What “retirement” means under the terms of the pension plan

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in the Metzgar vs. UA Plumbers & Steamfitters Local No. 22 Pension Fund, 2022 US app. LEXIS 5466 (2d Cir. March 2, 2022), the Second Circuit, in summary judgment, affirmed the district court’s decision granting summary judgment in favor of the plan trustees regarding the trustees’ reinterpretation of what “retirement” means under the terms of the annuity plan .

The plaintiffs were participants in the UA Plumbers & Steamfitters Local 22 Pension Fund (the “Fund”), a multi-employer defined benefit pension plan governed by an agreement and a trust deed (the “Trust”). The Fund provided participants with benefits under an adjusted benefits plan (the “Plan”). The plan set the normal retirement age at 65, but also provided a “special early retirement” option for employees after their 55th birthday whose combined age and years of service reached 85 years or more. The Trust gave the Trustees full discretionary power to interpret the Scheme.

Until the fall of 2011, the plan operated with the proviso that participants did not have to stop working for an insured employer to receive special early retirement payments; all they had to do was give up their job in a disqualifying employment relationship. This allowed participants to continue working in non-disqualifying employment (e.g., in a managerial position or as a project manager) while receiving retirement benefits from the plan.

In the fall of 2011, the Plan Trustees reviewed the Plan and determined that they needed to change their interpretation of the term “retirement” under the Plan due to the admission of participants who were not yet fully retired – ie, those who had not segregated their employment with their employers – in order to receive pension payments, the fund threatened to lose its tax-exempt status. The plan trustees advised the plaintiffs that they could either terminate their now disqualifying employment and continue receiving pension payments, or they could elect to continue their disqualifying employment, which would result in the suspension of their pension payments.

The plaintiffs sued the Fund, its board of trustees and its plan administrator, alleging that: 1) this change violated ERISA’s anti-cut rule; 2) the modification was an unlawful denial of service in violation of ERISA § 502(a)(1)(B); and 3) the defendants breached their duty of loyalty to the plaintiffs.

The Second Circuit agreed with the District Court that the defendants did not violate ERISA’s anti-cut rule. In doing so, the Court of Appeals argued that the defendants’ reinterpretation of the term “retirement” did not constitute an “amendment” of the plan because its actual terms had not changed. Furthermore, according to the Defendants’ reinterpretation, the Plaintiffs were never entitled to the accrued benefit they claimed to have lost.

The Second Circuit also affirmed the District Court’s conclusion that the defendants’ decision to require the plaintiffs to either stop working or stop receiving pension benefits was not arbitrary and unpredictable because it was based on a reasonable interpretation of the plan. The Second Circuit determined that this interpretation was based on the Trustees’ reasonable conclusion that this change was necessary to maintain the plan’s tax-exempt status. The Second Circuit further stated that the plaintiffs were unable to show how the defendants’ decision to “correct what they reasonably believed to be an erroneous interpretation of the plan to protect its tax-exempt status showed a failure, ‘caution, skill ‘Prudence and diligence.'”

Jackson Lewis PC © 2022National Law Review, Volume XII, Number 75

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