Source: https://law.justia.com/cases/federal/appellate-courts/ca2/16-723/16-723-2017-08-14.html
Timestamp: 2020-04-03 11:45:24
Document Index: 436338020

Matched Legal Cases: ['§ 1001', '§ 1001', '§ 1002', '§ 1002', '§ 1054', '§ 1132', '§ 1054', '§ 1054', '§ 1054', '§ 1054', '§ 1054', '§ 1054', '§ 1054', '§ 1054', '§ 1002', '§ 1002', '§ 1002', '§ 1054', '§ 1002', '§ 1054', '§ 1054', '§ 1054', '§ 1054', '§ 1', '§ 1', '§ 1054', '§ 1054', '§ 1054', '§ 1002', '§ 1054', '§ 1054']

Morrone v. Pension Fund of Local Number One, I.A.T.S.E., No. 16-723 (2d Cir. 2017) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 2017 › Morrone v. Pension Fund of Local Number One, I.A.T.S.E.
Morrone v. Pension Fund of Local Number One, I.A.T.S.E., No. 16-723 (2d Cir. 2017)
Morrone participates in a ʺdefined benefit planʺ offered by the Pension Fund. From 1970-1996, Morrone earned benefits under the Plan; in 1997, he stopped working union jobs. Under the Plan, a participant is entitled to the accrual rates ʺin effect at the time [he] ultimately separates from Covered Employment.ʺ In 1994, the Plan was amended to allow a worker who took a hiatus to bridge the gap by working five years. In 1999, the Plan removed the Five Year Rule and reinstated the Parity Rule, under which a worker with a break in Covered Employment of two or more years could bridge that gap and reactivate pension credits earned pre-hiatus by working for at least as many years after the break as the length of the break. Morrone returned to Covered Employment in 2012 and requested an estimate of the benefits he would receive should he retire in 2017. The estimate applied the Parity Rule: Pension credits that he earned pre-hiatus were assigned the 1996 rate; those earned since 2012 were valued at the current rate. Because Morrone had taken a 15‐year hiatus and would have returned to Covered Employment for only six years as of 2017, he was not entitled to the current accrual rate for his pre-hiatus pension credits. Applying the Five Year Rule would give Morrone an extra $705 per month. The Second Circuit affirmed summary judgment, in favor of the Fund, finding that the 1999 Amendment did not decrease Morroneʹs accrued benefits in violation of ERISAʹs anti‐cutback rule, 29 U.S.C. 1054(g). The higher benefit accrual rates that Morrone demands are not a ʺretirement‐type subsidyʺ but would constitute his normal retirement benefit if he satisfied the conditions to receiving them: the Parity Rule.
16 723 cv Morrone v. The Pension Fund of Local No. One, I.A.T.S.E. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term 2016 (Argued: February 21, 2017 Decided: August 14, 2017) Docket No. 16 723 cv VINCENT MORRONE, Plaintiff Appellant, v. THE PENSION FUND OF LOCAL NO. ONE, I.A.T.S.E., Defendant Appellee.* ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK Before: KEARSE, HALL, AND CHIN, Circuit Judges. The Clerk of Court is respectfully directed to amend the official caption to conform to the above. * Appeal from a judgment of the United States District Court for the Southern District of New York (Crotty, J.), entered pursuant to an opinion and order granting summary judgment dismissing plainti appellant s claim that an amendment to a pension plan violated the anti cutback provisions of the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. AFFIRMED. ROBERT L. LIEBROSS, Law O ce of Robert L. Liebross, New York, New York (Edgar Pauk, Law O ce of Edgar Pauk, Brooklyn, New York, on the brief), for Plainti Appellant. FRANKLIN K. MOSS (Denis P. Du ey Jr., Nicholas J. Johnson, on the brief), Spivak Lipton LLP, New York, New York, for Defendant Appellee. CHIN, Circuit Judge: Plainti appellant Vincent Morrone appeals from a judgment of the United States District Court for the Southern District of New York (Crotty, J.), dismissing his claim that an amendment to a pension plan o ered by defendant appellee the Pension Fund of Local No. One, I.A.T.S.E. (the Pension Fund ), violated the anti cutback provisions of the Employee Retirement Income Security 2 Act, 29 U.S.C. § 1001 et seq. ( ERISA ). We conclude that the amendment did not violate ERISA s anti cutback rule, and we therefore a rm. BACKGROUND The facts are largely undisputed and are summarized here in the light most favorable to Morrone. Morrone is a stagehand and a member of Local One of the International Alliance of Theatrical Stage Employees (the Union ). He participates in a de ned bene t plan (the Plan ), see 29 U.S.C. § 1002(35), o ered by the Pension Fund and is thus a participant in the parlance of ERISA, see 29 U.S.C. § 1002(7). From 1970 until 1996, Morrone earned bene ts under the Plan; in 1997, he stopped working Union jobs and therefore stopped earning bene ts; and in 2012, he resumed earning bene ts when he returned to Union work. The principal question presented is whether a 1999 amendment to the Plan violated ERISA s anti cutback rule, 29 U.S.C. § 1054(g), which prohibits a pension fund from reducing or eliminating certain earned bene ts. Among other bene ts, the Plan provides participants with a Normal Pension a monthly bene t, payable beginning at age sixty ve. The Normal Pension is based on two related concepts: pension credits and accrual 3 rates. Under the Plan, a participant accrues a pension credit for each calendar year in which he earns a minimum threshold amount of income from Covered Employment, i.e., qualifying work for an employer who is covered by the Union s collective bargaining agreements and who contributes to the Plan. 1 The Plan s Board of Trustees (the Board ) sets an accrual rate for each pension credit, expressed in terms of dollars per month. Not all pension credits are assigned the same accrual rate. Typically, the Board sets accrual rates for pension credits earned in more recent years higher than those earned in earlier years. Furthermore, when the Plan s investments perform well the Board occasionally exercises its discretion to raise retroactively the accrual rates for past years of pension credit. The monthly amount of a participant s Normal Pension is the sum of the products of each pension credit and its corresponding accrual rate. To illustrate, take a hypothetical case where a participant earned pension credits from 1988 until 2013 and then retired. Under the most recent The threshold amounts for the relevant years (in parentheses) are as follows: $4,000 (1961 through 1977), $6,000 (1978 through 1981), $9,000 (1982 through 1984), $12,000 (1985), $15,000 (1986 through 1992), $18,000 (1993 through 1994), $20,000 (1995 through 2001), $25,000 (2002 through 2004), $30,000 (2005), and $35,000 (2006 and later). 1 4 version of the Plan, pension credits earned from 1961 to 1990 have an accrual rate of $75 per month and pension credits earned from 1991 to 2014 have an accrual rate of $100 per month. Accordingly, upon retirement, such a hypothetical participant s monthly bene t would be $2,525 comprised of three pension credits (for Covered Employment from 1988 to 1990) at $75 per month plus twenty three pension credits (for Covered Employment from 1991 to and including 2013) at $100 per month. The example presumes that the participant is entitled to current accrual rates for all of the pension credits that he earned from 1988 to 2013. This is because in the hypothetical the participant left Covered Employment just once (upon retirement) and, under the terms of the Plan, unless an exception applies, a participant is entitled to the accrual rates in e ect at the time [he] ultimately separates from Covered Employment. J. App. 413. Morrone calls this feature of the Plan a living pension. Appellant s Br. at 4. Of course, stagehands like Morrone often leave and then later return to Covered Employment. This practice led to the possibility that a participant could leave Covered Employment, wait until the Board retroactively increased accrual rates, and then return to Covered Employment for just a year to qualify 5 for the higher rates. And so the Plan included rules governing how a participant could bridge a hiatus in Covered Employment and reactivate his living pension. The crux of the parties dispute here is whether Morrone may do so under the rule in e ect when he rst left Covered Employment in 1996 or whether he must satisfy a stricter rule under a 1999 amendment to the Plan. The two rules are discussed, in turn. Before 1994, the Plan contained the so called Parity Rule. That rule provided as follows: If a Participant does not earn [pension credit] based upon Covered Employment in two or more consecutive calendar years (the hiatus period ) and thereafter retires without having resumed work in Covered Employment and earning at least as many years of [pension credit] after such resumption as the number of consecutive years in such hiatus period, the amount of bene t to which such Participant will be entitled will be based upon the monthly bene t accrual rate in force immediately prior to the start of such hiatus period but subject to the minimum pension bene t amount in force on the e ective date of the award. J. App. 285. Simply put, under the Parity Rule a worker with a break in Covered Employment of two or more years in length could bridge that gap and reactivate his living pension as to pension credits earned before the break by working in Covered Employment for at least as many years after the break as the length of 6 the break itself. For example, a worker who takes a three year hiatus could reactivate the living pension by returning to Covered Employment for three years. A worker who, like Morrone, takes a fteen year hiatus would have to return to Covered Employment for fteen years to reactivate the living pension. In 1994, the Plan was amended to include the so called Five Year Rule. That rule provided as follows: A Participant who returns to Covered Employment [after a hiatus] and earns at least ve consecutive years of [pension credit] shall be entitled to a pension amount determined under the terms of the Plan and bene t levels in e ect at the time the Participant ultimately separates from Covered Employment. J. App. 413. Under the Five Year Rule, a worker who takes a three year hiatus must return to Covered Employment for ve years to reactivate the living pension for pension credits earned pre hiatus. Likewise, a worker who, like Morrone, takes a fteen year hiatus must return to Covered Employment for just ve years to do so (as opposed to fteen years under the Parity Rule). As noted, Morrone accrued pension credits under the Plan from 1970 until 1996 and then went on a fteen year hiatus. When Morrone left Covered Employment in 1996, the operative version of the Plan contained the Five Year Rule; the accrual rate for the pension credits earned from 1970 to 1990 7 was $50 per month; and the accrual rate for the pension credits earned from 1991 to 1996 was $70 per month. By amendment dated January 1, 1999 (the 1999 Amendment ), the Plan removed the Five Year Rule and reinstated the Parity Rule. Morrone returned to Covered Employment in 2012, and, by then, the Board had raised accrual rates for pension credits earned from 1970 to 1990 to $75 per month and for pension credits earned since 1990 to $100 per month. On January 14, 2013, Morrone wrote the Plan director to request an estimate of the monthly bene ts he would receive should he retire in 2017. After a protracted back and forth with the director not relevant to this appeal, the estimate Morrone received applied the Parity Rule: Pension credits that he earned from 1970 to 1990 were assigned a $50 per month accrual rate (the rate in e ect in 1996, when he began his hiatus); those earned from 1991 to 1996 were valued at $70 per month (also the 1996 rate); and those earned since 2012 were valued at $100 per month (the current rate), for a total monthly bene t of $1,770.2 The director determined that because Morrone had taken a fteen year hiatus and would have returned to Covered Employment for only six years as of 2017, he was not The estimate presumed Morrone would earn pension credits through the year 2014, rather than 2017. 2 8 entitled to the current accrual rate for the pension credits he earned before his hiatus. Morrone led an appeal with the Board, seeking current accrual rates for all of his pension credits and not just those he earned since returning to Covered Employment in 2012. The di erence is indeed material. Applying the Five Year Rule would give Morrone an extra $705 per month or $8,460 per year above the estimate provided by the Plan director. The Board denied Morrone s appeal and his subsequent request to reconsider. On October 14, 2014, having exhausted his administrative remedies, Morrone led this action below against the Pension Fund, seeking declaratory relief to clarify his rights to future pension bene ts under ERISA. See 29 U.S.C. § 1132(a)(1)(B) (providing that a civil action may be brought by a participant to clarify his rights to future bene ts under the terms of the plan ). Speci cally, Morrone alleged that the 1999 Amendment reinstating the Parity Rule was an illegal reduction of accrued bene ts or retirement type subsidies under ERISA s anti cutback rule. 29 U.S.C. § 1054(g). The parties led cross motions for summary judgment on April 24, 2015. On February 10, 2016, the district court granted the Pension Fund s motion 9 and denied Morrone s motion. It concluded that the 1999 [A]mendment did not reduce a retirement type subsidy . . . with respect to bene ts attributable to service before the amendment, as prohibited by 29 U.S.C. § 1054(g), because the bene ts Morrone contests are attributable to service after the amendment. Morrone v. Pension Fund of Local No. 1, I.A.T.S.E., No. 14 Civ. 8197, 2016 WL 554844, at *2 (S.D.N.Y. Feb. 10, 2016). Moreover, the district court held that the 1999 Amendment also did not decrease an accrued bene t because it merely modi ed the conditions under which Morrone could accrue additional bene ts in the future; it did not modify the bene ts Morrone had already accrued in the past. Id. Accordingly, the district court entered judgment in favor of the Pension Fund. This appeal followed. DISCUSSION The questions presented are whether, by removing the Five Year Rule and reinstating the Parity Rule, the 1999 Amendment impermissibly reduced (1) an accrued bene t or (2) a retirement type subsidy, in violation of ERISA s anti cutback provision. 29 U.S.C. § 1054(g). 10 I. Applicable A e Law A. A Stand dard of Re eview We review de n novo the district cour rt s summa ary judgme ent ruling, constru uing the ev vidence in the light m most favor rable to the e non mov ving party and drawing all reaso onable infer rences in [ [his] favor. . Mihalik v. Credit A Agricole eux N. Am., Inc., 715 F F.3d 102, 1 108 (2d Cir r. 2013); accord Fallin v. Cheuvre Common nwealth Ind dus., Inc., 6 695 F.3d 51 12, 516 (6th h Cir. 2012 2) (reviewin ng de novo the district court s ent try of sum mmary judg gment on g grounds th hat a plan amendmen nt RISA s anti i cutback r rule). A m movant is en ntitled to s summary did not violate ER judgme ent if there e is no gen nuine dispu ute as to an ny materia al fact and d the mova ant is entitled d to judgment as a matter of law w. Fed. R R. Civ. P. 56(a). B. B ERIS SA s Anti C Cutback R Rule ERISA was ena acted to en nsure that employee es will not be left em mpty handed d once emp ployers hav ve guarant teed them certain be enefits. Lo ockheed Cor rp. v. Spink, 5 517 U.S. 882 2, 887 (199 96). Its pur rpose is to mak[e] sure that if a worker has retirement been pr romised a d defined pe ension ben nefit upon r t and if h he has fulfilled d whatever r condition ns are requ uired to ob btain a vest ted benefit t he actu ually will receive it. N Nachman Co orp. v. Pens sion Benefit t Guar. Cor rp., 446 U.S S. 359, 375 11 (1980). The statute s so called anti cutback rule is crucial to this purpose. Cen. Laborers Pension Fund v. Heinz, 541 U.S. 739, 744 (2004). In fact, Congress amended the rule with the Retirement Equity Act of 1984 to clarify that it protects accrued benefits, as well as early retirement benefits, retirement type subsidies, and optional forms of benefits. See id. at 744; 29 U.S.C. § 1054(g)(1) (2). As amended, the anti cutback rule provides as follows: (g) Decrease of accrued benefits through amendment of plan (1) The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan [except in certain circumstances not present here]. (2) For purposes of paragraph (1), a plan amendment which has the effect of (A) eliminating or reducing an early retirement benefit or a retirement type subsidy (as defined in regulations), or (B) eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. In the case of a retirement type subsidy, the preceding sentence shall apply 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)(1) (2). Examining the statute s text reveals that the anti cutback rule has two important features. 12 First, the rule principally protects those benefits that a participant has earned, rather than those that he might earn in the future. See Heinz, 541 U.S. at 747 ( So far as the IRS regulations [that interpret § 1054(g)] are concerned . . . the anti cutback provision flatly prohibits plans from attaching new conditions to benefits that an employee has already earned. (emphasis added)). This is because, except for the case of a retirement type subsidy (which we will discuss below), the plain text of the statute prohibits only an amendment which (1) decreases an accrued benefit or (2) eliminat[es] or reduc[es] an early retirement benefit . . . or . . . an optional form of benefit . . . with respect to benefits attributable to service before the amendment. 29 U.S.C. § 1054(g)(1) (2) (emphases added). Accordingly, save changes that impact retirement type subsidies, employers are perfectly free to modify the deal they are offering their employees, as long as the change goes to the terms of compensation for continued, future employment. Heinz, 541 U.S. at 747 (emphasis added). Second, the rule privileges substance over form. See id. at 744 45. Again, the plain text of the statute focuses on the effect of a plan amendment, i.e., whether it decreases, eliminates, or reduces benefits or subsidies. 29 U.S.C. § 1054(g)(2) (emphasis added). This focus on the effect of plan amendments 13 means that a court must consider whether, in any practical sense, [the] change of terms could [] be viewed as shrinking the value of [a participant s] pension rights and reducing his promised benefits. Heinz, 541 U.S. at 745. For example, in Central Laborers Pension Fund v. Heinz, the Supreme Court rejected any formal distinction between, on the one hand, placing materially greater restrictions on the receipt of [a] benefit, and on the other, a decrease in the size of the monthly benefit payment itself because, as a matter of common sense, a participant s benefits cannot be understood without reference to the conditions imposed on receiving those benefits. Id. at 744 (alteration and internal quotation marks omitted). At bottom, [t]he real question is whether . . . at the moment the new [amendment] is imposed, the accrued benefit [or retirement type subsidy] becomes less valuable. Id. at 746. II. Application With these principles in mind, we turn to Morrone s arguments on appeal that the 1999 Amendment violated the anti cutback rule. We consider whether the 1999 Amendment decreased, first, Morrone s accrued benefits, and, second, a retirement type subsidy. 14 A. Accrued Benefits Morrone argues that the 1999 Amendment impermissibly reduced his accrued bene ts. First, he contends that applying the Parity Rule instead of the Five Year Rule plainly decreased his accrued bene ts because it reduced the accrual rates for the pension credits he earned from 1970 to 1996. Second, he avers that the right to reactivate the living pension feature under the Five Year Rule is itself a bene t that he accrued by working in Covered Employment from 1994 to 1996, when the Five Year Rule was in e ect. Both of these arguments fail. Morrone s rst argument is inconsistent with the Supreme Court s instruction in Heinz that, [i]n a given case, a court must evaluate the e ect of a plan amendment at the moment the new condition is imposed. 541 U.S. at 746. As noted above, Morrone accrued pension credits by earning the requisite amount of income from Covered Employment in each year from 1970 to 1996. It is therefore undisputed that, in 1999, when the Plan was amended, he was entitled to receive pension bene ts based on his service from 1970 to 1996 those pension credits were unquestionably an accrued portion of Morrone s bene t. The parties dispute what accrual rates Morrone was entitled to receive for these 15 accrued pension credits. Under Morrone s interpretation,3 the terms of the Plan before the 1999 Amendment provided that the pension to which a Participant is entitled shall be determined under the terms of the Plan and [the accrual rates] in e ect at the time the Participant separates from Covered Employment, i.e., in 1996, unless he satis es the Five Year Rule, in which case he shall be entitled to . . . [the accrual rates] in e ect at the time [he] ultimately separates from Covered Employment, i.e., in 2017. J. App. 413 (Article II, Section 16). Morrone separated from Covered Employment in 1996. In 1999, when the Plan was amended, Morrone had neither returned to Covered Employment, nor had he earned at least ve consecutive years of pension credit thereafter. As a result, he was entitled to the accrual rates in e ect in 1996, when he separated from Covered Employment and began his fteen year hiatus. In other words, in 1999, even under the version of the Plan that Morrone prefers the one containing the Five Year Rule Morrone had earned only the accrual rates in e ect in 1996. Thus, in accordance with Heinz, the 1999 Amendment did not violate the anti cutback rule because Morrone s accrued bene t [did not] The Pension Fund offers a conflicting interpretation of the preamendment version of the Plan, arguing that, even if the Five Year Rule applies, it does not benefit Morrone. But we need not reach this argument because, as we shall see, even if Morrone s interpretation is correct, there was no reduction of his accrued benefits. 3 16 become[] less valuable at the moment the [1999 Amendment was] imposed. 541 U.S. at 746. Indeed, Morrone will receive exactly the bene ts he was entitled to receive under the pre 1999 Amendment version of the Plan, namely, the accrual rates in e ect in 1996 for the pension credits he earned from 1970 to 1996. Morrone s second argument is that the right to reactivate his living pension under the Five Year Rule is itself a bene t that he accrued by working in Covered Employment from 1994 to 1996. This argument is belied by the text of the statute. As is relevant to this appeal, ERISA provides that [t]he term accrued bene t means . . . in the case of a de ned bene t plan, the individual s accrued bene t [1] determined under the plan and . . . [2] expressed in the form of an annual bene t commencing at normal retirement age. 29 U.S.C. § 1002(23)(A). Morrone fails to show how his purported right under the Five Year Rule satisfies either prong of this definition. As to the rst prong, the Supreme Court has noted that ERISA rather circularly defines accrued benefit as the individual s accrued benefit determined under the plan. Heinz, 541 U.S. at 744 (quoting 29 U.S.C. § 1002(23)(A)). Faced with this circularity in Heinz, the Supreme Court examined the terms of the plan before it to determine if a bene t was impermissibly 17 reduced in violation of the anti cutback rule. See id. at 744 45. Likewise, the Sixth Circuit has postulated that rather than give a comprehensive de nition of accrued bene ts, Congress chose to leave the responsibility of delineating the bounds of the term to the employer and the employee through the agreed upon terms of the plan document. Deschamps v. Bridgestone Ams., Inc. Salaried Emps. Ret. Plan, 840 F.3d 267, 279 80 (6th Cir. 2016) (quoting Thornton v. Graphic Commc ns Conf. of the Int l Bhd. of Teamsters Supplemental Ret. & Disability Fund, 566 F.3d 597, 608 (6th Cir. 2009)). In light of this delegation of responsibility, the Sixth Circuit reasoned that it should look to the terms of the Plan in ascertaining which, if any, bene ts . . . accrued prior to the [challenged] amendment. Id. at 280. Accordingly, we do the same. Here, the version of the Plan in effect before the 1999 Amendment does not define the term accrued benefit. But it does provide that the term Pension Credit shall mean the years of [pension credit] for service in Covered Employment which are accumulated and maintained for Employees in accordance with the provisions of Article III of this Pension Plan. J. App. 395. Article III, in turn, articulates the rules governing the accrual of pension credits, vesting rights, breaks in service, and other events that impact a participant s 18 status under the Plan, including hiatuses from Covered Employment. Moreover, as noted previously, the Plan states that a participant s monthly Normal Pension bene t is the sum of the products of each pension credit and its corresponding accrual rate. None of these provisions, however, supports Morrone s contention that the ability to qualify for current accrual rates under the Five Year Rule or the Parity Rule constitutes a benefit that he accrues under the Plan. Rather, we agree with the district court that the Five Year Rule and the Parity Rule are conditions under which Morrone could accrue additional benefits in the future ; they are not accrued benefits themselves. Morrone, 2016 WL 554844, at *2. As to the second prong, the statute defines accrued benefit in part as one capable of being expressed in the form of an annual benefit commencing at normal retirement age. 29 U.S.C. § 1002(23)(A). Indeed, ERISA s benefit accrual requirements provide that an accrued benefit under a defined benefit plan must be valued in terms of the annuity that it will yield at normal retirement age. Esden v. Bank of Boston, 229 F.3d 154, 163 (2d Cir. 2000) (construing 29 U.S.C. § 1054(c)(3)). Morrone has made no attempt to show that his right to reactivate his living pension under the Five Year Rule or the Parity Rule is capable of being valued in that way. And we are doubtful that he could 19 make such a showing, which would require speculative assumptions about, inter alia, the likelihood that the Board would raise accrual rates in the future, the amount of any such increase, the years of pension credit to which the increases would redound, and the likelihood that any given participant would accrue the requisite years of pension credit after his hiatus. In other words, we reject Morrone s contention that we should take a broad view of accrued benefits that would include a right to have his benefit calculated as if the Five Year Rule were still in effect. Arndt v. Sec. Bank S.S.B. Emps. Pension Plan, 182 F.3d 538, 541 (7th Cir. 1999) (rejecting a similar argument with respect to disability benefits). For these reasons, we conclude that, even if the Plan conferred on participants a right to reactivate the living pension feature after a hiatus in Covered Employment, such right does not constitute an accrued benefit as that term is defined in ERISA. 29 U.S.C. § 1002(23)(A). Accordingly, the 1999 Amendment did not violate § 1054(g)(1) of the anti cutback rule. B. Retirement Type Subsidy Morrone next argues that the higher accrual rates he seeks constitute a retirement type subsidy and, consequently, he should be permitted to satisfy the preamendment conditions for the subsidy, 29 U.S.C. § 1054(g)(2), by 20 earning five pension credits under the Five Year Rule rather than the fifteen required by the Parity Rule. We are not persuaded. The anti cutback rule protects retirement type subsidies only with respect to a participant who satis es (either before or after the amendment) the preamendment conditions for the subsidy. Id. We have read this provision as straightforwardly applying to participants . . . who quali ed for the subsidy before the [challenged] amendment or who could do so afterwards under the terms of the plan before the amendment. Alcantara v. Bakery & Confectionery Union & Indus. Int l Pension Fund Pension Plan, 751 F.3d 71, 77 (2d Cir. 2014). Furthermore, because an amendment placing materially greater restrictions on the receipt of [a] benefit reduces the benefit just as surely as a decrease in the size of the monthly benefit payment, Heinz, 541 U.S. at 744 (internal quotation marks omitted), the Plan may not lawfully apply the Parity Rule in place of the Five Year Rule if the higher accrual rates that Morrone seeks constitute a retirement type subsidy, see 29 U.S.C. § 1054(g)(2). We conclude they do not. ERISA does not de ne retirement type subsidy. Instead, Congress delegated authority to the Treasury Department to de ne the term. See 29 U.S.C. § 1054(g)(2) (prohibiting a plan amendment which has the e ect of . . . 21 eliminating or reducing . . . a retirement type subsidy (as de ned in regulations) (emphasis added)); Bellas v. CBS, Inc., 221 F.3d 517, 524 (3d Cir. 2000) ( Congress contemplated that the Treasury Department would promulgate regulations setting forth the de nition of retirement type subsidy. ). The Treasury Department did not exercise that authority until 2005 when, acting through the Internal Revenue Service ( IRS ), it promulgated regulations de ning retirement type subsidy. See Section 411(d)(6) Protected Bene ts, 70 Fed. Reg. 47,109 (Aug. 12, 2005). By their terms, those IRS regulations apply to plan amendments adopted on or after August 12, 2005 and thus do not apply to the 1999 Amendment. See 26 C.F.R. § 1.411(d)–3(j) (2016). Nonetheless, both Morrone and the Pension Fund rely on the regulations as persuasive authority and therefore we consider them here. The regulations de ne retirement type subsidy as follows: The term retirement type subsidy means the excess, if any, of the actuarial present value of a retirement type bene t over the actuarial present value of the accrued bene t commencing at normal retirement age or at actual commencement date, if later, with both such actuarial present values determined as of the date the retirement type bene t commences. Examples of retirement type subsidies include a subsidized early retirement bene t and a subsidized quali ed joint and survivor annuity. 22 26 C.F.R. § 1.411(d)–3(g)(6)(iv) ( rst emphasis in original and second emphasis added). A fundamental concept encompassed by this de nition is that a retirement type subsidy is an amount in addition to or in excess of a participant s normal retirement bene t. In that regard, the regulation accords with the ordinary meaning of the word subsidy as used in this context, i.e., a payment of an amount in excess of the usual charge for a service. Webster s Third New International Dictionary of the English Language Unabridged 2279 (1968) (emphasis added). It also comports with relevant legislative history. In describing the scope of 29 U.S.C. § 1054(g)(2), the Senate Report on the bill that would become the Retirement Equity Act of 1984 makes clear that a benefit subsidy is the excess of the value of a benefit over the actuarial equivalent of the normal retirement benefit. S. Rep. No. 98 575, at 28 (1984) (emphasis added). Decisions of our sister circuits are also in accord. For example, the Third Circuit has defined a retirement type subsidy to be the excess in value of a benefit over the actuarial equivalent of the normal retirement benefit. Bellas, 221 F.3d at 525 (emphasis added). In sum, the ordinary meaning of the word subsidy, the legislative history, existing case law, and IRS regulations lead us to conclude that 23 an essential characteristic of a retirement type subsidy is that it is an amount in excess of a participant s normal retirement benefit. Accordingly, if the higher accrual rates that Morrone seeks are not in excess of or in addition to his normal retirement benefit, then they are not a retirement type subsidy protected by § 1054(g)(2) of the anti cutback rule. Turning to the text of the Plan, we conclude that, even under Morrone s preferred interpretation, the higher accrual rates that he seeks would constitute his normal retirement bene t and not an amount in excess of it. Therefore, those higher accrual rates are not a retirement type subsidy. To recap, Article II, Section 16, entitled Application of Bene t Increases, provides that [t]he pension to which a Participant is entitled shall be determined under the terms of the Plan and bene t levels in e ect at the time the Participant separates from Covered Employment. J. App. 413. Article III, Section 11, entitled Protracted Absence of Participant from Covered Employment, contains the Parity Rule: A worker with a hiatus in Covered Employment of two or more years in length is entitled to the monthly bene t accrual rate in force immediately prior to the start of the hiatus, unless he returns to Covered Employment for at least as many years as the length of the hiatus itself. J. App. 24 431. Morrone argues, however, that the Five Year Rule is a preamendment condition to his receipt of the higher accrual rates in e ect when he plans to retire in 2017, and thus he should be permitted to qualify for those higher rates under the Five Year Rule in accordance with 29 U.S.C. § 1054(g)(2). Morrone is correct that the accrual rates he seeks via application of the Five Year Rule are greater than those he is entitled to receive under the Parity Rule. But those higher accrual rates are not an amount in excess of his normal retirement bene t. Under the terms of the Plan, they would constitute his normal retirement bene t if he satis ed the Plan s conditions for receiving them. That is because, regardless of whether the Five Year Rule or the Parity Rule applies, the Plan states that the monthly amount of [Morrone s] Normal Pension will be determined by calculating the sum of the products of each pension credit he earned and its corresponding accrual rate, as determined in accordance with the text of the Plan. J. App. 401; see also 29 U.S.C. § 1002(22) (de ning normal retirement bene t, in relevant part, as the bene t under the plan commencing at normal retirement age ). Accordingly, the 1999 Amendment did not place greater restrictions on the receipt of a retirement type subsidy. Instead, it merely changed the conditions under which Morrone could earn a larger normal 25 retirement bene t in the future. Thus, the 1999 Amendment is not prohibited by § 1054(g)(2) of the anti cutback rule because it does not reduce a retirement type subsidy. * * * Congress enacted robust protections for pensioners by expanding the anti cutback rule in 1984. The rule speci cally protects pensioners accrued bene ts, early retirement bene ts, retirement type subsidies, and optional forms of bene ts. But, contrary to Morrone s arguments on appeal, the anti cutback rule does not command that a pensioner s bene ts be determined under the version of the plan that is most generous to him. Employers remain perfectly free to modify the deal they are offering their employees, as long as the change goes to the terms of compensation for continued, future employment. Heinz, 541 U.S. at 747. That is exactly what happened in this case. CONCLUSION To summarize, we conclude that the 1999 Amendment did not decrease Morrone s accrued bene ts. Moreover, the higher bene t accrual rates that Morrone demands are not a retirement type subsidy rather, they would constitute his normal retirement bene t if he satis ed the conditions to receiving 26 them, namely, the Parity Rule. Accordingly, we conclude that the 1999 Amendment did not violate ERISA s anti cutback rule, 29 U.S.C. § 1054(g). We have considered Morrone s remaining arguments and conclude they are without merit. We therefore AFFIRM. 27
Change in pension fund rule for bridging hiatus in covered employment did not violate ERISA's anti-cutback rule.
Change in pension fund rule for bridging hiatus in covered employment did not violate ERISA's anti-c...