Opinion ID: 750718
Heading Depth: 2
Heading Rank: 1

Heading: Compliance with ERISA

Text: 19 Questions of statutory interpretation are questions of law and are thus reviewed de novo. Estate of Bonner v. United States, 84 F.3d 196, 197 (5th Cir.1996). We therefore conduct a de novo review in order to determine whether the Plan's application of the Amendment to Spacek comported with ERISA's statutory requirements. See Penn v. Howe-Baker Eng'rs, Inc., 898 F.2d 1096, 1100 (5th Cir.1990) ([W]e accord no deference to the [plan administrators'] conclusions as to the controlling law, which involve statutory interpretation.). 20 Spacek contended in the district court, and again urges on appeal as an alternative ground for affirmation of the district court's judgment, that application of the Amendment to him violated the anticutback provisions of 29 U.S.C. § 1054(g). Section 1054(g) provides as follows: 21 (1) The accrued benefit of a participant under a plan may not be decreased by an amendment to the plan, other than an amendment described in section 1082(c)(8) or 1441 of this title. 5 22 (2) For purposes of paragraph (1), a plan amendment which has the effect of-- 23 (a) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations), or 24 (b) eliminating an optional form of benefit, 25 with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. 26 29 U.S.C. § 1054(g). 27 Spacek argues that application of the Amendment to him violated § 1054(g) because the Amendment decreased his early retirement benefit. As such, he argues, § 1054(g)(2) dictates that the Amendment must be treated as an amendment reducing accrued benefits, and that § 1054(g)(1) prohibits such an amendment. Spacek's theory is that the suspension of benefit payments amounts to a reduction in benefits because he will never recover those suspended benefits and thus the cumulative total of benefits he will receive over his lifetime has been reduced. The district court rejected this argument, Spacek, 923 F.Supp. at 963, and so do we. While Spacek's interpretation of § 1054(g) has some logical appeal, it fails to comport with the plain language of § 1054(g), the provision's legislative history, and relevant interpretive regulations.
28 Spacek's reading of § 1054(g) is contrary to the wording of the ERISA statute. 6 Throughout the statute and corresponding regulations, the concepts of reduction of benefits and suspension of benefit payments are used in distinct ways, often within a single provision. For example, § 1441 provides procedures regarding disposition of benefits under terminated plans, instructing that the plan sponsor of a terminated multiemployer plan to which section 1341a(d) of this title applies shall amend the plan to reduce benefits, and shall suspend benefit payments, as required by this section. 29 U.S.C. § 1441(a) (emphasis added). Section 1341a(d) instructs that [t]he plan sponsor of a plan which terminates under ... this section shall reduce benefits and suspend benefit payments in accordance with section 1441 of this title. 29 U.S.C. § 1341a(d) (emphasis added). Similarly, § 1342, which governs termination of a plan by the Pension Benefit Guarantee Corporation, provides for the appointment of a trustee with the power, in the case of a multiemployer plan, to reduce benefits or suspend benefit payments under the plan. 29 U.S.C. § 1342(d)(1)(A)(v) (emphasis added). 7 29 The regulations adopted pursuant to ERISA also indicate that a distinction exists between reduction of benefits and suspension of benefit payments. For example, the regulations specify two situations in which a summary plan description must provide a description of any plan provision under which a benefit or benefit payment may be reduced, changed, terminated, forfeited or suspended. 29 C.F.R. §§ 2520.104b-4(a)(1)(iii), (a)(2)(iv) (emphasis added). 30 To interpret reduction of benefits as including suspension of benefit payments would make the word suspension redundant in all of these statutory provisions and interpretive regulations, which is contrary to the rule of statutory construction that each word must be given meaning. See Bailey v. United States, 516 U.S. 137, 143-45, 116 S.Ct. 501, 506, 133 L.Ed.2d 472 (1995) (noting the assumption that Congress intended each of its terms [in a statutory scheme] to have meaning). Thus, under the plain language of the statute, a suspension of benefit payments is not a reduction of benefits, and the district court did not err in determining that the Plan's application of the Amendment to Spacek did not violate § 1054(g) by reducing early retirement benefits. This conclusion finds further support in the legislative history of § 1054(g)(2).
31 The legislative history of the Retirement Equity Act of 1984, Pub.L. No. 98-397, 98 Stat. 1426 (REA), which added paragraph (2) to § 1054(g), supports the conclusion that § 1054(g)(2) does not preclude application of the Amendment to Spacek. During congressional debate, Representative William Clay, who introduced the House bill that ultimately became the REA, made the following statement regarding the section of the bill that would become § 1054(g)(2): 32 In addition, I wish to further clarify the anticutback provisions of section 301 of the bill. Those provisions are not intended to apply to benefit changes authorized by existing law; for example, they do not restrict the right of multiemployer pension plans under ERISA sections 203(a)(3)(E) and 4210(b)(3) and code section 411(a)(3)(E) to disregard past service credit when an employer ceases to be obligated to contribute. Nor do those provisions in any way apply to or affect the provisions of ERISA section 203(a)(3)(B) [29 U.S.C. § 1053(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 to adopt stricter rules for the suspension of subsidized early retirement benefits. 33 130 CONG.REC. 23,487 (1984) (emphasis added). The above clarification indicates that § 1053(a)(3)(B), which authorizes suspension of payment of accrued benefits under a multiemployer plan based on employment subsequent to commencement of payment of such benefits in the same industry, in the same trade or craft, and in the same geographic area covered by the plan, as when such benefits commenced, 29 U.S.C. § 1053(a)(3)(B)(ii), 8 also authorizes the very type of amendment at issue in this case, and that § 1054(g) in no way limits this authorization. We reach this conclusion based on the fact that § 1054(g) does nothing more than prohibit retroactive application of certain types of amendments. Accordingly, § 1054(g) can be construed as having a potential impact on § 1053(a)(3)(B) only if § 1053(a)(3)(B) authorizes retroactive application of amendments that provide for suspension of benefit payments based upon reemployment. Relevant federal regulations further bolster this conclusion.
34 Treasury Regulations adopted under 26 U.S.C. § 411, the section of the Internal Revenue Code that largely mirrors the accrual provisions of ERISA, 29 U.S.C. § 1054, further compel us to reject Spacek's argument that the Plan's application of the Amendment to him violates § 1054(g) by virtue of the fact that it will reduce the total amount of pension benefits that he will receive in his lifetime. Before turning to a discussion of the relevant regulations, we first must look to ERISA's definition of accrued benefits. Section 1002(23) of ERISA states that 35 [t]he 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.... 36 29 U.S.C. § 1002(23). Section 1054(c)(3) in turn provides in relevant part as follows: 37 For purposes of this section, in the case of any defined benefit plan, if an employee's accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age [e.g., an early retirement benefit], ... the employee's accrued benefit ... shall be the actuarial equivalent of such benefit.... 38 29 U.S.C. § 1054(c)(3). 39 Section 411(c)(3) of the Internal Revenue Code, 26 U.S.C. § 411(c)(3), mirrors the provisions of 29 U.S.C. § 1054(c)(3). The Treasury Regulations promulgated under § 411(c)(3) repeat the general rule that, where an employee's pension benefit commences at a time other than normal retirement age, the accrued portion of such a benefit is the actuarial equivalent of the retirement benefit available at normal retirement age. 26 C.F.R. § 1.411(c)-1(e). In other words, an early retirement benefit is accrued under the regulation to the extent that it has been actuarially reduced to compensate for the fact that it is paid before normal retirement age. However, the Treasury Regulations go on to provide that, for purposes of computing the actuarial equivalent of a retirement benefit available at normal retirement age, [n]o 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) of the Employment Retirement Income Security Act of 1974 [29 U.S.C. § 1053(a)(3)(B) ]. 26 C.F.R. § 1.411(c)-1(f). Thus, in calculating a plan participant's accrued benefit where the plan participant is receiving early retirement benefits, the calculation of the accrued benefit need not account for the decrease in total benefits paid as a result of a suspension authorized by 29 U.S.C. § 1053(a)(3)(B). 40 As noted above, § 1053(a)(3)(B) authorizes suspension of accrued benefits under a multiemployer plan based on employment subsequent to payment of accrued benefits in the same industry, in the same trade or craft, and in the same geographic area covered by the plan, as when such benefits commenced. 29 U.S.C. § 1053(a)(3)(B)(ii). This is precisely the type of suspension that occurred when the Plan applied the Amendment to Spacek. 41 Based on the above Treasury Regulations and § 1053(a)(3)(B), we conclude that, when an amendment to a plan calls for a suspension of benefit payments authorized by § 1053(a)(3)(B), as is the case here, the amendment does not decrease accrued benefits within the meaning of § 1054(g)(1). This is so because the reduction in total benefits paid over the lifetime of the plan participant as a result of the suspension need not be accounted for actuarially in computing the participant's accrued benefit under § 1054(c)(3) in the first instance. See 26 C.F.R. § 1.411(c)-1(f). Therefore, an amendment authorizing such a suspension does not serve to decrease the participant's accrued benefits, and thus cannot violate § 1054(g). 42 To the extent that an amendment such as the one at issue here would not violate § 1054(g) if it were applied to suspend fully accrued benefits, it plainly cannot violate § 1054(g) if it is applied to early retirement benefits, which may or may not be fully accrued. 9 The legislative history of the REA indicates that the fundamental purpose behind the addition of paragraph (2) to § 1054(g) was to afford early retirement benefits and retirement-type subsidies the same form of protection from reduction by amendment afforded to accrued benefits. The House Committee on Ways and Means stated that this portion of the REA codifie[d] present law generally precluding the elimination or reduction of benefits that have already been accrued by employees. H.R.REP. NO. 98-655, pt. 2, at 25-26 (1984). Furthermore, the Senate Finance Committee's report on the REA states that, under the bill, as under present law, the accrued benefit of a participant is not to be decreased by an amendment of a plan. The bill clarifies the scope of the prohibition against such decreases. S.REP. NO. 98-575, at 27-28 (1984), reprinted in 1984 U.S.C.C.A.N. 2547, 2573-74. This legislative history indicates that, if an amendment would not violate § 1054(g) if applied to fully accrued benefits, then it also cannot violate § 1054(g) if applied to early retirement benefits. 43 Because we conclude that the Amendment in this case would not violate § 1054(g) if it were applied to suspend a plan participant's fully accrued benefits, we in turn conclude that the Plan's suspension of Spacek's early retirement benefits pursuant to the Amendment did not violate § 1054(g). However, as noted earlier, our inquiry does not end here because employers may obligate themselves contractually to provide benefits at a level exceeding ERISA's minimum requirements for pension plans. See Wise, 986 F.2d at 937-38; Vasseur, 950 F.2d at 1006. Thus, we turn to the federal common law of contracts in order to determine whether application of the Amendment to Spacek constituted a breach of the Plan.