Opinion ID: 2995852
Heading Depth: 4
Heading Rank: 1

Heading: Amendment of plan by plan sponsor to reduce

Text: benefits, and suspension of benefit payments Notwithstanding sections 1053 and 1054 of this title, the plan sponsor of a terminated multiem- ployer plan to which section 1341a(d) of this title applies shall amend the plan to reduce benefits, and 12 No. 00-3314 shall suspend benefit payments, as required by this section. 29 U.S.C. § 1441(a) (emphasis added)8; see also 29 U.S.C. § 1425(a)(1) & 26 U.S.C. § 418D(a)(1) (plans in reorganization may amend the plan to reduce benefits); 29 U.S.C. § 1426(a) & 26 U.S.C. § 418E(a) (insolvent plans may suspend benefit payments); 29 U.S.C. § 1053 (a)(3)(E)(ii) & 26 U.S.C. § 411(a)(3)(F) (exception to forfeiture rule for amendments that reduce benefits under §§ 1441 or 1425, and suspension of benefit payments under §§ 1441 and 1426). Because the latter category (suspension of benefit payments) includes suspensions not according to any amendment, as in the case of insolvent plans, for example, it is not rendered superfluous by interpreting the amendment in this case as falling into the former category (amendments that reduce benefits).9 In other words, even crediting the reliability of any inference about the anti-cutback rule that can be drawn from the use of these phrases in various provisions relating to terminated or troubled plans, the most we can infer is that a suspension of benefit payments not falling 8 The reference to reduction and suspension in § 1341a, also relied upon by the court in Spacek, see 134 F.3d at 289, is derivative of section 1441, directing plan sponsors to “reduce benefits and suspend benefit payments in accordance with section 1441 of this title.” 29 U.S.C. § 1341a(d). 9 The reference to reduction and suspension in 29 U.S.C. § 1301(a)(8), which defines “non-forfeitable benefit” in the context of termination insurance, is consistent with this analysis. It states that the definition applies “whether or not the benefit may subsequently be reduced or suspended by a plan amendment, an occurrence of any condition, or operation of this chapter or the Internal Revenue Code of 1986.” A suspension of benefits in the case of an insolvent plan would be a suspension “by operation of this chapter” and not a reduction “by plan amendment.” No. 00-3314 13 into the first category—amendments that reduce benefits— should be excluded from the anti-cutback rule. But other than in the case of insolvent or terminated plans, an administrator’s authority to suspend benefits must come from the plan. And as we noted before, no one is disputing that the suspension in this case would be proper if it were contained in the original plan. It is the propriety of the amendment to the plan that is at issue in this case, and not the suspension itself, and therefore we cannot infer from the distinction made in Title IV between suspensions of benefit payments and amendments that reduce benefits that the amendment in this case is beyond the anti-cutback rule.10 10 The Fifth Circuit also relies on a Department of Labor regulation, 29 C.F.R. § 2520.104b-4(a)(1)(iii), which requires notice of plan provisions “under which the present benefit payment may be reduced, changed, terminated, forfeited or suspended.” Under the Fifth Circuit’s reasoning, this list of overlapping terms creates a whole host of redundancy problems unless we construe the list as creating mutually exclusive categories. But there is no need to do so to avoid redundancy because the term “suspended” has application outside the scope of the broader terms. For example, a suspension of benefits could be a forfeiture, but not always—as when the suspension is according to provisions in the plan meeting the requirements for post-retirement employment in § 29 U.S.C. 1053(a)(3)(B). Because a suspension will not always be a forfeiture, identification of the two concepts separately is not redundant, and there is no need to interpret the concept of forfeiture as excluding suspensions. The same is true for suspensions and reductions: a suspension will not always be a reduction in benefits, as when, for example, the suspension is according to the plan as originally conceived. The reference to suspensions in the notice regulation is therefore not rendered redundant by interpreting the amendment in this case as reducing benefits. (For the same reason, there is no redundancy in identifying suspensions and reductions separately (continued...) 14 No. 00-3314 We do not view the omission of a specific reference to suspensions in the anti-cutback rule as an oversight, but as unnecessary. Adding a reference to suspensions in § 1054(g)(1) (e.g., “The accrued benefit of a participant under a plan may not be decreased [or suspended] by an amendment of the plan”) or § 1054(g)(2) (e.g., “a plan amendment which has the effect of . . . eliminating[,] reducing[, or suspending] an early retirement benefit . . .”), would be awkward and perhaps overbroad; it is not the suspension of benefit payments that offends the anticutback rule, but the change (to the detriment of the participant) in the conditions triggering the suspension, and this concept is adequately captured by the prohibition against amendments that reduce benefits. 2. Legislative history of the Retirement Equity Act. The Fund, again relying on Spacek, also points to the legislative history of the Retirement Equity Act of 1984, which added paragraph (2)—the provision concerning amendments that reduce or eliminate early retirement benefits—to § 1054(g). See Spacek, 134 F.3d at 289-90. Spacek found instructive the following comment made by Representative William Clay during the final House debates on the Retirement Equity Act: Nor do those provisions in any way apply to or affect the provisions of ERISA section 203(a)(3)(B) and code section 411(a)(3)(B) relating to the suspension of benefits for postretirement employment, including the authorization for multiemployer plans 10 (...continued) in 29 U.S.C. § 1342 (trustee of terminated plan may “reduce benefits or suspend benefit payments under the plan, give appropriate notices, amend the plan . . .”).) No. 00-3314 15 to adopt stricter rules for the suspension of subsidized early retirement benefits. Spacek, 134 F.3d at 289 (quoting 130 Cong. Rec. 23,487 (1984)). The Fifth Circuit concluded that Representative Clay’s remark means that the anti-cutback rule in § 1054(g) does not limit the power of the plan to amend the plan to expand the restrictions on post-retirement employment. See Spacek, 134 F.3d at 289-90. We find Representative Clay’s remark ambiguous at best on the question of whether amendments concerning suspensions for disqualifying employment are outside the coverage of § 1054(g).11 But even if Representative Clay’s understanding of the anti-cutback rule were consistent with the Fifth Circuit’s—that suspensions upon disqualifying re-employment represent an additional exception to § 1054(g)—we find nothing in the legislative history to indicate that anyone else in Congress shared the understanding attributed to Representative Clay by the Fifth Circuit. The parties have not identified, and we have been unable to find, any further reference in the 11 It is not self-evident that Representative Clay’s reference to “stricter rules” means rules that are “more strict than before the plan amendment.” It could also mean that the new provision was not intended to affect the existing authorization for multiemployer plans to impose rules relating to suspensions of early retirement benefits that are stricter than those authorized for benefits commencing at normal retirement age, which must conform to the limits in § 203(a)(3)(B). See 29 C.F.R. § 2530.203-3(a)). Similarly, Representative Clay’s comment that the new provision will not affect the ERISA provisions that impose limits on the conditions a plan may place on post-retirement employment could mean simply that the new provision does not address those conditions substantively; it does not necessarily mean he believed that an amendment changing those conditions was outside the anti-cutback rule. 16 No. 00-3314 legislative history of the Retirement Equity Act to the exception for suspensions that the Fifth Circuit infers from Representative Clay’s remarks.12 The absence of any additional support in the legislative history suggests to us that the Fifth Circuit gave undue weight to the statement of Representative Clay, which (as interpreted by the Fifth Circuit) is at odds with the straightforward language of the statute. See Barnhart v. Sigmon Coal Co., 122 S. Ct. 941, 953-54 (2002) (rejecting interpretation contained in the floor statements of the statute’s sponsors); Monterey Coal Co. v. Federal Mine Safety and Health Review Comm’n, 743 F.2d 589, 596 (7th Cir. 1984) (same); Alex v. City of Chicago, 29 F.3d 1235, 1239 n.3 (7th Cir. 1994) (“[I]solated remarks of individual legislators, . . . [can]not be used to find ambiguity, or contrary intent, in statutory language that, with respect to a case in hand, is clear on its own terms without rendering nugatory the ‘plain meaning’ canon of construction.”).13 Accordingly, we conclude that Representative Clay’s remarks cannot be used to support an exception to the anti-cutback rule for amendments that expand disqualifying employment. 3. Treasury Regulation 26 C.F.R. § 1.411(c)-1(f). The court in Spacek also found support in 26 C.F.R. § 1.411(c)-1(f), a Treasury Department regulation concern- 12 By contrast, both the House and the Senate Reports discuss the two exclusions specifically identified in § 1054(g)—for cases of substantial business hardship and for terminated multiemployer plans. See H.R. Rep. No. 98-655, pt. 2, at 27 (1984); S. Rep. No. 98-575, at 30, reprinted in 1984 U.S.C.C.A.N. 2547, 2576. 13 Moreover, Representative Clay’s statement, on August 9, 1984, was made three days after the Senate had passed the bill, on August 6, 1984, see P.L. 98-397, further undermining its reliability as evidence of Congress’s intent. See Sigmon Coal Co., 122 S. Ct. at 954 n.15; Monterey Coal Co., 743 F.2d at 597. No. 00-3314 17 ing the allocation of accrued benefits between employer and employee contributions. By way of background, the court first noted that the term “accrued benefit” means the employees’ benefit as accrued under the plan, expressed in the form of “an annual benefit commencing at normal retirement age,” 29 U.S.C. § 1002(23),14 or, for early retirement benefits, the actuarial equivalent of the benefit commencing at normal retirement age. See Spacek, 134 F.3d at 290 (citing 29 U.S.C. § 1054(c)(3); 26 C.F.R. § 1.411(c)- 1(e)).15 The Treasury regulation relied upon by Spacek, 26 C.F.R. § 1.411(c)-1(f)(1), states that in calculating the actuarial equivalent of an accrued benefit, “[n]o adjustment . . . is required on account of any suspension of benefits” if the suspension is permitted under ERISA § 203(a)(3)(B)—the section dealing with restrictions on post-retirement employment.16 According to the Fifth Circuit, “because the reduction in total benefits paid over the lifetime of the plan participant as a result of the 14 The term “accrued benefit” means[,] in the case of a defined benefit plan, the individual’s accrued benefit determined under the plan and, except as provided in section 1054(c)(3) of this title, expressed in the form of an annual benefit commencing at normal retirement age . . . . 29 U.S.C. § 1002(23). 15 [I]f an employee’s accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age, . . . the employee’s accrued benefit . . . shall be the actuarial equivalent of such benefit . . . . 29 U.S.C. § 1054(c)(3). 16 No adjustment to an accrued benefit is required on account of any suspension of benefits if such suspension is permitted under section 203(a)(3)(B) . . . . 26 C.F.R. § 1.411(c)-1(f)(1). 18 No. 00-3314 suspension need not be accounted for actuarially in computing the participant’s accrued benefit,” an amendment “authorizing such a suspension does not serve to decrease the participant’s accrued benefits, and thus cannot violate § 1054(g).” 134 F.3d at 291. This reasoning, however, is inconsistent with the language of paragraph (2) of § 1054(g), which provides that an amendment that has the effect of eliminating or reducing early retirement benefits shall, for purposes of § 1054(g), “be treated as reducing accrued benefits.” 29 U.S.C. § 1054(g)(2), ERISA § 204(g)(2) (emphasis added); see Ahng, 96 F.3d at 1036; Bellas, 221 F.3d at 523. Whether a benefit is “accrued” for other purposes under ERISA is irrelevant for purposes of § 1054(g)(2). See Costantino v. TRW, Inc., 13 F.3d 969, 979-80 (6th Cir. 1994) (“There is no inconsistency between Defendant’s claim that the definition of ‘accrued benefits’ excludes [retirement-type] subsidies, and the [Retirement Equity Act’s] strategy of protecting subsidies by treating them as ‘accrued benefits’ in several provisions.”); Bellas, 221 F.3d at 523 (“While the definition of an accrued benefit has not been modified, Congress did modify section 204(g) in 1984 to the end that early retirement benefits and retirement-type subsidies were defined as being accrued for purposes of ERISA’s anti-cutback provisions.”). In fact, it was on this basis that we overruled our earlier decision in Meridith v. Allsteel, Inc., 11 F.3d 1354, 1359-60 (7th Cir. 1993), which held that an amendment reducing early retirement benefits did not violate § 1054(g) because the benefits were not accrued benefits as defined under 29 U.S.C. § 1002(23). See Ahng, 96 F.3d at 1036-37. The portion of the regulation relied upon by the court in Spacek, like the general definition of accrued benefits relied on in Meridith, is simply irrelevant to our determination of the scope of § 1054(g)(2), which treats amendments that reduce early retirement benefits as reducing accrued benefits. No. 00-3314 19 The Fifth Circuit reasoned, however, that because the amendment would not decrease “accrued benefits,” then the amendment could not violate the anti-cutback rule as applied to full retirement benefits, because for those benefits, the prohibition is limited to amendments that decrease “accrued benefits.” See 134 F.3d at 291. According to Spacek, applying the anti-cutback rule to amendments governing suspension of early retirement benefits would therefore give early retirement benefits greater protection than full retirement benefits, which is contrary to Congress’s intent that early retirement benefits receive the same protection as full retirement benefits. Id. But Spacek’s observation about Congress’s intent cuts both ways. The question is, same as what? Other than perhaps the remarks of Representative Clay (reliance on which, as we just discussed, is problematic), there is nothing in the legislative history of the Retirement Equity Act to suggest that Congress had any specific understanding about whether amendments affecting suspensions of full or early retirement benefits would be covered. And we disagree with Spacek’s key premise—that for full retirement benefits, 26 C.F.R. § 1.411(c)- 1(f) means that an amendment expanding the condi- tions triggering a suspension would not be covered by the anti-cutback rule. As Spacek points out, the regulation instructs that in calculating the accrued benefit, no actuarial adjustment need be made to account for the decrease in total benefits paid as a result of the suspension. See 134 F.3d at 290. This is consistent with ERISA § 203(a)(3)(B), 29 U.S.C. § 1053(a)(3)(B), which states that a suspension for certain post-retirement employment is not a forfeiture. But it does not necessarily follow that, because no actuarial adjustment is required, an amendment concerning suspensions cannot decrease accrued benefits. To say that a suspension is not a forfeiture (or does not decrease 20 No. 00-3314 accrued benefits) is not the same as saying that a change in the rules governing suspensions cannot decrease accrued benefits. In other words, we can conclude from the regulation that a pre-existing plan provision suspending benefit payments would not decrease accrued benefits; the regulation says nothing, however, about a change in the rules regarding suspensions. And if we view “accrued benefits” as including the conditions on receiving those benefits, then the amendment, by increasing those conditions, decreases accrued benefits. Spacek’s logic therefore depends on interpreting the term “accrued benefits” as including only the periodic payment, but excluding the conditions affecting the participant’s ability to receive that amount. There is nothing in the statutory definition that compels this interpretation, and we are persuaded that our interpretation is closer to ERISA’s purpose of protecting anticipated benefits. See generally Hickey, 980 F.2d at 468 (“ERISA protects the benefits described in the Plan by ensuring that, if a pensioner is promised a benefit and fulfills the conditions required to receive it, the pensioner will actually receive the described and promised benefit.”); LANGBEIN & WOLK, supra, at 121-22. Another regulation, moreover, supports our conclusion that Spacek’s construction is too narrow. That regulation, 26 C.F.R. § 1.411(d)-4, which contains the Treasury Department’s interpretation of 26 U.S.C. § 411(d)(6) (the counterpart of the anti-cutback rule in the Internal Revenue Code), interprets the anti-cutback rule as applying to amendments that impose further restrictions or increase the conditions affecting benefits that have already accrued. The regulation begins by defining “section 411(d)(6) protected benefits” as including any benefit that is described in 26 U.S.C. §§ 411(d)(6)(A) & (B) (the counterpart in the Internal Revenue Code of the anticutback rule in 29 U.S.C. § 1054(g)). 26 C.F.R. § 1-411(d)-4 Q&A-1. It then provides that: No. 00-3314 21 The addition of employer discretion or objective conditions with respect to a section 411(d)(6) protected benefit that has already accrued violates section 411(d)(6). Also, the addition of conditions (whether or not objective) or any change to existing conditions with respect to section 411(d)(6) protected benefits that results in any further restriction violates section 411(d)(6). 26 C.F.R. 1.411(d)-4 Q&A-7. The section of the anti-cutback rule dealing with early retirement benefits does not limit the prohibition to a decrease in “accrued benefits,” but rather says that an amendment that “has the effect of—eliminating or reducing” benefits will “be treated as reducing accrued benefits.” 29 U.S.C. § 1054(g)(2). Reading this language to include an amendment increasing conditions is straightforward, and we decline to abandon this plain reading in favor of the Fifth Circuit’s interpretation of the term “accrued benefits,” which is neither compelled by the statutory definition nor supported by legislative history or other persuasive authority.17 17 One final point: in conducting our research we encountered a sentence in the current Internal Revenue Manual addressing the question posed in this case. The manual states that “[a]n amendment that reduces I.R.C. 411(d)(6) protected benefits on account of 203(a)(3)(B) service does not violate I.R.C. 411(d)(6).” Internal Revenue Manual 4.72.14.3.5.3(7) (available on WESTLAW RIA-IRM database). This statement does not settle the matter, however. An agency manual is generally entitled only to whatever deference is due based on its persuasiveness. United States v. Mead Corp., 533 U.S. 218 (2001); Matz v. Household Int’l Tax Reduction Inv. Plan, 265 F.3d 572, 575 (7th Cir. 2001). The single statement in the manual does not tell us anything about the thoroughness of the agency’s analysis or the validity (continued...) 22 No. 00-3314