ERISA-Sixth Circuit Rules That Trustees’ Decision To Terminate Plaintiff’s Disability Benefits Under A Pension Plan Is Subject To A Deferential Review

In Price v. Board of Trustees of the Indiana Laborer’s Pension Fund, Nos. 09-3897/4204 (6th Cir. 2011), the Court faced several complex issues arising under ERISA. For many years, the plaintiff had received occupational disability benefits from a plan, a multi-employer pension plan, which is subject to ERISA (the “Plan”). His benefits were discontinued, when the Plan’s trustees amended the Plan to limit occupational disability benefits to a period of two years. The plaintiff then sued the Plan and its trustees, on the grounds that his benefits had vested, so that the amendment violated ERISA. The district court agreed, and ruled in the plaintiff’s favor. The Plan and its trustees appeal.

The Court began its analysis by noting that the disability benefits are welfare benefits, and ERISA itself does not require that welfare benefits vest. In certain circumstances, vesting may be inferred from the parties’ agreements. In the Sixth Circuit, the courts apply the Yard-Man inference, under which an inference in favor of vesting is used to determine whether retiree health insurance benefits continue beyond the expiration of a collective bargaining agreement. But does Yard-Man apply here? The Court said that it does not, since the occupational disability benefits differ from retiree health benefits. Another source of vesting could be the Sixth Circuit’s Sprague case. That case holds that when a benefit is unilaterally provided by an employer, vesting will obtain if the plan documents contain a clear and express statement of intent to vest. However, the Court said that Sprague does not apply here either, since the benefits in that case were offered unilaterally, while the disability benefits here were bargained-for.

The remaining possible source of vesting is the Plan itself. The terms of the Plan prohibit an amendment that reduces the benefits of any participant “whose rights have already become vested”. Have the plaintiff’s benefits become vested, so that the trustees’ amendment could not apply to him? Here, the Plan gave the trustees the discretion to interpret the Plan. Accordingly, the Court said that deference must be given to the trustees’ decision to amend the Plan and terminate the plaintiff’s occupational disability benefits. Further, the Court said that the word “vested” as used in the Plan refers to retirement benefits, not disability benefits. As such, it was reasonable for the trustees to interpret the Plan to provide that plaintiff’s disability benefits had not vested and therefore could be terminated by an amendment . However, the Court noted that the district court did not review the trustees’ decision to terminate the benefits using the deferential standard. The Court concluded that the district court’s decision must be vacated, and the case must be remanded back to the district court for a decision applying this standard.

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