ERISA-Second Circuit Finds That A Plan Amendment, Which Reduces Retirement-Type Subsidies Of Participants Not Meeting Preamendment Conditions For The Subsidies When They Left Work, But Who Could Subsequently Meet The Conditions Without Returning To Work,

In Alcantara v. Bakery & Confectionery Union & Indus. Int’l Pension Fund Pension Plan (2nd Cir. 2014), the defendants were appealing a judgment by the district court, holding that the anti‐cutback rule in § 204(g) of ERISA precludes a plan amendment that reduces retirement‐type subsidies of the plaintiffs, who ceased employment without satisfying the preamendment conditions for the subsidy, but who could later satisfy the conditions without returning to work. The Second Circuit Court of Appeals (the “Court”) ruled that this amendment does violate the anti-cutback rule, and upheld the district court’s decision.

In this case, the defendants are the Bakery and Confectionery Union and Industry International Pension Fund Pension Plan (the “Plan”), a multiemployer defined‐benefit pension plan, and its Board of Trustees. The plaintiffs are participants in the Plan. The Plan provides for a range of benefits. The standard benefit, payable at age 65 — the “normal retirement age” under the Plan — was labeled Plan A. Participants could elect to receive their Plan A pension benefits as early as age 55, but at an actuarially reduced level that reflected the earlier (and longer) expected stream of payments. Certain employers elected to offer additional subsidized early retirement benefits that were not actuarially reduced. Two of these plans, Plan G (the “Golden 80 Plan”), and Plan C (the “Golden 90 Plan”), are at issue here. Under those Plans, a participant who had completed at least ten years of service with a participating employer, and whose combination of his age and years of service totaled 80 or 90 years, respectively, could retire and receive full pension benefits (that is, benefits with no actuarial reduction).

Prior to July 2010, the Plan allowed a participant to “age into” Golden 80 or 90 benefits. This meant that a participant who had achieved the ten-year minimum service requirement, but who had left covered employment before achieving the requisite 80- or 90- year age‐plus‐years‐of‐service level, would still become eligible for Golden 80 or 90 benefits as soon as his age‐plus‐years‐of‐service reached the required 80‐ or 90‐year requirement. In July 2010, the Trustees amended the Plan to eliminate the option to “age into” benefits and to require that a participant be employed at the time he qualified for Golden 80 or 90 benefits. The amendment affected only those participants who had completed the ten‐year minimum service requirement, but who had not yet reached the requisite age‐plus‐years‐of‐service level and were no longer working for an employer participating in the Golden 80 or 90 Plans. Participants who lost their opportunity to qualify for Golden 80 or 90 benefits as a result of the amendment filed suit alleging that the plan amendment violated § 204(g), ERISA’s anti‐cutback rule, which prohibits plan amendments that reduce or eliminate certain pension benefits.

In analyzing the case, the Court said that the anti‐cutback rule, ERISA § 204(g), treats as a benefit reduction, and therefore prohibits, the elimination or reduction of a retirement‐type subsidy , with respect to benefits attributable to service before the amendment. A proviso states that this prohibition applies only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. 29 U.S.C. § 1054(g).

The Court continued by saying that it is clear that the Golden 80 and 90 Plans are retirement‐type subsidies that qualify for protection under § 204(g), since they offer benefits which actuarially exceed the normal retirement benefit. Moreover, the proviso recognizes that a participant may “grow into” eligibility for retirement‐type subsidy benefits protected by the anti‐cutback rule by satisfying the eligibility requirements after the date of the amendment. As such, the Court concluded that the anti-cutback rule protects the plaintiffs in this case who have satisfied -or will satisfy- the preamendment conditions for their Golden 80 and 90 benefits. This means that the anti-cutback rule protects the plaintiffs who qualified for the benefits prior to terminating employment (that is, they had sufficient service and were old enough before termination), and in addition protects those plaintiff who, although they have terminated their employment before qualifying for the benefits, will “grow” into those benefits even though they do not resume employment (that is, they had enough service at termination and will subsequently attain the age needed to qualify for the benefits).