Under ERISA [the Employee Retirement Income Security Act, which governs most private-sector employee benefit plans], pension plans must be administered in accordance with their terms. Although this rule is well-known by plan administrators, disputes arise when parties disagree about the meaning of the plan’s terms. Nonetheless, if the terms of the plan unambiguously favor your pension claim, do what the participant did in Walton v. Pension Plan, No. 2:16-cv-00397, 2017 U.S. Dist. LEXIS 80440 (W.D. Pa. May 24, 2017): FIGHT BACK.
In Walton, Don Walton worked for Alcoa Inc. from 1985 until 2015 when he retired with thirty years of service. On December 31, 2012, Walton received a $49,000 lump sum from Alcoa. In a written communication to Walton, Alcoa explained that the lump sum was a “bonus” given to “compensate” him for the fact that he had served as an Interim Plant Manager in 2012, but could not receive supplemental pay while he was employed in that capacity.
When Walton retired in 2015, Alcoa omitted the $49,000 lump sum payment from the calculation of his “final average compensation,” which reduced his monthly pension. Walton asked Alcoa to re-compute his pension using the lump sum, but Alcoa refused; so Walton sued.
In defense of Walton’s claim, Alcoa argued that the $49,000 lump sum was “supplemental pay,” which was expressly excluded under the plan’s definition of “Compensation.” The Magistrate Judge disagreed because Alcoa had expressly advised Walton that he could not receive supplemental pay as an Interim Plant Manager and that it had given him the lump sum in consideration of that fact.
The Magistrate Judge also found that Alcoa’s pension plan explicitly included “bonuses” in its definition of “Compensation,” and that Alcoa had expressly deemed the 2012 lump sum to be a “bonus” in its written communication to Walton. Therefore, Walton was entitled to have his pension benefits recalculated using the $49,000 lump sum in his “final average compensation,” and to receive the pension amounts wrongfully withheld plus reasonable costs and attorneys’ fees Walton incurred in prosecuting his claim.
The takeaway from this case is that if the terms of your pension plan unambiguously favor your pension claim and you are unable to resolve the dispute with the plan administrator, sue. It may just net you additional pension benefits and possibly also an award of your costs and attorneys’ fees.
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