Thomas E. HEINZ and Richard J. Schmitt, Jr., Plaintiffs-Appellants, v. CENTRAL LABORERS’ PENSION FUND, Defendant-Appellee.
No. 00-3314.
United States Court of Appeals, Seventh Circuit.
Decided Sept. 13, 2002.
303 F.3d 802
Argued Feb. 12, 2001.
III.
For the reasons stated above, we affirm the district court‘s ruling regarding the terms of Mr. Sines’ supervised release which require Mr. Sines to attend a sex offender treatment program with periodic polygraph examinations and prohibit him from contact with Mr. Henry.
AFFIRMED.
Gery R. Gasick (Argued), Peoria, IL, for Plaintiffs-Appellants.
Patrick J. O‘Hara (Argued), Cavanagh & O‘Hara, Springfield, IL, Jeffrey M. Wilday, Brown, Hay & Stephens, Springfield, IL, for Defendant-Appellee.
WILLIAMS, Circuit Judge.
We are asked to decide whether a pension plan amendment which expands the types of post-retirement employment that trigger mandatory suspension of early retirement benefits violates ERISA‘s “anti-cutback” rule,
I. BACKGROUND
The facts are not in dispute. Plaintiffs Thomas E. Heinz and Richard J. Schmitt, Jr., are participants in a multiemployer pension plan administered by defendant Central Laborers’ Pension Fund. Both plaintiffs, who were 39 years old when they retired in 1996, qualified for and began receiving monthly benefits payments under a “service-only pension,” which was available to participants who retired at any age, so long as they had earned 30 or more pension credits. The monthly payments available under the service-only pension were the same as those available at normal retirement age—that is, the benefits were not actuarially reduced to take into account that payments began at an earlier age and would continue over a longer period. The monthly amount was determined based on the contribution rates at which the required 30 pension credits were earned.
Under the plan, monthly benefit payments for those retiring before age 60, like the plaintiffs, were subject to suspension for periods during which the participants worked in certain “disqualifying employment.” At the time of plaintiffs’ retirement, disqualifying employment was defined in the plan (for employees retiring before age 60) as employment:
in a job classification of any type specified and covered in a collective bargaining agreement or in any occupation or job classification where contributions are to be made to the Fund pursuant to a written agreement (either as a union or non-union construction worker).
After their retirement, plaintiffs obtained jobs as supervisors in the construction industry, which was not disqualifying under the existing definition. For two years the plaintiffs worked as construction supervisors while collecting monthly pension benefits. Then, in 1998, the plan was amended and the definition of disqualifying employment was expanded to include (for participants who retired before age 53) work “in any capacity in the construction industry (either as a union or non-union construction worker).”2 The Fund construed this amended definition as cov
The plaintiffs sued the Fund and, on cross motions for judgment on the pleadings, the district court entered judgment for the Fund. The district court, after careful analysis, held first, that the anti-cutback rule does not apply to suspensions of early retirement benefits payments triggered by disqualifying employment, and second, that the Fund‘s interpretation of the amended definition of disqualifying employment to include supervisory work was not arbitrary and capricious. The plaintiffs appeal on both grounds.
II. ANALYSIS
ERISA does not require employers to provide pension or early retirement benefits, or mandate a particular level of benefits. Hickey v. Chicago Truck Drivers, Helpers and Warehouse Workers Union, 980 F.2d 465, 468 (7th Cir.1992). Instead, “ERISA protects the benefits described in the Plan by ensuring that, if a pensioner is promised a benefit and fulfills the conditions required to receive it, the pensioner will actually receive the described and promised benefit.” Id. at 469. ERISA protects benefits from forfeiture through detailed rules regulating vesting and accrual rates, which ensure the participant‘s right to receive promised benefits notwithstanding his or her consent to plan provisions that would otherwise require forfeiture. See JOHN H. LANGBEIN & BRUCE A. WOLK, PENSION AND EMPLOYEE BENEFIT LAW 121-22 (3d ed.2000).
One limited exception to the non-forfeiture rules is that pension plans may contain provisions requiring the suspension of monthly benefit payments if a participant works in certain jobs after retirement. See
A. Plan Amendments Under 29 U.S.C. § 1054(g)
Plan amendments are permitted under ERISA, see
The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(c)(8) or 1441 of this title.
Paragraph (2) of § 1054(g), added by the Retirement Equity Act of 1984, P.L. 98-397, makes clear, however, that early retirement benefits are within the protection of the anti-cutback rule. Under that new provision, the test is not whether the amendment decreases “accrued benefits,” but rather whether the amendment “has the effect of eliminating or reducing” early retirement benefits attributable to service before the amendment:
For purposes of paragraph (1), a plan amendment which has the effect of—
(A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations), or
(B) eliminating an optional form of benefit,
with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits ....
Before the amendment, plaintiffs had the right under the plan to work as construction supervisors and continue to receive their monthly benefit payments. When disqualifying employment was redefined to include work “in any capacity in the construction industry (either as a union or non-union construction worker),” and when the Fund applied that definition to supervisory work, the plaintiffs lost their right to work as construction supervisors while collecting benefits.
We conclude that plaintiffs’ loss of the option of working as construction supervisors was a reduction of their early retirement benefits within the meaning of § 1054(g)(2). A participant‘s benefits cannot be understood without reference to the conditions imposed on receiving those benefits, and an amendment placing materially greater restrictions on the receipt of the benefit “reduces” the benefit just as surely as a decrease in the size of the monthly benefit payment. We have not before interpreted the prohibition in the anti-cutback rule as limited to amendments that reduce the amount of the periodic payment, and we find nothing in the language of the rule that suggests such an interpretation. In Ahng, for example, we held that the plaintiffs had stated a claim for violation of § 1054(g) when they alleged that a
The Fund argues that these cases are distinguishable because a change in the eligibility requirements, as in Ahng for example, differs from a change in the conditions triggering suspension of benefit payments in that the former permanently reduces benefits or eliminates certain participants’ rights to benefits, whereas a suspension is temporary. We find the distinction unconvincing. Although with a suspension the interruption in benefit payments is temporary, the retiree never recovers the payments lost during the employment period. The amendment thus “eliminates” monthly benefit payments for participants who take certain jobs after retirement and “reduces” the participant‘s total early retirement benefits by an amount determined by how long the disqualifying work continues. Plaintiffs lost a valuable right they had earned before the amendment—the right to continue to work in the industry while receiving monthly benefit payments—and that loss was permanent.5 In our judgment, this was a reduction of early retirement benefits within the plain meaning of § 1054(g)(2).6
B. Spacek v. Maritime Association
The Fund points out, however, that “suspensions” are not identified along with the prohibitions against decreases, reductions, and elimination of benefits in the anti-cutback rule. The Fund relies on Spacek, 134 F.3d 283, in which the Fifth Circuit concluded that an amendment like the one in this case did not violate the anti-cutback rule because it concerned a “suspension” and not a “reduction” in benefits.7 The Fifth Circuit supported its conclusion with: (1) an examination of the use of the two terms under the statute and related regulations; (2) the legislative history of the Retirement Equity Act; and (3) a Treasury regulation concerning the effect of suspensions on “accrued benefits.” We respectfully conclude, however, that the Fifth Circuit‘s arguments do not support its conclusion.
In Spacek, the court noted that “[t]hroughout the statute and corresponding regulations, the concepts of reduction of benefits and suspension of benefit payments are used in distinct ways, often within a single provision.” 134 F.3d at 288-89 (citing
We disagree with the inference that Spacek draws from the various provisions that refer to both reductions and suspensions. Our interpretation of the anti-cutback rule does not suggest that all suspensions are “reductions” (or vice versa), only that if the suspension is pursuant to an amendment that reduces benefits (attributable to service before the amendment), then it is a reduction within the anti-cutback rule. This interpretation does not render the word “suspension” in the other provisions redundant.
For example, Spacek relies on various provisions in Title IV of ERISA (relating to financially troubled and terminated plans) that refer to both “reduction of benefits” and “suspension of benefit payments“; according to Spacek, to avoid redundancy, the former phrase must be construed as excluding the latter. Id. But Spacek‘s identification of the two relevant phrases is too narrow; to the extent the Title IV provisions identify two separate categories, they are amendments that reduce benefits on the one hand, and suspen
(a) Amendment of plan by plan sponsor to reduce benefits, and suspension of benefit payments
Notwithstanding sections 1053 and 1054 of this title, the plan sponsor of a terminated multiemployer plan to which section 1341a(d) of this title applies shall amend the plan to reduce benefits, and shall suspend benefit payments, as required by this section.
In other words, even crediting the reliability of any inference about the anti-cutback rule that can be drawn from the use of these phrases in various provisions relating to terminated or troubled plans, the most we can infer is that a suspension of benefit payments not falling into the first category—amendments that reduce benefits—should be excluded from the anti-cutback rule. But other than in the case of insolvent or terminated plans, an administrator‘s authority to suspend benefits must come from the plan. And as we noted before, no one is disputing that the suspension in this case would be proper if it were contained in the original plan. It is the propriety of the amendment to the plan that is at issue in this case, and not the suspension itself, and therefore we cannot infer from the distinction made in Title IV between suspensions of benefit payments and amendments that reduce benefits that the amendment in this case is beyond the anti-cutback rule.10
We do not view the omission of a specific reference to suspensions in the anti-cutback rule as an oversight, but as unnecessary. Adding a reference to suspensions in § 1054(g)(1) (e.g., “The accrued benefit of a participant under a plan may not be decreased [or suspended] by an amendment of the plan“) or § 1054(g)(2) (e.g., “a plan amendment which has the effect of ... eliminating[,] reducing[, or suspending] an early retirement benefit ...“), would be awkward and perhaps overbroad; it is not the suspension of benefit payments that offends the anti-cutback rule, but the change (to the detriment of the participant) in the conditions triggering the suspension, and this concept is adequately captured by the prohibition against amendments that reduce benefits.
2. Legislative history of the Retirement Equity Act.
The Fund, again relying on Spacek, also points to the legislative history of the Retirement Equity Act of 1984, which added paragraph (2)—the provision concerning amendments that reduce or eliminate early retirement benefits—to § 1054(g). See Spacek, 134 F.3d at 289-90. Spacek found instructive the following comment made by Representative William Clay during the final House debates on the Retirement Equity Act:
Nor do those provisions in any way apply to or affect the provisions of ERISA section 203(a)(3)(B) and code section 411(a)(3)(B) relating to the suspension of benefits for postretirement employment, including the authorization for multiemployer plans to adopt stricter rules for the suspension of subsidized early retirement benefits.
Spacek, 134 F.3d at 289 (quoting 130 Cong. Rec. 23,487 (1984)). The Fifth Circuit concluded that Representative Clay‘s remark means that the anti-cutback rule in § 1054(g) does not limit the power of the plan to amend the plan to expand the restrictions on post-retirement employment. See Spacek, 134 F.3d at 289-90.
We find Representative Clay‘s remark ambiguous at best on the question of whether amendments concerning suspensions for disqualifying employment are outside the coverage of § 1054(g).11 But even if Representative Clay‘s understanding of the anti-cutback rule were consistent with the Fifth Circuit‘s—that suspensions upon disqualifying re-employment represent an additional exception to § 1054(g)—we find nothing in the legislative history to indicate that anyone else in Congress shared the understanding attributed to Representative Clay by the Fifth Circuit. The parties have not identified,
3. Treasury Regulation 26 C.F.R. § 1.411(c)-1(f).
The court in Spacek also found support in
This reasoning, however, is inconsistent with the language of paragraph (2) of § 1054(g), which provides that an amendment that has the effect of eliminating or reducing early retirement benefits shall, for purposes of § 1054(g), “be treated as reducing accrued benefits.”
The Fifth Circuit reasoned, however, that because the amendment would not decrease “accrued benefits,” then the amendment could not violate the anti-cutback rule as applied to full retirement benefits, because for those benefits, the prohibition is limited to amendments that decrease “accrued benefits.” See 134 F.3d at 291. According to Spacek, applying the anti-cutback rule to amendments governing suspension of early retirement benefits would therefore give early retirement benefits greater protection than full retirement benefits, which is contrary to Congress‘s intent that early retirement benefits receive the same protection as full retirement benefits. Id. But Spacek‘s observation about Congress‘s intent cuts both ways. The question is, same as what? Other than perhaps the remarks of Representative Clay (reliance on which, as we just discussed, is problematic), there is nothing in the legislative history of the Retirement Equity Act to suggest that Congress had any specific understanding about whether amendments affecting suspensions of full or early retirement benefits would be covered. And we disagree with Spacek‘s key premise that for full retirement benefits,
As Spacek points out, the regulation instructs that in calculating the accrued benefit, no actuarial adjustment need be made to account for the decrease in total benefits paid as a result of the suspension. See 134 F.3d at 290. This is consistent with
Another regulation, moreover, supports our conclusion that Spacek‘s construction is too narrow. That regulation,
The addition of employer discretion or objective conditions with respect to a section 411(d)(6) protected benefit that has already accrued violates section 411(d)(6). Also, the addition of conditions (whether or not objective) or any change to existing conditions with respect to section 411(d)(6) protected benefits that results in any further restriction violates section 411(d)(6).
The section of the anti-cutback rule dealing with early retirement benefits does not limit the prohibition to a decrease in “accrued benefits,” but rather says that an amendment that “has the effect of—eliminating or reducing” benefits will “be treated as reducing accrued benefits.”
Nothing in ERISA, the legislative history of the Retirement Equity Act, or the Treasury regulation relied upon by the court in Spacek persuades us to depart from our conclusion that
CUDAHY, Circuit Judge, dissenting.
Judge Williams for the majority has labored with great skill and ingenuity to overcome the efforts of Chief Judge Caroline Dineen King for a Fifth Circuit panel that came out the other way. See Spacek v. Maritime Ass‘n, 134 F.3d 283 (5th Cir.1998). Though Judge Williams has put as persuasive a face as may be possible on the majority‘s position, I still find Spacek quite compelling. Spacek, it seems to me, presents straightforward and plausible arguments, not susceptible to rebuttal by the sometimes tortured contentions of the majority.
The first pillar supporting the outcome in Spacek is the absence of the word “suspend” or its variants from
The majority attempts to rebut this argument with two points. First, it seems to say that a “suspension” is really a “reduction” because over time a “suspension” of the receipt of a benefit reduces the economic value of the total benefits received. Op. at 806. Of course, there is an economic loss from a suspension; if there were none, there would be no lawsuit. But, that does not mean that, as used in ERISA, a “suspension” is exactly equivalent to a “reduction” or is included within it. From the point of view of the recipient on the facts before us, the suspension of pension payments does not reduce the recipient‘s current income because the temporarily lost pension income is replaced by earned income derived, as was the pension, from the very same construction industry. This elimination of “double-dipping” from the construction industry‘s pockets seems substantially more equitable, and is certainly less burdensome to the pension recipient, than would be a reduction in the amount of the benefit unsupplemented by earned income. Hence, the broadening of the ban on “double-dipping” seems not inequitable.
Second, the majority attempts to dismiss the argument from redundancy based on the numerous ERISA provisions that contain both the words “reduction” and “suspension” by distinguishing those provisions as involving matters other than an amendment purporting to diminish benefits. Op. at 807-808. Thus, the majority apparently concludes that if a suspension is pursuant to an amendment that diminishes benefits, then the suspension is a reduction of benefits. Op. at 807-808. On the other hand, if a suspension is not pursuant to such an amendment, then, the majority concludes, it is not a reduction of benefits. Id. I do not follow this logic. While there may be more than one means of invoking a suspension, what constitutes a suspension—the
The majority‘s subsequent argument that § 1054(g) concerns only amendments and thus it only bars suspensions pursuant to an amendment, Op. at 809, only makes sense if a suspension is a reduction of benefits. But, beside the majority‘s ipse dixit, there is nothing to indicate that a suspension of benefits is a reduction of benefits as those terms are used in ERISA. Rather, as the analysis of Treasury Regulation
The legislative history involving the clear comments of Representative Clay firmly supports the interpretation based on plain meaning. The effort of the majority to explain away this comment is unconvincing. The comment appears to reflect an understanding at the time of the adoption of the anti-cutback rule that it not apply to adjustments made by the plan (perhaps in the interest of the plan‘s financial integrity) to the rules involving suspension of benefits in the event of re-employment in the construction industry. With respect to the arguments of the majority depreciating the use of legislative history in general, these arguments become less weighty in the case of legislative history that fits so closely with the interpretation founded on plain meaning.
The plain meaning is also supported by the Internal Revenue Manual described by the majority in its footnote 17. Again, this bit of authority fits neatly into the interpretation derived from plain meaning. It is, therefore, hard to explain away.
That Spacek‘s interpretation reflects the plain meaning of the statute is supported by the outcome in Whisman v. Robbins, 55 F.3d 1140 (6th Cir.1995). In Whisman, the appellant had qualified for a “‘30-and-Out’ pension benefit, which [was] available to participants with thirty years of service, regardless of age.” Id. at 1143. He received $1,000 per month under the “30-and-Out” provision until he began working for the United States Postal Service in 1986, at which time, his pension benefit was suspended under the Plan‘s re-employment provision. Id. The Sixth Circuit held that the re-employment provision, which suspends early retirement benefits if the participant is engaged in prohibited employment, was not contrary to the law. Id. at 1146-47 (citing Gardner v. Central States, Southeast & Southwest Areas Pension Fund, No. 93-3070, 1993 WL 533540 (6th Cir. Dec.21, 1993)). The court then dealt with Whisman‘s argument invoking the anti-cutback rule of ERISA.
Whisman counters that Gardner is inapplicable because at the time Whisman applied and qualified for pension benefits, [the reemployment provision], adopted in 1987, was not in effect. According to Whisman, the application of the amended reemployment provision violates the principle of Costantino v. TRW, Inc., 13 F.3d 969 (6th Cir.1994). We disagree. In Costantino, this Court held that a plan‘s attempt to eliminate early retirement subsidies for retirees that had already qualified for the subsidy prior to plan amendment violates the anticutback rules of ERISA and the Tax Code. Costantino is based upon an application and enforcement of section 204(g) of ERISA,
29 U.S.C. § 1054(g) , which prohibits employers from amending their pension plan to decrease or eliminate early retirement benefits or retirement type subsidies. Even assuming that the “30-and-Out” benefit contains an early retirement subsidy, Whisman‘s argument is unpersuasive, because § 1054(g) and Costantino involve a reduction or elimination of accrued benefits and retirement-type subsidies, not a suspension, as is the case here.
Whisman, 55 F.3d at 1147 (emphasis added and footnote omitted). The court went on to conclude that Whisman would have lost even under the unamended plan. Id. While the majority dismisses Whisman as reaching its conclusion without analysis, perhaps the Whisman court thought that its conclusion was obvious from the plain meaning of § 1054(g).
Initially, to gain some perspective on the status of early retirement benefits in relation to normal retirement benefits, one should recognize that early retirees—here only 39 years old—would be much more likely to go back to work in construction than people normally retiring in their sixties. Hence, it would not be at all surprising that “double-dipping” by early retirees would, perhaps for reasons of the financial integrity of the plan, be dealt with more severely (and certainly not less severely) than would re-employment in the industry by workers retiring at a normal (and relatively advanced) age.2 It would appear more likely that normal retirees would be allowed to retain their pension payments than would early retirees. So one might logically expect employment restrictions on early retirees to be more onerous than those on normal retirees.
The Retirement Equity Act (REA), however, added the language of § 1054(g)(2), and, as Spacek states, “The legislative history of the REA indicates that the fundamental purpose behind the addition of paragraph (2) was to afford early retirement benefits and retirement-type subsidies the same form of protection from reduction by amendment afforded to accrued benefits.” I am therefore in accord with Spacek‘s conclusion that, if an amendment, such as the one at issue here, would not violate § 1054(g) if it were applied to suspend fully accrued benefits, it plainly cannot violate § 1054(g) if applied to early retirement benefits. Spacek, in reaching that conclusion, starts with the proposition from the applicable treasury regulation that, “for the purposes of computing the actuarial equivalent of a retirement benefit available at normal retirement age, ‘[n]o adjustment of any accrued benefit is required on account of any suspension of benefits if such suspension is permitted under section 203(a)(3)(B) of the Employment Retirement Income Security Act of 1974 [29 U.S.C. § 1053(a)(3)(B)].‘” Spacek, 134 F.3d at 290 (quoting
Spacek then notes the authorization under § 1053(a)(3)(B) of suspension of accrued benefits based on certain employment—as is the case here. At this point, Spacek goes on to conclude that an authorized suspension does not decrease accrued benefits. And, as earlier noted, to the extent that an amendment would not violate the anti-cutback provision rule if applied to fully accrued benefits, such an amendment cannot, based on the demonstrated intent of Congress, violate the rule if applied to early retirement benefits. The logic here seems inescapable.
As far as I can divine, the majority‘s effort at refutation involves a simple attempt at bootstrapping. The majority says that the Spacek reasoning is inconsistent with the language of paragraph (2) of the anti-cutback rule, apparently because this provision requires that amendments that have the effect of eliminating or re
The majority also adds the point that, even though a suspension of benefit payments may not decrease accrued benefits (or become a forfeiture), a change in the rules governing suspensions may indeed decrease benefits. Op. at 812. This argument misses the mark because the provisions we are discussing are directed to what is permissible for changes in the plan. To change the rules governing suspensions is merely to create a suspension with a little different design than an earlier one. The rules addressing the consequences of invoking a suspension necessarily encompass changes leading to a new form of suspension.
The majority‘s reliance on
Spacek‘s analysis relies on straightforward interpretations of statutory and regulatory language. The majority seeks to refute it with implausible and unconvincing arguments that do violence to the clear intent of the drafters.
As to considerations of policy and equity, it is true that my analysis may result in defeating in some instances the expectations of the plan participants. But this seems acceptable if they withdraw from retirement and return to the workforce, later to place additional demands upon the plan. They suffer no loss of regular income and are merely deprived of a bonus in the form of a dual recovery at the expense of the construction industry. Meanwhile, the financial integrity of the plan may be affected by continuing to make retirement provisions for participants who have not really retired.
I therefore respectfully dissent.
No. 01-3448.
United States Court of Appeals, Seventh Circuit.
Argued April 4, 2002.
Decided Sept. 17, 2002.