Randal Andersen v. Dhl Retirement Pension Plan
766 F.3d 1205
9th Cir.2014Background
- Plaintiffs are former Airborne employees who participated in both Airborne’s defined benefit Retirement Income Plan (a floor-offset plan) and the Profit Sharing defined contribution plan. The Retirement Income Plan’s benefit is offset by an annuity value attributed to the Profit Sharing account.
- Section 7.11 of the Retirement Income Plan allowed participants to transfer their nonforfeitable Profit Sharing account balances into the Retirement Income Plan so those funds would be paid as an annuity by the defined benefit plan (thereby eliminating the offset and often increasing periodic benefit payments).
- After DHL acquired Airborne, DHL amended section 7.11 effective December 31, 2004 to prohibit transfers into the Retirement Income Plan; the Profit Sharing Plan itself was not amended and still permits transfers to eligible plans that will accept them.
- The amendment led many participants to receive materially smaller periodic benefits because (1) the Retirement Income Plan used more favorable actuarial assumptions to measure an annuity value for offset purposes (making the offset larger), and (2) participants could no longer move assets into the defined benefit plan to eliminate the offset and receive annuities calculated under the defined benefit plan’s assumptions.
- Plaintiffs sued alleging the amendment violated ERISA’s anti-cutback rule, but the district court dismissed (relying on Tasker) and the Ninth Circuit affirmed, holding the amendment did not violate §1054(g) because Treasury Regulation A‑2 permits elimination of transfer rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether eliminating the transfer option violated ERISA’s anti-cutback rule (29 U.S.C. §1054(g)) because it reduced participants’ overall periodic benefits | Andersen: elimination reduced total periodic annuities and thus cut accrued benefits in violation of the anti‑cutback rule | DHL: the amendment did not reduce any plan’s accrued benefit; Treasury Regulation A‑2 expressly permits eliminating transfer rights | Held: No violation. Neither plan’s statutory "accrued benefit" was reduced, and Regulation A‑2 provides the applicable exception permitting elimination of transfer rights |
| Whether the transfer right is an “optional form of benefit” protected by the anti‑cutback rule | Plaintiffs: transfer right is protected; eliminating it is a prohibited cutback regardless of technical plan formulas | DHL/Government: the transfer-from-right is treated as an elective transfer under Treasury regs; even if it is an optional form, the Secretary’s regulation waives protection for eliminating such transfers | Held: Court need not decide definitively; even if it were an optional form, Regulation A‑2 waives protection and authorizes eliminating the transfer option |
| Whether the statutory definition of “accrued benefit” encompasses the transfer option or combined take‑home benefits across both plans | Plaintiffs: under floor‑offset principles and IRS guidance, accrued benefit should be treated considering the integrated arrangement, so loss of transfer reduced accrued benefit | DHL: ERISA defines accrued benefit by reference to each plan’s terms; Retirement Income Plan’s accrual formula (section 4.01) was unchanged, and the transfer provision sat in the Payment article, not the Accrued Benefit article | Held: "Accrued benefit" is defined by each plan’s terms; section 4.01 controls for the defined benefit plan and was not amended, so accrued benefits were not reduced |
| Whether deference is owed to Treasury/DOL interpretations (government amicus) on Regulation A‑2 and its application | Plaintiffs: challenge the Secretary’s authority to promulgate A‑2 in part (reasserted below) | Government: A‑2 permissibly interprets the anti‑cutback statute; agency brief is persuasive and should be afforded deference on the regulation’s meaning | Held: Court defers to the government’s interpretation of its regulation per Auer/Skidmore principles (some deference); declines to afford Chevron deference to government’s interpretation of the statute itself, but finds the agency interpretation persuasive |
Key Cases Cited
- Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999) (defines distinctions between defined‑contribution and defined‑benefit plans)
- Cent. Laborers’ Pension Fund v. Heinz, 541 U.S. 739 (2004) (describes ERISA anti‑cutback rule and Secretary’s role in interpreting overlapping provisions)
- Lockheed Corp. v. Spink, 517 U.S. 882 (1996) (ERISA protects employees’ reasonable expectations regarding promised benefits)
- Tasker v. DHL Retirement Savings Plan, 621 F.3d 34 (1st Cir. 2010) (affirming that eliminating transfer rights falls within Regulation A‑2 exception to anti‑cutback rule)
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to agency interpretation of its own regulation)
- Chase Bank USA, N.A. v. McCoy, 131 S. Ct. 871 (2011) (limits deference to agency litigation positions but supports deference to an agency’s interpretation of its own regulation when not plainly erroneous or inconsistent)