Employee Benefits-Sixth Circuit Rules Against Plaintiffs Claims That The Employer And Pension System Improperly Cut Pension Benefits

The case of  Duncan v. Muzyn, No. 17-5389 (6th Cir. 2018), Jerry Duncan and a class of pension-plan participants sued their employer and its pension system when the system cut their benefits. Their suit has already produced one appeal before this the Sixth Circuit Court of Appeals (the “Court”). Duncan v. Muzyn, 833 F.3d 567 (6th Cir. 2016). They now pursue the second.

In this case, the Tennessee Valley Authority (the “TVA”) provides funding for the Tennessee Valley Authority Retirement System (“the Plan”). A seven-member board (“the Board”) administers the Plan and manages its assets. And the Plan, in turn, provides defined benefits to participants. That means the Plan, by way of the TVA’s contributions, pays a pension benefit to participants in a defined amount.  That benefit includes a cost-of-living adjustment.  In 2009, the Plan found itself in financial trouble. Thanks in no small part to the recession, the Plan’s liabilities exceeded its assets and it needed to make some changes to ensure its long-term stability. So the Board cut some benefits. These cuts included temporarily lowering cost-of-living adjustments while also increasing the age at which certain Plan participants would first become eligible to receive cost-of-living adjustments. This litigation followed.

There are two issues in this appeal. First, Plaintiffs maintain that the Board failed to give proper notice to the TVA and Plan members before it made the cuts. Second, Plaintiffs contend that the Board violated the Plan’s rules by paying their cost-of-living adjustments for certain years out of the wrong account, an accounting claim. The district court granted summary judgment for the TVA and the Board on both claims.

Upon reviewing the case, the Court ruled that the Board gave proper notice of the benefit cuts after the Board had voted to approve them. Also, the Court found that the plaintiffs lacked standing to bring a claim that the cost-of living adjustments had been paid from the wrong account, since the plaintiffs had not suffered any injury. Accordingly, the Court affirmed the district court’s ruling that the Board gave proper notice of the benefits cut. It vacated the district court’s ruling with respect to Plaintiffs’ accounting claim, and remanded the case with instructions to dismiss the accounting claim for lack of subject-matter jurisdiction.