Retirement Plan Can Mandate Arbitration, Cost-Sharing

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By Jacklyn Wille

Aug. 1 — Standardized-test maker Educational Testing Service can force an employee's widow to arbitrate her claims against the company's retirement plan, a federal judge ruled ( Luciano v. Teachers Ins. & Annuity Ass'n of Am. — Coll. Ret. Equities Fund , 2016 BL 246156, D.N.J., No. 3:15-cv-06726-MAS-DEA, unpublished 7/29/16 ).

The judge upheld a provision in ETS's retirement plan requiring that claims over plan benefits be submitted to a binding arbitration process in which the claimant and the plan “equally share” in the arbitration costs. The widow unsuccessfully argued that this cost-sharing provision violated the Employee Retirement Income Security Act.

The widow's proposed class action challenges the spousal benefit calculations made by ETS and its plan service provider, Teachers Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA-CREF). According to the widow, ETS and TIAA-CREF placed impermissible restrictions on qualified pre-retirement spousal annuities available to surviving spouses of retirement plan participants.

Mandatory Arbitration Upheld

ETS and TIAA-CREF argued that the widow's claims should be dismissed under a mandatory arbitration provision in the company's retirement plan. The widow disagreed, contending that the plan's arbitration provision violated ERISA Section 503's requirement that benefit claimants be given a reasonable opportunity for full and fair review of their claim.

In a July 29 unpublished decision, Judge Michael A. Shipp of the U.S. District Court for the District of New Jersey sided with the companies.

Shipp relied on Bond v. Twin Cities Carpenters Pension Fund , 307 F.3d 704, 8th Cir., 2002 , a split decision by a panel of judges for the U.S. Court of Appeals for the Eighth Circuit.

In Bond, two judges agreed that an ERISA plan participant was denied a “full and fair review” of his claim for pension benefits under Section 503 because the plan required him to pay half the costs associated with arbitrating an appeal of his denied benefit claims. The dissenting judge in Bond found Section 503 inapplicable because it required only full and fair review by a plan fiduciary, as opposed to any review by an outside body.

In weighing the widow's claims against ETS and TIAA-CREF, Shipp adopted the reasoning of the Bond dissent and ordered the widow to submit her claims to mandatory arbitration.

Despite this ruling, Shipp said in a footnote that the widow wouldn't be precluded from arguing in the future that the mandatory arbitration provision “would deny her a forum to vindicate her statutory rights.”

Post Polak Goodsell MacNeill & Strauchler PA and Cohn Lifland Pearlman Herrmann & Knopf LLP represented the widow. Walsh Pizzi O'Reilly Falanga LLP represented TIAA-CREF. Cozen O'Connor represented ETS.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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