736 F.3d 33
1st Cir.2013Background
- Plumbers & Pipefitters Local Union #51 merged four local plans into a single Post-Merger Defined Benefit Pension Plan (effective Sept. 1, 1998) that adopted the most generous pre-merger "banked hour" rules, with retrospective effect for some participants.
- "Banked hours" are excess hours credited to cover short years or converted to pension credits at retirement.
- Several plaintiffs were active employees at the merger, accrued retrospective increases to their banked-hour pension credits, and later retired receiving benefits under the Post-Merger Plan.
- The multiemployer Trust later faced funding shortfalls; Trustees adopted Amendment Nine (2011) to retroactively reduce pre-9/1/1998 banked-hour benefits to pre-merger (less generous) levels.
- Plaintiffs sued under ERISA's anti-cutback rule, 29 U.S.C. § 1054(g)(1), alleging Amendment Nine unlawfully decreased their "accrued benefits." The district court granted plaintiffs summary judgment; the First Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether retrospective banked-hour increases conferred while plaintiff-employees were working are "accrued benefits" protected by ERISA's anti-cutback rule | Post-merger retrospective increases were conferred while plaintiffs were employees and therefore are "accrued benefits" attributable to pre-amendment service | Retrospective increases were gratuities conferred after the service (i.e., not "earned") and thus cannot "accrue" or be protected | The court held such retrospective benefits are "accrued benefits" attributable to prior service and protected from reduction by amendment |
| Whether ERISA requires a promise of benefit to predate the underlying service to "accrue" | An accrual can arise where a benefit is tied to prior service and was conferred while the individual remained an employee, satisfying ERISA's incentive/expectation purpose | A benefit must be promised before the service (i.e., be an "earned" promise) to be "accrued"; retroactive conferrals are mere gratuities | The court rejected the "earned-before-service" requirement; ERISA looks to whether benefit is attributable to service and conferred while the person was an employee/participant |
| Whether plan language or statutory definitions bar treating these retrospective benefits as accrued | Section 1002(23) points to plan-determined accrued benefit; plaintiffs satisfied the statutory form requirement | Trustees argued policy and some precedent support treating post-service promises as non-accrued | The court found §1002(23) requires reference to plan terms and that the Plan conferred the benefits while plaintiffs were employees, so they accrued |
| Whether exceptions (e.g., insolvency, PPA rehabilitation) permit Amendment Nine | Plaintiffs: no applicable statutory exception here | Trustees: Plan critical status and funding concerns justify reductions | Court: statutory exceptions (substantial business hardship; terminated multiemployer plans) do not apply; Amendment Nine violated anti-cutback rule |
Key Cases Cited
- Cent. Laborers' Pension Fund v. Heinz, 541 U.S. 739 (2004) (anti-cutback rule protects justified retirement expectations)
- Lockheed Corp. v. Spink, 517 U.S. 882 (1996) (ERISA protects vested expectations)
- Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359 (1980) (ERISA ensures promised benefits are paid at retirement)
- Bd. of Trs. of Sheet Metal Workers' Nat'l Pension Fund v. Comm'r, 318 F.3d 599 (4th Cir. 2003) (distinguishing accrued benefits from gratuitous post-retirement promises)
- Williams v. Rohm & Haase Pension Plan, 497 F.3d 710 (7th Cir.) (COLA was accrued where promise predated retirement)
- Thornton v. Graphic Commc'ns Conference, 566 F.3d 597 (6th Cir.) (post-retirement promises are gratuitous; accrual requires promise during employment)
- Cinotto v. Delta Air Lines Inc., 674 F.3d 1285 (11th Cir.) (accrued benefits contrasted with anticipated future-service benefits)
- Sun Capital Partners III, LP v. New Eng. Teamsters & Trucking Indus. Pension Fund, 724 F.3d 129 (1st Cir.) (PBGC intervention when multiemployer plan becomes insolvent)