Opinion ID: 405004
Heading Depth: 1
Heading Rank: 2

Heading: Forfeiture under ERISA

Text: 7 At the time the district court rendered its decision it did not have the benefit of the Supreme Court's decision in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981). Affirming the Third Circuit, the Court held that the offset of workers' compensation benefits does not constitute a forfeiture under § 203 of ERISA and therefore the Treasury Regulation 26 C.F.R. § 1.411(a)-4(a) permitting such offsets is valid. See also Server v. Interpace Corp., 657 F.2d 1115 (9th Cir. 1981). 2 8 The Supreme Court initially noted that while Section 203 prohibits forfeitures of benefits, the amount of benefits provided under a pension plan is specifically left to the determination of the parties through the collective bargaining process. Thus, the statutory definition of 'non-forfeitable' assures that an employee's claim to the protected benefit is legally enforceable, but it does not guarantee a particular amount or a method for calculating the benefit. 451 U.S. at 512, 101 S.Ct. at 1900. The Court pointed out that although Congress set certain limits on permissible accrual practices, 29 U.S.C. § 1054(b)(1), and vesting schedules, 29 U.S.C. § 1053(a) (2), it specifically did not prohibit integration, a calculation practice in which other income sources available to retired employees are included in determining pension benefits. 451 U.S. at 514, 101 S.Ct. at 1901. Indeed, the Court noted, Congress specifically permitted pooling of Social Security Act and Railroad Retirement Act Benefits in calculating pension benefits, 29 U.S.C. §§ 1054(b)(1)(B)(iv), 1054(b)(1)(C), and 1054(b)(1)(G), without providing a specific exception to the § 203(a) forfeiture provision. 451 U.S. at 514-15, 101 S.Ct. at 1901. 9 No specific provision in ERISA permits integration with workers' compensation, but the Court concluded that Treasury Regulation 26 C.F.R. § 1.411(a)-4(a), which permits such offsets, was consistent with the Act. The Court observed that when Congress enacted ERISA, IRS rulings already permitted integration of workers' compensation payments in calculating pension benefits, if such benefits corresponded to benefits paid under the pension plan. See Rev.Rul. 68-243, 1968 C.B. 157; Rev.Rul. 69-421, 1969-2 C.B. 72. Since the legislative history of ERISA reveals that Congress approved those rulings, see H.R.Conf.Rep.No. 93-1280, 93rd Cong., 2d Sess., 277 (1974), U.S.Code Cong. & Admin.News, p. 5038, the Court reasoned that Congress intended to sanction offset of workers' compensation benefits. 451 U.S. at 521, 101 S.Ct. at 1905. 10 The arguments raised by appellees in this case, and accepted by the district court, were specifically rejected in Alessi. But even while acknowledging the impact of Alessi, appellees argue that it does not apply to payments under a workers' compensation scheme which are unrelated to reimbursement of lost wages, such as medical expenses or compensation for disfigurement or bodily impairment. They point to the Court's statement in Alessi that the IRS permitted integration on the basis that workers' compensation is as much as income maintenance program, responding to wage loss, as it is remuneration for injury, and therefore it may be integrated with pension benefits to the advantage of the entire group. 451 U.S. at 520 n.16, 101 S.Ct. at 1904 n.16. On the other hand, as the Court noted, IRS did not permit integration of workers' benefits concerned with compensating for the direct effects of the injury itself such as remuneration for medical expenses and bodily impairment awards. 451 U.S. at 520-21, 101 S.Ct. at 1904. 11 Since the offset provision in the company plan refers to workers' compensation benefits in general, appellees urge us to remand to the district court to determine which portion of appellees' workers' compensation benefits constitute non-income replacement items, and thus are not subject to offset. 12 In this case, however, as the district court recognized, the company has offset only those payments which Hawaii law recognizes as intended to provide income replacement. Under the Hawaii Workers' Compensation system temporary and permanent total disability benefits paid under Haw.Rev.Stat. § 386-31 (1976) serve as compensation for loss of earning capacity. See Cuarisma v. Urban Painters, Ltd., 59 Haw. 409, 583 P.2d 321 (1978). Similarly, death benefits authorized under Haw.Rev.Stat. § 386-41 (1976) are designed to replace the contribution of the deceased worker towards the maintenance of his dependents. See Hawaiian Canneries Co. v. Dependents of Clara Kali, 43 Haw. 173 (1959); 2A Larsen, The Law of Workmen's Compensation § 6300 (1981). On the other hand, partial permanent disability benefits set out in Haw.Rev.Stat. § 386-32 (1976), including disfigurement awards, compensate for impairment of bodily integrity and may be awarded in addition to total disability payments. Cuarisma, 59 Hawaii at 421, 583 P.2d at 327. The company offset only temporary and permanent total disability benefits paid to appellees Lin, Yee, Young, Kaai and Jeremiah, and death benefits paid to Mrs. Pascoe. It did not offset reimbursement of medical expenses, disfigurement awards and other payments made to appellees which do not match up with any benefits provided under the private pension plan. See Rev.Rul. 78-178, 1978-1 C.B. 117. Accordingly, remand to determine whether offset of particular benefits is permitted is unnecessary. 3 13