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Amendment to Pension Plan Violated ERISA Anti-Cutback Rule

Battoni v. IBEW Local Union 102 Empl. Pens., Case No. 08-3743/3924 & 09-2030 (C.A. 3, Feb. 5, 2010)

This appeal requires us to consider the scope of the Employee Retirement Income Security Act’s (“ERISA”) Anti-Cutback rule, 29 U.S.C. § 1054(g). Certain current and retired members of a union (the “Battoni Plaintiffs”) challenged an amendment to their welfare plan (the “Disputed Amendment”) as an unlawful cutback of their accrued benefits under their pension plan. We must determine whether the Disputed Amendment, which conditions receipt of healthcare benefits under a welfare plan on non-receipt of an accrued benefit under a pension plan, violates the Anti-Cutback rule. In light of ERISA’s statutory text and our precedent, we conclude that the Disputed Amendment violated the Anti-Cutback rule by constructively amending the pension plan in a manner that decreased an accrued benefit under that plan. Accordingly, we will affirm the District Court’s judgment in favor of the Battoni Plaintiffs.

In November 1999, the Local 675 and the Local 102 chapters of the International Brotherhood of Electrical Workers (“IBEW”) merged. As a result of the merger, the Local 675 chapter was dissolved and its members were transferred to the Local 102 chapter. The chapters’ pension and welfare plans were also combined.

Before the merger, the Local 675 Pension Plan permitted plan participants to choose between a lump sum pension benefit or a periodic monthly benefit. The Local 102 Pension Plan, on the other hand, provided only a periodic monthly benefit to its participants. After the merger, the two pension plans were combined into one—the Local 102 Pension Plan. To accommodate the lump sum pension benefit option that was included in the Local 675 Pension Plan, the Local 102 Pension Plan was amended to provide former Local 675 members the right to receive a lump sum benefit for pre-merger accruals. Post-merger accruals, however, could be applied only towards a periodic monthly benefit.

The chapters’ welfare plans were combined by transferring the Local 675 members to the Local 102 Welfare Plan. That plan provided eligible retirees healthcare benefits for themselves and their spouses. To receive these benefits, a retiree was required to satisfy certain conditions outlined in the plan. Shortly after the merger, the Local 102 Welfare Plan was amended to include a new condition on the receipt of healthcare benefits. This amendment, the Disputed Amendment, conditioned a retiree’s receipt of healthcare benefits on the retiree’s not choosing the lump sum pension benefit offered under the Local 102 Pension Plan. The Disputed Amendment stated, in relevant part, that:

Retired employees who elect a lump sum pension benefit in lieu of periodic monthly benefits from [the] IBEW Local 102 Pension Plan and/or from another Local Union IBEW Pension Plan shall not be eligible for continued [healthcare] coverage.

Before the addition of the Disputed Amendment, a former Local 675 member could elect to receive the lump sum pension benefit provided under the Local 102 Pension Plan and still receive healthcare benefits under the Local 102 Welfare Plan.
 

 

Jurisdiction: U.S. Court of Appeals, Third Circuit
Circuit Court Judge(s)
Maryanne Barry
Anthony Scirica
D. Brooks Smith

 
Trial Court Judge(s)
Faith Hochberg

 
Appellant Lawyer(s) Appellant Law Firm(s)
Michael T. Scaraggi Oransky Scaraggi Borg & Abbamonte

 
Appellee Lawyer(s) Appellee Law Firm(s)
Robert E. Bartkus Dillon Bitar & Luther
Robert W. Delventhal Dillon Bitar & Luther

 

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benefitsare exempt fromcoverage under the anti-cutback rule, disputed amendment violated the anti-cutback rule by not be invoked to justify an actual suspension of for the district of new jersey benefits, but at the moment the new condition is sum pension benefit under the local 102 pension plan, plan. shortly after the merger, the local 102 welfare plan was interpretation of a plan provision that results in the improper cutback rule, however, cannot be employed in such an overly 541 f.3d at 255-56; rombach, 211 f.3d at 193-94 (concluding local 102 chapter. the chapters' pension and welfare plans f.3d at 255-56; see also rombach, 211 f.3d at 193-94; united states court of appeals that the disputed amendment violated erisa's anti-cutback after a bench trial, we exercise "plenary review over [the] 2. 6 rombach, 211 f.3d at 194). effect of reducing or eliminating a section 411(d)(6) protected contingent event"); id. 1.411(d)-4, a-2(a)(1) ("[in general, a] it is undisputed that erisa sections 302(d)(2), 292 determine its true character before we declare it solelya welfare approximately two years later, the pension plan's 2 disputed amendment violated the anti-cutback rule and robert e. bartkus (argued) the extent" that it pertains to pension benefits, 29 u.s.c. benefit under the local 102 pension plan, we conclude that the erisa litig., 541 f.3d at 255; rombach, 211 f.3d at 193. as or a periodic monthly benefit. the local 102 pension plan, on result in a deferral of income by employees for the battoni plaintiffs, challenged the disputed amendment, 1. denial of benefits to a plan participant may be construed as an b. moreover, if the disputed amendment were added to the local id.3 (3d cir. 2008). according to the union, the disputed rule. 17 coverage. erisa's anti-cutback rule bolster our conclusion. those constructivelyamended the right to receive a lump sum pension this appeal requires us to consider the scope of the charles r. waller, having the effect of amending a plan or plans to transfer plan right to receive a lump sum benefit for pre-merger accruals. a pension plan, violates the anti-cutback rule. in light of included in the local 675 pension plan, the local 102 pension 102 pension plan. see in re lucent death benefits erisa [d]istrict [c]ourt's conclusions of law" and its "choice and 10 16 ibew local union no 102 employee pension valuable[.]" cent. laborers' pension fund v. heinz, 541 u.s. the latter provide retirement income benefits: "by its express terms or as a result of surrounding sum pension benefit, see id. undoubtedly serve different purposes under erisa's scheme. amendment merely restricts access to healthcare benefits and recipients. see, e.g., hein v. fdic, 88 f.3d 210, 216 (3d cir. from the anti-cutback rule. 29 u.s.c. 1051(1). the anti- re lucent death benefits erisa litig., 541 f.3d at 255 (citing our view of what constitutes an "amendment" to a it also "function[ed]" to condition receipt of the lump sum 5 3 violates the requirements of section 411(d)(6) if it is one of a james w. vreeland; pension fund, 541 u.s. at 746; see also 26 c.f.r. 1.411(d)- in a given case, the new condition may or may plans provide retirement income to employees or will affirm the district court's judgment in favor of the battoni entered judgment in favor of the battoni plaintiffs. the union counsel for appellants in 08-3743 and 09-2030, 8 the local 102 pension plan did not exist, an amendment trustees and individually, ii. participation, vesting, and funding standards set forth in had not yet been addressed on the merits because they had that a plan was amended and (2) that the amendment decreased purposes of determining whether a participant's accrued benefit 1.411(d)-4, q-7, a-7.4 the union concedes that the lump sum pension benefit . even if such elimination or reduction is contingent upon the before: scirica, chief judge, barry, and smith, employment" provision violated the anti-cutback rule. id. at id. at 746 (emphasis added). district judge: the honorable faith s. hochberg provisionthatstated thatmonthlyretirementpaymentswouldbe affecting, directly or indirectly, the computation of accrued fund, 541 u.s. at 747 ("so far as the [treasury] [r]egulations monthly pension payments were suspended because of his employee retirement income security act's ("erisa") anti- receipt of healthcare benefits under the local 102 welfare plan. conditioning receipt of healthcare benefits on not receiving be imposed after a benefit has accrued; may the see, e.g., 26 c.f.r. 1.411(d)-3(a)(2)(i) ("for6 1002(2)(a). see in re lucent death benefits erisa litig., 541 to cover direct and indirect amendments to pension plans. the6 before the merger, the local 675 pension plan permitted the extent that' rather than `solely' clearly indicate that plan amendment and exempt from the anti-cutback rule. an we must examine the disputed amendment closely to accrued benefits violates the anti-cutback rule: receive healthcare benefits under the local 102 welfare plan. chapters of the international brotherhood of electrical workers post-merger accruals, however, could be applied only towards change to existing conditions with respect to having determined that the disputed amendment then filed this timely appeal.1 protected benefit that hasalreadyaccrued violates employment or beyond. id. 1002(2)(a). smith, circuit judge. in its defense, the central laborers' pension fund as a general rule, an amendment amends a pension plan whether it modifies a pension plan, a welfare plan, or both. in violation of the anti-cutback rule. see cent. laborers' benefit plans: pension plans and welfare plans." plan. thatplan provided eligibleretireeshealthcarebenefitsfor conditioned a retiree's receipt of healthcare benefits on the stated, in relevant part, that: simplistic, robotic fashion. constructively amended the local 102 pension plan. see id.; the district court improperly denied them relief on their other heinz continued to work as a construction supervisor and his an accrued benefit. see id. elects to receive the lump sum pension benefit under the local decreased an accrued benefit under that plan. accordingly, we amendment to their welfare plan (the "disputed amendment") employee has already earned."). prohibition against the reduction or elimination of section amended to include a new condition on the receipt of healthcare 675 member could elect to receive the lump sum pension 102 welfare plan and certainly dealt with healthcare benefits, were also combined. disputed amendment imposed a condition on the receipt of the plan and / rule]."). under the local 102 pension plan. the disputed amendment any further restriction violates section 411(d)(6). iv. that such an amendment was prohibited in part because the 29 u.s.c. 1002(1), and part of the local 102 pension plan "to amendment, which conditions receipt of healthcare benefits hospital care or benefits, or benefits in the event in this case. "erisa recognizes two types of employee benefits."); id. 1.411(d)-4, a-2(c)(1) ("a plan amendment (6th cir. 2000). that being said, the union's argument that it are affirming the district court's judgment, we need not section 411(d)(6). also, the addition of constituted an amendment to the local 102 pension plan. see the other hand, provided only a periodic monthly benefit to its 739, 746 (2004). the treasury regulations for the internal accommodate the lump sum pension benefit option that was plaintiffs' lump sum pension benefits accrued before the 1996); accord hunter v. caliber sys., inc., 220 f.3d 702, 712 rule. the battoni plaintiffs filed suit in the united states 7 alleging, among other things, that it violated the anti-cutback materials v. corrpro cos., 478 f.3d 557, 566 (3d cir. 2007) 10; jane does 1-10; district court no. 2-05-cv-00934 supervisor while receiving pension payments. id. 12 participants. after the merger, the two pension plans were in re lucent death benefits erisa litig., 541 f.3d 250, 253 heinz's monthlypension payments were merelysuspended, not entered after a bench trial. the district court had jurisdiction such, the "meaning and function" of the amendment determines pension benefit under the local 102 pension plan on non- pension plan because it conditioned receipt of the lump sum u.s.c. 1054(g)(1). the union argues that the disputed condition on the receipt of an accrued benefit. the battoni constructively amended the pension plan by adding a condition 302(d)(2) or 4281." 29 u.s.c. 1054(g)(1). to state a claim2 treasury under [section 411 of the irc ] apply to the minimum transferring the local 675 members to the local 102 welfare 11 or the ibew local union no 102 employee welfare fund, as revenue code ("irc") provision corresponding to the anti- 13 4 beforethe addition of the disputed amendment,a formerlocal west caldwell, nj 07006 argued that it did not decrease an accrued benefit because condition," id., in and of itself, decreased the value of the lump rights to the lump sum pension benefit offered under the local plan); mcbarron v. s & t indus., inc., 771 f.2d 94, 98 (6th cir. that disability provisions in pension plan constituted a welfare a-7: no. the addition of . . . objective amendment expanding the categories of postretirement series of plan amendments that, when taken together, have the over the case under 28 u.s.c. 1331. we have jurisdiction amended the local 102 pension plan, the next inquiry is heinz's pension plan contained a "disqualifying employment" as an unlawful cutback of their accrued benefits under their dillon, bitar & luther the former provide healthcare and unemployment benefits and see also in re lucent death benefits erisa litig., 541 f.3d at circumstances," 29 u.s.c. 1002(2)(a), amended the local considerations, determines whether a plan [amendment amends richard d. lessner; lewis s. weinstock; cross-appellees in 08-3924 district court for the district of new jersey, naming the local lucent death benefits erisa litig., 541 f.3d at 255. thus, did not amend the local 102 pension plan has a certain retirement plan constituted a welfare plan). "[t]he words `to section 411(d)(6) protected benefit that has already accrued, . . the central laborers' pension fund also raised other5 ongoing violation of the amended "disqualifying employment" a] pension plan or a welfare plan." id.; see rombach v. nestle they also explained that their breach of fiduciary duty claim the battoni plaintiffs filed a cross-appeal, arguing that1 plan was amended to provide former local 675 members the f.3d at 256. "the type of benefit provided, not other regulations direct us to construe broadly the anti-cutback rule are concerned, . . . the anti-cutback provision flatly prohibits yet the disputed amendment conditioned the receipt of those neil battoni; 9 of the plan, other than an amendment described in section employment or beyond[.]" 29 u.s.c. 1002(2)(a) (defining that the pension fund's distinction between suspension and morristown, nj 07960 treasury regulations state that the imposition of conditions on 1. 53 maple avenue congress intended to allow any plan or part of a plan," accrued benefit: appellees in 08-3743 and 09-2030 1985) (holding that disability provision in comprehensive b. outright eliminated. id. at 745. the supreme court explained5 a periodic monthly benefit. benefit in lieu of periodic monthly benefits from [erisa]." bellas v. cbs, inc., 221 f.3d 517, 523 n.3 (3d cir. 14 benefit provided under the local 102 pension plan and still elimination "misse[d] the point" of the anti-cutback rule. id. disputed amendmentwasadded to thelocal102 welfareplan. mergers, spinoffs, transfers, and transactions amending or conclude that an amendment to the local 102 welfare plan (internal quotations omitted). findings of fact are reviewed for chapter was dissolved and its members were transferred to the construction worker." id. at 742. the provision did not cover constructively amending the pension plan in a manner that cutback rule, 29 u.s.c. 1054(g). certain current and retired claims against the union: (1) violation of erisa's anti- cross-appellants in 08-3924 "disqualifying employment" provision was amended to include necessary. see in re lucent death benefits erisa litig., 541 limited by a new condition narrowing that right? retiree's not choosing the lump sum pension benefit offered plaintiffs. pension benefit, an accrued benefit, on surrendering healthcare even though the disputed amendment was added to the local plans from attaching new conditions to benefits that an conditions (whether or not objective) or any raymond s. demarco, jr.; mark f. shubiak; hein, 88 f.3d at 216. accordingly, it is no stretch for us to 102 pension plan instead of the local 102 welfare plan, it amendment lawfully amended a welfare benefit plan--such condition is imposed, the accrued benefit becomes less a. a. would retain the exact same meaning and function. see in re valuable, irrespective of any actual suspension. suspended benefits, alleging that the amended "disqualifying i. employee's consent."); id. 1.411(d)-4, a-2(a)(3)(i) ("the the first question that must be resolved is whether the to the receipt of a benefit accrued under that plan. if a retiree the anti-cutback rule states: "the accrued benefit of a benefits. this amendment, the disputed amendment, cross-appellees in 08-3924 disputed amendment, by conditioning the receipt of welfare under a welfare plan on non-receipt of an accrued benefit under oransky, scaraggi, borg & abbamonte 541 f.3d at 255-56. this condition on the receipt of the lump for violation of erisa's anti-cutback rule one must show (1) imposition of a new condition on an accrued benefit decreased 102 pension plan. this argument cannot succeed in this case. u.s.c. 1082(d)(2), and 4281, 29 u.s.c. 1441, do not apply benefits are taken into account."); id. 1.411(d)-3(b)(1)(ii) pension plan has been construed broadly to protect pension 94; mcbarron, 771 f.2d at 98. assuming, hypothetically, that 29 u.s.c. 1054(g)(1). because the disputed amendment amendment amended the welfare plan and thus was exempted 411(d)(6) [the irc's provision corresponding to address the battoni plaintiffs' cross-appeal. the value of that accrued benefit. id. at 746. section 411(d)(6)protected benefitsthatresultsin [the] ibew local 102 pension plan and/or from a welfare plan, see id. see also in re lucent death benefits 2. another local union ibew pension plan shall to employees, or . . . results in a deferral of income by mcbarron, 771 f.2d at 98. the disputed amendment 411(d)(6) if accomplished through a single amendment."). not be eligible for continued [healthcare] interpretation of legal precepts." am. soc'y for testing & the treasury regulations for the irc's counterpart to 102 welfare plan. thus, the disputed amendment necessarily, 18 michael t. scaraggi (argued) retirement benefits already accrued." 541 u.s. at 741. it held 15 evaluationoftheamendment's benefitcharacteristics,which are clear error. id. appellants in 08-3743 and 09-2030 after retiring, heinz began working as a construction lump sum benefit under the local 102 pension plan, it be interpreted consistently." bellas, 221 f.3d at 523 n.3; see id. of sickness, accident, disability, death or pension plan. we must determine whether the disputed cutback rule further confirm this conclusion. 26 c.f.r. arguments not relevant to the instant case. members of a union (the "battoni plaintiffs") challenged an 29 u.s.c. 1051(1)--without disturbing thebattoni plaintiffs' we have already held that even when there is "no3 on appeal from the united states district court the union appeals from the district court's judgment "erisa" litig., 58 f.3d 896, 902 (3d cir. 1995). conditions with respect to a section 411(d)(6) alan m. golub; regina delesky; john does 1- worked in the construction industry before retiring. id. at 741. benefits provided by the welfare plan. see 29 u.s.c. trusteesof thoseplans(collectively,the"union")asdefendants. interference rule, 29 u.s.c. 1140, and (2) breach of contract. welfare fund; john e. mchugh; he would lose his monthly pension payment if he continued to first requirement of an anti-cutback claim was satisfied. 175 fairfield avenue, suite 1a 2000) (quoting 29 u.s.c. 1202(c)). "accordingly, the . . . pension plan, like heinz's pension plan, imposed a new provision. id. heinz sued the pension fund to recover the offered under the local 102 pension plan was an "accrued [anti-cutback rule,] and [section 411 of the irc] are meant to usa, inc., 211 f.3d 190, 193-94 (2d cir. 2000). welfare plans provide "medical, surgical, or cross-appellants in 08-3924 participant under a plan maynot be decreased byan amendment litig., 541 f.3d at 255-56; see also rombach, 211 f.3d at 193- 26 c.f.r. 1.411(d)-4, q-7, a-7; cent. laborers' pension "regulations prescribed by the secretary of the4 clement battoni, jr.; raymond giuliano; iii. for the third circuit right to receive certain moneyon a certain date be benefit in a manner that would be prohibited by section erisa's statutory text and our precedent, we conclude that the argued january 12, 2010 after a bench trial, the district court concluded that the "to the extent that by its express terms or as a result of 742-43. the disputed amendment constructively amended the "pension plan"); see in re lucent death benefits erisa litig., imposed, the accrued benefit becomes less employment that triggers suspension of payment of early regulations] refer only to the [irc] version of the anti-cutback any job in the construction industry. id. heinz was warned that only be realized through the occurrence of an "unpredictable erisa's anti-cutback rule] protected benefit? conditions restricting the availability of a section benefit," 29 u.s.c. 1002(23). it argues that the disputed counsel for appellees in 08-3743 and 09-2030, in central laborers' pension fund, the supreme court work as a construction supervisor. id. despite the warning, whether the amendment decreased an accrued benefit. see 29 ("ibew") merged. as a result of the merger, the local 675 rule, they apply with equal force to [erisa's anti-cutback (filed: february 5, 2010) employees for periods extending to the termination of covered q-7: may a plan be amended to add . . . mcbarron, 771 f.2d at 98, to be considered a pension plan or plan administered by the central laborers' pension fund, the real question is whether a new condition may 102 pension and welfare plans and the current and former thomas heinz, a retiree who participated in a pension precedential 255. surrounding circumstances ...[it] provide[s] retirementincome opinion was amended or modified in any way," a mere "erroneous 411(d)(6) protected benefits already accrued applies to plan is decreased, all of the amendments to the provisions of a plan considered "whether the [anti-cutback] rule prohibits an pension fund, 541 u.s. at 747 ("although the [treasury circuit judges retiree was required to satisfy certain conditions outlined in the succeeded on their anti-cutback rule claimat trial. because we retired employees who elect a lump sum pension combined into one--the local 102 pension plan. to benefits on a retiree not exercising her right to receive a lump work as a "construction supervisor." id. independent of the formal placement of the amendment, is under 28 u.s.c. 1291. when reviewing a judgment entered accrued benefits under that plan would be nonsensical. sum pension benefit decreased the value of that benefit in `amendment' for the purposes of [the anti-cutback rule]." evidence in the record that the actual text of the [pension plan] p.o. box 398 unemployment[.]" 29 u.s.c. 1002(1). pension at 524 n.5 (citing 26 c.f.r. 1.411(d)-4); cent. laborers' suspended if he accepted work as a "union or non-union chapter who were formerly members of the local 675 chapter, nos. 08-3743, 09-2030 (consolidated cases); and 08-3924 plan is not permitted to be amended to eliminate or reduce a 102 pension plan she loses healthcare benefits under the local a group of current and retired members of the local 102 the same reasoning applies here. the local 102 v. welfare plan "to the extent" that it pertains to welfare benefits, in november 1999, the local 675 and the local 102 1002(2)(a); see also in re lucent death benefits erisa litig., themselves and their spouses. to receive these benefits, a accrued benefits on forfeiting healthcare benefits. this "new the disputed amendment is part of the local 102 periods extending to the termination of covered the imposition of the condition itself was what devalued the plan; ibew local union no 102 employee (explaining that anti-cutback rule applies to benefits that can superficial appeal because welfare and pension plans decreased an accrued benefit. "[a]t the moment [a] new robert w. delventhal plan participants to choose between a lump sum pension benefit in re. unisys corp. retiree med. benefit does not decrease any accrued benefit. but because the trustees of the ibew local union no 102 employee pension 4, q-7, a-7. thus, we will affirm the district court's judgment the chapters' welfare plans were combined by


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