Pension Plans May Count Service Different Ways for Different Things

Pension Plans May Count Service Different Ways for Different Things

I frequently receive calls from pension plan participants who are confused about their plan’s rules for counting service for vesting, participation, and determining the amount of the pension. I explain that plans may legally count service differently for each of these things, and that most plans do. A recent case illustrates the point and participants’ confusion. Miller v. Ret. Program Plan, No. 18-6314 (Aug. 22, 2019).

Consolidated Nuclear Security LLC (CNS) sponsored a retirement plan for its employees (the Plan). To participate in the Plan, a worker must be employed by CNS or a company that has adopted the Plan. Employees who work for subcontractors, whom the Plan calls “leased” employees, are generally ineligible to participate in, or accrue benefits under, the Plan.

In 1992, Kenneth Miller began doing electrical work at CNS’s Security Complex in Oakridge Tennessee. Initially, he worked for a subcontractor and, thus, was a leased employee ineligible to participant in the Plan. However, on December 6, 2004, Miller began working for a company that had adopted the Plan–Babcock and Wilcox Technical Services–thereby becoming eligible to participate in the Plan.

Twelve years later, Miller noticed that the Plan was calculating his pension as though his Credited Service began in 2004 when he started working for Babcock, rather than in 1992 when he started working for the subcontractor. Miller asked the Plan Administrator (PA) to calculate his pension with a Credited Service date beginning in 1992. The PA refused. So, Miller sued in a federal district court which ruled in his favor.

On appeal, the Sixth Circuit Court of Appeals explained that the issue was whether Miller’s time as a leased employee counted as “Credited Service” as that term is used in determining the amount of a participant’s pension benefit under the Plan. The Sixth Circuit observed that the Plan provides two different meanings for the term “Credited Service. One is that an employee’s service as a leased employee counts for purposes of participation and vesting under the Plan. The other is that an employee’s prior service as a leased employee does not count as “Credited Service” for purposes of computing the “Accrued Benefit” under the Plan. Accordingly, Miller’s time as a leased employee counted as Credited Service for purposes of vesting, but not for the purpose of calculating the amount of his pension. More specifically, when Miller started work for Babcock, his 12 years as a leased employee met the vesting requirement under the Plan that he have at least five years of Credited Service. However, that same 12 years could not be used to increase his Accrued Benefit under the Plan. Therefore, the Sixth Circuit held that the Plan’s terms “unambiguously” supported the PA’s decision and reversed the district court’s ruling in favor of Miller.

This case illustrates the importance of carefully reading the pension plan before bringing a pension claim, as courts WILL enforce unambiguous plan provisions.

[To read more of my posts about pension and retirement issues, please go to my Facebook Page “Pension Justice 4 You” and, if you like it, click the Like and Follow buttons and share the Page (or any Posts on it) with your Friends. If you are in need of assistance, please call me or email me, Eva Cantarella, at 248-335-5000 or [email protected]]

Leave a Reply

Your email address will not be published. Required fields are marked *

Untitled 1