                              In the

United States Court of Appeals
                For the Seventh Circuit

No. 08-1135

T HOMAS F RY,
                                                  Plaintiff-Appellant,
                                  v.

E XELON C ORPORATION C ASH B ALANCE P ENSION P LAN,

                                                 Defendant-Appellee.



             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
               No. 06 C 3723—William T. Hart, Judge.


        A RGUED A PRIL 3, 2009—D ECIDED JULY 2, 2009




   Before E ASTERBROOK, Chief Judge, and E VANS and
S YKES, Circuit Judges.
  E ASTERBROOK, Chief Judge. The Exelon Corporation
Cash Balance Pension Plan is a defined-benefit plan
that works like a defined-contribution plan, except that
the individual accounts are virtual. All of the Plan’s
assets are held in a single trust; the Plan does not have
a separate pot of assets to match each employee’s ac-
2                                               No. 08-1135

count. Cooper v. IBM Personal Pension Plan, 457 F.3d 636 (7th
Cir. 2006), and Berger v. Xerox Corp. Retirement Income
Guarantee Plan, 338 F.3d 755 (7th Cir. 2003), discuss
more fully the nature of a cash-balance plan.
  Many pension plans, including Exelon’s, give workers
the option of taking a lump-sum distribution when they
quit or retire. A defined-contribution plan just turns
over the balance of the account. 29 U.S.C. §1002(23)(B). A
defined-benefit plan operates under different rules—or
did until 2006, when the addition to ERISA of 29 U.S.C.
§1053(f) brought the treatment of lump-sum distribu-
tions into harmony. Our plaintiff, Thomas Fry, left
Exelon in 2003, so we describe the former approach, which
required pension plans to start with the current balance
and add any contractually promised interest (or any
other form of guaranteed increase in benefits) through the
employee’s “normal retirement age.” The plan then
discounted the resulting number to present value using
the “annual rate of interest on 30-year Treasury securities
for the month before the date of distribution.” 29
U.S.C. §1055(g)(3), incorporated by 29 U.S.C. §1053(e)(2).
  This process was designed to ensure the actuarial
equivalence of the lump-sum payment and the pension
available at retirement. But, if the Treasury rate does not
match the market return, the process misfires. Berger
describes the mechanics. If the Treasury rate is less than
a plan’s annual guarantee—as it normally will be, be-
cause Treasury bonds have very little risk, and a corre-
spondingly low rate of return—the lump sum balloons (a
3.5% difference in the rates doubles the cash paid out
No. 08-1135                                                3

to someone who leaves at 45 and does not plan to retire
until 65). If the Treasury rate exceeds the plan’s guarantee,
as it may during a time when the stock market is in
decline, the lump sum shrinks accordingly. For most of
the 1990s and 2000s, the Treasury rate was below the
guarantees offered by cash-balance plans. This gave
employees a big incentive to quit early and claim lump-
sum distributions; it also encouraged pension plans to
reduce their promised annual returns, which hurt all
employees (not just those who planned a strategic early
departure).
  The 2006 amendment fixed the problem for all cash-
balance plans. It also avoided the uncertainty inherent
in a need to estimate what rates of return lie in the fu-
ture. (Did anyone in 2003 predict accurately that the
stock market as a whole would rise from 2004 through
2007 but plummet in 2008?) Many plans, of which
Exelon’s was an example, had applied a self-help fix.
When it was established in 2002, Exelon’s Plan provided
that each employee’s “normal retirement age” arrived
after five years on the job. This was also the Plan’s vesting
date, and thus the first opportunity to demand a lump-
sum distribution when leaving for other employment.
Because ERISA required the addition of interest (and
discounting at the Treasury rate) only through each par-
ticipant’s “normal retirement age,” this enabled Exelon’s
Plan to avoid the entire adjustment process and distrib-
ute the balance of the worker’s virtual account just as a
defined-contribution plan would distribute the balance
of an actual account.
4                                               No. 08-1135

   Thomas Fry opted into the Exelon cash-balance Plan
when it was created in 2002. His virtual account was
funded initially with the actuarial value of his traditional
defined-benefit pension. Exelon contributes to the Plan
5.75% of each participant’s annual compensation, and
it adds annual interest (called “investment credits”) at the
greater of 4% or an average of the 30-year Treasury
bond rate and the average return on the Standard &
Poors 500 index. Fry quit in 2003, at age 55, after
working more than five years at Exelon. He asked for and
received the value of his account, more than $500,000, and
filed this suit because the Plan gave him just the bal-
ance—rather than the balance plus “investment credits”
through 2013 (when he will turn 65), discounted to
present value at the Treasury rate (which was 5.16% in
October 2003, the month before Fry retired). His suit
contends that the Plan’s definition of “normal retirement
age” is invalid and that he is entitled to credits through
age 65; the district court held, however, that the Plan
satisfies ERISA’s requirements. 2007 U.S. Dist. L EXIS
65355 (N.D. Ill. Aug. 31, 2007).
  Fry makes much of the fact that the Plan’s definition
of “normal retirement age” is designed to work around
the augment-and-discount process required by the pre-
2006 version of §1053(e)(2)(B). He calls this an “evasion”;
the Plan calls it careful design. No matter. Names do not
decide concrete cases. Employers are entitled to vary
by contract those aspects of pension plans ERISA
makes variable, and they may act in their own interest
when doing so, see Lockheed Corp. v. Spink, 517 U.S. 882
(1996), just as participants are entitled to the benefit
No. 08-1135                                                 5

of terms (such as vesting rules) that the law makes immu-
table. Lowering the normal retirement age means that
lump-sum distributions may be smaller, but it has
benefits for the workers, such as accelerating the applica-
tion of the anti-forfeiture clause, which like §1053(e)(2)(B)
before 2006 is keyed to the plan’s “normal retirement
age”. See Contilli v. Teamsters Local 705 Pension Fund, 559
F.3d 720 (7th Cir. 2009).
  How much discretion employers enjoy when selecting
a “normal retirement age” depends on the language of
ERISA, for the phrase is a defined term:
    The term “normal retirement age” means the
    earlier of—
        (A) the time a plan participant attains normal
        retirement age under the plan, or
        (B) the later of—
              (i) the time a plan participant attains
              age 65, or
              (ii) the 5th anniversary of the time a plan
              participant commenced participation in the
              plan.
29 U.S.C. §1002(24). Exelon says that subsection (A) allows
it to define “normal retirement age” as it pleases. Fry
insists that the statute implies restrictions: first that
the “normal retirement age” be an age rather than a differ-
ent measure (such as $20,000 or 175 pounds); and second
that it be “normal” (which is to say, the mean or median
for retirement at the firm, rather than age 25 or the age
of the incumbent President).
6                                               No. 08-1135

  Fry’s first argument flops because the Plan’s for-
mula—the participant’s age when beginning work, plus
five years—is an “age.” It is employee specific, to be
sure, but “age + 5” remains an age. It is not as if the
Plan provided that “an employee reaches normal retire-
ment age when he owns ten umbrellas.” The Plan’s for-
mula not only specifies an “age” but also is lifted right
out of the statute. Subsection (B)(ii) defines as the
highest possible “normal retirement age” (for a person
hired at 65 or older) “the 5th anniversary of the time a
plan participant commenced participation in the plan.”
Making that statutory definition of “normal retirement
age” universally applicable can’t be rejected on the
ground that the formula does not yield an “age.” ERISA
does not require the “normal retirement age” to be the
same for every employee; §1002(24)(B)(ii) shows that too.
   As for the argument that five years on the job is not the
“normal” retirement age: §1002(24) does not compel a
pension plan’s retirement age to track the actuarial tables.
If it did, then instead of granting discretion to the
plan’s sponsor the statute would read something like: “The
term ‘normal retirement age’ means the median age
at which participants in the plan retire.” But the statute
does not say this, nor does it say that the “normal retire-
ment age” must be at least 62 but cannot exceed 65.
Some industries have much younger retirement
ages—under 30 for football and under 40 for futures
commission merchants. The statutory cap at age 65
itself requires some departure from normal practices at
law firms, universities, and other employers where
people work past the time when they can start drawing
No. 08-1135                                                7

full Social Security benefits (which for those approaching
retirement today is 66 rather than 65).
  Under §1002(24)(A) an age is the “normal retirement
age” because the plan’s text makes it so. The age in the
plan is “normal” in the sense that it applies across the
board, to every participant in the plan. (It is important
to understand that a “normal retirement age” in a pension
plan does not control when employees must retire, but
only when certain rights vest and how benefits are ad-
justed. That’s why it makes sense to speak of an age
being “normal” to the plan’s operation rather than to
anyone’s retirement prospects.)
  In 2007 the Treasury Department issued a regulation
providing that a plan’s “normal retirement age” must be
“reasonably representative of the typical retirement age
for the industry” (subject to safe harbors for employers
with unusually early or late retirement patterns). 72 Fed.
Reg. 28604, 28606 (May 22, 2007), amending 26 C.F.R.
§1.401(a)–1(b). Fry contends that this regulation sup-
ports his position. It does not, because like almost all
regulatory changes it operates only prospectively. See
§1.401(a)–1(b)(4). See also Bowen v. Georgetown University
Hospital, 488 U.S. 204 (1988). The commentary accompany-
ing this regulation acknowledges that employer choice
had been honored in pre-2007 years. 72 Fed. Reg. at 28605.
The regulation therefore does not affect the calculation
of lump-sum distributions in 2003. (Whether the regula-
tion is within the scope of the agency’s interpretive dis-
cretion, see Chevron U.S.A. Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984), is a question not
presented here.)
8                                                No. 08-1135

  Fry chastises the district court for disagreeing with
Laurent v. PricewaterhouseCoopers LLP, 448 F. Supp. 2d 537
(S.D. N.Y. 2006). Decisions of district judges lack authorita-
tive force in or outside their districts; they have persuasive
weight only. The district judge in Laurent was trying to
read the tea leaves in Esden v. Bank of Boston, 229 F.3d
154 (2d Cir. 2000). And Esden itself did not interpret
§1002(24). It dealt with the same subject as Berger: how a
cash-balance plan calculates actuarial value when an
employee elects a lump-sum distribution before a given
plan’s “normal retirement age.” As far as we can tell, ours
is the first appellate opinion on the interaction between
§1002(24) and the pre-2006 requirement of actuarial
adjustments to the hypothetical balance. Instead of guess-
ing how other judges might approach the subject, we
have analyzed the statutory language directly. And on
the understanding of “normal” that we have just ex-
plained, the statutory language allows employers to
specify a “normal retirement age” that differs from
typical retirement patterns.
                                                   A FFIRMED




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