Pension Benefit Claims

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The Sixth Circuit is back in the news.  This week’s notable decision is Clemons v. Norton Healthcare Inc. Ret. Plan, No. 16-5063, __F.3d__, 2018 WL 2142640 (6th Cir. May 10, 2018), an upset to the Plaintiff-Retirees who had prevailed on behalf of a certified class at the district court on their claim for underpaid pension benefits.  This lengthy opinion is succinctly summarized by the Court as follows:

This appeal is the latest installment in an ERISA litigation saga that has spanned almost ten years. At the risk of oversimplifying their case, the Plaintiff–Retirees claim that Defendant Norton Healthcare, Inc. Retirement Plan (“Norton”) underpaid them under the terms of the plan. The district court found that the plan was unambiguous in the Retirees’ favor. We agree with the district court on most issues.
Continue Reading Sixth Circuit Holds that Contra Proferentum and Firestone Deference Are Incompatible on Issues of ERISA Plan Interpretation

This week’s notable decision is Teufel v. Northern Trust Co., No. 17-1676, __F.3d__, 2018 WL 1734700 (7th Cir. Apr. 11, 2018). In Teufel, the Seventh Circuit considered whether an amendment to the Northern Trust pension plan decreased Teufel’s accrued benefit and harmed older workers relative to younger ones, in violation of ERISA’s anti-cutback rule and the Age Discrimination in Employment Act (ADEA).  

The gist of the amendment is as follows:  In 2012, Northern Trust changed its pension plan from a defined-benefit plan under which retirement income depended on years worked, times an average of each employee’s five highest-earning consecutive years, times a constant (“Traditional formula”) to a new PEP formula that multiplies the years worked and the high average compensation not by a constant but by a formula that depends on the number of years worked after 2012.  The parties agree that it reduces the pension-accrual rate.  For people hired before 2002, Northern Trust provided a transitional benefit that treated them as if they were still under the Traditional formula except that it would deem their salaries as increasing at 1.5% per year, without regard to the actual rate of change in their compensation.
Continue Reading Expectation of Future Salary Increases Is Not An “Accrued Benefit” for Purposes of Anti-Cutback Rule