Onan Corporation, the Pension Policy Committee of Cummins Engine Company, Inc., the Onan Pension Plan, and the Onan Profit Sharing Plan. On December 14, 1994, the Onan board of directors formally amended and “restated” the Onan Pension Plan, retroactive to January 1, 1989, adopting what is known as a cash balance pension plan design. Plaintiffs assert that Onan has violated the ADEA, first by establishing and maintaining a cash balance pension plan that reduces the rate of a participant’s benefit accrual because of age, and second by providing alternative formulas for annuities under the Pension Plan without offering an equivalent lump sum payment as an optional form of benefit. Plaintiffs also contend that the Onan Pension Plan’s rate of benefit accrual violates ERISA because a participant’s rate of benefit accrual decreases based on a participant’s age, because some forms of benefits are payable only as annuities and not as lump sums, because the accrual of benefits is excessively “backloaded,” and because. defendants failed to use reasonable actuarial factors in determining participants’ offset amounts under the Onan Profit Sharing Plan. Defendants have moved for summary judgment on all of plaintiffs’ claims. Plaintiffs have moved for summary judgment as to liability on their age discrimination claims on the rate of benefit accrual issue under both the ADEA and ERISA, and on their claims regarding lump sum distributions under ERISA, 29 U.S.C. §§ 1053 & 1055. For two reasons, the court finds as a matter of law that the cash balance design of the Onan Pension Plan does not violate the age discrimination provisions on the rate .of benefit accrual in the ADEA, 29 U.S.C: § 623(i), or ERISA, 29 U.S.C. § 1054(b)(1)(H). First, the legislative history shows that these specific prohibitions do not apply at all to employees who have not yet reached normal retirement age. Accrual of benefits for these younger employees is regulated by other provisions of ERISA. Second, even assuming these pension age discrimination provisions apply at all to participants who have not reached normal retirement age, when their language is properly applied to cash balance pension plans, the undisputed facts show that the rate of benefit accrual does not depend on age. The court also finds as a matter of law that the Onan Pension Plan does not discriminate on the basis of age by failing to provide for a lump sum payment option for all alternative formulas for calculating an annuity benefit. The court therefore grants summary judgment for defendants on these claims and denies plaintiffs’ motion for summary judgment on these claims. In light of very recent decisions of the Second and Eleventh Circuits interpreting 29 U.S.C. § 1053(e), however, the court denies both sides’ motions for summary judgment on the question whether ERISA requires the Onan Pension Plan to offer payment of benefits based on the so-called “minimum annuity” and “grandfather annuity” in the form of a lump sum payment that is the actuarial equivalent of the applicable annuity. See Esden v. Bank of Boston, 229 F.3d 154, 161 (2d Cir.2000); Lyons v. Georgian-Pacific Corp. Salaried Employees Retirement Plan, 221 F.3d 1235, 1251 (11th Cir.2000). These recent decisions may call for the creation of subclasses of plaintiffs based on the effects of 1994 legislation. There are also issues regarding the availability and extent of retroactive relief for participants who have chosen to take benefits in the form of annuities rather than lump sum distributions. The court also is not persuaded that defendants are entitled to summary judgment on two additional issues. The first is whether the Onan Pension Plan violates the “anti-backloading” benefit accrual requirements of ERISA. The second is whether Onan could properly use two different interest rates when calculating opening account balances for participants who had also participated in the Profit Sharing Plan. Defendants’ motion for summary judgment on ERISA claims is denied on those claims. II. Cash Balance Pension Plans In general, federal law recognizes two types of pension plans provided by employers: defined benefit plans and defined contribution plans. In a defined benefit plan, a plan participant is entitled to a fixed periodic benefit payment upon retirement. Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999), citing Commissioner v. Keystone Consolidated Industries, Inc., 508 U.S. 152, 154, 113 S.Ct. 2006, 124 L.Ed.2d 71 (1993). Benefits are paid to plan participants pursuant to a formula spelled out in the pension plan. Defined benefit plans are usually funded by the employer on an actuarial basis, which is supposed to ensure that the plan will have adequate funds to pay the benefits promised to plan participants when they reach retirement age. Because a defined benefit plan “consists of a general pool of assets rather than individual dedicated accounts,” the employer “typically bears the entire investment risk and ... must cover any underfunding as the result of a shortfall that may occur from the plan’s investments.” Hughes Aircraft, 525 U.S. at 439, 119 S.Ct. 755. Until recently, the benefit formulas in defined benefit plans typically have been based on a percentage of the participant’s salary over the last year or several years before retirement, multiplied by the participant’s years of service with the employer. That design assumes that most employees’ compensation is highest near the end of their careers, so an employee usually earns the largest share of a retirement benefit near the end of his or her career. Thus, such a plan rewards long-term employment and loyalty. Some pension practitioners refer to this as a “backloaded” accrual of benefits. See generally Alvin D. Lurie, Cash Balance Plans: Enigma Variations, Tax Notes Today (Oct. 25, 1999) (electronic publication). In contrast, a defined contribution plan establishes an individual account for each participant. The employer , may make periodic contributions to the participant’s individual plan account (often supplemented by voluntary contributions by the participant). The participant’s retirement benefit is determined by the balance in the individual account, which will depend on the contributions plus net investment earnings on the contributions. See 29 U.S.C. § 1002(23)(B) (defining a participant’s accrued benefit in a defined contribution account as “the balance of the individual’s account”). Because a participant’s retirement benefit is not a fixed amount, the participant bears the investment risk. De^ fined contribution plans generally do not have the “backloading” problem found in many defined benefit plans. The benefits in a defined contribution plan are a function of contributions and investment earnings over an entire career with an employer, not primarily just the last year or last few years. See generally The Controversy Over Cash Balance Plans, 158 N.J.L.J. 652 (Nov. 22,1999). Cash balance plans are defined benefit plans that strongly resemble defined contribution plans. See generally Esden v. Bank, of Boston, 229 F.3d 154, 176 (2d Cir.2000) (describing cash balance plans). The IRS has described cash balance plans as follows: In general terms, a cash balance plan is a defined benefit pension plan that defines benefits for each employee by reference to the amount of the employee’s hypothetical account balance. An employee’s hypothetical account balance is credited with hypothetical allocations and hypothetical earnings determined under a formula selected by the employer and set forth in the plan. These hypothetical allocations and hypothetical earnings are designed to mimic the allocations of actual contributiqns and actual earnings to an employee’s account that would occur under a defined contribution plan. Cash balance plans often specify that hypothetical earnings (referred to in this notice as interest credits) are determined using an interest rate or rate of return under a variable outside index (e.g., the annual yield on one-year Treasury securities). IRS Notice 96-8, 1996-1 C.B. 359 (Feb. 5, 1996). Because cash balance plans provide that an individual’s account will receive interest credits that are outside the control of the employer, • the employer bears the risk that the plan’s investment return may fall below the interest credit rate guaranteed by the plan. Similarly, the employer benefits if the plan’s net investment return is above the rate guaranteed by the plan. From an economic standpoint, a cash balance pension plan is'' something of a hybrid between a defined benefit and defined contribution pension' plan. By legal definition, however, a cash balance pension plan is still a defined benefit plan. With cash balance plans, as with any defined benefit plans, there is a risk “that at a given time plan assets will fall short of the present value of vested plan benefits.” Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 230, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) (O’Connor, J., concurring). Defined benefit pension plans therefore are subject to a number of statutory requirements that do not apply to defined contribution plans. A cash balance plan must comply with these requirements because it is a defined benefit plan under the law. Most of these requirements were written between 1974 and 1984, before cash balance plans were developed and began to be widely adopted. See generally John M. Vine, Cash Balance Plan Litigation, 615 PLI/Lit 631 (Oct.Nov.1999). “At that time, most pension plans were based on a formula that expressed an employee’s accrued benefit, not as an account balance, but as an annuity commencing at normal retirement age.” Id. at 634. The rules for defined benefit plans simply were not developed to address the features of cash balance pension plans. See Esden v. Bank of Boston, 229 F.3d at 158. The first cash balance pension plan was established in 1985. See Lee A. Sheppard, The Down-Aging of Pension Plans, Tax Analysts, Inc. (1999). Cash balance plans have become increasingly popular among employers in recent years. Many employers believe that cash balance pension plans are more attractive to younger workers than traditional defined benefit plans that tend to provide the greatest benefits to long term career employees. Cash balance plans provide greater portability of benefits from one job to another over the course of a career. See Esden v. Bank of Boston, 229 F.3d at 158, n. 5 (summarizing benefits of cash balance plans); Lyons v. Georgia-Pacific Corp. Salaried Employees Retirement Plan, 221 F.3d at 1248 (noting that “one arguable benefit of [cash balance] plans is that they allow younger workers to take a larger benefit with them when changing jobs”). However, many older workers have resisted the conversion of their pension plans to cash balance plans. Conversions of plans can affect adversely the expectations, of a generation of employees who were too young to derive much benefit from the traditional “final average pay” design, but who are too old to have gotten an early start in their careers on the benefits of a cash balance plan. This generation has essentially been getting the worst of both worlds as a result of the conversions. See generally Hope Viner Samborn, Now You See It, Now You Don’t, Older Workers Watch Pension Erode as Employers Turn to Cashr-Balance Plans, 85 Nov.-A.B.A. J. 34 (Nov.1999). In the face of growing popularity of cash balance plans among employers and growing controversy among older workers regarding these plans, neither the IRS nor the EEOC has issued final regulations regarding the application of ERISA and the ADEA to cash balance plans. Perhaps in part as a result of this lack of guidance from the agencies, courts are now considering class action lawsuits brought by employees unhappy with their employers’ decisions to convert their pension plans to a cash balance design. See id. (noting that conversions to cash balance pension plans “have spurred groups of older workers to file class action lawsuits alleging age discrimination and other violations of the law” and listing various lawsuits that have been filed on behalf of unhappy workers). III. Summary Judgment Standard The purpose of summary judgment is to “pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Under Rule 56(c) of the Federal Rules of Civil Procedure, the court should grant summary judgment if and only if the record shows there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c). The fact that the parties have filed cross-motions for summary judgment does not alter the standard. When considering the plaintiffs’ motion for summary judgment, the court must consider the evidence in the light reasonably most favorable to the defendants, and vice versa. In light of this standard, the facts set forth in this entry are either undisputed or represent the evidence of disputed facts in the light reasonably most favorable to the non-moving parties on the particular issue. IV. Undisputed Facts A. Onan and Its Prior Pension and Profit Sharing Plans Since 1992 Onan has been a wholly-owned subsidiary of Cummins Engine Company, Inc. In 1952 Onan established the Profit Sharing Plan, which was a defined contribution employee pension benefit plan under ERISA. In 1976 Onan established the Onan Pension Plan, which is a defined benefit plan under ERISA: Beginning in 1976, the Onan Pension Plan and the Profit Sharing Plan provided a “floor-offset” arrangement. Benefits for a participant in the Onan Pension Plan were calculated after taking into account the same participant’s benefits earned under the Profit Sharing Plan. The Pension Plan therefore provided a minimum level of benefits available to a participant regardless of contributions to the Profit Sharing Plan or the investment return on contributions to either plan. As originally adopted, the Onan Pension Plan used a “final average pay” design. The plan provided that a participant’s accrued benefit determined as of a specified date was based on the participant’s “average monthly compensation” determined as of that specified date, less 50% of the participant’s “Social Security benefit” determined as of such specified date, and less the participant’s Profit Sharing Plan offset. “Average monthly compensation” was based on the highest five consecutive plan years of compensation completed within the ten most recent years, which is why it can be called a “final average pay” design. B. The New Cash Balance Design for the Onan Pension Plan In the late 1980s, Onan was advised that the Tax Reform Act of 1986, P.L. No. 99-514, 100 Stat.2085 (1986), would require changes to the integrated final average pay plans like the Onan Pension Plan that used offsets for Social Security benefits and profit sharing benefits. Maintaining the basic design and level of benefits would have increased Onan’s costs substantially, by between $750,000 and $2,000,000 in the first year. ' Onan began to evaluate alternative benefit formulas for the Pension Plan. Onan hired a consulting firm, Kwasha Lipton, for advice on alternative plan designs that would comply with the Tax Reform Act yet be cost neutral for Onan. After several months', Kwasha Lipton recommended a cash balance plan formula, which the firm had helped to develop and promote. On October 27,1989, the company’s Pension Policy Committee recommended to the Onan board of directors that a cash balance formula be adopted to replace the final average pay benefit formula. More than five years later, in December 1994, the Onan board of directors formally amended the Onan Pension Plan to adopt the cash balance design retroactive to January 1,1989. Under the terms of the new Onan Pension Plan, each participant’s accrued benefit as of December 31, 1988, under the prior final average pay formula was converted to an opening account balance for a hypothetical individual account. See Pension Plan § 3.3. Thereafter, each participant’s hypothetical account balance in the Pension Plan has received “pay-based credits” for each year of service, as well as interest credits, or hypothetical earnings, ón those pay-based credits. Pension Plan §§ 3.2, 3.4. A participant’s service credit or pay-based credit is 2.5% of eligible compensation up to the Social Security wage base, and 4.25% of eligible compensation in excess of the wage base. Pension Plan § 3.2. Interest credits are credited to a participant’s account each month. The interest credits are made at the “Inactive Interest Credit Rate”. for any year in which the participant is not an employee and is not receiving benefit payments. The Inactive Interest Credit Rate is the average of the one-year Treasury bill and 30-year U.S. government bond yields for the immediately preceding fiscal year. While the participant is still employed, the interest credits are made at the Active Interest Credit Rate, which is 2.25% higher than the Inactive Interest Credit Rate. Pension Plan § 3.4. For example, in 1994, the Inactive Interest Credit Rate was 5.25% and the Active Interest Credit Rate was 7.50%. In 1998, the Inactive Interest Credit Rate was 6.25% and the Active Interest Credit Rate was 8.50%. The Onan Pension Plan defines a participant’s “accrued benefit” in two different ways, as follows: (a) When expressed in the form of a lump sum amount, the Participant’s Account balance, as of any particular determination date (including the right to future periodic adjustments pursuant to Section 3.4 with respect to such Account balance at such determination date); and (b) When expressed in the form of an annuity commencing on a particular determination date, the single life annuity which is the Actuarial Equivalent of the Participant’s Account balance on such date. Pension Plan § 1.2. A participant’s retirement benefit is paid in its standard form as a single life annuity or, if the participant is married, a qualified joint and 50% survivor annuity. Pension Plan §§ 6.2, 6.3. For those participants who started early enough with Onan to have also participated in the Profit Sharing Plan, the participant’s retirement benefit under the amended Pension Plan is offset by the participant’s profit sharing amount, just as it would have been under the prior version of the Pension Plan. The amended Pension Plan sets forth the actuarial factors used to calculate each participant’s profit sharing offset. See Pension Plan, Ex. I, § 2. The new benefit formula includes several features that protect the rights and, at least to some degree, the expectations of employees who were also participants in the pre-1989 Pension Plan. First, as required by ERISA, see 29 U.S.C. § 1054(g)(1), participants’ accrued benefits under the prior version of the Pension Plan are specifically protected in the amended Pension Plan: No Reduction in Pre-January 1, 1989 Accrued Benefits Under Prior Plan. In no event shall the benefits payable under this Plan to a Participant who was a participant under the Prior Plan (i) who becomes a Participant under Section 2.1(a), be less than the Actuarial Equivalent of the benefits such Participant would have received under the Prior Plan if he had ceased to be an Employee on December 21, 1988 or (ii) who becomes a Participant under Section 2.1(c), be less than the Actuarial Equivalent of the benefits to which such Participant was entitled under the Prior Plan at his termination of employment before January 1,1989. Pension Plan § 6.10. Second, the Pension Plan also provides for a “minimum annuity” and a “grandfather annuity.” Pension Plan, Ex. II. Neither feature was required by ERISA or any other law. These optional annuities were intended to provide participants who were also participants in the prior version of the Pension Plan with benefits comparable to those they would have been entitled to if they had retired under the prior version. Nolander Aff. ¶ 16. The minimum annuity guarantees that, in converting a participant’s account balance to the accrued benefit at cessation of employment, the benefit amount will not be less than the amount of the minimum annuity. Pension Plan, Ex. II. The Pension Plan also provides that for those Plan participants who were also participants under the prior version, the benefit amount at cessation of employment shall be no less than a higher, guaranteed “grandfather annuity.” Id. If a participant elects to receive the pension benefit as an annuity, he or she will receive the greatest of the “minimum annuity,” the “grandfather annuity,” or the actuarial equivalent of the individual account balance. Pension Plan, Exs. I, II. Under the Pension Plan, however, a participant is not entitled to demand a lump sum distribution based on either the minimum annuity or the grandfather annuity. Those two levels of benefits are paid only in the form of an annuity. During November 1989, Onan conducted a series of mandatory slide presentations for all employees in small group settings to explain and answer questions about the amendments to the Pension Plan. Around the same time, Onan also distributed a brochure to each participant outlining the amendments. Onan followed-up the slide presentations with question and answer sessions, staff and team meetings, and personal meetings upon request. In May 1990 participants received a memorandum addressing frequently asked questions about the new cash balance formula. Onan also conducted informational sessions to answer participants’ questions regarding the new cash balance plan formula. In late 1990, participants also received a summary plan description setting forth the amendments to the plan. By way of a memorandum dated July 12,1990, all participants were advised that pension estimates were available upon request. Since 1989, each participant has received an annual cash balance statement that details his or her current account balance value and, since 1992, the individual benefit payable at normal retirement age. As late as the fall of 1994, though, Onan officials were still working to fine-tune the terms of the amended and restated Pension Plan. On October 7, 1994, Kwasha Lipton sent a draft of the amended Pension Plan document to Onan’s director of compensation and benefits. The draft contained “redlining” in which the language defining “Accrued Benefit” was revised. Similarly, the definitions of “Compensation” and “Eligible Employee” were revised. Pl.Ex. 15. The final Pension Plan document was not formally executed by Onan until December 1994. See Pl.Ex. 5, ¶ 4 (Onan’s Answer in related Tax Court case). As a result, the plan document setting forth the final terms of the amendments was not available for inspection by Onan’s employees until late December 1994. On March 24, 1995, Onan submitted the amended Pension Plan to the IRS District Office for approval as a qualified plan under the Internal Revenue Code, 26 U.S.C. § 401. On July 28,1997, the IRS Employee Plan Specialist responsible for reviewing the Pension Plan notified Onan that the District Office’s position was that the plan “does not satisfy the clear and straightforward requirement of section 411(b)(l)(H)(i) of the Code because the plan’s benefit accrual rate decreases as a participant attains each additional year of age.” PLApp. A, Ex. 4 at 29. The IRS District Office has not issued a determination letter regarding the Pension Plan’s qualification status, but has submitted the Pension Plan determination letter request to the IRS National Office for advice. Id. at 23. C. Individual Plaintiffs and the Classes Plaintiff James Eaton worked for Onan from 1953 through April 5, 1995, when he retired at age 62. Eaton elected to receive his retirement benefit from the Pension Plan in the form of an annuity. He is currently receiving a monthly benefit from the Pension Plan. Plaintiff Steve Seidlitz has been employed by Onan since 1972 and is currently a participant in the Pension Plan. Eaton and Seidlitz each filed a charge of discrimination with the EEOC on November 22, 1996, alleging that Onan’s conversion of the average final pay formula to a cash balance formula violated Section 4(i) of the ADEA, 29 U.S.C. § '623(i). Plaintiffs filed their complaint in this court on May 19, 1997, alleging in relevant part the same claims set forth in their EEOC charges. Cplt., Cts. I — III. Plaintiffs then filed an Amended Complaint on July 1, 1998, adding claim's that Onan, by failing to give participants the option of receiving the minimum or grandfather annuities in lump sum payments, violated Section 4(a) of the ADEA, 29 U.S.C. § 623(a). Am. Cplt., Cts. III-V. Plaintiffs’ complaints also asserted claims under ERISA. Before filing their complaint, plaintiffs did not exhaust their administrative remedies under the Pension Plan’s claims procedure. Am. Cplt. ¶ 53. However, plaintiffs do not contend at this point in the case that the Pension Plan has been administered contrary to its terms. Regarding claims under the ADEA, the court entered an agreed order on November 7, 1997, defining the following plaintiff class for a collective action under 29 U.S.C. § 216(b): Any employee or former employee of Onan Corporation who is or was entitled to the accrual of a benefit under the Onan Pension Plan for any period after the latter of (i) December 31, 1988, or (ii) the date the participant attained age 40. Approximately 1500 of the 2500 persons eligible to join the collective action under the ADEA have done so. Regarding claims under ERISA, the court entered an agreed order on April 7, 1998, defining the following plaintiff class under Fed.R.Civ.P. 23(b)(2): All persons, other than Defendants, who are or have been participants in or beneficiaries of the Onan Pension Plan at any time on or after January 1, 1988, and who have or have had a vested right to benefits from the Pension Plan. By separate entry today, the court has denied defendants’ motion to decertify the ERISA class and the ADEA collective action. Other undisputed facts are noted below as needed. V. Discussion The court addresses in Part A plaintiffs’ claims of age discrimination based on the rate of benefit accrual, then turns in Part B to the age discrimination claims based on the availability of lump sum distributions. The court then addresses in Part C plaintiffs’ claims under ERISA, and finally deals with a few loose ends in Part D. A. Age Discrimination and the Rate of Benefit Accrual 1. The Statutes and the Issue Plaintiffs contend that the Onan Pension Plan violates pension age discrimination provisions enacted in Sections 9201 and 9202 of the Omnibus Budget Reconciliation Act of 1986 (“OBRA 1986”), P.L. 99-509, 100 Stat. 1874, 1973-78. Those three parallel provisions are found in the ADEA at 29 U.S.C. § 623(i), in ERISA at 29 U.S.C. § 1054(b)(1)(H), and in the Internal Revenue Code at 26 U.S.C. § 411(b)(1)(H). The ADEA provision states in relevant part: (i)(l) Except as otherwise provided in this subsection, it shall be unlawful for an employer, an employment agency, a labor, organization, or any combination thereof to establish or maintain an employee pension benefit plan which requires or permits— (A) in the case of a defined benefit plan, the cessation of an employee’s benefit accrual, or the reduction of the rate of an employee’s benefit accrual, because of age,.... 29 U.S.C. § 623(i). The ERISA provision states that a defined benefit pension plan violates the age discrimination prohibition if, under the plan, “the rate of an employee’s benefit accrual is reduced, because of the attainment of any age.” 29 U.S.C. § 1054(b)(1)(H). The Internal Revenue Code provision uses the same language as the ERISA provision. See 26 U.S.C. § 411(b)(1)(H). The House Senate Conference Committee report on these three provisions stated that the conferees intended that the three provisions be “interpreted in a consistent manner and do not intend any differences in language in the provisions to create an inference that a difference exists among such provisions.” See H.R. Conf. Rep. No. 1012, 99th Cong., 2d Sess. 378-79 (1986), reprinted in 1986 U.S.C.C.A.N. 3868, 4023-24. Plaintiffs claim that the Onan Pension Plan violates the ADEA and ERISA provisions by reducing the rate of benefit accrual because of the participant’s age. (Plaintiffs also believe the plan violates the parallel provision of the Internal Revenue Code, but they realize they have no standing to enforce that provision directly.) Both sides have moved for summary judgment on these claims. There are no disputed issues of material fact regarding these claims. Whether these statutes are violated does not depend on any question of intent. Plaintiffs assert their claims, and defendants defend the plan, based on objective and undisputed facts about .the terms and effects of the Onan Pension Plan’s cash balance design. The dispute between the parties is one of statutory interpretation: how must a defined benefit plan participant’s “rate of an employee’s benefit accrual” be determined for purposes of the OBRA 1986 pension age discrimination provisions in the ADEA and ERISA? The issue has considerable practical importance. Cash balance plans have become increasingly common over the past fifteen years. If plaintiffs are correct, it is likely that hundreds of cash balance plans with millions of participants will be deemed illegal. Plaintiffs concede that the service or pay-based credits under the Onan Pension Plan do not depend at all on a participant’s age, and that the interest credits under the plan also do not depend at all on a participant’s age. Plaintiffs argue that the law requires that a participant’s rate of benefit accrual be measured not in terms of the current pay credits or the current interest credits, but in terms of the amount of an annual benefit beginning at normal retirement age. "When the rate of benefit accrual is measured in this manner, estimates of projected future interest credits on a current year’s pay credits are deemed “accrued” in the year in which the applicable pay credit was granted. If one wants to measure a participant’s accrued benefit in the form of an annuity commencing at normal retirement age, then the undisputed facts show that the participant’s age must be part of the calculation. See Pou-lin Aff. II ¶¶ 5-8. If plaintiffs’ interpretation of the statutes is correct — if the pension age discrimination provisions required a participant’s rate of benefit accrual to be measured solely in terms of the value of an annuity payable at normal retirement age — then the Onan Pension Plan, and probably any other cash balance plan, violates the OBRA 1986 pension age discrimination provisions. This effect results simply from the time value of money. All other things being equal, the service credit for a younger employee adds more to the value of an annuity payable at that employee’s normal retirement age than an identical service credit for an older employee. The younger employee’s service credit will earn interest credits for more years than the older employee’s before each reaches the age of normal retirement. This effect is inherent in virtually any cash balance pension plan design. Two examples under the Onan Pension Plan illustrate this basic point. Plaintiffs compare the benefits earned by two employees who began employment at Onan at the same time in 1990. See Poulin Aff. I, Ex. F. One employee is 25 years old and the other is 45 years old. Both perform the same work and both earn salaries of $30,000. See Poulin Aff. I ¶¶ 18-19 & Ex. F. In their first year of service, each employee earns a service credit of $960. Id. Using plaintiffs’ methodology to measure the rate of benefit accrual in terms of an annuity payable at normal retirement age, the amount of each employee’s service credit is projected forward to age 65 assuming an inactive interest rate of 8.75%. For the 25 year old employee, the projected account balance from that $960 credit will grow by age 65 to $25,293.71. For the 45 year old employee, the projected account balance at age 65 for that same $960 Credit will be $4,725.28. When these projected account balances are converted to single life- annuities at age 65, the 25 year old employee has accrued in that one year ah annuity of $3,025.56, while the 45 year old employee has accrued in that same year' an annuity of only $565.22. If the rate of benefit accrual is measured as a ratio of the annuity at age 65 to the employee’s current compensation,- the 25 year old employee’s rate of benefit accrual (his “accrued benefit” divided by-his salary) is 10.09%, while the 45 year old employee’s rate of benefit accrual is only 1.88%. Plaintiffs also point to the experience of “Jane Doe,” a former Onan'employee who was born on December 5, 1946. She began her employment with Onan oh August 14, 1989, and terminated her employment on January 23, 1998. As of the date her employment terminated, Doe had an account balance under the cash balance Pension Plan equal to $5,625.85. PLApp. A, Ex. 13. Assuming that interest rates stayed constant, that balance would continue to grow until Doe reached age 65, at which point it would pay for a normal retirement benefit payable as a single life annuity with payments of $112.28 per month, or $1,347.46 per year. Id. If Doe were five years younger, born on December 5, 1951, but all 'other aspects of her employment had been the same; she would have accrued a benefit payable as a single life annuity at age 65 with payments of $151.90 per- month or $1,822.80 per year, again' assuming interest rates remained constant. Poulin Aff. I ¶¶ 10-16 & Ex. E. Defendants do not quarrel with plaintiffs’ arithmetic in these examples. The effects plaintiffs describe are the obvious effects of the time value of money as applied to participants’ cash balances. Instead, defendants quarrel with the statutory interpretation. Defendants contend that the OBRA 1986 pension age discrimination provisions apply only to employees who have already passed normal retirement age, so that those provisions do not apply at all to the younger employees who have not reached normal retirement age. Defendants also argue that even if the pension age discrimination provisions do apply to benefit accruals before normal retirement age, Congress did not explicitly require, and certainly; did not intend to require, that a participant’s rate of benefit accrual be measured only in terms of the value' of an annuity commencing at normal retirement age. Defendants suggest that the rate of benefit accrual could also be measured in terms of the change in the balance of each participant’s hypothetical account, which does not depend at all on age. Defendants also contend that plaintiffs’ statutory interpretation serves no apparent public policy purpose. Plaintiffs assert that the court should apply here the parallel definitions of “accrued benefit” in ERISA and the Internal Revenue Code. For purposes of ERISA, the term “accrued benefit” means “in the case of a defined benefit plan, the individual’s accrued benefit determined under the plan and, except as provided in- [29 U.S.C. § 1054(c)(3) ], expressed in the form of an annual benefit commencing at normal retirement age.” 29 U.S.C. § 1002(23)(a). Similarly, section 411 of the Internal Revenue Code section states in relevant part: “For purposes of this section, the term ‘accrued benefit’.means — (i) in the case of a defined benefit plan, the employee’s accrued benefit determined under the plan and, except as provided in subsection (c)(3), expressed in the form of an annuity beginning at normal retirement age.” 26 U.S.C. § 411(a)(7)(A)(i). Thus, both of these definitions of “accrued benefit” require expression and measurement in the form of an annuity beginning at normal retirement age. The ERISA definition is “for purposes of this title.” The Internal Revenue Code definition is “for purposes of this section,” and the same section includes the prohibition in § 411(b)(1)(H) on having “the rate of an employee’s benefit accrual” reduced because of the attainment of any age. Based primarily on this statutory language, plaintiffs contend that the pension age discrimination provisions require a measure of a participant’s rate of benefit accrual in terms of an annuity payable at normal retirement age. When interpreting a statute, the court’s first step “is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.” Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Edüd 808 (1997). The court’s inquiry “must cease if the statutory language is unambiguous and ‘the statutory scheme is coherent and consistent.’ ” Id., quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 240, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). In this case, however, the key statutory phrase — “rate of an employee’s benefit accrual” — does not unambiguously require that the rate be measured, as plaintiffs contend, solely in terms of an annuity payable at normal retirement age. In addition, although the statutory language does not expressly limit the prohibitions to benefit accruals occurring after an employee reaches normal retirement age, there are unusually strong indications in the legislative history that Congress intended that they be so limited. Neither the ADEA nor ERISA defines “rate of an employee’s benefit accrual” specifically for purposes of applying these age discrimination provisions. Additionally, although OBRA 1986 directed issuance of “such final regulations as may be necessary to carry out the amendments made by this subtitle” no later than February 1, 1988, see P.L. 99-509 § 9204(e), neither the EEOC nor the IRS has yet issued regulations describing how the “rate of an employee’s benefit accrual” for a defined benefit plan will be determined under the age discrimination provisions. Both sides’ briefs attempt to read tea leaves from various non-authoritative statements by the Department of the Treasury and the EEOC. These include preliminary decisions, proposed regulations, preambles to proposed regulations, compliance manuals, and congressional hearing testimony of agency officials. The conflicting signals only underscore the difficulty and ambiguity of the statutory interpretation problem. Cf. Pryner v. Tractor Supply Co., 109 F.3d 354, 363-64 (7th Cir.1997) (“Each side has its favorite Supreme Court case that it has flogged mercilessly to yield the desired holding.”). Perhaps the most telling point is that, despite these various earlier signals, both agencies launched new efforts last year to study the question in further detail. See 64 Fed.Reg. 56578 (Oct. 20, 1999) (IRS solicits comments on cash balance conversions); PLApp. A, Ex. 11 (Sept. 20, 1999, EEOC announcement of national study of age discrimination issues under cash balance plans). When dealing with such statutory ambiguities, the courts look for guidance from many sources, including legislative history, the broader purposes of the legislation at issue, including evidence of the limitations and compromises made in Congress, as well as common sense and the practical implications of the alternative interpretations. See, e.g., Toibb v. Radloff, 501 U.S. 157, 161, 111 S.Ct. 2197, 115 L.Ed.2d 145 (1991) (courts look first to statutory language and then to legislative history if statutory language is unclear); Crandon v. United States, 494 U.S. 152, 158, 110 S.Ct. 997, 108 L.Ed.2d 132 (1990) (“In determining the meaning of the statute, we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy.”); Commissioner v. Asphalt Products Co., 482 U.S. 117, 121, 107 S.Ct. 2275, 96 L.Ed.2d 97 (1987) (“Judicial perception' that a particular result would be unreasonable may enter into construction of ambiguous statutory provisions, but cannot justify disregard of what Congress has plainly and intentionally provided.”); American Tobacco Co. v. Patterson, 456 U.S. .63, 71, 102 S.Ct. 1534, 71 L.Edüd 748 (1982) (“Statutes should be interpreted to avoid untenable distinctions and unreasonable results whenever possible.”); Kelly v. Wauconda Park Dist., 801 F.2d 269, 271-73 (7th. Cir.1986) (where parties offer'reasonable but conflicting interpretations pf a statute’s plain meaning, courts may base their conclusions on legislative history and common sense). The court is persuaded that the OBRA 1986 pension age discrimination provisions do not outlaw the Onan cash balance plan. The court reaches this' conclusion by two alternative and independent routes. First, there are strong indications that the pension age discrimination provisions of OBRA 1986 do not apply at all to employees under the age of normal retirement. They were intended to ensure that employees who choose to work past the age of normal retirement continue to accrue pension benefits, albeit with some important restrictions. : Second, even if the OBRA 1986 pension age discrimination provisions do apply to employees below the age of normal retirement, the court does' not believe those statutes require that the rate of benefit accrual be measured solely in terms of change in the value of an’ annuity payable at normal retirement age. Plaintiffs’ proposed interpretation would produce strange results totally at odds with the intended goal of the OBRA 1986 pension age discrimination provisions. There is no statutory or public policy reason that the rate of benefit accrual could not be measured, at least for these purposes, in terms of the rate of change in the balance of an employee’s hypothetical account. In fact, that measure provides a precise, quantifiable, and clear measure that does not require any estimates or actuarial assumptions. 2. Application Before Normal Retirement Age? Plaintiffs point out correctly that the statutory language of the OBRA 1986 pension age discrimination provisions does not specifically limit those requirements to employees who are past normal retirement age. There are strong indications in the statutes and the legislative history, however, that Congress did not intend to apply those provisions to the rate of benefit accrual for employees who have not yet reached normal retirement age. First, the headings in ÓBRA 1986 lend support to this view. The heading for the Internal Revenue Code provision, 26 U.S.C. § 411(b)(1)(H), reads: “Continued accrual beyond normal retirement age.” The text of OBRA 1986 includes no other headings for inclusion in the codified versions of these provisions. However, Section 9202 of OBRA 1986 includes both the ERISA and Internal Revenue Code provisions, and it is entitled “Benefit Accrual Beyond Normal Retirement Age.” See 100 Stat. 1975. (Section 9201 is entitled “Prohibition Against Discrimination on the Basis of Age in Employee Pension Benefit Plans,” which provides no guidance on this point. See 100 Stat. 1973.) Those headings referring to accrual “beyond normal retirement age” certainly seem to indicate that the provisions were not intended to apply to employees who have not yet reached normal retirement age. Statutory headings are not necessarily overwhelming or controlling indications of the meaning of statutes, of course. Nevertheless, they may provide helpful indications of meaning. See, e.g., Almendarez-Torres v. United States, 523 U.S. 224, 234, 118 S.Ct. 1219, 140 L.Ed.2d 350 (1998) (heading that was consistent with legislative history was useful tool to resolve doubts about meaning); INS v. National Center for Immigrants’ Rights, Inc., 502 U.S. 183, 189, 112 S.Ct. 551, 116 L.Ed.2d 546 (1991) (generic reference in text of regulation to “employment” should be read as reference to “unauthorized employment” identified in paragraph’s heading). Because the three provisions were all enacted together, though, it is reasonable to use the heading from the Internal Revenue Code as a clue to the meaning of all three. See H.R. Conf. Rep. No. 1012, 99th Cong., 2d Sess. 378-79 (1986) (“OBRA 1986 Conference Report”), reprinted in 1986 U.S.C.C.A.N. at 4023-24 (conferees intended that all three provisions be interpreted consistently, notwithstanding differences in language). The legislative history of these provisions lends powerful and explicit support to defendants’ contention that the OBRA 1986 “rate of benefit accrual” provisions were not intended to be applied to employees who have not yet reached normal retirement age, but were instead intended to ensure that employees who decided to work beyond normal retirement age would continue to accrue additional retirement benefits for such service. When the text of a statute is ambiguous, the most persuasive evidence of congressional intent besides the statute itself is the conference report. See Pappas v. Buck Consultants, Inc., 923 F.2d 531, 537 (7th Cir.1991) (interpreting meaning of “fiduciary” under ERISA: “The most authoritative form of [legislative history] is a congressional report defining the scope and meaning of proposed legislation. The most authoritative report is a Conference Report acted upon by both Houses and therefore unequivocally representing the will of both Houses as the joint legislative body.”), citing Commissioner v. Acker, 361 U.S. 87, 94, 80 S.Ct. 144, 4 L.Ed.2d 127 (1959) (Frankfurter, J., dissenting); accord, Resolution Trust Corp. v. Gallagher, 10 F.3d 416, 421 (7th Cir.1993) (conference report is the “most persuasive evidence of congressional intent besides the statute itself’); Monterey Coal Co. v. Federal Mine Safety & Health Review Comm’n, 743 F.2d 589, 598 (7th Cir.1984) (explaining that conference reports “are, apart from the language of the statute itself, generally the most reliable sources of congressional intent”), citing National Ass’n of Greeting Card Publishers v. United States Postal Service, 462 U.S. 810, 832 n. 28, 103 S.Ct. 2717, 77 L.Ed.2d 195 (1983). Additionally, the statements of sponsoring legislators are entitled to considerable weight. See Monterey Coal, 743 F.2d at 596 (“There is considerable room for disagreement about the proper treatment of a sponsor’s or conferee’s interpretation of a bill.... But the sponsor’s or conferee’s interpretation is ordinarily accorded substantial weight, at least when it is consistent with the statute and the rest of the legislative history.”). Here the Conference Report and the statements of sponsors lend strong support to defendants’ narrow view of the OBRA 1986 pension age discrimination provisions. The OBRA 1986 Conference Report explained the background and terms of the legislation. The Secretary of Labor originally had authority for the enforcement of both the ADEA and ERISA, and the Secretary had issued an interpretation of these statutes that permitted employers to stop a participant’s accrual of pension benefits when the participant reached the age of 65. See OBRA 1986 Conference Report at 378, reprinted in 1986 U.S.C.C.A.N. at 4023. In July 1979, authority for enforcing and administering the ADEA was transferred to the EEOC. The EEOC then announced that it intended to rescind the Department of Labor’s interpretation of the ADEA regarding the accrual of benefits for participants who worked past the age of 65. In March 1985, the EEOC proposed regulations that would have required that participants who chose to work past the age of 65 continue to accrue benefits. See id. The Conference Report shows that Congress was addressing that issue of pension benefits of employees who continued working after they reached the age of 65. See id. (noting that during “the past three Congresses, bills have been introduced to require employers to continue benefit accruals and allocations”). The sponsors’ statements do the same. When Senator Grassley first introduced in 1985 what became the OBRA 1986 pension age discrimination provisions, he explained: “I am introducing legislation today that would amend the Age Discrimination in Employment Act (ADEA) and the Employee Retirement Income Security Act (ERISA) to require continued pension benefit accruals for workers who work past the normal retirement age of 65.” 131 Cong. Rec. 18868 (July 11, 1985). Later, speaking in support of the OBRA 1986 Conference Report, then-Representative Jeffords stated: [T]he bill before us is also a pension bill which extends valuable pension accrual protections to older Americans luho work beyond normal retirement age. It is important for this body to understand what this “Older Americans Pension Benefits” provision does and does not do. What it does is prevent a covered employee pension benefit plan from eliminating or reducing an employee’s pension benefit accruals, because of the attainment of any age, for the period of employment after the employee attains the normal retirement age under his or her plan. This is accomplished by means of a coordinated amendment to the Age Discrimination in Employment Act (ADEA), the Employee Retirement Income Security Act (ERISA), and the Internal Revenue Code. In this coordinated fashion the amendments also make it clear that pension benefit accruals prior to normal retirement age meet the age nondiscrimination provisions if they also conform to the benefit accrual rules described in section 204 of ERISA and section 411(b) of the Internal Revenue Code. 132 Cong. Rec. 32963 (Oct. 17, 1986) (emphasis added). Representative Roukema added similar comments: The legislation amends current law to preclude the “attainment of any age” as a reason for eliminating or reducing pension benefits accruals after normal retirement age. Therefore, employees who want or need to continue working beyond normal retirement age will no longer be able to be treated adversely under their pension plans because of their age. The conference report on H.R. 5300 and the statement of the managers makes it clear that, with respect to benefit accruals under normal retirement age, pension plans which conform with the existing benefit accrual rules under ERISA and the Internal Revenue Code are considered to meet the new requirements. This framework provides a safe harbor for prenormal retirement age accruals for all covered pension plans.... 132 Cong. Rec. 32975 (Oct. 17, 1986). Similarly, Representative Clay said that the conference committee bill would “make it clear that employee benefit plans may not reduce pension accruals or allocations on the basis of an employee’s age. In short, these changes will assure that older Americans who work beyond normal retirement age continue to earn pension credits.” 132 Cong. Rec. 32975 (Oct. 17, 1986). Representative Hawkins added that under the conference committee bill, “employers [sic, should be employees] who work beyond normal retirement age will continue earning pension credit.” Id. The quoted remarks of Representatives Jeffords, Rouke-ma, Clay, and Hawkins all came in the form of “revised and extended remarks” not actually delivered on the floor of the House. Nevertheless, there is no indication that any other Members expressed any different views. ‘ Most important, their descriptions of the scope of the legislation are consistent with the OBRA 1986 Conference Report itself, which said very plainly: Under the conference agreement, the rules preventing the reduction or cessation of benefit accruals on account of the attainment of age are not intended to apply in cases in tohich a plan satisfies the normal benefit accrual requirements for employees idho have not attained normal retirement age. OBRA 1986 Conference Report at 379, 1986 U.S.C.C.A.N. at 4024 (emphasis added). The OBRA 1986 Conference Report also contained an example of a benefit plan that provides a benefit of $10 monthly per year of a participant’s service. See id. at 381, 1986 U.S.C.C.A.N. at 4026. If a participant has 10 years of service at the plan’s normal retirement age of 66, then the participant is entitled to receive a benefit of $100 a month if he or she retires at age 66. Id. The conference report explained that if the participant continued working beyond the normal retirement age of 65, “the plan is required to provide an additional benefit of $10 per month for each year of service after age 65.” Id. Thus, the only illustration the conference report provided was limited to protecting the rate of benefit accrual for employees who have continued to work past normal retirement age. Accordingly, both the OBRA 1986 Conference Report and the statements of legislators leading the push for these specific provisions indicate that differences in the rate of benefit accruals of those participants who had not yet reached normal retirement age would not violate the pension age discrimination provisions, at least as long as the benefit accruals satisfied the more general accrual rules of 29 U.S.C. § 1054(b) and 26 U.S.C. § 411(b). This background provides considerable support for defendants’ argument that Congress did not intend for the pension age discrimination provisions to apply to the rate of benefit accrual for participants under the age of 65. In addition, this interpretation does not leave employees between the ages of 40 and 65 unprotected from age discrimination. The more general terms of the ADEA continue to bar intentional age discrimination, and all the other complex benefit accrual rules for defined benefit plans continue to apply. 3. The Rate of Benefit Accrual Need Not Be Measured Solely In Terms of an Annuity Payable at Normal Retirement Age Even if the OBRA 1986 pension age discrimination provisions were deemed to apply to the rate of benefit accrual for participants who have not reached normal retirement age, these provisions do not require a measure of a participant’s rate of benefit accrual that is based solely on the value of the participant’s annuity payable at normal retirement age. The concept of the “benefit accrual rate” does not have a single, self-evident meaning, especially in the complex world of pension plan regulation. The term is used and defined in different ways and for different purposes under ERISA and the Internal Revenue Code. A careful examination of the practical effects of plaintiffs’ method for determining a participant’s rate of benefit accrual shows that the pension age discrimination provisions do not require a measure of accrued benefits based on an annuity beginning at normal retirement age. First, as defendants point out, plaintiffs’ method for determining a participant’s rate of benefit accrual simply would not make sense in evaluating benefit accruals after normal retirement age. Plaintiffs deny that the statutes are limited to employees past normal retirement age, but they must concede that those employees were at least a major focus of the OBRA 1986 provisions. Under plaintiffs’ interpretation of the statutes, however, if benefit accruals after normal retirement age must be measured in terms of annuities payable at normal retirement age, ie., in a year before the benefit accruals are earned, then the example in the Conference Report itself would become illegal! That example, discussed above, assumes that an employee earns a benefit of an annuity of $10 per month for every year of service. An employee with ten years of service by age 66 is entitled to receive an annuity of $100 per month beginning at age 65. The employee who continues to work past age 65 would be entitled to an annuity of $110 per month beginning at age 66, $120 per month beginning at age 67, and so on. See OBRA 1986 Conference Report at 381, 1986 U.S.C.C.A.N. at 4026. If plaintiffs’ method is applied to this example and the participant’s benefit accruals are converted to an annuity payable at age 65, the participant’s rate of benefit accrual measured that way inevitably decreases as the employee gets older. The reason for this decrease is merely the time value of money: an annuity of $10 per month beginning at age 65 is worth more than an annuity of $10 per month beginning at age 66. Yet the OBRA 1986 Conference Report included this example to describe the intended effect of compliance with the new law. Plaintiffs’ interpretation would transform that example of compliance into an example of a violation. That is a strong sign that there is a problem with plaintiffs’ interpretation. Further, defendants point out correctly that cash balance plans fix the problem Congress was trying to solve in the OBRA 1986 provisions. An employee who continues to work past the normal retirement age continues to accrue pay credits (unless the plan has a lawful cap not tied to age, such as a maximum number of years of service that can be credited). She also continues to accrue interest credits on her entire cash balance, so that her benefits continue to grow beyond normal retirement age. In fact, a cash balance plan will make many such older workers better off than the law requires. Federal law allows a plan not only to suspend payment of benefits for a plan participant who works past normal retirement age, but to do so without increasing the benefits to account for the fact that they are paid later. See 29 C.F.R. § 2580.203-3. Second, in trying to discern the effect of ambiguous statutory language, courts are not prohibited from considering the practical effects of alternative interpretations of that language and the public policies that would be served by those interpretations. The court has provided plaintiffs an opportunity to explain how their interpretation of the “rate of benefit accrual” would promote any public policy that Congress might have entertained or considered. Plaintiffs have not provided any answer beyond what amount