Pensioners need to know that they may not be able to count on their pension providing the support represented. One court in Arendt & Brown v. Wash.-Id.-Mont.-Carpenters-Employers Retirement Trust Fund 2014 WL1771701 (E.D. Wash. 2014), in effect held that the only secure pension benefit now is the normal retirement benefit. (And on other fronts that is under fire as well now.) The Washington federal judge ruled that a plan could eliminate Rule of 80 benefits which the pensioners had actually paid more to receive than the typical normal retirement benefit. The Rule of 80 benefit paid an enhanced and greater benefit when the years of service and age equaled 80. Of course there were a minimum number of years to serve to be eligible as well as the increased contribution to participate. ERISA for a long time has protected pension benefits disallowing a cutback of many benefits under many circumstances. However, the Pension Protection Act (PPA) allows for plans to cut benefits when the plan enters critical status. So here the cuts were legal.
The PPA was an effort by the government to keep plans from becoming insolvent and thus falling under the purview of the Pension Benefit Guarantee Corporation (PBGC). The PBGC is like “insurance” for pension funds much like the FDIC is insurance for bank accounts. When a plan falls within the purview of the PBGC, often benefits are not paid at 100%, but everyone within the plan is treated equally.
The PPA here, however, does not treat everyone equally. Rather, those that paid more for the Rule of 80 benefit in this Washington case will receive the same normal retirement benefit as those individuals that paid less. In essence, their excess Golden 80 contributions are seized and there is nothing provided in return. The pensioners were “rolling the dice” and wagering that they might receive what they were working and paying for. Only they did not know it at the time. The defendant justified its decision claiming that plans are subject to termination under 29 U.S.C. §1341a and therefore the expectations could not be set on actually receiving the benefit even though additional monies were paid.
Due process and unjust talking arguments were cast aside. The court held that the government did not compel the plan to act, but rather just allowed the activity when the plan reached certain low funding thresholds such as a 65% level of funding. This ignores still the fact that the Rule of 80 benefit required an added contribution and those that paid less to receive the normal retirement benefit are getting a better bargain.
The net result, however, is that any individual will be deprived of the benefit of the significant contributions that were paid into pension funds to participate in additional forms of benefits such as the Rule of 80 benefit according to this Washington federal court. The Plan still must comply with the PPA, and they don’t always do that. There may be further challenges to this as this is a relatively new issue. It is clear that it does sit well with many. They now wish they had just kept their money and invested it as they saw fit.
What You Can Do
Each year every pensioner should look at their Summary Annual Report to see how well the pension is funded. This would apply even while you are receiving your pension. If it looks like the pension is going down to where it appears to be critically underfunded, I would seek advice from an ERISA lawyer that regularly practices Pension Law in Tuscaloosa. If you have a claim, it may be possible to group your claim with many others such that the cost of representation may be much more economical than you would think. What you should not do, however, is “trust” the pension fund to act in your best interest. You must be ever vigilant to watch out for your own pension rights!