Court Opinion

ID: 4481637
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:00.181164+00
Date Added: 2024-06-11T14:53:50.066785
License: Public Domain

DreNNEN, J., dissenting: I disagree with the basic premise of the majority that the Commissioner’s determination that “discrimination exists” “should not bo overturned unless it is demonstrated to be arbitrary, unreasonable, or an abuse of discretion.” I realize that this standard was used by the Court in Ed & Jim Fleitz, Inc., 50 T.C. 384, an opinion that was not court reviewed, but I think such a standard is entirely too rigid a limitation on judicial review of the Commissioner’s determination, which is neither required, nor warranted, by the language of the statute nor its legislative history. I think this Court should disavow the standard adopted in the Fleitz case before it becomes any more authoritative. Section 401(a) (3) provides in general that a pension trust will qualify if it “benefits either- — (A) * * * or (B) such employees as qualify under a classification set up by the employer and found by the Secretary * * * not to be discriminatory in favor of” the prohibited group; “and (4) if the contributions or benefits provided under the plan do not discriminate in favor of” the prohibited group. If the language “found by the Secretary” was intended to circumscribe judicial review of the basic question whether the classification is discriminatory unless the Commissioner’s determination is demonstrated to be “arbitrary, unreasonable, or an abuse of discretion,” I think it would be an abdication by Congress of its legislative function in favor of the Commissioner. But if, as I believe, the quoted language was not intended to give the Commissioner such broad discretion I think the adoption of the standard used by -the majority for review of the Commissioner’s determination amounts to an abdication of the Court’s function to make a meaningful judicial review of that determination. The basic issue is whether the plan either by a classification used, or in operation, does discriminate in favor of the prohibited group, and I think it is the prerogative of the courts, and their duty when called upon, to make this determination independently, giving due regard to the usual weight afforded the Commissioner’s determination. It should be noted that the words “found by the Secretary * * * not tobe discriminatory” appear in paragraph.3(B) of section 401 (a) and apply only to the classification set up by the employer and are not applicable to paragrah (4) which requires that the contributions and benefits do not discriminate in favor of the prohibited group. Also, paragraph (5) provides that a classification shall not be considered discriminatory within the meaning of sections 401(a)(3)(B) or 401 (a) (4) merely because it is limited to clerical or salaried employees. I agree that the phraseology in paragraph (5) does not make a salaried-employees-only classification nondiscriminatory per se, but I do think it is difficult to reconcile this language with the conclusion of the majority that the Commissioner’s unilateral determination that the salaried-employees-only classification used here is discriminatory should not be overturned unless demonstrated to be arbitrary, unreasonable, or an abuse of discretion. It may also be that the Commissioner’s determination here runs afoul of even the majority’s standard when the determination is predicated on a formula which compares the compensation of the salaried employees with the compensation of the nonsalaried employees in order to conclude that a majority of the salaried employees are highly compensated and thus fall within the prohibited group, thereby making the classification discriminatory. FoReestee 'and Stereett, JJ., agree with this dissent.