Home > Blog > Blog > Pension Plans > Second Circuit Affirms Multiemployer Pension Plan’s Denial of Retirement Benefits Because Participant Did Not Separate from Covered Employment

Second Circuit Affirms Multiemployer Pension Plan’s Denial of Retirement Benefits Because Participant Did Not Separate from Covered Employment

In Aracich v. The Board of Trustees of The Employee Benefit Funds of Heat And Frost Insulators Local 12, et al., No. 22-2544-CV, 2023 WL 4692316 (2d Cir. July 24, 2023), Plaintiff-Appellant Matthew Aracich, the former business manager of the International Association of Heat and Frost Insulators Local No. 12 (“Union”), brought this action seeking pension and retiree health benefits against various defendants, including the Welfare Fund of the Union (“Welfare Plan”) and the Pension Fund of the Union (“Pension Plan”). The gist of Aracich’s ERISA and state law claims is that the defendants improperly deemed him not to be “retired” under the terms of the Plans, which led to his denial of benefits. The district court dismissed the complaint under Rule 12(b)(6) for failure to state a claim. Aracich appealed and the Second Circuit Court of Appeals affirmed.

The court first determined that the Pension Plan and Welfare Plan documents grant the Trustees the discretion to interpret the terms of the plan. The Pension Plan Document (“PPD”) provides a participant with benefits if that participant has retired and qualifies for either a regular pension or an early retirement pension. Qualification for either pension depends on pension credits, which reflect earnings and time of service in Covered Employment.  Covered Employment is defined as employment with an employer that is required under a CBA or other agreement to contribute to the Pension Plan. The PPD further states that to be considered “retired,” a participant must have separated from Covered Employment.” To receive pension benefits, a participant “must stop working.” Under the Welfare Plan, retirees are eligible to receive health benefits if they work until age 60 and then retire (as defined in the PPD) while eligible for benefits.

Aracich worked in covered employment at the Union until he left in 2018 to become president of the Building and Construction Trades Council of Nassau & Suffolk Counties, AFL-CIO (“the Council”), where he is currently employed. The Council agreed to contribute to the Plans on Aracich’s behalf which allowed him to continue to accrue pension credits despite leaving the Union. Then in 2021, Aracich informed the Plans that the Council intended to terminate his participation agreement, and the Plans accepted the Council’s termination. Aracich also announced he would be retiring from the Union. Shortly thereafter, at the age of 60 and with over thirty years of pension credits, Aracich sought early retirement pension and retiree welfare benefits. Though he remained employed at the Council, he took the position that he “retired” when the Council stopped making contributions to the Plans and no longer qualified as a covered employer. The Trustees denied the claim because he never ceased working for the Council. They cited the Pension Fund SPD which explains that a participant must stop working in order to begin receiving benefits.

The court upheld the Trustees’ interpretation of the Plans under abuse of discretion review. The court explained:

According to the PPD, to be considered retired, a Participant must have separated from Covered Employment. The PPD does not further define “separated.” However, the Pension Fund Summary Plan Description explains that “you must stop working” in order to receive benefits. To the extent that it is ambiguous whether “separated” refers to the participant actually separating from the employer—or whether separation could be accomplished by the employer ceasing to be a covered employer while the participant continues working—Sections 6.3 and 6.4 of the PPD grant discretion to the Trustees to determine whether an individual has “separated” and is therefore retired for the purposes of the plan.

We agree with the district court that the Trustees properly exercised such discretion here. In concluding that the interpretation of the Trustees was reasonable, the district court relied on the definition of “retire” found in the PPD; on the explanation in the Pension Fund Summary Plan Description that one “must stop working” in order to begin receiving benefits; and on the Trustees’ concern that allowing Aracich to receive benefits would jeopardize the Plan’s tax-qualified status. These are proper considerations that, especially taken together, demonstrate that the Trustees’ interpretation of the PPD was neither “without reason” nor “erroneous as a matter of law.”

(cleaned up and citations omitted). The court also rejected Aracich’s challenges to the district court’s dismissal of his ERISA § 510 and 204(g) claims and it found his state law claim preempted by ERISA.


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*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

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