Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
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.
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.
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.
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 firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the complaint is at http://www.bloomberglaw.com/public/document/Tagliareni_et_al_v_Bakery_and_Confectionery_Union_and_Industry_In.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)