ERISA's Anti-Forfeiture Rule And Good Lawyering Net Pension Plan Participant An Additional $109,000 In Pension Benefits

ERISA [the Employee Retirement Income Security Act, which governs most private sector pension plans] seeks to protect pension plan participants from losing their promised pension benefits. One way ERISA does this is through an "anti-forfeiture rule" that expressly prohibits the forfeiture of a participant's vested pension benefit at normal retirement age. In a recent court decision, this rule was instrumental in netting the pension claimant an additional $109,000 in past due pension benefits plus interest and the right to seek an award of costs and attorneys' fees incurred in prosecuting the claim. Aicher v. IBEW Local Union No. 269 Joint Trust Funds Office, No. 12-1781, 2017 U.S. Dist. LEXIS 83061 (D. N.J. May 31, 2017). Here are the facts:

From 1971 to 1992, Richard Aicher worked as an electrician for various employers who contributed to an IBEW pension plan in which he participated. [IBEW is the acronym for International Brotherhood of Electrical Workers.] From 1992 through June of 2010, Aicher worked as the Assistant Business Manager of the union and continued to participate in the plan. In July of 2010, he accepted the position of Administrative Manager of the union's Joint Funds Office. His duties in that position were strictly managerial and administrative in nature; he did not do any electrical work, perform any electrical estimates, or supervise any electricians.

The following month (August 2010), Aicher, who had reached normal retirement age under the plan and was fully vested in his pension benefits, submitted to the Plan Administrator (PA) (i) an application to retire and start his pension in September of 2010, and (ii) a waiver of any further pension credits otherwise due him under the plan. The PA did not respond to Aicher's pension application, even after he hired an attorney to secure a decision on it. In fact, Aicher did not receive a decision on his pension application until January of 2012 when he was terminated as the Joint Funds Administrative Manager.

On January 3, 2012, the PA approved Aicher's August 2010 pension application, but made the effective start date of the pension January 2012, rather than September 2010 (the start date Aicher sought in his pension application). The PA denied Aicher's claim to have his pension start on the earlier date on the grounds that (i) under Article VI of the plan, if a pensioner accepts employment "in the electrical construction industry," pension payments must immediately stop as of the first of the month following the date of such employment; and (ii) Aicher was employed "in the electrical construction industry" while he worked as the Joint Funds Administrative Manager.

Aicher sued the plan and the PA in federal court to recover the pension benefits due him between September 2010 (the pension start date he sought in his August 2010 pension application) and January 2012 (the pension start date determined by the PA). Aicher argued that Article VI of the pension plan was overly broad in its reach and violated ERISA's anti-forfeiture rule. Therefore, the PA's denial of his claim to have his pension start in September of 2010 was illegal. The federal district court agreed.

In reaching its decision for Aicher, the federal district court noted that ERISA's anti-forfeiture rule prohibits the forfeiture of a participant's vested pension benefit at normal retirement age and that Aicher had retired at normal retirement age and was vested in his pension benefits. However, the district court explained that ERISA's anti-forfeiture rule contains an exception for multiemployer plans, such as the IBEW pension plan, which allows those plans to suspend benefits derived from employer contributions while the employee is employed "in the same industry, in the same trade or craft, and the same geographic area covered by the plan, as when such benefits commenced." The federal district court found that the PA's denial of Aicher's claim to have his pension benefits start in September of 2010 contained no analysis as to whether his post retirement employment as the Joint Funds Administrative Manager was in the same "trade or craft" as his previous job, or that the tasks he performed as the Joint Funds Administrative Manager were similar to those types of business activities engaged in by employers who made contributions to the plan. Therefore, the PA's perfunctory denial of Aicher's claim was arbitrary and capricious and could not stand. Accordingly, the district court (i) ordered the pension plan to pay Aicher $109,000 in past due benefits plus interest, and (ii) stated that Aicher could also seek an award of attorneys' fees.

The takeaway from this case is that ERISA's anti-forfeiture rule trumps plan provisions and plan administrator decisions that arguably conflict with that rule. If your pension benefits have been denied, suspended, or reduced, and you are in a private-sector pension plan (multiemployer or otherwise), it may be worth your while to consult with an experienced ERISA pension attorney for an evaluation as to whether the denial, suspension, or reduction was unlawful.

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