In Metzgar v. U.A. Plumbers & Steamfitters Local No. 22 Pension Fund, 2022 U.S. App. LEXIS 5466 (2d Cir. Mar. 2, 2022), the Second Circuit in a summary order affirmed the district court’s decision granting summary judgment in favor of plan trustees regarding the trustees’ reinterpretation of what “retire” means under the terms of the pension plan.

Plaintiffs were 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 provided benefits to participants according to a Restated Plan of Benefits (the “Plan”). The Plan set the normal retirement age at 65, but it also provided a “Special Early Retirement” option to employees after their 55th birthday whose combined age and years of service equaled 85 or more. The Trust gave the trustees full discretionary authority to interpret the Plan.

Until fall 2011, the Plan operated with the understanding that participants did not have to stop working for a covered employer to receive special early retirement pension payments; they only had to stop working in a disqualifying employment position. This allowed participants to continue working in non-disqualifying employment (such as in a managerial position or as a project manager) while receiving pension benefits through the Plan.

In fall 2011, the Plan trustees reviewed the Plan and determined they had to change their interpretation of the term “retire” under the Plan because allowing participants who were not fully retired – i.e., those who had not severed their employment with their employers – to receive pension payments was putting the Fund in jeopardy of losing its tax-exempt status. The Plan trustees informed Plaintiffs that they could either cease their now disqualifying employment and continue to receive pension payments, or they could elect to continue their disqualifying employment resulting in the suspension of their pension payments.

Plaintiffs brought suit against the Fund, its Board of Trustees, and its Plan Administrator alleging: 1) this change violated ERISA’s anti-cutback rule; 2) the change was a wrongful denial of benefits in violation of ERISA § 502(a)(1)(B); and 3) Defendants breached their fiduciary duty to Plaintiffs.

The Second Circuit agreed with the district court that Defendants did not violate ERISA’s anti-cutback rule. In doing so, the appellate court reasoned that Defendants’ reinterpretation of “retire” did not constitute an “amendment” of the plan because its actual terms had not changed. In addition, under Defendants’ reinterpretation, Plaintiffs were never entitled to the accrued benefit they claimed to have lost.

The Second Circuit also affirmed the district court’s conclusion that Defendants’ decision to require Plaintiffs either to stop working or to stop receiving pension benefits was not arbitrary and capricious because it was based on a reasonable interpretation of the Plan. The Second Circuit noted this interpretation was based on the trustees’ reasonable conclusion this change was required to maintain the Plan’s tax-exempt status. The Second Circuit further explained that Plaintiffs failed to demonstrate how Defendants’ decision “to correct what they reasonably thought was an erroneous interpretation of the Plan in order to protect its tax-exempt status demonstrated a failure to exercise ‘care, skill, prudence, and diligence.’”

 

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Photo of Katelyn W. Harrell Katelyn W. Harrell

Katelyn W. Harrell is an associate in the New Orleans, Louisiana, office of Jackson Lewis P.C.

Katelyn’s practice focus includes the defense of ERISA plans and plan fiduciaries at both public and private companies. She is a member of the firm’s Employee Benefits…

Katelyn W. Harrell is an associate in the New Orleans, Louisiana, office of Jackson Lewis P.C.

Katelyn’s practice focus includes the defense of ERISA plans and plan fiduciaries at both public and private companies. She is a member of the firm’s Employee Benefits group, and is a contributor to the Employee Benefits Newsletter, the firm’s publication covering current events in benefits law.

In addition to litigating ERISA-based claims, Katelyn is also involved in litigating general employment law matters, including representing employers in Family and Medical Leave cases, discrimination claims relative to age, sex, disability, race, religion, and sexual harassment, and handling EEOC charges and other administrative complaints through the administrative and judicial process. She has trial experience including sitting first chair in two bench trials as well as second chair in a third.

Prior to joining Jackson Lewis, Katelyn practiced general casualty litigation with a local New Orleans defense firm.

Photo of Robert W. Rachal Robert W. Rachal

Robert W. Rachal is of counsel in the New Orleans, Louisiana, office of Jackson Lewis P.C. His practice focuses on complex ERISA fiduciary, benefits, and executive compensation litigation, including defending DOL investigations, and on advising ERISA fiduciaries.

Robert’s work has included advising fiduciaries…

Robert W. Rachal is of counsel in the New Orleans, Louisiana, office of Jackson Lewis P.C. His practice focuses on complex ERISA fiduciary, benefits, and executive compensation litigation, including defending DOL investigations, and on advising ERISA fiduciaries.

Robert’s work has included advising fiduciaries and defending, across the country, companies, plan providers and plan fiduciaries in all types of complex ERISA litigation, e.g., from claims ESOP stock was overvalued, to claims 401(k) fees were excessive, or that pension plans owed greater benefits under complex provisions of ERISA. His work also includes advising and consulting on issues that arise in complex ERISA litigation and benefits claim processing and in disputed over executive benefits. Representative recent matters include:

  • Defended several Catholic health care organizations against claims their multi-billion dollar pension plans did not qualify for the “church plan” exemption to ERISA. Motion to dismiss granted, which ruling was subsequently quoted and adopted by the U.S. Supreme Court in Advocate v. Stapleton, 137 S. Ct. 1652 (2017)).
  • Defended seller/ESOP trustee in claim ESOP paid too much for $1 billion hotel company. Favorable summary judgment and Daubert rulings for defendants led to amicable settlement.
  • Defended company against class action claiming company illegally cutback pension benefits in a cash balanced conversion. Motion to dismiss granted and affirmed on appeal.

Robert’s clients include both Fortune 500 companies and small and mid-size employers.

He is a prolific writer and lecturer on cutting-edge ERISA litigation and fiduciary issues, including for the ABA and Bloomberg BNA.

Robert was the senior articles editor of Tulane Law Review while attending law school. After law school he clerked for Judge Jacques Wiener of the U.S. Fifth Circuit Court of Appeals.