The U.S. Supreme Court has agreed to review a decision that concerns whether an employer followed proper procedures when it changed pension benefits calculation rules.

The court has granted certiorari to Sally L. Conkright et al. Petitioners vs. Paul J. Frommert et al., a class-action brought on behalf of participants in a pension plan sponsored by Xerox Corp., Norwalk, Conn.

The plaintiffs sued the administrators of the Xerox Corporation Retirement Income Guarantee Plan and the plan itself, alleging the plan had violated the participants’ rights under the Employee Retirement Income Security Act by adding a mechanism that involved use of “phantom account” factor and the hypothetical growth of an employee’s previous lump-sum retirement benefits distribution to calculate current benefits.

The U.S. District Court for the Western District of New York entered summary judgment in favor of Xerox.

A 3-judge panel at the 2nd Circuit Court of Appeals reversed part of the district court decision.

“We find that the plan has not always contained a phantom account, that it was not properly added to the plan through amendment until 1998, that its application to employees rehired prior to 1998 violates ERISA’s anti-cutback provision by impermissibly reducing their benefits, and that its adoption in 1998 was made without proper notice to plan participants,” the 2nd Circuit says in its opinion.

The plaintiffs applied for Supreme Court review in October 2008.

The U.S. government filed a friend of the court brief in May, and the court agreed Monday to let the Business Roundtable, Washington, file a brief presenting its views.

The Supreme Court says it may be considering the following questions about the Conkright case:

1. Whether the 2nd Circuit erred in holding, in conflict with decisions of the Supreme Court and other courts, that a district court has no obligation to defer to an ERISA plan administrator’s reasonable interpretations of the terms of the plan if the plan administrator arrived at its interpretation outside the context of an administrative claim for benefits.

2. Whether the 2nd Circuit erred in holding that a district court has “allowable discretion” to adopt any “reasonable” interpretation of the terms of an ERISA plan when the plan interpretation issue arises in the course of calculating additional benefits due under the plan as a result of an ERISA violation.

Case docket information is available here.