Eliminating a participant option to switch to a defined benefit plan from a defined contribution offering does not violate ERISA anti-cutback provisions, even if participants’ accrued — but unclaimed — benefits are reduced. The recent ruling in Andersen v. DHL Retirement Pension Plan (Case No. 2:12-cv-00439-MJP WL 5389141, U.S. Dist., Western District of Washington Nov. 2, 2012) mirrors a 2010 decision that allowed a retirement plan to take such an action.
Facts of the Case
Retirees of the former Airborne Express Inc. sued after they were not allowed to transfer funds between DC and DB plans after DHL Holdings (USA) Inc. acquired Airborne in 2003. In late 2004, DHL merged the Airborne Profit Sharing Plan, an individual-account DC plan, into DHL’s equivalent, the DHL Retirement Savings Plan. A short time later, DHL eliminated participants’ right to transfer their DHL plan balance to the former Airborne’s Retirement Income Plan, a DB plan that may have offered participants higher monthly pension payments. In 2006, the RIP was merged into the DHL equivalent.
In March 2012, the Andersen plaintiffs, former Airborne employees at the time of its acquisition by DHL, sued for denial of benefits and breach of fiduciary duty under ERISA Section 502. Their main claim was that DHL violated ERISA anti-cutback rules by not allowing them to transfer funds from the former Airborne DC plan to the DB option. DHL sought to have the case dismissed.
The Courts Weigh in
But this path had been trod before by other former Airborne Express employees in Tasker v. DHL (621 F.3d 34, 1st Cir.(Mass.), Oct. 6, 2010), and the district court closely followed that ruling. The 1st U.S. Circuit Court of Appeals in 2010 reviewed identical claims by separate plaintiffs against DHL resulting from the 2004 plan amendment that ended DC-to-DB transfer in Tasker. The circuit court judges in that instance also concluded that Treasury regulations allowed such plan amendments.
“…The regulation insulates the challenged plan amendments from the anti-cutback rule,” the Tasker decision stated.
The district court reinforced the Tasker ruling two years later. The November 2012 Andersen decision reads, in part, “Plaintiffs argue that Tasker is wrongly decided, because the regulation allows the elimination of the right to transfer funds, but only so long as such an amendment does not reduce the monthly annuity benefit. Plaintiffs are mistaken.” The district court in the new ruling found no reason to depart from a straightforward reading of the Treasury regulation, and dismissed all three claims made by Andersen plaintiffs.
Finding out More
See the full story here on Thompson’s HR Compliance Expert. Refer to ¶452 in the Pension Plan Fix-It Handbook for more information on anti-cutback provisions for retirement plans and the topic of optional forms of distribution.
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