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Second Circuit: Reinterpretation of Special Early Retirement Benefit Terms Does Not Violate ERISA’s Anti-Cutback Rule

In Metzgar, et al v. U.A. Plumbers and Steamfitters Local No. 22 Pension Fund, et al., No. 20-3791, 2022 WL 610340 (2d Cir. Mar. 2, 2022), Plaintiffs-Appellants are participants in the U.A. Plumbers & Steamfitters Local 22 Pension Fund (the “Fund”), a defined benefit multi-employer pension plan governed by an Agreement and Declaration of Trust (the “Trust”). The Fund paid pension benefits according to a Restated Plan of Benefits (the “Plan). After age 55, Plaintiffs qualified for and were paid special early retirement benefits while they continued to work in non-disqualifying employment. The Plan was interpreted to allow pension benefits to be paid to participants who did not completely stop work, but just switched to non-disqualifying employment, such as in a managerial position, or as a project manager or estimator. In the fall of 2011, Plan Trustees concluded that the Plan could no longer be interpreted to allow payment of special retirement benefits to participants who did not “retire” under the terms of the Plan because such interpretation would run afoul of the Internal Revenue Code (IRC) and jeopardize the Fund’s tax-exempt status. Some plaintiffs quit work and continued to receive pension benefits while others continued to work and stopped receiving pension benefits. Plaintiffs sued the Fund, its Board of Trustees, and its Plan Administrator contending that forcing them to choose between their pension or their jobs (1) violated ERISA’s anti-cutback rule, 29 U.S.C. § 1054(g); (2) was a wrongful denial of benefits under 29 U.S.C. § 1132(a)(1)(B); and (3) a breach of Defendants’ fiduciary duty to Plaintiffs. The district court granted summary judgment to Defendants and denied Plaintiff’s request for a preliminary injunction to enjoin Defendants from withholding 25% of Plaintiff’s monthly pension payments to recoup prior payments Defendant believed were made in violation of the IRC.

The Second Circuit affirmed the judgment of the district court. The court found that the Trust gives Defendants full discretionary authority to determine eligibility and to interpret the terms of the Plan. The court deferred to Defendants’ interpretation of the Plan because it was reasonable and not arbitrary and capricious. The Plan states that “Any Employee who retires” is eligible for a special retirement pension. The term “retire” in common parlance means to leave employment after a period of service. The Trustees reasonably concluded that to “retire” means to separate from employment with all employers that contribute to the Plan. Even though the Plan allows post-retirement employment in “non-disqualifying employment” that is not inconsistent with the Trustees’ interpretation. Participants would just have to retire first and separate from their prior employment before becoming reemployed. The reinterpretation of the Plan was not arbitrary and capricious because Defendants reasonably understood that it was necessary to avoid violating the IRC, 26 U.S.C. § 401(a) and jeopardizing the Fund’s tax-exempt status.

The Second Circuit rejected Plaintiffs’ argument that Defendants’ reinterpretation of the Plan violated ERISA’s anti-cutback rule, which prohibits decreasing an accrued benefit by an amendment of the plan. It explained that the Plan has always required that a participant retire. Even though “retire” was not defined prior to a 2012 amendment, it was reasonable for Defendants to interpret the Plan as not ever allowing for distributions in the manner that Defendants had previously practiced. The reinterpretation is not an amendment because the plan terms did not change, and Plaintiffs were not entitled to the accrued benefit they claim to have lost due to their continued employment. Defendants did not wrongfully deny Plaintiffs benefits in violation of ERISA § 502(a)(1)(B) because the requirement to stop working or stop receiving benefits was based on a reasonable interpretation of the Plan. Plaintiffs also did not show that Defendants breached their fiduciary duty under ERISA by correcting an erroneous interpretation of the Plan. Lastly, the court held that the district court did not abuse its discretion in denying Plaintiffs’ motion for a preliminary injunction because Plaintiffs failed to demonstrate that they would suffer irreparable harm absent an injunction.


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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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