Opinion ID: 3191566
Heading Depth: 3
Heading Rank: 2

Heading: Discriminatory Amendment

Text: We also agree with the District Court’s second finding that the Plan Document prohibits this type of amendment. The Plan Document provides: “no amendment shall . . . [c]reate or effect any discrimination in favor of Participants who are highly compensated, who are officers or [sic] the Employer, or who are stockholders of the Employer.” (App. 454–56). The District Court found that eliminating non-owner employees from benefits violates this prohibition. (Id. at 39–40). Appellant does not dispute that the 2009 Amendment violates this provision. Rather, Appellant argues that this provision was intended to exempt the arrangement from federal income tax, and that the plan sponsor may choose at any time to terminate tax-exempt status and become a taxable organization. (Appellant’s Br. 24–25). 21 Appellant’s argument ignores the importance of adhering to procedures for amending a plan. The Secretary is correct that in order for Koresko’s argument to succeed, he would have had to show that he amended the plan to remove this provision before executing the 2009 Amendment, “otherwise, the discrimination provision remains in conflict with [the 2009 Amendment].” (Appellee’s Br. 35). The 2009 Amendment did not specifically eliminate the original provision or mention the original plan provision, but it directly conflicts with the original provision. In adhering to the governing documents and the amendment procedure set forth, the 2009 Amendment is invalid because it is inconsistent with the anti-discrimination clauses for future amendments. We need not delve into the District Court’s public policy arguments having found two reasons why the 2009 Amendment was invalid. We do note that the Supreme Court has articulated a purpose behind having written procedures govern making amendments to an ERISA plan: “such a requirement increases the likelihood that proposed plan amendments, which are fairly serious events, are recognized as such and given the special consideration they deserve.” Curtiss-Wright Corp., 514 U.S. at 82. Given the seriousness of plan amendments and the explicit directions in the applicable governing documents, we have little difficulty in holding that the 2009 Amendment is invalid because it was executed without proper authority and is in conflict with existing plan provisions.15 15 We agree with the District Court that it is troubling that Koresko sought to avoid application of ERISA through this amendment. (App. 40 n.18) (“John Koresko admitted at oral argument that one purpose of the [2009] [A]mendment, which he authored, was to avoid application of ERISA.”). While we acknowledge that a plan sponsor may amend or terminate an ERISA-covered plan, the termination of a plan through an amendment must follow the plan’s amendment procedures. See Hozier v. Midwest Fasteners, Inc., 908 22