In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 06-2555
GARY WILLIAMS,
                                             Plaintiff-Appellee,
                               v.

ROHM AND HAAS PENSION PLAN,
                                         Defendant-Appellant.
                         ____________
           Appeal from the United States District Court
    for the Southern District of Indiana, New Albany Division.
           No. 04 CV 78—Sarah Evans Barker, Judge.
                         ____________
     ARGUED JUNE 6, 2007—DECIDED AUGUST 14, 2007
                     ____________


  Before RIPPLE, KANNE, and EVANS, Circuit Judges.
  KANNE, Circuit Judge. Gary Williams filed suit, individ-
ually and on behalf of all others similarly situated, alleg-
ing that the Rohm and Haas Pension Plan (Plan) violated
the Employee Retirement Income Security Act (ERISA)
by failing to include a cost-of-living adjustment (COLA)
in his lump sum distribution from the Plan. 29 U.S.C.
§ 1054(c)(3). The district court granted class certification
and entered summary judgment for Williams. The district
court concluded that the terms of the Plan violated ERISA
because the COLA was an accrued benefit as ERISA
defines that term. We agree, and therefore affirm the
judgment of the district court.
2                                               No. 06-2555

                     I. BACKGROUND
  The Plan is a defined benefit pension plan under § 3(35)
of ERISA. 29 U.S.C. § 1002(35). Section 3.1 of the Plan
defines “Accrued Benefit” as “that portion of a Partici-
pant’s Basic Amount of Normal Retirement Pension,
expressed in terms of a monthly single life annuity begin-
ning at or after his Normal Retirement Date, that has
accrued as of any determination date in accordance with
Article VII.” Article VII provides a formula to calculate the
“Normal Retirement Pension” as a function of the partici-
pant’s years of service and level of compensation. The
accrued benefit, under the terms of the Plan, is thus the
result of this formula, expressed in terms of a monthly
single life annuity.
  The Plan provides participants with a variety of pay-
ment options, as relevant here, either a one-time lump
sum distribution or a monthly annuity payment. The
Plan explains that the lump sum distribution is the
actuarial equivalent of the accrued benefit, calculated
using interest rates and mortality tables set by the
Internal Revenue Code.
  COLAs are commonly applied to annuities in order to
account for inflation. With a COLA, an annuitant’s pay-
ments will increase each year at a level commensurate
with the calculated rate. The Plan calculates each year’s
COLA based upon the previous year’s Consumer Price
Index for Urban Wage Earners and Clerical Workers and
limits each Participant’s COLA to three percent of their
annual benefit. The Plan describes the COLA as an “en-
hancement.” While participants who choose to receive
their pension payments as an annuity are automatically
entitled to a COLA, those who choose a one-time lump
sum payment do not qualify for the COLA enhancement.
 Williams was employed by Rohm and Haas from 1969
until his termination in 1997. As a participant in the Plan,
No. 06-2555                                                3

he was entitled to his accrued benefit under the Plan upon
his termination. Williams chose to receive his pension in
a one-time lump sum distribution of $47,850.71. Six years
later, Williams filed a class action suit against Rohm and
Haas alleging that he was wrongfully denied benefits
under the Plan because his lump sum distribution did not
include the present value of the COLA he would have
received had he chosen to receive his pension in the
form of monthly annuity payments. The district court
dismissed the complaint because Williams had not ex-
hausted his administrative remedies. Williams exhausted
the administrative process, to no avail, and filed the
instant case in 2004.
  After granting class certification for former Plan partici-
pants who had received lump sum distributions without
COLAs, the district court denied the Plan’s motion for
summary judgment and granted Williams’s motion for
summary judgment.


                       II. ANALYSIS
  The issue before us is whether the Plan’s COLA falls
within ERISA’s definition of “accrued benefit.” If so, then
the Plan violates ERISA by providing COLAs to partici-
pants who opt for annuity payments but denying COLAs
to participants who opt for one-time lump sum distribu-
tions. 29 U.S.C. § 1054(c)(3). We review the district court’s
grant of summary judgment de novo, viewing all facts
in the light most favorable to the non-moving party.
Sperandeo v. Lorillard Tobacco Co., Inc., 

, 870
(7th Cir. 2006) (citing Vallone v. CNA Fin. Corp., 

, 631 (7th Cir. 2004)); see also Silvernail v.
Ameritech Pension Plan, 

, 357 (7th Cir. 2006)
(noting that, notwithstanding discretion afforded a plan
administrator, claims that the plan as interpreted violates
ERISA are reviewed de novo). Summary judgment is
4                                               No. 06-2555

proper when “there is no genuine issue as to any material
fact and . . . the moving party is entitled to a judgment as
a matter of law.” FED. R. CIV. P. 56(c).
  The parties agree that the plain terms of the Plan
exclude the COLA from a participant’s accrued benefit.
Therefore, we need only decide whether this formulation
complies with ERISA’s requirements. ERISA and the
Internal Revenue Code prescribe that if a defined benefit
pension plan allows for a lump sum distribution, then that
distribution must equal the present value of the accrued
benefit expressed in the form of a single-life annuity. 29
U.S.C. § 1054(c)(3); 26 U.S.C. § 411(c)(3); 26 C.F.R.
§ 1.417(e)-1(d). We recognized this limitation in Berger v.
Xerox Corp. Ret. Income Guarantee Plan, where we
stated: “ERISA requires that any lump-sum substitute
for an accrued pension benefit be the actuarial equivalent
of that benefit.” 

, 759 (7th Cir. 2003) (citing
29 U.S.C. § 1054(c)(3); May Dept. Stores Co. v. Fed. Ins.
Co., 

, 600 (7th Cir. 2002); Esden v. Bank of
Boston, 

, 164, 173 (2d Cir. 2000)); see also Call
v. Ameritech Mgmt. Pension Plan, 

, 817 (7th
Cir. 2007) (“When a participant in a defined-benefit
pension plan is given a choice between taking pension
benefits as an annuity or in a lump sum, the lump sum
must be so calculated as to be the actuarial equivalent of
the annuity.”).
  So, what is an “accrued benefit” under ERISA? The Plan
urges us to interpret “accrued benefit” to mean whatever
the particular plan document says it means. Indeed, it
finds support for this interpretation in ERISA § 2(23)(A):
“The term ‘accrued benefit’ means— . . . the individual’s
accrued benefit determined under the plan and . . . ex-
pressed in the form of an annual benefit commencing at
normal retirement age.” 29 U.S.C. § 1002(23)(A). ERISA
itself directs us to look at the individual plan’s terms
in order to discern the accrued benefit. See Bd. of Trs. of
No. 06-2555                                                  5

the Sheet Metal Workers’ Nat’l Pension Fund v. Comm’r,

, 602-03 (4th Cir. 2003). Under ERISA,
“private parties, not the Government, control the level of
benefits” provided to pension plan participants. Alessi v.
Raybestos-Manhattan, Inc., 

, 511 (1981).
   Williams acknowledges that we must look to the individ-
ual plan document to determine what the “accrued bene-
fit” is in any given case, but argues that ERISA does not
accept the document’s definition. Rather, the “accrued
benefit” is that benefit a participant would be entitled to
if he chose to receive it in the form of a single-life annuity,
thus, forcing parity between annuity and lump sum
distributions. In this case, the Plan considers the COLA
to be an enhancement that is awarded to annuitants,
over and above the accrued benefit. Under Williams’s
interpretation of ERISA, we simply ask: What would
Williams get if he chose to receive his pension in annuity
payments? The annuity, calculated based upon his years
of service and compensation, plus the yearly COLA. That
is the accrued benefit. Williams’s lump-sum payment
would then be the combined present value of the annuity
and projected COLA.
  We considered a very similar issue in Hickey v. Chicago
Truck Drivers, Helpers and Warehouse Workers Union, 

(7th Cir. 1992). In Hickey, a plan terminated
without providing funding for future COLAs. We held that
the COLA was part of the accrued benefit and, as such, its
elimination violated ERISA’s anti-cutback provision. 

see 29 U.S.C. § 1054(g)(1). In reaching our deci-
sion, we distinguished accrued benefits from ancillary
benefits. 

(citing H.R. Conf. Rep. No. 1280, 93d
Cong., 2d Sess. 60, reprinted in 1974 U.S.C.C.A.N. 5038,
5054). Ancillary benefits are those that would be provided
by a new employer, separate from any benefits provided
by the current employer, such as health or life insurance.
6                                               No. 06-2555

Rep. No. 807, 93d Cong., 2d Sess. 60,
reprinted in 1974 U.S.C.C.A.N. 4670, 4726). “In contrast,
the COLA [is] inseparably tied to the monthly retire-
ment benefit as a means for maintaining the real value of
that benefit. It [cannot], therefore, be said to be ancillary
to the benefit, and it would not be provided by a new
employer.” 

stated that “[t]he term ‘accrued benefit’
has a statutory meaning, and the parties cannot change
that meaning by simply labeling certain benefits as ‘ac-
crued benefits’ and others, such as the COLA, as ‘supple-
mentary benefits.’ ” 

. But this is precisely what
the Plan has attempted to do in this case. It seeks to
disguise a penalty exacted against lump sum recipients
as a bonus afforded to annuitants. In fact, it appears
that the Plan attempted to write around ERISA’s limits
by explicitly excluding the COLA from lump sum dis-
tributions after learning of a district court case holding
that a COLA is, per se, an accrued benefit under ERISA.
See Laurenzano v. Blue Cross & Blue Shield of Mass., Inc.
Ret. Income Trust, 

(D. Mass. 2001).
  The Plan argues that the district court’s decision penal-
izes it for providing an enhanced benefit to annuitants,
and that such a penalty is contrary to the purposes of
ERISA. In support of this argument, the Plan relies
primarily on the Fourth Circuit’s opinion in Sheet Metal
Workers, quoting: “[I]f trustees of ERISA plans knew that
providing an additional benefit to already-retired employ-
ees for a given year would lock that benefit in as a floor
for all future years, they would be less likely to in-
crease benefits gratuitously in years when the plans
were particularly flush.” Appellant’s Br. p. 24 

). The key to the quoted passage is that
the participants were “already retired.” The COLA in
that case was in no way “accrued” because it was not
No. 06-2555                                              7

included in the plan during the term of the participants’
employment. Sheet Metal 

.
Employers are not required to provide pension benefits,
but when they do, their plans must comply with ERISA,
and the promises they make can in no way be considered
mere gratuities. See May Dept’s Stores 

.
  The Plan cannot avoid that which is dictated by the
terms of ERISA. While ERISA generally allows each plan
to select the monetary amount of benefits provided, it
remains a paternalistic regulation designed to restrict
the freedom of contract. 

that a COLA
applied to a defined benefit pension plan annuity is an
accrued benefit under ERISA, and that holding is deter-
minative in this case. The Plan, as administered, violates
ERISA. 29 U.S.C. § 1054(c)(3). If a defined benefit pen-
sion plan entitles an annuitant to a COLA, it must also
provide the COLA’s actuarial equivalent to a participant
who chooses instead to receive his pension in the form
of a one-time lump sum distribution.


                    III. CONCLUSION
  For the foregoing reasons, the judgment of the district
court is AFFIRMED; and this case is REMANDED to the
district court for further proceedings, including calculat-
ing the value of the COLAs that were denied.
8                                        No. 06-2555

A true Copy:
      Teste:

                   ________________________________
                   Clerk of the United States Court of
                     Appeals for the Seventh Circuit




               USCA-02-C-0072—8-14-07