Benefits and Compensation

Some Owed Enhanced Benefits After Corporate Takeover, 6th Circuit Rules

A recent court decision reminds plan sponsors that mergers and acquisitions can trigger unexpected or complex changes to participant benefits that rely on careful plan language interpretation.

In the case, some former employees of an Anheuser-Busch subsidiary were granted enhanced pension benefits as a result of the controlling company’s purchase by InBev because their employment with a controlled group was involuntarily terminated in the takeover — even though they secured jobs with the successor corporation. Anheuser-Busch and InBev merged in 2008 after a hostile takeover.

In Adams v. Anheuser-Busch Cos., No. 13-3149 (6th Cir., July 11, 2014), 6th U.S. Circuit Court of Appeals judges ruled the plaintiffs had been denied enhanced benefits triggered by their unit’s sale by the Belgium-based brewing conglomerate. In doing so, the judges overruled a decision by the U.S. District Court for Southern Ohio in the same case No. 2:10-cv-826  (2013) that the plaintiffs weren’t eligible for the increased benefits after the sale because they remained employed by the new entity.

Background

In 2009, four plants run by Metal Container Corp., the former Anheuser-Busch unit for which the plaintiffs worked, were spun off and sold to Ball Corp. The employees were transferred to a similar pension plan with Ball and ceased to be participants in Anheuser-Busch InBev’s plan after the sale.

The Anheuser-Busch pension plan was amended in 2000 to add a “change in control” provision providing that the retirement benefits of a participant whose employment with the controlled group is involuntarily ended within three years after the change of control “shall be determined by taking into account an additional five years of Credited Service and … an additional five (5) years of age.”

The 6th Circuit judges wrote in their decision that the amendment “apparently was not motivated by sheer largess on the part of Anheuser-Busch, but came on the heels of management’s recognition that the company’s retirement plan was over-funded and might represent an attractive source of funds for a potential acquirer.”

After their transfer to being Ball employees, the plaintiffs made claims to the Anheuser-Busch plan administrator for recalculation of their future benefits but the company denied their requests because they had accepted employment with Ball.

The appellate judges wrote that ERISA is “unambiguous” about not requiring a job loss or period of unemployment to occur when such an acquisition terminates participants’ employment with a controlled group. They reviewed de novo whether plan language on this area was ambiguous.

To read the complete story on Thompson’s HR Compliance Expert, click here.