Kmart Corp., Troy, Mich., violated federal pension law by using the wrong interest rate to calculate lump-sum distributions for employees accepting the companys early retirement offer, a U.S. District Court in East St. Louis, Ill., ruled. The company used a 6.83% interest rate to calculate the one-time pension payments, instead of the correct interest rate of 5.81%. Kmart maintained that the interest rate it used was valid for the plan year ended Jan. 31, 1998, but the court ruled that since the checks were dated Feb. 1, 1998, or later, Kmart should have used the lower interest rate, which was applicable for the subsequent plan year.
Douglas Sprong, partner in the law firm of Carr, Korein, Tillery, Kunin, Montroy, Cates, Katz & Glass, representing former employees in the class-action suit, expects damages to be around $1 million or $2 million. An Aug. 24 date was set for a hearing on the damages.