Opinion ID: 696601
Heading Depth: 2
Heading Rank: 1

Heading: Legality of the Plan's Suspension of Benefits Provision

Text: 9 Both the Board of Trustees and the BCAC suspended Whisman's benefits under Section 4.12 of the Reemployment and Suspension of Benefits rules. Section 4.12 provides: REEMPLOYMENT AND SUSPENSION OF BENEFITS RULES 10 (a) A Pensioner shall have his benefit payments suspended for any calendar month in which he works in Prohibited Reemployment (as defined in subsection (f), below), except that, if he has reached his Vested Pension Retirement Date 3 he may work in Prohibited Reemployment without having his benefit payments suspended if: 11 (1) he works less than 40 hours during a calendar month; or 12 (2) he is not working in the Same Trade or Craft ... in which he was employed while earning Contributory Service Credit under this Pension Plan; or 13 (3) he is not working in the same Geographical Area covered by this Pension Plan.... 14 A Pensioner shall permanently lose his rights to any benefit payments which are suspended because of his work in Prohibited Reemployment. 4 15 Although the district court held that the Trustees, in denying Whisman's appeal, did not act unreasonably under the Plan's provisions, it nonetheless found error because the plan itself was contrary to law and for that reason alone, the suspension of benefits cannot be upheld. Whisman v. Robbins, 810 F.Supp. 936, 949 (S.D. Ohio 1992). Central States challenges that holding. 16 Generally, ERISA prohibits a pension plan from failing to make payments to a participant who has reached the normal retirement age. 29 U.S.C. Sec. 1053(a). 5 However, that same section creates a limited exception for eligible participants who have reached normal retirement age but continue to work: 17 (3)(B) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as the employee is employed, subsequent to the commencement of payment of such benefits-- 18 ... 19 (ii) in the case of a multiemployer plan, in the same industry, in the same trade or craft, and the same geographic area covered by the plan, as when such benefits commenced. 20 The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations with respect to the meaning of the term employed. 21 29 U.S.C.A. Sec. 1053(a) (West Supp.1995). The DOL regulations adopted in accordance with subparagraph (a)(3)(B)(ii) of Sec. 1053 state in relevant part: 22 (a) General. Section 203(a)(3)(B) of the Act provides that the right to the employer-derived portion of an accrued pension benefit shall not be treated as forfeitable solely because an employee pension benefit plan provides that the payment of benefits is suspended during certain periods of reemployment which occur subsequent to the commencement of payment of such benefits. This section sets forth the circumstances and conditions under which such benefit payments may be suspended. A plan may provide for the suspension of pension benefits which commence prior to the attainment of normal retirement age, or for the suspension of that portion of pension benefits which exceeds the normal retirement benefit, or both, for any reemployment and without regard to the provisions of section 203(a)(3)(B) and this regulation to the extent (but only to the extent) that suspension of such benefits does not affect a retiree's entitlement to normal retirement benefits payable after attainment of normal retirement age, or the actuarial equivalent thereof. 23 ... 24 (c)(2) Multiemployer plans. In the case of a multiemployer plan, ... the employment of an employee subsequent to the time the payment of benefits commenced or would have commenced if the employee had not remained in or returned to employment results in section 203(a)(3)(B) service during a calendar month, or during a four or five week payroll period ending in a calendar month, if the employee, in such month or payroll period: 25 --Completes 40 or more hours of service ... or --Receives payment for any such hours of service performed on each of 8 or more days (or separate work shifts) in such month, ...; in 26 --An industry in which employees covered by the plan were employed and accrued benefits under the plan as a result of such employment at the time that the payment of benefits commenced or would have commenced if the employee had not remained in or returned to employment, and 27 --A trade or craft in which the employee was employed at any time under the plan, and--The geographic area covered by the plan at the time that the payment of benefits commenced or would have commenced if the employee had not remained in or returned to employment. 28 29 C.F.R. Sec. 2530.203-3 (1994). Thus, under Sec. 2530.203-3, a multiemployer plan may suspend otherwise accrued pension benefits: (1) when a participant retires prior to normal retirement age and then begins other employment, 29 C.F.R. Sec. 2530.203-3(a); and when (2) a participant has reached normal retirement age and takes another job where he works forty or more hours in a month and his reemployment is in the same industry, in the same trade or craft, and in the same geographical region as that when he was covered by the plan. 29 C.F.R. Sec. 2530.203-3(c)(2). In the first situation, a participant has not yet qualified for the protection of Sec. 1053(a), which commences upon attainment of normal retirement age, usually age 65, a fact which is reflected in 29 C.F.R. Sec. 2530.203-3(a). In the second, a participant is covered by Sec. 1053(a), but that protection is subject to the limited exception carved out in the statute and regulations. 29 The district court acknowledged that the plain language [of 29 C.F.R. Sec. 2530.203-3(a) ] permits the suspension of retirement benefit payments, Whisman, 810 F.Supp. at 944, but nonetheless felt that subsection (c) limited Central States' authority to suspend retirement benefits prior to normal retirement age. Further, because Section 4.12(a) of the Plan was phrased in the disjunctive rather than the conjunctive, the lower court held that the Plan provision violated ERISA Sec. 1053(a)(3)(B)(ii) and DOL regulation Sec. 2530.203-3(c). 30 This court recently had occasion to address precisely this analysis in Gardner v. Central States, Southeast & Southwest Areas Pension Fund, No. 93-3070, 1993 WL 533540 (6th Cir. Dec. 21, 1993) (per curiam) (unpublished), 6 which dealt with the identical reemployment provision at issue here and which considered the district court's decision below: 31 Section 4.1 7 authorizes the suspension of benefits when a participant engages in prohibited reemployment. Even if a participant has not reached the vested retirement pension date, which is normally one's 65th birthday, the participant must still be working in prohibited reemployment before his benefits can be suspended. This is in contrast to Department of Labor (DOL) regulations, which were passed pursuant to ERISA Sec. 203(a), that state: A plan may provide for the suspension of pension benefits which commence prior to the attainment of normal retirement age ... for any reemployment and without regard to the provisions of Section 203(a)(3)(B)[.] 29 C.F.R. Sec. 2530.203-3(a) (emphasis added). See also Geib v. New York State Teamsters Conference Pension, 758 F.2d 973, 977 (3d Cir.1985) (the nonforfeitability provisions of Sec. 203 do not apply until normal retirement age is reached.); Dennis v. Board of Trustees of Food Employers Labor, 620 F.Supp. 572, 576 (M.D. Pa.1985) (finding that the Board could have legally prohibited [the applicant], as a person who has not yet attained normal retirement age, from receiving pension benefits upon any reemployment.); Chambless v. Masters, Mates & Pilots Pension, 571 F.Supp. 1430, 1441 (S.D.N.Y.1983) (The case law thus makes clear that section 203(a) provides no protection against the suspension of benefits of plan participants ... who have not yet reached normal retirement age.). Thus, without running afoul of Sec. 203(a), Central States need not have placed any conditions on the forfeiture of benefits for participants who become reemployed prior to reaching normal retirement age. 32 Gardner, 1993 WL 533540, at  5 (footnote omitted). We agree with, and therefore adopt, the reasoning and conclusion of the Gardner court with respect to Section 4.12. 33 Gardner held that early retirement benefits may be suspended for any reason under ERISA, and subsection (c) of 29 C.F.R. Sec. 2530.203-3(c)(2) is inapplicable in that situation. 8 The district court erred in holding that the principle stated in subsection (a) regarding early retirement benefits was limited by subsection (c), and that the pension plan provisions were contrary to law. The Central States Plan, which limits suspension of early retirement benefits only if the participant is engaged in prohibited reemployment, was more generous than it need have been, and is constrained only by the terms of its plan. See Gardner, 1993 WL 533540, at  5. 34 Whisman counters that Gardner is inapplicable because at the time Whisman applied and qualified for pension benefits, Section 4.12(a), adopted in 1987, was not in effect. According to Whisman, the application of the amended reemployment provision violates the principle of Costantino v. TRW, Inc., 13 F.3d 969 (6th Cir.1994). We disagree. In Costantino, this Court held that a plan's attempt to eliminate early retirement subsidies for retirees that had already qualified for the subsidy prior to plan amendment violates the anticutback rules of ERISA and the Tax Code. Costantino is based upon an application and enforcement of section 204(g) of ERISA, 29 U.S.C. Sec. 1054(g), 9 which prohibits employers from amending their pension plan to decrease or eliminate early retirement benefits or retirement-type subsidies. Even assuming that the 30-and-Out benefit contains an early-retirement subsidy, Whisman's argument is unpersuasive, because Sec. 1054(g) and Costantino involve a reduction or elimination of accrued benefits and retirement-type subsidies, not a suspension, as is the case here. 35 Had the prior reemployment provision been applied, Whisman would still lose. Section 4.09(a)(1) of the 1985 version of the Plan provided that retirement pension payments shall be suspended for all periods of reemployment in the Teamster Industry, Section 4.09(a)(2), with Teamster Industry defined as all public and private work covered, or of the type covered, by any Collective Bargaining Agreement or any Teamster Contract. Section 4.09(a)(1) (emphasis added). This definition of prohibited reemployment is substantially similar to the section relied upon by the trustees, Section 4.12(f)(3), which prohibits [w]ork in any capacity ... for an employer engaged in the types of business activities in which a Contributing Employer is engaged. (Emphasis added.) Whisman, as a flexible employee, delivered mail to intercity post office branches, work which is similar to work performed by employees covered by collective bargaining agreements of contributing employers. 10 Further, we agree with the district court that the Trustees were not unreasonable in concluding that the business activities of the USPS were similar in nature to those conducted by UPS. See Whisman, 810 F.Supp. at 949. See also Sclafani v. Central States, Southeast & Southwest Areas Pension Fund, 795 F.Supp. 400 (S.D. Fla. 1992) (reemployment with USPS as mail handler was prohibited reemployment under pension plan because of similarities between UPS, a contributing employer, and USPS), aff'd, 998 F.2d 1021 (11th Cir.1993). Thus, the result would have been the same. 11 36 Whisman also cites a June 1985 interpretation of the reemployment provisions, apparently unearthed during discovery, wherein the trustees approved an interpretation of the reemployment rules to allow retirees to accept employment in a position outside potential coverage by a Teamster industry collective bargaining agreement. Whisman contends that, as the Teamsters could not lawfully organize United States Postal Service employees, the 1985 interpretation should have been applied to him. In support, he cites 39 U.S.C. Sec. 1203(a), which provides that [t]he Postal Service shall accord exclusive recognition to a labor organization when the organization has been selected by a majority of the employees in an appropriate unit as their representative, 39 U.S.C.A. Sec. 1203(a) (West 1980), and points out that the American Postal Workers Union, AFL-CIO, is that union. The problem with this argument is that the statute provides merely that the Postal Service may be represented by only one union at a given time, it does not say that union could never be the Teamsters. In the absence of any other evidence that postal service workers could not select the Teamsters as their exclusive bargaining representative, it cannot be said that USPS is outside potential coverage by a Teamster industry. This argument, too, fails. 37 Next Whisman argues that Central States could not lawfully suspend benefits for reemployment with USPS because USPS is not an employer 12 or industry 13 as defined in the Central States plan or by applicable federal law. The term employer as used in the prohibited reemployment provision is modified by the phrase engaged in the types of business activities in which the Contributing Employer is engaged. Thus, we do not think the trustees acted arbitrarily in giving the term its plain meaning, as modified. The restricted definitions found in the LMRA and ERISA, serve a different purpose, namely to define the scope of their application. 38 Whisman also claims that USPS is not an industry as defined in the regulations because USPS is not a business as are couriers such as UPS, a Contributing Employer. This argument misunderstands the use of the term in the regulation. Business as used in 29 C.F.R. Sec. 2530.203-3(2)(c)(i) describes types of activities engaged in by the employers maintaining the Plan, not the outside industry. Further, the regulations themselves do not specifically exclude government businesses from the definition of industry; we see no reason to do so here. The Trustees did not abuse their authority in concluding that Whisman's reemployment involved working for an employer which is engaged in the same business activities as employers which make contributions to this Pension Fund, since UPS engages in some of the same types of business as the U.S. Postal Service (for example, overnight delivery of letters and delivery of parcels). 39