Multiemployer Plan Participants Allege Rehabilitation Plan Violates ERISA and PPA

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By Matthew Loughran

Jan. 16 — The Bakery and Confectionery Union and Industry International Pension Fund violated federal benefits law when it adopted a rehabilitation plan which prevents former covered employees from “aging into” vested benefits as previously permitted under the plan, a class of participants in the plan have alleged in a complaint filed in federal district court in New York.

The complaint, filed on Jan. 9 in the U.S. District Court for the Southern District of New York, challenged the rehabilitation plan instituted by the multiemployer defined benefit plan's trustees pursuant to the Pension Protection Act on the grounds that the plan effectively amended the plan in a way that has already been ruled to violate the anti-cutback provisions of the Employee Retirement Income Security Act by the U.S. Court of Appeals for the Second Circuit (Alcantara v. Bakery & Confectionery Union & Indus. Int'l Pension Fund Pension Plan, 751 F.3d 71, 58 EBC 2180 (2d Cir. 2014).

According to the complaint, the trustees of the plan violated the requirements of the PPA and ERISA when they declared the plan to be in critical status and filed the rehabilitation plan canceling the ability of employees who were no longer performing covered service to “age into” full vested benefits under the plan when the sum of their age or service credit reached 80 or 90.

Counsel for the plan didn't respond to Bloomberg BNA's request for comment.

Previous Plan Amendment Blocked

The rehabilitation plan provision challenged in the complaint acts in the same manner as a previous amendment to the plan that had been deemed to violate ERISA Section 204(g), which prohibits reduction of vested benefits by plan amendment.

According to the complaint, prior to 2010, a participant who retired before meeting the preconditions for the plan's “Golden 80” and “Golden 90” benefits could become eligible for those benefits after retirement, when his or her age and years of service added up to 80 or 90, respectively.

The contested amendment eliminated this ability.

The participants filed a series of lawsuits in 2011 and 2012, which were all transferred to the U.S. District Court for the Southern District of New York and all alleged that this amendment violated ERISA's anti-cutback rule.

In April 2012, Judge Vincent L. Briccetti concluded that the contested amendment violated the anti-cutback rule and entered judgment in favor of the participants.

On May 1, 2014, the Second Circuit affirmed the district court's ruling, finding that the amendment improperly reduced a vested benefit in violation of ERISA.

Rehabilitation Plan Adopted

According to the complaint, while the district court was considering the challenge to the plan amendment, the plan trustees declared the plan to be in “critical” status for the plan year beginning in 2012.

As required by the PPA, the trustees issued a rehabilitation plan in November 2012 detailing the changes to the plan necessary to bring it out of critical status.

The complaint claimed that the rehabilitation plan included a provision that restricted any employee who hadn't qualified for Golden 80 or Golden 90 status before April 30, 2012, from “aging into” the status after leaving covered employment.

According to the complaint, this provision was contingent on the outcome of the plan amendment litigation and the complaint admitted that the plan hadn't issued any formal notice confirming that the Golden 80 or Golden 90 benefits were being reduced or terminated since the adoption of the rehabilitation plan.

Similar Plan Provision Constitutional

An identical rehabilitation plan provision was found not to violate the Fifth Amendment to the U.S. Constitution by the U.S. District Court for the Eastern District of Washington the day after the Second Circuit's opinion in Alcantara was issued (Arendt v. Wash.-Idaho-Mont. Carpenters-Emp'rs Ret. Trust Fund, 2014 BL 123575, 58 EBC 2062 (E.D. Wash. 5/2/14). 

In that case, the plan participants also challenged a rehabilitation plan that attempted to eliminate the ability of early retirees to “age into” a vesting benefit, but did so on constitutional grounds, asserting that the plan was the result of state action since it was required by the PPA.

The court's decision upholding the rehabilitation plan has been appealed to the U.S. Court of Appeals for the Ninth Circuit, which has docketed the appeal (Arendt v. Wash.-Idaho-Mont. Carpenters-Emp'rs Ret. Trust Fund, 9th Cir., No. 14-35457, appeal docketed, 5/28/14).

The participants in the instant case don't allege a constitutional wrong, but instead challenge that the trustees violated the provisions of the PPA in the way that they determined the plan to be in critical status.

The complaint also alleges that the adoption of the rehabilitation plan itself constituted a breach of fiduciary duty under ERISA.

The case has yet to be assigned to a judge, but it has been referred to Judge Briccetti as potentially related to the cases that he decided in April 2012.

The complaint was filed by Alexandra Manfredi, Elizabeth Evelyn Hunter and William David Frumkin of Frumkin & Hunter LLP in White Plains, N.Y.

Counsel for the trustees have yet to enter an appearance in the case, but a waiver of service on behalf of all the defendants was filed by Julia Penny Clark of Bredhoff & Kaiser PLLC in Washington.

To contact the reporter on this story: Matthew Loughran in Washington at

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

Text of the complaint is at

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