Official Media Statement: Vectren Retirement Benefits Legal Matter
On March 12, 2015, a lawsuit was filed by 17 current or former Vectren employees, all of whom were also former non-bargaining unit employees of Southern Indiana Gas and Electric Company, Inc. (“SIGECO”). The employees assert, among other things, that nearly 15 years ago they were not provided full and sufficient information to make an informed decision when choosing whether to have their retirement benefits calculated under their current benefit formula or an alternative formula.
SIGECO became a Vectren subsidiary in 2000. Shortly thereafter, the SIGECO retirement plan for non-bargaining unit employees (“SIGECO plan”) was merged into the Vectren Combined Non-bargaining Retirement Plan. Before the plan merger, participants in the SIGECO plan, including the employees filing suit, were given the option of having their future benefits calculated under the existing SIGECO plan formula or through Vectren’s cash balance plan formula, which included an increased level of company contributions into the employee’s 401(k) plan. Of approximately 365 eligible participants, around 160, including the 17 employees filing suit, chose the new cash balance formula, which was a competitive, market-based plan that, unlike the SIGECO plan, offered portability should the employee choose to leave the company prior to retirement age. In the 15 years since the choice was made, two recessions and historically low interest rates have resulted in lower benefits under the cash balance formula.
As Plan administrator, Vectren fully investigated the employees’ claims and confirmed that before making their election, participants were provided with detailed written information about their options, and this information warned them that estimates included with the information were based on stated assumptions and not a guarantee of future benefits. The information demonstrated that an employee who intended to remain with the company until at least age 55 likely fared better under the SIGECO plan formula. In addition, in-person informational sessions were held to allow participants to ask questions regarding their choices. Participants were also encouraged to seek independent financial advice as to the best choice for them. Finally, participants who chose the cash balance formula had to do so by signing a form indicating their desire to opt into the cash balance formula. This same process and information led roughly 205 participants to stay with the existing SIGECO plan formula.
Vectren appreciates that the individuals who filed this suit may regret their decision to opt into the cash balance formula in light of economic conditions over the last 15 years. However, in its role as Plan administrator, it found no basis for allowing those employees to avoid the consequences of their choice and intends to defend this suit accordingly. While Vectren remains committed to providing the competitive compensation and benefits needed to attract and retain our high-quality workforce, we cannot control the consequences of the economy. We look forward to resolving this issue and moving forward in a positive manner with all parties involved.
