Petition — Buczynski v. General Motors Corp.

Supreme Court brief1980

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Text

No. A-1048

80-198 AUG 8 1999

Supreme Court of the Hite Heo cea |

Ocroser Term, 1979

HENRY BUCZYNSKI, ALEX BORUSOVIC and

OTHER RETIRGES SIMILARLY SITUATED,

Petitioners,

THE GENERAL MOTORS CORPORATION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

Marc C. Gertis,

Counsel for Petitioners,

325 Westfield Avenue, East,

Roselle Park, New Jersey 07204.

(201) 245-8100

WEINER, STAUBACH, E;DELSON

& HopMayer,

Attorneys for Petitioners.

Witutum R. Caroset1,

McArpiz, CarosELLI, SPAGNOLLI

& BracHier,

1100 Law & Financial Building,

Pittsburgh, Pennsylvania 15219,

Of Counsel.

Adams Press Corp., 5 Commerce Street, Newark, N. J. 07102—(201) 623-8611

Questions Presented

1. Whether a provision in respondent’s pension plan

which sanctions a forfeiture of vested retirement benefits

by offsetting the amount of a subsequent worker’s com-

pensation award against the retiree’s pension is unlawful

under the Employee Retirement Income Security Act of

1974, 29 U.S.C. 1053.

2. Whether Chapter 156 of the New Jersey Laws of

1977, amending N.J.S.A. 34:15-29 (prohibiting offsets of

workers’ compensation awards against retirement pen-

sions) is a proper exercise of state power, not pre-empted

by E.R.LS.A., 29 U.S.C. 1144.

Parties to the Proceeding

Plaintiffs-Appellees-Petitioners in Case No. 79-1668:

Henry Buczynski, Alex Borusovic and Other Retirees Simi-

larly Situated

Defendant-Appellant-Respondent in Case No. 79-1668:

The General Motors Corporation

Intervenor:

State of New Jersey

As Amicus Curiae:

Carmen F. Gargon, Frank E. Doumont, Robert Milanovich,

Wayne C. Banks, Michael E. Barna, Paul J. Miller and

George Zihol

Gray Panthers

Shenango, Inc., U.S. Steel Corp., Crucible Inc., Jones &

Laughlin Steel Corporation, Mesta Machine Company,

Pullman-Standard and Wheeling-Pittsburgh Steel Corp.

United States (Tax Division, Department of Justice)

Plaintiff-Appellees in Case No. 19-1534:

Joseph Allessi, Raymond Buisson, Stephen Michalski,

Charles Repka, Helen Vogt and T. Edward White

Defendants-Appellants in Case No. 19-1534:

Raybestos-Manhattan, Inc. and Raybestos-Manhattan, Inc.

Employee Retirement Plan

TABLE OF CONTENTS

IRR Fr II isinincsccnchsceccancerccitinsainicctaseniaundabcbbentapeni

Parties TO PROCEEDING ...

STATEMENT OF JURISDICTION ............------c----cee-ee---0--0----0--) i

STATUTES AND REGULATIONS INVOLVED 22..........-cceeeeeeeeeeeeeee

STATEMENT OF THE CASE ....... pe MRE IH LIRA

REASONS FoR GRANTING WRIT:

1. -The issue raised in question 1 is of paramount

importance in that it involves the construction

of §1053 of E.R.I.S.A. which has never been

decided by this Court, and will affect the rights

of retirees of over 7,000 pension plans across

ED CARE TOD tidenrssssentncpstccitasitencnecsnnpiiins

Chapter 156 of the New Jersey Laws of 1977,

amending N.J.S.A. 34:15-29 (prohibiting off-

sets of workers’ compensation awards against

retirement pensions) is a proper exercise of

state power, not preempted by E.R.LS.A., 29

SL BAUR victinntiicndentaiiatiemideaen ;

CoNCLUSION ... Fe EEE NP ERO De eS AD

APPENDIX:

A—Opinion of the United States Court of Ap-

peals for the Third Circuit ...............2....c.00

ii TABLE OF CONTENTS

PAGE

B—Judgment of the United States Court of

Appeals for the Third Cireuit ~....0.0000222....... dla

C—Order of the United States Court of Appeals

for the Third Cireuit Denying Petition for

jE AES TER OSS SSR REE AY d4a

D—Petition for Removal ...................ccsscectecceseeee 36a

Order Certifying Class Action, Ete. .............. 39a

Memorandum Opinion of the United States

District Court for the District of New Jer-

Oy Ctra BG, TO TB) a eccctosocsietccnceiccctoree 4la

Opinion of the United States District Court

for the District of New Jersey (December

ah ROTO): siiniccniealadatinp yi odes i

Amended Order Filed April 5, 1979 ............ 67a

EK—Relevant Statutory Provisions ...................... 69a

Cases Cited

Allessi, et al. v. Raybestos-Manhattan, et al. (Docket

| ERNE ELAS T ESTER 51 SEE OTT OD RE 4

DiCanas v. Bica, 424 U.S. 351 (1976) 2... teesscseeeceeee 11

Fremont v. MeGraw-Edison, 606 F.2d 752 (7th Cir.

DS BRR CRG rae ka eae oa On CL OES Ro 10

Gargon v. Wheeling-Pittsburgh Steel Corp., et al.,

A de 2 SIU PID ny Saas n OE ary POO ane RE i)

Jones v. Rath Packing Co., 430 U.S. 519 (1977) 000... 11

Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414

eae OE CRTTEN wicreepebieth lpia nenchiacaniiensinconppenitanlRaciass 11

TABLE OF CONTENTS ll

PAGE

Nachman Corporation v. Pension Benefit Guarantee

Corp., et al., 48 U.S.L.W. 4524 (No. 78-1557), de-

cided May 12, 1980) 5, 7,8

Riley v. MEBA Pension Trust, 570 F.2d 406 (2d Cir.

1977) 9, 10

Stong v. Bucyrus-Erie Co. & Bucyrus Hourly Retire-

ment Plan, 472 F.Supp 1088 (E.D. Wi. 1979) recon.

RRs RPO TR, TG eisenncsiniicccttscceinctielinsictticcnnsttin 8,9

Utility Workers of America v. Consumers Power Co.,

453 F.Supp 447 (E.D. Mich. 1978) 9

Winer v. Edison Brothers Stores Pension Plan, 593

F.2d 307 (8th Cir. 1979) 10

Statutes Cited

Chapter 156 of New Jersey Laws of 1977 ................ i, 2, 4, 11

Employment, Retirement Security Act of 1974:

Sec. 2, 29 U.S.C. See. 1002 ... ; 5

Sec. 3(19), 29 U.S.C. Sec. 1002(1) ...............c.cccceeses 2,5

Sec. 203, 29 U.S.C. See. 1053 i

Sec. 203, 29 U.S.C. Sec. 1053 (a) 2,8

Sec. 203(a), 29 U.S.C. See. 1053(a) 5

Sec. 203(a) (2), 29 U.S.C. See. 1053(a) (2) ............ 5

See. 203(a) (3), 29 U.S.C. See. 1053(a) (3) ............ 5

See. 514, 29 U.S.C. See. 1144 ............. i, 11

N.J.S.A. 34:15-29 i, 2,11

iv TABLE OF CONTENTS

PAGE

28 U.S.C.:

Sec. 1254(1) .

Sec. 1441

29 U.S.C.:

Sec. 1002(19) 8

See. 1053(a) - 4,8

Sec. 1144(a) .. eS 5!

Rule Cited

Federal Rule of Civil Procedure 23(b)2 3

No. A-1048

IN THE

Supreme Court of the United States

Ocroser Term, 1979

= =

HENRY BUCZYNSKI, ALEX BORUSOVIC and

OTHER RETIREES SIMILARLY SITUATED,

Petitioners,

THE GENERAL MOTORS CORPORATION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

Statement of Jurisdiction

The Judgment of the Court of Appeals was entered on

February 15, 1980. Said Judgment was certified and is-

sued in lieu of a formal mandate on March 27, 1980.

A timely Petition for re-hearing was filed and was de-

nied on March 19, 1980. On June 2, 1980, this Honorable

Court entered an Orper Extenpine Time To Fite Petition

For Writ oF Certiorari to Auaust 16, 19£0.

The jurisdiction of this Court is envoked under 28 U.S.C.

§1254(1).

Statutes and Regulations Involved

The following Statutes and Regulations, which are in-

volved in this case are set forth in Appendix D, infra:

29 U.S.C. §1002(19)

29 U.S.C. §1053(a)

29 U.S.C. §1144(a)

N.J.S.A. 34:15-29

Statement of the Case

On August 5, 1977, plaintiff-petitioners, Henry Buczyn-

ski and Alex Borusovic, on behalf of themselves and “all

other retired members of the International Union, United

Automobile, Aerospace and Agricultural Implement Work-

ers of America, similarly situated,” instituted the instant

action against The General Motors Hourly-Rate Employees

Pension Plan (hereinafter referred to as the GM Pension

Plan), which conditions the right to vested pension bene-

fits by allowing the deduction of workers’ compensation

benefits received by a retiree from pension benefits other-

wise payable to him. Plaintiff-respondents’ complaint also

sought the invalidation of this pension plan provision on

the basis of N.J.S.A. 34:15-29, as amended by Chapter 156

of the Laws of 1977 of the State of New Jersey (hereinafter

referred to as Chapter 156), which provides that:

The right of compensation granted by this chap-

ter [the New Jersey Worker’s Compensation Act]

may be set off against disability pension benefits or

payments but shall not be set off against employees’

retirement pension benefits or payments. (A12a)

The above-mentioned action was removed to the United

States District Court of the District of New Jersey on Au-

gust 9, 1977 (Al3a-15a), on the motion of respondent pur-

suant to 28 U.S.C. §1441. On August 9, 1978, an Order

certifying class action was entered by consent of the par-

ties pursuant to Federal Rule of Civil Procedure 28(b)2

(A50a-51la).

The plaintiffs are all retired employees of the General

Motors Corporation who, at the time of their retirement,

were employed by the General Motors Corporation in New

Jersey. Each member of the plaintiff class was receiving

a pension under the GM Pension Plan when he collected a

workers’ compensation award for a work-related injury.

Plaintiff Buezynski received approximately $2,500.00, and

plaintiff Borusovie received approximately $2,300.00. The.

full amount of these awards were subsequently deducted

from their vested pension benefit under Article IV, Section

2 of the GM Pension Plan, which provides:

Section 2, Deductions of Workmen’s Compensation

In determining the monthly benefits payable under

this Plan, a deduction shall be made unless prohibited

by law, equivalent to all or any part of of Work-

men’s Compensation (including compromise or re-

demption settlements) payable to such employee by

reason of any law of the United States, or any po-

litical subdivision thereof, which has been or shall

be enacted provided that such deductions shall be

to the extent that such Workmen’s Compensation

has been provided by premiums, taxes or other pay-

ments paid by or at the expense of the Corporation,

except that no deduction shall be made for the fol-

lowing:

(a) Workmen’s Compensation payments specifically

allocated for hospitalization or medical expense, fixed

**¥

statutory payments for the loss of any bodily mem-

ber, or 100% loss of use of any bodily member, or

payments for the loss of industrial vision.

(b) Compromise or redemption settlements payable

prior to the date monthly pension benefits first be-

come payable.

a claim filed not later than two years after the break-

ing of seniority. (A28a)

On August 24, 1978, the District Court issued a Mem-

orandum Opinion in which it held that section 2 of Article

IV of the GM Pension Plan constituted an illegal for-

feiture of vested pension benefits under §203(a) of E.R.I.

S.A., 29 U.S.C. §1053(a). The Court also determined

that Chapter 156 of New Jersey Law was not pre-empted

by E.R.I.S.A. See Appendix B, infra. Upon a motion

by respondent for reconsideration, the District Court, on

December 20, 1978 issued a second Opinion and an Order

reaffirming its previous Decision. (A67a-75a).

Upon appeal by respondent, General Motors Corpora-

tion, and with the consolidation of the above-captioned

case with the unreported decision in Joseph Allessi, et al.

v. Raybestos-Manhattan, Inc., et al. (Docket No. 79-1534),

which invalidated a similar pension plan provision, a three

judge panel for the United States Court of Appeals for

the Third Circuit reversed and remanded the decision of

the District Court.

REASONS FOR GRANTING THE WRIT

1. The issue raised in question 1 is of paramount

importance in that it involves the construction of

§1053 of E.R.I.S.A. which has never been decided

by this Court, and will affect the rights of retirees

of over 7,000 pension plans across the United States.

The scope and purpose of E.R.ILS.A. is to provide a

comprehensive nationwide Federal program for the pro-

tection of retirees vested pension benefits. Congressional

policy, as embodied in the language of E.R.I.S.A., §2,

29 U.S.C. $1002, manifests the clear intention of Congress

to make sure that if a worker has been promised a pen-

sion upon retirement and he has fulfilled the requirements

for obtaining vested benefits, that he actually receive it.

Nachman Corporation v. Pension Benefit Guarantee Corp.,

et al., 48 U.S.L.W. 4524 (No. 78-1557, decided May 12,

1980).

The statutory provisions which unambiguously delineate

the non-forfeitability policy expressed by Congress with

respect to vested pension benefits are set forth in §203(a),

29 U.S.C. §1053(a), and “§3(19) and 29 U.S.C. §1002(19).

These sections provide that subject to the four carefully

delineated exceptions of §203(a) (3), 29 U.S.C. §1053(a) (3),

an employee's pension benefits, once vested, are not to be

forfeitable for any reason.

Section 203(a)(2) of E.R.LS.A., 29 U.S.C. §1053(a) (2)

provides several alternative minimum vesting schedules,

the only conditions being age and years of service. The

two named petitioners, having satisfied all vesting require-

ments with regard to age and years of service, and being

entirely vested, have a non-forfeitable right to 100% of

their accrued benefits. Nowhere within the above-enu-

merated sections or elsewhere in the Act, is there a pro-

vision excepting offsets of workers’ compensation awards

from the general non-forfeitability requirements.

Despite the language, purpose and policy of E.R.LS.A.,

if the law is, as stated by the Third Circuit, retirees and

pensioners of General Motors Pension Plan as well as

7,000 other pension plans throughout the nation will be

deprived of much of the protection which the Act pur-

ports to give them. Pension plans will be able to con-

dition the receipt of vested pension benefits upon factors

other than age and service. Article IV, §2 of the GM

Pension Plan imposed a condition to the receipt of vested

pension benefits, namely, forbearance from exercising sta-

tutory rights under state workers’ compensation and oe-

cupational disease laws. By exercising such rights, plain-

tiff-petitioners can be deprived of some or all of their

pension rights. In addition, many pensioners with more

severe work-related disability awards can be expected to

suffer major financial losses as a result of these pension

forfeitures.

If the law is, as stated by the Third Cirenit, pension

plans will be able to reduce retirees’ vested pension bene.

fits through the imposition of offsets including, but not

limited to, the subsequent receipt of a worker’s compensa-

tion awe~d. If the law is as the Third Cireuit states, then

the enjoyment of pension benefits which employees earn

and on which they are entitled to rely, may be arbitrarily

denied, even after the enactment of E.R.LS.A.

In New Jersey, the only redress for a worker who is in-

jured in the course of his employment, is filing a claim in

the division of workers’ compensation. Such a workers’

compensation action is a statutory remedy, and is in lieu

of the common law remedy of a tort action. If the Third

Cireuit decision is permitted to stand, provisions such as

Article TV, Section 2 of the GM Pension Plan will force

an injured employee to elect whether to forego his statu-

tory right to workers’ compensation in order to collect his

vested pension benefits, or to pursue his workers’ compen-

sation remedy only to have whatever award he receives

set off against his retirement pension. The net result is

to effectively deny such an employee of his only remedy

for a job-related disability. Moreover, it would place

maimed and injured retirees in the same economic position

as their healthy counterparts without providing any addi-

tional benefits for the suffering and losses which would

continue to burden them and diminish their enjoyment of

life. There is no indication in the legislative history and

language of E..R.1.8.A. that Congress intended this “harsh

dilemma,”

With the advent of the recent decision in Nachman,

supra, this Honorable Court has made an important state-

ment that E.R.LS.A. was enacted to preclude the vestiges

of previous pension practices which have the clear effect

of depriving pensioners of their right to benefits. In Nach-

man, supra, the Court held that Congress did not intend

to exclude otherwise vested benefits from E.R.IL.S.A. cov-

erage solely because an employer disclaims liability for

deficiencies in a pension fund. Moreover, this Honorable

Court reasoned that since the terms “vested” and “non-

forfeitable” are to be used synonymously, any attempt by

a pension plan to place a condition upon the receipt of

vested pension benefits were impermissible forfeitures vio-

lative of the Act.

As this Court stated in Nachman, §203(a) is a cen-

tral provision in E.R.LS.A. It requires generally

that a plan treat an employee’s benefits, to the ex-

tent that they have vested by virtue of him having

his age and length of service requirements no greater

than those specified in §203(a)(2), as not subject to

; Des whic

forfeiture. A provision in a plan urported to

sanction forfeiture of vested benefits for any reason,

other than one listed in subsection (a) (3) would vio-

late this section after January 1, 1976, its effective

date... 48 U.S.L.W. 4526, n.10

It is respectfully submitted that the decision of the Third

Cireuit runs contrary to the above-cited observation by

this Court in Nachman, supra. By interpreting the law in

such a manner as to expand permissible forfeitures, the

Third Cireuit’s opinion in this case is also in opposition to

this Court’s observation in Nachman, 48 U.S.L.W. at 4532,

n.9 that:

As the Chairman of the House Committee on Edu-

cation and Labor explained with regard to an ear-

j il)’ ition of “non-forfeitable” almost iden-

tical to that contained in 2 U.S.C. §1002(19) as

finally enacted: “The definition of the term ‘non-for-

feitable’ is intended to preclude any conditions to

receipt of vested benefits other than those noted in

the definition.”

The opinion of the Third Circuit determined that Con-

gress, under E.R.1L8.A., gave pension plans the right to

make offsets against vested pension plan benefits in vio-

lation of the vesting and non-forfeitability requirements of

E.R.LS.A., 29 U.S.C. §1053(a). This Court should review

this case in order to prevent the ge of those protee-

tions which were clearly enumerated in the legislative his-

tory and statutory language of E.R.LS.A,

The overwhelming weight of judicial authority under

BE.R.LS.A., prior to the Third Cireuit’s decision herein,

maintained that nearly identical offset provisions violated

the minimum vesting standards of $203, 29 U.S.C. §1053 of

E.R.LS.A. In particular, in Stong v. Bucyrus-Erie Co. and

Bucyrus Hourly Retirement Plan, 472 F.Supp. 1088 (1.D.

Wi. 1979), recon, denied, December 10, 1979, the Court

held that the workers’ compensation offset imposed condi-

tions subsequent to an employee’s right to his normal re-

tirement benefits which were contrary to the above-men-

tioned provisions of E.R.L8.A.

The pension plan provision invalid. ‘ted in Stong, supra

is the same provision currently being challenged, before

the Third Cireuit Court of Appeals, ‘n seven consolidated

class actions involving the steel industry. Gargon vy.

Wheeling-Pittsburgh Steel Corp., et al., (Cir. No. 78-1367).

Under the present situation, steelworkers in Milwaukee

will not experience these pension offsets, while steelwork-

ers in Pittsburgh, under the same basic steel contract,

Workers?

continue to have their vested pension benefits offset.

Moreover, in Utility{ Union of America v. Consumers

Power Co., 453 F.Supp 447 (.D. Mich. 1978), the Court

maintained that the plight of workers prompted the non-

forfeitability language of E.R.LS.A. This Court, citing

statutory language and legislative history, concluded that

Congress did not intend to exempt workers’ compensation

payments from the nonforfeitability requirement of E.R.1.

S.A. It should be noted that the Utility Workers decision

has been argued before the United States Court of Ap-

peals for the Sixth Circuit in June of 1979, and a decision

is expected soon.

The decision of the Third Circuit herein is also in con-

flict with other cases decided under the nonforfeitability

standard of E.R.1.S.A. including Riley v. MEBA Pension

Trust, 570 F.2d 406 (2d Cir. 1977), where the Seeond Cir-

cuit Court of Appeals held that:

When section 208(a)(3)(B), provides that certain

suspensions are not forfeitures, it necessarily im-

plied that those not falling within its terms are.

The Riley Court concluded by maintaining that “each

month’s denial [of vested pension benefits] constitutes a

separate forfeiture and a separate wrong” under E.R.I.S.A.

570 F.2d at 411.

The decision of the Third Circuit, in the ease at bar, is

also in conflict with the decision of the Eighth Circuit in

Winer v,. Edison Brothers Stores Pension Plan, 593 F.2d

307 (Sth Cir. 1979) and with the decision of the Seventh

Cireuit in Fremont v. McGraw-Edison, 606 F.2d 752 (7th

Cir. 1979) both of which held that any conditions upon

receipt of nonforfeitable pension benefits were invalid.

By departing from these previous decisions, the Third

Cireuit has diluted the protection of retirees’ vested pen-

sion benefits which E.R.I.S.A. was enacted to safeguard.

There is nothing in the language, policy or history of

K.R.LS.A, to support the decision of the Third Circuit

that workers’ compensation offsets against vested pension

benefits do not constitute impermissible forfeitures. This

Court should review this case in order to protect the in-

tegrity of the Act and effectuate the intent of Congress,

that being the protection of the rights of retirees and

pensioners in this country.

2. Chapter 156 of the New Jersey Laws of 1977,

amending N.J.S.A. 34:15-29 (prohibiting offsets of

workers’ compensation awards against retirement

pensions) is a proper exercise of state power, not

pre-empted by E.R.LS.A., 29 U.S.C. 1144.

Chapter 156 of the New Jersey Laws of 1977, amend-

ing N.J.S.A. 34:15-29 (see Appendix D) became effective

July 14, 1977 as an amendment to the New Jersey Work- | As

ers’ Compensation Act. W the trial court correctly con-

cluded in its first opinion, said statute is not concerned

with pension plans qua. pension plans but only with en-

suring that an employee receives his rightful compensa-

tion benefits. (A6la). This Honorable Court has found

that workers compensation is an area in which the State

is deemed to have broad authority under the police power,

DiCanas vy. Bica, 424 U.S. 351 (1976). Although the pre-

emption of §514(a) of E.R.LS.A., 29 U.S.C. 1144 ad-

mittedly is broad, it does not show a clear congressional

intent to pre-empt a law, which is part of the New Jersey

Workers Compensation Act and which is not concerned

with “pension plans qua pension plans.” Absent a

clear congressional intent to pre-empt, pre-emption should

not be found, Jones v. Rath Packing Co., 430 U.S. 519

(1977).

The State of New Jersey has manifested a strong in-

terest in protecting workers in the employment relation-

ship and in seeing that workers are compensated for work-

related injuries, ever since the original enactment of the

Workers’ Compensation Statute in 1909. This State policy

should be allowed to prevail provided it does not inter-

fere with Federal regulation, Merrill Lynch, Pierce, Fen-

ner and Smith v. Ware, 414 U.S. 117 (1973). The New eaner

Jersey law constitutes a fewexercise of police power © P

since it does not interfere with the Federal regulatory

scheme in the area of benefit pensions and can operate

in harmony with Federal law. It is respectfully submitted

that the Third Circuit decision, finding the State law

pre-empted by E.R.LS.A., is in conflict with the pre-

viously cited decisions of this Court.

CONCLUSION

For the foregoing reasons, this Petition for a Writ of

Certiorari should be granted.

Respectfully submitted,

Marc C. Gertis,

Counsel for Petitioners,

325 Westfield Avenue, East,

Roselle Park, New Jersey 07204.

(201) 245-8100

Werner, Stavsacu, Epetson

& Hopmayer,

Attorneys for Petitioners.

Wituiam R. Carosetwt,

McArpiz, CarosELii, SPAGNOLLI

& BracHLer,

1100 Law & Financial Building,

Pittsburgh, Pennsylvania 15219,

Of Counsel.

APPENDIX A

Opinion of the United States Court of Appeals for the

Third Circuit

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 79-1668

HENRY BUCZYNSKI, ALEX BORUSOVIC, and

OTHER RETIREES SIMILARLY SITUATED,

Appellees

Vv.

THE GENERAL MOTORS CORPORATION,

Appellant

STATE OF NEW JERSEY,

Intervenor

(D.C. Civil No. 77-1644)

No. 79-1534

JOSEPH ALESSI, RAYMOND BUISSON,

STEPHEN MICHALSKI, CHARLES REPKA,

HELEN VOGT and T. EDWARD WHITE,

Appellees

Vv.

RAYBESTOS-MANHATTAN, INC.,

and RAYBESTOS-MANHATTAN, INC.

EMPLOYEE RETIREMENT PLAN,

jointly, severally or in the alternative,

Appellants

STATE OF NEW JERSEY,

Intervenor

Appendia A

(D.C. Civil No. 78-0434)

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

Argued: January 8, 1980

Before: GIBBONS, ROSENN and GARTH, Circuit Judges

WEINER, STAUBACH, EDELSON & HOPMAYER

LESTER WEINER, ESQ.

MARC C. GETTIS, ESQ. (Argued)

325 Westfield Avenue, East

Roselle Park, NJ 07204

Attorneys for Appellees

Buczynski and Borusovic

GELMAN & GELMAN

MICHAEL S. SCAROLA, ESQ. (Argued)

45 Church Street

Paterson, New Jersey 07505

Attorneys for Appellees

Alessi, Buisson, Michalski

‘Repka, Vogt and White

JOHN J. DEGNAN

ATTORNEY GENERAL OF NEW JERSEY

STEPHEN SKILLMAN, ESQ.

ASSISTANT ATTORNEY GENERAL

MICHAEL S. BOKAR (Argued)

DEPUTY ATTORNEY GENERAL

State House Annex

Trenton, NJ 08625

Attorneys for Intervenor

State of New Jersey

Appendia A

J. RICHARD LAUVER, ESQ.

CHARLES R. SMITH, ESQ.

J. MICHAEL EWING, ESQ.

KIRKPATRICK, LOCKHART, JOHNSON

& HUTCHISON

1500 Oliver Building

Pittsburgh, PA 15222

Attorneys for Shenango, Inc.

As Amicus Curiae

JAMES T. CARNEY, ESQ.

United States Steel Corporation

600 Grant Street, Rm. 6082

Pittsburgh, PA 15230

Attorneys for US Steel Corp.

As Amicus Curiae

WILLIAM R. CAROSELLI, ESQ.

McARDLE, CAROSELLI, SPAGNOLLI

& BEACHLER

1100 Law & Finance Building

Pittsburgh, PA 15219

Attorneys for Gargon, Doumont

Milanovich, Banks, Barna,

Miller, Zihol

As Amicus Curiae

CARPENTER, BENNETT & MORRISSEY

LAURENCE REICH, ESQ. (Argued)

JOHN C. HEAVEY, ESQ.

744 Broad Street

Newark, NJ 07102

Attorneys for Appellant

General Motors Corporation

Appendiz A

PITNEY, HARDIN & KIPP

S. JOSEPH FORTUNATO, ESQ.

WARREN J. CASEY, ESQ. (Argued)

ARNOLD S. COHEN, ESQ.

163 Madison Avenue

Morristown, NJ 07960

Attorneys for Appellants

Raybestos-Manhattan, Inc.

M. CARR FERGUSON

ASSISTANT ATTORNEY GENERAL

WILLIAM A. FRIEDLANDER, ESQ.

MICHAEL J. ROACH, ESQ.

ROBERT J. DEL TUFO,

UNITED STATES ATTORNEY

Tax Division

Department of Justice

Washington, D.C. 20530

Attorneys for the United States

As Amicus Curiae

WILLIAM L. STANDISH, ESQ.

WILLIAM H. POWDERLY, III, ESQ.

PATRICK W. RITCHEY, ESQ.

CHARLES R. HERPICH, JR., ESQ.

REED, SMITH, SHAW & McCLAY

747 Union Trust Building

Pittsburgh, PA 15219

Attorneys for Crucible Inc.,

Jones & Laughlin Steel Corp.

Mesta Machine Company

Pullman-Standard and

Wheeling-Pittsburgh Steel Corp.

As Amicus Curiae

Appendia A

PAUL S. NATHANSON, ESQ.

BRUCE K. MILLER, ESQ.

NEAL S. DUDOVITZ, ESQ,

National Senior Citizens Law Center

1636 West 6th Street, Suite 201

Los Angeles, CA 90017

Attorneys for Amicus Curiae

Gray Panthers

OPINION OF THE COURT

(Filed February 15, 1980)

GARTH, Circuit Judge

These two appeals pose a single question: whether

the Employee Retirement Income Security Act of 1974

(ERISA) or the laws of New Jersey invalidate the provi-

sion of the pension plans of defendants General Motors

and Raybestos-Manhattan authorizing reduction, or off-

set, of pension benefits by amounts received by the pen-

sioner under a Workmen’s Compensation statute. We

conclude that these offset provisions are not unlawful

under ERISA, and that the New Jersey statute prohibit-

ing them is preempted by ERISA. We therefore reverse

the district court orders which enjoined such offsets and

which required payment to pension beneficiaries of

those amounts which the pension trustees had offset in

the past.

Both these cases present similar fact patterns,’

and procedural histories. General Motors (GM) and

1. No material facts are in dispute in either case. In Alessi, all

facts were stipulated. In Buczynski, the parties filed a stipulation of

facts and the plaintiffs presented, at the instance of the district

Appendia A

Raybestos-Manhattan (Raybestos) maintain pension

plans covered by ERISA, 29 U.S.C. §1001 et seq. (1976).

Both pension plans provide that, under certain circum-

stances, benefits will be reduced by the amount of Work-

men’s Compensation payments received by plan

participants.” )

NOTE 1 — (Continued)

court, the testimony of Hubert Clodfelter. Clodfelter was a union

negotiator for the United Auto Workers in 1970 when the GM pen-

sion plan was under consideration. He testified about the meaning

of the “unless prohibited by law” clause in the GM offset provision.

See note 2 infra.

2. The GM offset clause provides:

Section 2. Deductions for Workmen's Compensation

In determining the monthly benefits payable under this Plan, a

deduction shall be made unless prohibited by law, equivalent to

all or any part of Workmen's Compensation (including compro-

mise or redemption settlements) payable to such employee by

reason of any law of the United States, or any political subdivi-

sion thereof, which has been or shall be enacted, provided that

such deductions shall be to the extent that such Workmen's

Compensation has been provided by premiums, taxes or other

payments paid by or at the expense of the Corporation, except

that no deduction shall be made for the following:

(a) Workmen's Compensation payments specifically allo-

cated for hospitalization or medical expense, fixed statutory

payments for the loss of any bodily member, or 100% loss of use

of any bodily member, or payments for loss of industrial vision.

(b) Compromise or redemption settlements payable prior

to the date monthly pension benefits first become payable.

claim filed not later than two years after the breaking of

seniority.

The Raybestos offset clause provides:

All Retirement Income payments shall be reduced by the

entire amount of any and all payments the Member is eligible to

receive under any and all statutes pertaining to workmen's

compens: tion, occupational disease, unemployment compen-

sation, cash sickness benefits, and similar laws, other than pri-

mary Social Security benefits, presently in effect or which may

Appendia A

In 1977, New Jersey enacted a statute expressly

prohibiting such offset provisions. The statute, which

became effective July 14, 1977, added the underscored

sentence to N.J. Stat. Ann. §34:15-29 (Supp. 1979), a

part of New Jersey’s Workmen’s Compensation pro-

gram. The complete section now provides:

The right of compensation granted by this chapter

shall have the same preference against the assets of

the employer as is now or may hereafter be allowed

by law for a claim for unpaid wages for labor. Claims

or payments due under this chapter shall not be as-

signable, and shall be exempt from all claims of

creditors and from levy, execution or attachment.

The right of compensation granted by this chapter

may be set off against disability pension benefits or

payments but shall not be set off against employees’

retirement pension benefits or payments.

Shortly after this statute went into effect, the plain-

tiffs brought class actions® against the defendants in the

be enacted from time to time, which payments are paid concur-

rently with the Retirement Income.

3. In Alessi, the request for class certification was abandoned

after the case was removed to the federal courts, and the action was

continued on behalf of the named plaintiffs only. In Buczynski, the

following class was certified py consent of the parties:

The certified class consists “of those persons who are re-

tired members of the General Motors Corporation Hourly-Rate

Employees Pension Plan who retired under the provisions of

said Pension Plan as set forth in Exhibit A-1 to the Agreement

between General Motors Corporation and the International

Union, United Automobile, Aerospace and Agricultural Imple-

ment Workers of America, dated November 11, 1970, Novem-

ber 19, 1973, or November 22, 1976, who retired with benefits

payable for months commencing on or after April 1, 1971, and

who, at the time of their retirement, were employed by General

Motors Corporation in New Jersey.” See order filed August 9.

1978.

Buczynski v. General Motors Corp., 456 F. Supp. 867, 868 n.1

(D.N.J. 1978).

Appendia A

New Jersey state courts. The named plaintiffs in each

suit were former employees of the defendants who had

recovered Workmen’s Compensation judgments against

the defendants and whose pension benefits were being

reduced as a result.4 The suits sought permanent in-

junctions against the offsets and recoupment damages

for those offsets, alleged to be unlawful, which had al-

ready been made.

Both cases were removed by the defendants to the

United States District Court for the District of New Jer-

sey. Both district judges to whom the respective cases

were assigned, reached the same result. The district

court judge in Buczynski issued two published opinions.

The first opinion is reported at 456 F. Supp. 867 (D.N.J.

1978). The second opinion, which denied reconsider-

ation, is reported at 464 F. Supp. 133 (D.N.J. 1978). The

district court judge in Alessi issued a single, un-

published letter opinion.

Although the complaints in both cases challenged

the offsets only on the basis of the New Jersey statute,

both courts found the offset invalid under §203(a) of

ERISA, 29 U.S.C. §1053(a) (1976) (hereinafter

§1053(a)). In so holding, both courts invalidated a regu-

lation issued by the Treasury Department expressly au-

thorizing the offset clauses, 26 C.F.R. §1.411(a)-4(a)

(1979).° They also held that the New Jersey statute was

4. One of the Alessi plaintiffs, Helen Vogt, had not vet begun to

receive her plan benefits (which were deferred termination benefits

rather than retirement payments) by the time suit was filed. and

thus had not yet suffered the impact of the offset clause. She was

scheduled to begin receiving termination benefits on February 1.

1979.

5. The Buczynski court's first opinion made no mention of the

Treasury regulation. The regulation was only considered and found

invalid in the opinion responding to GM's motion for reconsider-

ation. See 464 F. Supp. at 134-36.

Appendia A

not superseded by ERISA’s preemption clause, 29

U.S.C. §1144 (1976).®

General Motors and Raybestos bring these appeals,

challenging the district courts’ conclusions that the off-

sets are invalid under ERISA and that the New Jersey

statute is not preempted. We address these issues in

turn.

The plaintiffs claim that the defendants’ offset is

rendered unlawful by ERISA's antiforfeiture provision,

29 U.S.C. §1053(a) (1976). This section provides in per-

tinent part:

(a) Each pension plan shall provide that an

employee's right to his normal retirement benefit is

6, The Buczynski court also held that it need not reach the pre-

emption claim since it had already found that the offset was invalid

under ERISA itself. See 456 F. Supp. at 872. Preemption was dis-

cussed, however, by assuming arguendo that the offset was not

invalid under ERISA, see id, The court concluded that the New Jer-

sey statute was not preempted, id, at 872-74.

After the Buczynski and Alessi opinions were issued, still an-

other opinion of the district court of New Jersey addressing these

questions was filed, Carpenter Technology Corp. v. Boyton, No.

78-1415 (D.N.J., Dec, 12, 1979). Carpenter diverged from

Buczynski and Alessi by holding that ERISA did, indeed, preempt

the New Jersey statute, See our discussion infra at Part III, The

Carpenter court reached the same result as its predecessors, howev-

er, by holding that the Workmen's Compensation offset was prohib-

ited by ERISA itself.

7. The State of New Jersey has intervened in both Alessi and

Buczynski, In addition, several amicus briefs have been filed in

Buczynski, The United States as amicus urges reversal of the dis-

trict court. So do several steel companies, who are involved in litiga-

tion on this same issue in the Western District of Pennsylvania.

These steel companies are; Crucible, Inc., Jones & Laughlin Steel

Corp.. Mesta Machine Co., Pullman-Standard, Shenango, Inc.,

United States Steel Corp,, and Wheeling-Pittsburgh Steel Corp.

The individual steelworkers, who are suing their employers on this

issue, urge affirmance, The steelworkers are Carmen F. Gargon,

Frank E, Doumont, Robert Milanovich, Wayne C, Banks, Michael

E. Barna, Paul J, Miller, and George Zihol. The Gray Panthers, one

of the amici permitted to file in Buczynski, urge affirmance as well.

10a

Appendia A

nonforfeitable upon the attainment of normal retire-

ment age and in addition shall satisfy the require-

ments of paragraphs (1) and (2) of this subsection.

A Treasury regulation, however, addresses the per-

missibility of offsets under ERISA’s antiforfeiture provi-

sion and expressly authorizes such offsets, declaring

them not to be prohibited forfeitures. This regulation

provides in pertinent part:®

Furthermore, nonforfeitable rights are not consid-

ered to be forfeitable by reason of the fact that they

may be reduced to take into account benefits which

8, This Treasury regulation was not issued under ERISA's

antiforfeiture requirement found at 29 U.S.C, §1053(a) (1976), but

rather under an antiforfeiture provision included in the Internal

Revenue Code requirements for pension plans, 26 U.S.C. §411(a)

(1976), The tax code requirement for pension plans was enacted in

Tide Il of ERISA, ERISA expressly provides that Treasury Depart-

ment regulations under the tax code pension provisions shall apply

to the analogous provisions of ERISA codified in Title 29 of the

United States Code, 29 U.S.C, §1202(c) (1976) provides:

ury under sections 410(a), 411, and 412 of Title 26 (relating to

minimum participation standards, minimum vesting stan-

dards, and minimum funding standards, respectively) shall

also apply to the minimum participation, vesting, and funding

standards set forth in parts 2 and 3 of subtitle B of subchapter |

of this chapter [which include 29 U.S.C, §1053(a)], Except as

otherwise expressly provided in this Act, the Secretary of Labor

shall not prescribe other regulations under such parts, or apply

the regulations prescribed by the Secretary of the Treasury un-

der sections 410(a), 411, 412 of Title 26 and applicable to the

minimum participation, vesting, and funding standards under

such parts in a manner inconsistent with the way such regula-

tions apply under sections 410(a), 411, and 412 of Title 26.

We thus conclude that the Treasury regulation issued under

the antiforfeiture requirement of 26 U.S.C, §411(a) (1976) must, if

valid, control our interpretation of 29 U.S.C. §1053(a) (1976) as

well, None of the parties here contends otherwise. This issue is dis-

cussed at greater length in Baker v. Otis Elevator Co., No, 79-1185,

slip. op, at 5-8 (3d Cir,, Nov, 13, 1979),

lla

Appendia A

are provided under the Social Security Act or under

any other Federal or State law and which are taken

into account in determining plan benefits.

26 C.F.R. §1.411(a)-4(a) (1979),

In determining the legality of the Workmen's Com-

pensation offset, then, we must begin our inquiry with

this regulation, which, if held to be valid, would require

us to sustain the offset provisions in the General Motors

and Raybestos pension plans,

In assessing the validity of 26 C.F.R. §1.411(a)-4(a)

(1979), we first turn to a consideration of the character

of the regulation. In this court's recent opinion in Baker

v, Otis Elevator Co., No. 79-1185 (3d Cir., Now. 13,

1979), which also concerned the validity of a Treasury

regulation interpreting a provision of ERISA, we recog-

nized a distinction between two types of administrative

regulations, with a corresponding distinction in the ap-

propriate standard of review. We there stated:

There can be no question but that the regula-

tion with which we are here concerned is a legisla-

tive regulation which was issued pursuant to a clear

delegation of rule making authority, see U.S.C,

§1202(c) (1976), As Professor Davis has explained,

A legislative rule is the product of an exer-

cise of delegated legislative power to make law

through rules. An interpretative rule is any rule

an agency issues without exercising delegated

legislative power to make law through rules.

The distinction between the two kinds of

rules is fundamental. . . . Valid legislative rules

have about the same effect as valid statutes:

they are binding on courts. . . .

[By contrast, however,] |clourts always

have power to substitute their judgment for ad-

12a

Appendix A

ministrative judgment as to the content of in-

terpretative rules, but they refrain in varying

degrees from substituting judgment in various

circumstances....

2 K.C. Davis, Administrative Law Treatise,

§7:8 at 36-37 (1979). We recognize the distinc-

tion in the nature of the two types of rules, lead-

ing in turn to a distinction in our standard of re-

view. Our scope of review of legislative rules is

far more restricted than the scope of our review

of interpretative rules. See id., at 37.

Slip. op. at 9-10.

After an analysis of the Supreme Court’s decision in

Batterton v. Francis, 432 U.S. 416 (1977), which ad-

dressed the same issue, we concluded in Baker that, to

sustain a legislative regulation, “we need only determine

.. , that its promulgation is not an abuse of discretion,

that it is neither arbitrary or capricious, nor contrary to

the governing statutory section and ERISA as a whole,”

slip op. at 11-12.

As in Baker, the Treasury Department regulation at

issue here is plainly legislative in nature; it was issued

pursuant to the same delegation of rule-making power

as the regulation in Baker, which was there held to be

legislative. See slip op. at 9; 29 U.S.C. 120260.0,976). It

is thus subject to the: limited review prescribed in

Baker.”

The plaintiffs contend that the Treasury regulation

must be struck down because it is inconsistent with the

9. Neither district court here recognized that 26 C.F.R.

§1.411(a)-4(a) (1979) is a legislative regulation. Other courts that

have invalidated this regulation have failed as well to recognize this

salient characteristic. See note 10 infra. By failing to accord this

regulaton the appropriate degree of deference, these courts have

impermissibly substituted their own judgment as to the interpreta-

tion of the statute for that of the Treasury Department.

13a

Appendix A

governing statutory provision, ERISA’s antiforfeiture re-

quirement, 29 U.S.C. §1053(a) (1976). Before turning

to their claim, we think it is appropriate to acknowledge

that fidelity to the standard of review set forth in Baker

and Batterton, supra, requires that a legislative regula-

tion be invalidated only for a clear and manifest conflict

with the governing statute. Overturning a legislative

regulation where the statute may arguably be given

conflicting readings, or where the conflict between the

regulation and the statute is not plain, does violence to

the congressional intent to delegate rule-making author-

ity to the administrative agency. Approached from this

perspective, the conclusions reached by the district

courts in Buczynski and Alessi, that the regulation is in-

consistent with 29 U.S.C. §1053(a) (1976), cannot be

sustained: The legislative history affirmatively supports

the Treasury regulation, and, at the very least, any con-

flict between the regulation and the statute, if one

indeed exists, is clearly insufficient to mandate

invalidation.

The district courts here, as well as the other courts

that have invalidated this regulation,'!° make similar syl-

logistic arguments to demonstrate the conflict with

ERISA which they perceive. They begin with §1053(a),

which provides broadly that pension benefits must be

10. In addition to Buczynski and Alessi, offset provisions have

been declared unlawful, and the Treasury regulation has been in-

validated, in Strong v. Bucyrus-Erie, 472 F. Supp. 1089 (E.D. Wis.

1979); Utility Workers’ Union v. Consumers Power Co., 453 F.

Supp. 447 (E.D. Mich. 1978), appeal docketed, No. 78-1402 (6th

Cir., August 2, 1978); and Carpenter Technology Corp. v. Boyton.

No. 78-1415 (D.N.J., Dec. 12, 1979). Offset provisions, and the

Treasury regulation authorizing them, have been upheld in Bordine

v. Evans Products Co., 453 F. Supp. 19 (E.D. Mich. 1978); Pavlovic

v. Chrysler Corp., No. 7-70438 (E.D. Mich., Jan. 10, 1978). and

Carlson v. Bundy Corp., No. 6-72272 (E.D. Mich. 1977).

l4a

Appendix A

nonforfeitable. They then focus on §1053(a)(3), which

specifically exempts certain pension plan provisions

from the nonforfeitability rule. The list of these excep-

tions includes, inter alia, nonpayment of benefits if the

plan participant dies, §1053(a)(3)(A), and suspension of

benefits if the participant takes a job with an employer in

the same industry, §1053(a)(3)(B). This list, however,

does not include offsets for Workmen’s Compensation.

Finally, these district courts add to §1053(a) the defini-

tion of “nonforfeitable” found in 29 U.S.C. §1002(19)

(1976), which provides:

(19) The term “nonforfeitable”’ when used

with respect to a pension benefit or right means a

claim obtained by a participant or his beneficiary to

that part of an immediate or deferred benefit under

a pension plan which arises from the participant’s

service, which is unconditional, and which is legally

enforceable against the plan. For purposes of this

paragraph, a right to an accrued benefit derived

from employer contributions shall not be treated as

forfeitable merely because the plan contains a pro-

vision described in section 1053(a)(3) of this title.

(emphasis added).

Armed with these provisions, these district courts

reason as follows: all reductions in benefits are forfei-

tures; all forfeitures are prohibited by §1053(a), with the

sole exceptions being those listed in §1053(a)(3); Work-

men’s Compensation offsets are not included in the list

of permissible forfeitures in §1053(a)(3); ergo, Work-

men's Compensation offsets are prohibited forfeitures.

Thus, they conclude that the Treasury regulation au-

thorizing offsets for benefits provided under Federal or

State law is in conflict with ERISA, and is therefore

invalid, because it expands the class of permissible

forfeitures beyond those specifically set forth in

l5a

Appendia A

§1053(a)(3). The Buczynski district court, in its second

opinion, makes the argument as follows:

Another difficulty with the defendant's inter-

pretation results from ERISA’s handling of the term

“nonforfeitable”. 29 U.S.C. §1002(19) provides the

definition. Under this section, only the exceptions

specifically included in §1053 are consistent with

nonforfeitability. Worker’s compensation does not

appear. Only deductions included in §1053(a)(3)

are exceptions to §1002’s definition of nonfor-

feitability.

Based on these cases, I must conclude it is

clear that Congress expected that pension benefits .

would generally be nonforfeitable, and that employ-

ees would forfeit benefits only under narrowly

defined circumstances. Regulations promulgated

must assist in achieving this goal. Treas.Reg.

§1.411(a)-4(a), by impeding the attainment of this

goal, is inconsistent with the statute. Accordingly.

the defendant’s reliance on it as a source of expand-

ing the scope of permissible deductions from pen-

son payments is misplaced. Section 1053 forbids

the offsets found in the defendant's plan.

464 F. Supp. at 135-36 (footnotes and citations omitted).

Thereafter, the district court in Alessi, relying on

the Buczynski opinions, reached the same result. See

Alessi v. Raybestos-Manhattan, No. 78-0434, slip op. at

5 (D.N.J., Feb. 15, 1979).

While this argument is not without some superficial

appeal, the courts’ syllogism is defective, and we must

reject it. Understanding this defect, however, requires

some explanation of the regulation of pension plans by

the Internal Revenue Service before and after ERISA

was enacted.

Prior to enactment of ERISA in 1974, the Internal

Revenue Code set forth a variety of requirements that

had to be met by pension plans in order to qualify for fa-

16a

Appendix A

vorable tax treatment. One requirement was that the

plans be nondiscriminatory. This tax code requirement

was set forth in 26 U.S.C. §401(a)(4) & (5). On the pas-

sage of ERISA, these sections were amended, but the

amendments did not alter the basic aim of the statute.

Discrimination in contributions or benefits under a pen-

sion plan was still prohibited. These sections now pro-

vide in pertinent part:

(a) Requirements for qualification. — A trust

created or organized in the United States and

forming part of a stock bonus, pension, or

profit-sharing plan of an employer for the exclusive

benefit of his employees or their beneficiaries shall

constitute a qualified trust under this section—

* » *

(4) If the contributions or the benefits pro-

vided under the plan do not discriminate in favor of

employees who are—

(A) officers,

(B) shareholders, or

a a ©

(5)... [A] plan [shall not] be considered dis-

criminatory . .. merely because the contributions or

benefits of or on behalf of the employees under the

plan .. . differ because of any retirement benefits

created under State or Federal law... .

Under these sections, the IRS prior to ERISA had

extensive experience with a pension plan provision simi-

lar to the offset clause challenged here. That provision

was the offset of Social Security benefits against pension

benefits. In its interpretation of the clause excerpted

above from 26 U.SIC. §401(a)(5), the IRS had long

permitted pension plans to offset pension benefits by the

amount of Social Security benefits that a plan partici-

17a

Appendix A

pant received. The first such regulation was issued in

1943, and it simply reiterated the Statutory language

quoted above. The current version of this regulation, is-

sued in 1960, provides as follows:

(b) A plan... under which the contributions

or benefits differ because of any retirement benefit

created under State or Federal law, will not be dis-

criminatory because of such exclusion or differ-

ence, provided the total benefits resulting under the

plan and under such law establish an integrated

and correlated retirement system satisfying the

tests of section 401(a).

26 C.F.R. §1.401-4(b) (1979).

The parties do not dispute that this regulation per-

mits offset of pension benefits by the amount of Social

Security benefits received.

In enacting ERISA, Congress was familiar with the

practice of the IRS allowing such offset provisions. Con-

gress was also aware that the IRS, while allowing such

offsets, would not permit any increase in the rate of off-

set based upon any increase in the level of Social Securi-

ty benefits occurring after a retiree began to receive his

pension. Congress sought to codify this administrative

practice of not permitting an increased offset based upon

increased Social Security benefits, and did so by enact-

ing §1021(e) of ERISA, which is codified at 26 U.S.C.

§401(a)(15) (1976). This section provides:

(1S) a trust shall not constitute a qualified trust

under this section unless under the plan of which

such trust is a part . . . such benefits are not de-

creased by reason of any increase in the benefit lev-

els payable under title II of the Social Security Act

or any increase in the wage base under such title II,

if such increase takes place after September 2,

1974, or (if later) the earlier of the date of first re-

18a

Appendiz A

ceipt of such benefits or the date of such separation,

as the case may be. (emphasis added).

Congress’s understanding in enacting this section

is made clear in the report of the House Ways and

Means Committee:

Protection is given to retired individuals and in-

dividuals who are separated from the service of the

employer against reductions in private plan benefits

when social security benefit levels increase. In gen-

eral, under present integration |i.e., offset] proce-

dures, social security benefits attributable to em-

ployer contributions are treated as though they were

part of the private plan. As a result when the level of

social security benefits increases, some integrated

plans have reduced the amount of the retirement

benefits that they provide for covered employees.

Present law under administrative practice pro-

vides that qualified plans may not use increases in

social security benefit levels to reduce the benefits

that they pay where the employees concerned are

retired and are already receiving integrated plan

benefits. The bill codifies this treatment for retired

, persons. It also extends the prohibition against re-

ducing plan benefits where social security benefit

levels are increased to cases where the individuals

concerned are separated from service prior to retire-

ment and have deferred nonforfeitable rights to plan

benefits. This provision is effective for increases in

social security benefits which take place after the

date of enactment or on the date of the first receipt

of plan benefits or the date of separation from serv-

ice (whichever is applic: __) if that date is later.

These changes do not affect the ability of plans

to use the integration procedures to reduce the

benefits that they pay to individuals who are cur-

rently covered when social security benefits are

liberalized.

“

19a

Appendix A

H.R. Rep. No. 93-807, 3 U.S. Code Cong. & Admin.

News 4670, 4695-96 (1974).

Despite certain misgivings about offset, or integra-

tion practices expressed later in this report, Congress

chose not to bar the Social Security offset entirely, but

merely to prohibit increases in the amount of the offset

based on increases in the amount of Social Security

benefits.

A number of conclusions can be drawn from this

history, conclusions which shed light on the analysis on

which the Alessi and Buczynski courts relied in striking

down the Treasury regulation. In choosing only to limit

increased Social Security offsets rather than bar them

entirely in §401(a)(15), Congress gave its implicit ap-

proval to the practice of permitting offsets against pen-

sion plan benefits — in that instance, an offset of Social

Security benefits against pension plan benefits. Further,

since §401(a)(15) was enacted at the same time as

§1053(a)’s requirement that pension benefits be

nonforfeitable, we must conclude that the offset of So-

cial Security benefits implicitly approved in the former

section was not simultaneously rendered illegal by the

latter section’s requirement of nonforfeitability.

This conclusion reveals the primary defect in the

Buczynski/Alessi district court analyses. Those courts

reasoned, as noted above, that all benefit reductions are

forfeitures, and all forfeitures are impermissible except

for the four exceptions listed in §1053(a)(3). Yet Con-

gress has approved the Social Security offset, and that

offset does not appear among the permissible forfeitures

under §1053(a)(3). Thus, the district courts’ reasoning

runs afoul of Congress's approval of the Social Security

offset. If all reductions in benefits are forfeitures, and all

forfeitures are prohibited with the exceptions listed in

§1053(a)(3), then, under the district courts’ reasoning,

Social Security offsets should also be prohibited. Yet, as

we have seen, this is not the case. It is true, as the courts

20a

Appendiz A

reasoned, that all forfeitures are prohibited with the ex-

ception of those listed in §1053(a)(3), but it cannot be

true that all reductions in benefits are necessarily forfei-

tures. Congress’s implicit approval of the Social Security

offset compels the concl:ision that such an offset is not a

forfeiture. Thus, the very basis on which the district

courts found the Treasury regulation in issue here to

conflict with §1053(a) is in error.

The plaintiffs contend, however, that the Work-

men’s Compensation offset cannot be sustained on the

strength of Congress’s approval of the Social Security

offset. They contend that even if the Social Security off-

set is not a forfeiture under ERISA, the Workmen’s

Compensation offset is. Social Security benefits and

pension benefits, they point out, are both designed to

compensate for wages lost as a result of old age, and

therefore the Social Security offset simply avoids a dupli-

cation of benefits directed to the same end. Workmen's

Compensation, by contrast, is designed to compensate

for losses flowing from employment related injuries;

thus, the Workmen’s Compensation offset, unlike the

Social Security offset, cannot be defended as a means to

avoid duplication of benefits.

. The plaintiffs’ argument here fails to recognize the

breadth of the Social Security program. Social Security

provides benefits for disabilities, see 42 U.S.C. §423

(1976), as well as benefits for old age. Thus, the Social

Security offset that Congress has approved includes,

perforce, an offset against pension benefits for disability

benefits. The Social Security offset, since it includes an

offset of disability benefits, makes any purported distinc-

tion between the Social Security offset and the Work-

men’s Compensation offset meaningless. The disability

offset, included within the Social Security offset, thus

compels us to reject any purported distinction between

Social Security offsets and Workmen’s Compensation

offsets.

21a

Appendix A

And the same argument may be made with respect

to benefits provided under the Railroad Retirement Act,

45 U.S.C. §231 et seq. ( 1976). The same implicit con-

gressional approval of offsets of Social Security benefits

that appears in 26 U.S.C. §$401(a)(15) (1976) is accord-

ed to offsets of Railroad Retirement Act benefits in 29

U.S.C. §1056(b) (1976).'! Railroad retirement benefits

include payments for disability as well as payments for

old age. See 45 U.S.C. §231la(a)(1\(iv) & (v) (1976).

Thus, Congress has implicitly approved two disability

offsets against retirement payments. As a result, reliance

on the difference in the character of the offsets (retire-

ment benefits as opposed to disability benefits) is

misplaced.

The conclusion that not all benefit reductions are

forfeitures; that, specifically, a Social Security offset is

not a forfeiture; and that the district courts’ reasoning is

erroneous, is enough by itself to require upholding the

Treasury regulation under the review of legislative regu-

lations prescribed by Baker v. Otis Elevator and

Batterton v. Francis. Once we conclude that Social Se-

curity offsets are not forfeitures, in the absence of clear

evidence that Congress intended to prohibit Workmen’s

Compensation offsets, it cannot be said that a regulation

allowing Workmen’s Compensation offsets is so contrary

to ERISA that it cannot stand. Thus, we conclude that

there is an insufficient basis on which to strike down the

regulation.

11. 29 U.S.C. §1056(b) provides in pertinent part:

[A] plan may not decrease benefits of such a participant by rea-

son of any increase in the benefit levels payable under title II of

the Social Security Act or the Railroad Retirement Act of 1937, °

or any increase in the wage base under such title II, if such in-

crease takes place after September 2, 1974, or (if later) the ear-

lier of the date of first entitlement of such benefits or the date of

such separation. (emphasis added).

22a

Appendix A

Our conclusion that a proper interpretation of

ERISA requires giving binding effect to this regulation

receives further support in the legislative history of the

Act. That history demonstrates to our satisfaction that

Congress did not disapprove of Workmen’s Compensa-

tion offsets as well as Social Security offsets.

In the course of IRS administration of the

nondiscrimination requirement for pension plans under

26 U.S.C. §401(a)(4) & (5) (1976), the Service issued a

revenue ruling explicitly approving an offset for Work-

men’s Compensation:

Section 401(a)(5) of the Code provides that a

plan shall not be considered discriminatory merely

because the contributions or benefits of or on behalf

of the employees under the plan differ because of

any retirement benefits created under State or Fed-

eral law.

The effect of section 401(a)(5) of the Code is to

permit total benefits inclusive of those provided un-

der the social security or similar program, to be used

for comparative purposes. See Part 4(j) of Revenue

Ruling, 65-178, C.B. 1965-2, 94. A program, like the

social security program, that requires employer con-

tributions and makes benefits available to the gen-

eral public is a similar program for purposes of Part

4(j) of Revenue Ruling 65-178.

Further, section 401(a)(5) of the Code does not

provide for the offset of benefits under a qualified

plan by disability damages recovered from an em-

ployer in a common law action. Such disability dam-

ages are not paid under a program similar to the so-

cial security program and offsetting retirement

benefits by disability damages of this type would re-

sult in the plan being used to satisfy the employer's

liability for damages.

23a

Appendix A

Since the benefits payable under a workmen’s

compensation law or occupational diseases law are

available to the general public, it is held that bene-

fits payable under such laws are acceptable as an

offset against benefits payable under the qualified

pension plan in the instant case. However, benefits

under the plan may not be offset by disability dam-

ages recovered by an employee in a common law ac-

tion against the employer. (emphasis added).

Rev. Rul. 68-243, 1968-1 C.B. 157, 158.

The substance of this ruling has been republished

by the IRS on two occasions. !2

The legislative history of ERISA indicates that Con-

gress was familiar with the IRS rules on integration of

benefits in pension plans, and intended that these rules

12. In 1969, the IRS published an extensive Revenue Ruling

consolidating and updating the rules on qualification of pension

plans under 26 U.S.C. §401 (1976). This ruling contained the same

position expressed in Revenue Ruling 68-243:

(4) Integration With Benefits Provided Under Other Pub-

lic Programs. — Benefits provided under a pension, annuity,

profit-sharing, or stock bonus plan may be integrated with

those provided under a state or Federal program that, like the

social security program, requires employer contributions and

makes benefits available to the general public. Thus, benefits

payable under a state workmen’s compensation law or an occu-

pational diseases law may be an acceptable offset against bene-

fits payable under a qualified plan. However, benefits payable

under a qualified plan may not be offset by disability damages

recovered by an employee in a common law action against the

employer. See Rev. Rul. 68-243, C.B. 1968-1. 157. (emphasis

added).

Rev. Rul. 69-421, part 4, (j)(4), 1969-2 C.B. 61, 72.

This same provision was included without change in a special

IRS publication in 1972. Internal Revenue Service, Pub. No. 778,

Guides for Qualification of Pension, Profit-Sharing, and Stock Bo-

nus Plans 15 (1972).

24a

Appendia A

be preserved. The report of the Conference Committee

states:

Moreover, the conferees intend that the anti-

discrimination rules of present law in areas other

than the vesting schedule are not to be changed.

Thus, the present antidiscrimination rules with re-

spect to coverage, and with respect to contributions

and benefits are to remain in effect. Also, the

antidiscrimination rules may be applied with re-

spect to benefit accruals.

H. Conf. Rep. No. 93-1280, 3 U.S. Code Cong. & Admin.

News 5038, 5058 (1974).

This history of IRS practice with respect to Work-

men’s Compensation offsets, and of congressional pres-

ervation of the antidiscrimination rules, suggests that, if

anything, Congress approved of Workmen’s Compensa-

tion offsets. Thus, the evidence indicates that the Treas-

ury regulation in issue here conforms to congressional

intent. Accordingly, because the regulation is not

contrary to §1053(a) and the provisions of ERISA as a

whole, we must sustain its validity. '*

13. An additional argument in support of the position taken by

GM and Raybestos was made by the amicus steel companies. They

called our attention to a proposal made in Congress by Senators

Harrison Williams and Jacob Javits, two of the original sponsors of

ERISA. The proposal, if enacted into law, which it was not, would

have prohibited Workmen's Compensation offsets. The proposal

states:

(a) Section 206(b) of such Act [ERISA] is amended

(3) by adding at the end thereof the following new sen-

tence: “A pension plan may not reduce or suspend retirement

pension benefits being received by a participant or beneficiary

or retirement pension benefits in which a participant who is

separated from the service has a nonforfeitable right by reason

of any payment made to the participant or beneficiary by the

25a

Appendix A’

III.

Our conclusion that the Treasury regulation must

be sustained does not, by itself, require granting judg-

ment in favor of the defendants. For even if ERISA does

not prohibit the Workmen’s Compensation offset in the

GM and Raybestos pension plans, New Jersey’s 1977

statute does. This statute, as noted earlier, provides in

relevant part:

The right of compensation granted by this chapter

[the workmen’s compensation act] may be set off

employer maintaining the plan as the result of an award or set-

tlement made under or pursuant to a workers’ compensation

laws.”

As we understand the argument, the steel companies contend

that there would have been no need for the introduction of such a

proposal unless ERISA as originally enacted, and as currently in

force, permitted Workmen's Compensation offsets.

While certainly plausible, we do not attribute much weight to

this argument. The difficulty with it, as with all arguments of this

nature, is that the understanding of the amendment’s sponsors is

open to conflicting interpretations. It is possible that the sponsors

believed that such offsets were permissible under the original

ERISA. It is also possible, however. that they believed that such off-

sets were impermissible under ERISA as enacted, and sought the

amendment to override the Treasury regulation that erroneously, in

their view, authorized such offsets. Thus. the argument cuts both

ways.

Two additional arguments, attacking our conclusion that the

regulation is valid, are made by amici Gray Panthers and Steelwork-

ers. Neither of these arguments merits discussion. They argue that

the regulation conflicts with 29 U.S.C. §1056(d)(1) (1976), which

provides that pension plan benefits “may not be assigned or alienat-

ed,” and with 29 U.S.C. §1103(¢)(1) (1976). which provides that

“the assets of a plan shall never inure to the benefit of any employer,

and shall be held for the exclusive purposes of providing benefits to

participants in the plan and their beneficiaries and defraying rea-

sonable expenses of administering the plan.” In our opinion, the

discussion and analysis found in part II, supra, which demonstrates

an overriding congressional intent to permit Workmen's Compensa-

tion offsets against pension benefits. disposes of these contentions

as well.

26a

- Appendia A

against disability pension benefits or payments but

shall not be set off against employees’ retirement

pension benefits or payments.

N.J. Stat. Ann. §34:15-29 (Supp. 1979).

The statute, of course, prohibits the offset clause

challenged here, and the defendants do not contend oth-

erwise. They do claim, however, that this statute is su-

perseded by ERISA’s preemption provision, 29 U.S.C.

§1144(a) (1976).'* This section states:

(a) Except as provided in subsection (b) of this

section,'® the provisions of this subchapter and

subchapter III of this chapter shall supersede any

14. The State of New Jersey, which has intervened in both

Buczynski and Alessi, asks us to abstain from deciding the preemp-

tion question. It suggests that if we await a New Jersey state court

interpretation of the statute, it may obviate our consideration of the

preemption claim. The state suggests that the New Jersey courts

are likely to hold that N.J. Stat. Ann. §34:15-29 (Supp. 1979) pro-

tects employees who obtained Workmen’s Compensation judg-

ments after the statute went into effect. Since all the plaintiffs in

Alessi and all the named plaintiffs in Buczynski recovered their

judgments before the effective date of the statute, it does not, New

Jersey argues, protect them and there is no need to determine

whether the statute is preempted by ERISA.

However, we decline to abstain for two reasons. First, the con-

struction of the statute that New Jersey proposes will not forever re-

move the need for consideration of the preemption question. It will

simply postpone consideration until a claim is made by an employee

who recovered a Workmen’s Compensation award after July 14,

1977 and it appears to us that such a claim is not far off. Second,

and of greater importance, the certified class in Buczynski appears

to include persons who recovered Workmen’s Compensation judg-

ments after the statute’s effective date. See note 3 supra. Thus,

there are plaintiffs in this suit who are protected by the statute re-

gardless of how the New Jersey courts may construe the statute. In

this posture, then, we are obliged to resolve the preemption claim.

15 None of the exceptions referred to are applicable here, and

the plaintiffs do not argue to the contrary.

27a

Appendix A

and all State laws insofar as they may now or hereaf-

ter relate to any employee benefit plan described in

section 1003(a) of this title and not exempt under

section 1003(b) of this title. This section shall take

effect on January 1, 1975.

The district court judge in Buczynski, despite his

conclusion that the offset provision was unlawful under

ERISA itself, nevertheless discussed the preemption is-

sue. The district court in Buczynski, followed thereafter

by Alessi, concluded that the New Jersey statute was not

preempted:

It is true that under ERISA, 29 U.S.C.

§1144(a), all state laws which “relate to” any em-

ployee benefit plan covered by ERISA are supersed-

ed. Although the New Jersey statute undoubtedly

“relates to” pension plans in the broadest dictionary

sense of that term, this court cannot agree with the

defendant that the New Jersey statute “relates to”

pension plans within the meaning of ERISA, 29

U.S.C. §1144(a). Congress, to be sure, must have

intended by that language to occupy the entire field

of pension plan law to the exclusion of all state regu-

lation. However, the New Jersey statute at issue

here is in no way concerned with pension plans qua

pension plans. On the contrary, the New Jersey

Statute is solely concerned with protecting the em-

ployee’s right to worker’s compensation disability

benefits. . . .

Congress, by enacting ERISA, and the specific

preemptive language of 29 U.S.C. §1144(a), could

not have intended to prohibit states from protecting

an employee’s state-created right to worker’s com-

pensation benefits by enacting laws such as the one

New Jersey enacted here.

456 F. Supp. at 872-73 (citations omitted).

—_—

28a

‘Appendia A

Our reading of ERISA satisfies us that ERISA does

preempt N.J. Stat. Ann. §34:15-29 (Supp. 1979). Thus,

we cannot agree with the district courts that have con-

cluded otherwise.'!® The primary purpose of the statute,

and its direct effect, is to prohibit pension plans from off-

setting Workmen’s Compensation benefits against pen-

sion retirement benefits. It simply cannot be said that

this statute does not concern pension plans qua pension

plans (Buczynski), or that its effect on such plans is

merely collateral (Alessi). In our opinion, the only pur-

pose and effect of the statute is to set forth an additional

statutory requirement for pension plans; this purpose

negates the characterization of the statute attributed to

it by the New Jersey district courts.

Further, ERISA preempts state statutes that “relate

to any employee benefit plan,” 29 U.S.C. §1144(a)

(1976) (emphasis added). The view taken by the

Buczynski court, that ERISA preempts only statutes

concerning “pension plans qua pension plans,” could be

accepted only if ERISA’s preemption clause were much

more narrowly drawn than it is. Here, the preemption

clause, reaching statutes that “relate to” pension plans,

has an obviously broader scope

In noting that “the New Jersey statute undoubtedly

‘relates to’ pension plans in the broadest dictionary sense

of that term,” 456 F. Supp. at 872, the district court in

Buczynski appears to concede the difficulty of its narrow

interpretation. The court reasoned, however, that Con-

gress could not have intended the term to be given its

full breadth. Yet the legislative history of the clause, as

well as the plain meaning of its language, belie this

claim. The legislative history of the clause has been de-

16. As previously noted, see note 6 supra, still another New

Jersey district court has addressed this preemption question, and

agrees with our conclusion that the New Jersey statute is preempt-

ed by ERISA. See Carpenter Technology Corp. v. Boyton, No.

78-1415, slip op. at 5-9 (D.N.J., Dec. 12, 1979).

29a

Appendiz A

tailed elsewhere and we need not repeat it here. See

Wadsworth v. Whaland, 562 F.2d 70, 76-77 (1st Cir.

1977), cert. denied, 435 U.S. 980 (1978); National Car-

riers’ Conference Comm. v. Heffernan, 454 F. Supp. 914,

915-17 (D. Conn. 1978); Hewlett-Packard Co. v.

Barnes, 425 F. Supp. 1294, 1297-1300 (N.D. Cal. 1977),

affd per curiam, 571 F.2d 502 (9th Cir.), cert. denied,

439 U.S. 831 (1978). We need only note its most promi-

nent features: that the original House and Senate provi-

sions were significantly narrower, and were rejected by

the Conference Committee in favor of the current provi-

sion; and that explanations of the Conference substitute

given on the floor of both chambers make plain that the

preemptive intent is just as broad as its language sug-

gests. Thus, it is clear that the preemption provision is

intended to be read in its normal dictionary sense, and

that the New Jersey statute prohibiting Workmen’s

Compensation offsets cannot stand.!”

IV.

We conclude that the Workmen’s Compensation

offset in General Motors’s and Raybestos’s pension plans

is not a forfeiture rendered invalid by ERISA’s

antiforfeiture provision, 29 U.S.C. §1053(a) (1976). In

so concluding, we sustain the Treasury regulation ex-

pressly authorizing provisions of this type, 26 C.F.R.

§1.411(a)-4(a) (1979). We also conclude that the New

Jersey statute that prohibits these offsets, N.J. Stat. Ann.

§34:15-29 (Supp. 1979), is preempted by ERISA, 29

U.S.C. §1144(a) (1976).

17. Raybestos, in the district court in Alessi, contended that

the New Jersey statute should be struck down on at least two other

grounds. First, that the statute was preempted under the National

Labor Relations Act, and, second, that it was an unconstitutional

impairment of the obligation of contracts. The court rejected both of

these attacks, slip op. at 8-9. In light of our conclusion that the stat-

ute is preempted by ERISA itself, we need not reach these issues.

30a

Appendiz A

In light of our conclusions, which are contrary to

the conclusions reached by the district courts in both

Buczynski and Alessi, we will vacate the respective or-

ders dated April 3, 1979 (Buczynski) and March 1, 1979

(Alessi) which permanently enjoin the defendants from

offsetting Workmen’s Compensation benefits and which

required that reimbursement be made for amounts off-

set in the past; we direct that the district courts enter

judgment for the defendants. Each side shall bear its

own costs.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

3la

APPENDIX B

Judgment of the United States Court of Appeals for the

Third Circuit

UNITED STATES COURT OF APPEALS

For tHe Turrp Circuit

No. 79-1534

—-

Aurss!, JosepH, RaymMonp Buisson, StepHen MIcHALSKI,

Cuar.tes Repxs, HeLen Voor anp T. Epwarp Wuire

VS.

Raysestos-Manuatran, Inc. anp Raysestos-MANHATTAN,

Inc., Emptoyee Retirement Puan Jorntiy, SeveRALLY

AND IN THE ALTERNATIVE,

Appellants,

State or New Jersey,

Intervenor.

(D. C. Civil No. 78-0434)

No. 79-1668

Buozynsk1, Henry, Atex Borusovic anp Oruer Retires

SIMILARLY SITUATED

vs.

—

32a

Appendix B

—~>—

Te Genera Motors Corporation,

Appellant,

State or New JERSEY,

Intervenor.

(D. C. Civil No. 77-1644)

APPEAL FROM THE Unitep Srares District Court

FOR THE District or NEw JERSEY

Present: Gispons, Rosen and Garru, Circuit Judges

JUDGMENT

These causes came on to be heard on the records from

the United States District Court for the District of New

Jersey and were argued by counsel on January 8, 1980.

On consideration whereof, it is now here ordered and

adjudged by this Court that the judgments of the said

District Court dated April 3, 1979 and appealed at our

No. 79-1668, and dated March 1, 1979, and appealed at

our No. 79-1534, be, and the same are hereby vacated

and the causes are remanded to the said District Courts

for entry of judgments for the defendants, all in accord-

ance with the opinion of this Court. Each side shall

bear its own costs.

33a

Appendix B

Attest:

Tuomas F. Quinn

Clerk

Certified as a true copy and issued in lieu

of a formal mandate on March 27, 1980.

February 15, 1980

Test:

Tomas F, Quinn

Clerk, United States Court of

Appeals for the Third Circuit

34a

APPENDIX C

Order of the United States Court of Appeals for the

Third Circuit Denying Petition for Rehearing

UNITED STATES COURT OF APPEALS

For THE T'w1rp Circuit

No. 79-1668

- =

Henry Buczynskxi, ALteEx Borusovic anp OrHer Retirees

SrmiLar.y SIrvaTep,

Plaintiffs-Appellees,

Tue GeneraL Motors Corporation,

Defendant-Appellant,

State or New Jersey,

Intervenor.

Sur Petirion ror ReHearina

Present: Axpisert, Gispons, Rosenn, Hunrer, Weis,

GartH, HiccrnsorHam AND Swovirer,

Cirewt Judges

The petition for rehearing filed by Plaintiffs-Appellees

in the above entitled case having been submitted to the

judges who participated in the decision of this court and

35a

Appendix C

to all the other available circuit judges of the circuit in

regular active service, and no judge who concurred in the

decision having asked for rehearing, and a majority of

the circuit judges of the circuit in regular active service

not having voted for rehearing by the court in bane, the

petition for rehearing is denied.

Dated: March 19, 1980

By the Court,

Leonard I. Garth

Judge

Leonard I. Garth, U.S.C.J.

36a

APPENDIX D

‘Petition for Removal

UNITED STATES DISTRICT COURT

For tut District or New JERSEY

Civil Action No. 77-1644

—>

Henry Buczynski1, ALex Borusovic anp Oruer Retirees

SIMILARLY SITUATED,

Plaintiffs,

THe GreneraL Morors Corporation,

Defendant.

To THE JUDGES OF THE Unitep States District Court For

THE District or New JERSEY:

The Petition of General Motors Corporation, for re-

moval of this action from the Superior Court of New Jer-

sey, Chancery Division, Union County, to the United States

District Court for the District of New Jersey, respectfully

shows to this Honorable Court:

1. That your Petitioner, General Motors Corporation,

is the defendant in a civil action brought against it in the

Chancery Division of the Superior Court of the State of

New Jersey, Union County, entitled, “Henry Buczynski,

Alex Borusovic and Other Retirees Similarly Situated,

37a

Appendix D

Plaintiffs, vs. The General Motors Corporation, Defend-

ant,” a copy of the Complaint (and annexed Affidavits) and

Order to Show Cause in which action are annexed hereto

and made parts hereof as Exhibits A and B, respectively,

the, same constituting all the process, pleadings, and orders

served upon your Petitioner in said action.

2. That the aforesaid action was commenced by the fil-

ing of said Yomplaint and Order to Show Cause on August

9, 1977, said\Complaint and Order to Show Cause having

been received\ by your Petitioner on August 9, 1977.

3. That your Petitioner was, at the time of the com-

mencement of the aforesaid action, and now is, a corpora-

tion duly organized and existing under and by virtue of

the laws of the State of Delaware, and an employer and

the administrator of an employee pension benefit plan

within the meaning of the Employee Retirement Income

Security Act of 1974, 29 U.S.C. §1001 et seq., and was and

is engaged in commerce within the meaning of Section 301

(a) of the Labor Management Relations Act, 1947, 29 U.S.C.

§185(a).

4. That the aforesaid action is a suit alleging a viola-

tion of the rights of the plaintiffs under a contract between

an employee and a labor organization representing em-

ployees in an industry affecting commerce and an action

by a participant or beneficiary of an employee pension

benefit plan to recover benefits due to him under the terms

of his plan, to enforce his rights under the terms of the

plan, or to clarify his rights to future benefits under the

terms of the plan, within the meaning of Section 002(a) of

the Employee Retirement Income Security Act of 1974,

29 U.S.C, §$1132(a), and a civil action of which the United

38a

Appendix D

States District Courts have original jurisdiction under

and pursuant to the provisions of Section 301(a) of the

Labor Management Relations Act, 1947, 29 U.S.C. §185(a),

Section 502(e) of the Employee Retirement Income Se-

curity Act of 1974, 29 U.S.C. §11382(e)(1), and 28 U.S.C.

§1331, and a civil action which may be removed to this

Court pursuant to the provisions of 28 U.S.C. $1441.

5. That your Petitioner files and presents herewith a

bond, with good and sufficient surety, in the penal sum of

Five Hundred Dollars ($500.00), conditioned, as required

by 28 U.S.C. $1446(d), that Petitioner will pay all costs

and disbursements incurred by reason of these removal

proceedings should it be determined that this cause is not

removable or is improperly removed.

Wuererore, your Petitioner prays that this cause pro-

ceed in this Court as an action properly removed thereto.

CARPENTER, BenNETT & Morrissey

Attorneys for Defendant-Petitioner

General Motors Corporation

By: Laurence Reicu

A Member of the Firm

744 Broad Street

Newark, New Jersey 07102

(201) 622-7711

Dated: August 9, 1977

39a

Appendix D

Order Certifying Class Action, Etc.

UNITED STATES DISTRICT COURT

For THE District or New JEerRsEy

(Hon. Frederick B. Lacey)

Civil Action No. 77-1644

ip.

—

Henry Buczynsx1, Atex Borusovic anp OrHER RETIRERS

SIMILARLY SITUATED,

Plaintiffs,

THE GeneraL Morors Corporation,

Defendant.

This matter having been opened to the Court by Lester

Weiner, Esq., attorney for plaintiffs, on the application

of plaintiffs for an order certifying the above-entitled ac-

tion as a class action, and the Court noting the consent

of the parties hereto to the entry of this Order, and good

cause appearing,

Ir ts, on this 9th day of August, 1978,

OrDERED, that this action be and it hereby is certified as

a class action pursuant to Rule 23(b)(2) of the Federal

Rules of Civil Procedure; and it is

40a

Appendix D

FurtHer Orperep, that the class be and it hereby is

certified as consisting of those persons who are retired

members of the General Motors Corporation Hourly-Rate

Employes Pension Plan who retired under the provisions

of said Pension Plan as set forth in Exhibit A-1 to the

Agreement between General Motors Corporation and the

International Union, United Automobile, Aerospace and

Agricultural Implement Workers of America, datad No-

vember 11, 1970, November 19, 1973, or November 22, 1976,

who retired with benefits payable for months commencing

on or after April 1, 1971, and who, at the time of their

retirement, were employed by General Motors Corporation

in New Jersey; and it is

FurtHer Orperep, that the above-entitled action be and

it hereby is set down for Pretrial Conference before Hon-

orable William J. Hunt at 9:00 A.M. on April 10, 1978, and

for trial before this Court on May 1, 1978.

Freperick B. Lacey, U.S.D.J.

We hereby consent to the making and entry of the fore-

going Order.

Lester WEINER

Attorney for Plaintiffs

By: Marc C, Gertis

CARPENTER, BENNETT & Morrissey

Attorneys for Defendant

By: Laurence Reicu

A Member of the Firm

Joun J. Degnan

Attorney General of the State of

New Jersey

Attorney for Intervenor

By: Micwart S. Boxar

Deputy Attorney General

4la

Appendix D

Memorandum Opinion of the United States District Court

for the District of New Jersey (August 24, 1978)

UNITED STATES DISTRICT COURT

District or New JERSEY

Civil No. 77-1644

»™

—

Henry Bucozynsx1, Atex Borusovic, and Orner REvTIREES

Sr iLar.y Srrvatep,

Plaintiffs,

GeneraL Motors Corporation,

Defendant.

Lacey, D.J.

Plaintiffs in this class action! are retired employees of

defendant General Motors Corporation who had been re-

1 The certified class consisis “of those persons who are retired

members of the General Motors Corporation Hourly-Rate Employees

Pension Plan who retired under the provisions of said Pension

Plan as set forth in Exhibit A-1 to the Agreement between General

Motors Corporation and the International Union, United Automo-

bile, Aerospace and Agricultural Implement Workers of America,

dated November 11, 1970, November 19, 1973, or November 22,

1976, who retired with benefits payable for months commencing on

or after April 1, 1971, and who, at the time of their retirement,

were employed by General Motors Corporation in New Jersey.”

See order filed August 9, 1978.

42a

Appendix D

ceiving retirement pension benefits from the defendant

pursuant to a pension plan negotiated between the defend-

ant and plaintiffs’ union. After the plaintiffs received

worker’s compensation payments pursuant to New Jersey’s

Worker’s Compensation Act,’ the defendants reduced the

plaintiffs’ benefits under the plan by an amount equal to

those payments, pursuant to Article IV, Section 2, of the

plan.

The plaintiffs contend that the defendant cannot law-

fully make such deductions in their pension benefits. They

seek reimbursement of all pension benefits thus withheld

and a permanent injunction against all such future dedue-

tions which are predicated upon the receipt of worker’s

compensation payments.

For the reasons set forth below, the plaintiffs are en-

titled to the relief they seek.

Dealing first with the issue of subject matter jurisdiction

in this removed matter, 28 U.S.C. § 1441, I conclude I have

such jurisdiction to decide the issues. Even were there

any question about the propriety of removal by the de-

fendant, neither side has questioned it. Since it is clear

I would have had original jurisdiction over the claims pre-

sented here, a valid judgment can be entered with respect

to them.? Grubbs v. General Electric Credit Corp., 405

U.S. 699, 702 (1972).

2N.J.S.A. 34:15 et seq.

8 Thus, this court would have had original subject matter juris-

diction over the instant action under the Labor Management Rela-

tions Act of 1947, 29 U.S.C. § 185(a) and under the Employee

Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.

§§ 1132(f), 1132(a) (3).

Moreover, this court has removal jurisdiction over plaintiffs’ state

court action under 28 U.S.C. § 1441(a)(b), predicated upon 29

U.S.C. § 185(a).

43a

Appendix D

The complaint as filed alleges that the plaintiffs are re-

tired employees of the defendant, that they have been re-

ceiving pension benefits under a Pension Plan Agreement

between their union and the defendant, that they have ob-

tained judgments entitling them to worker’s compensation

benefits, and that the defendant threatens to reduce their

pension benefits because they have recovered worker’s com-

pensation benefits. The complaint sets forth Article IV,

Section 2 of the Pension Plan Agreement:

In determining the monthly benefits payable under

this Plan, a deduction shall be made unless prohibited

by law, equivalent to all or any part of Workmen’s

Compensation (including compromise or redemp-

tion settlements) payable to such employee by rea-

son of any law of the United States, or any political

subdivision thereof, which has been or shall be en-

acted, provided that such deductions shall be to the

extent that such Workmen’s Compensation has been

provided by premiums, taxes or other payments paid

by or at the expense of the Corporation, except that

no deduction shall be made for the following:

(a) Workmen’s Compensation payments specifi-

cally allocated for hospitalization or medical expense,

fixed statutory payments for the loss of any bodily

member, or 100% loss of use of any bodily member,

or payments for loss of industrial vision.

(b) Compromise or redemption settlements pay-

able prior to the date monthly pension benefits first

become payable.

der a claim filed not later than two years after the

breaking of seniority. (emphasis added)

44a

Appendix D

The complaint then alleges that the deductions threat-

ened by the defendant are now in violation of a recent

amendment to New Jersey’s Worker’s Compensation Act*

which provides that:° “The right of compensation granted

by this chapter may bet set off against disability pension

benefits or payments but shall not be set off against em-

ployees’ retirement pension benefits or payments.” The

complaint concludes with a prayer for a permanent injunc-

tion against the threatened deductions.

Plaintiffs’ action, therefore, is predicated upon an alleged

breach or violation of the “unless prohibited by law” clause

of the Pension Plan Agreement.® Thus they argue that,

since Article IV, Section 2 of the Pension Plan Agreement

bars the defendant from offsetting pension benefits against

worker’s compensation benefits where “prohibited by law,”

and the New Jersey Worker’s Compensation Act embodies

such a prohibition, the continued deductions violate the ex-

press provisions of the Pension Plan Agreement.

The complaint did not advance a claim founded upon a

theory that the offset provision is unlawful under ERISA.

That claim was first raised indirectly when plaintiffs’ coun-

sel brought to this court’s attention the recently decided

* There is no allegation that defendant threatens to make the de-

ductions in plaintiffs’ pension benefits contrary to the three excep-

tions to the offset provision contained in subdivisions (a), (b),

or (c) of Article IV, Section 2 of the Pension Plan Agreement.

5L. 1977, c. 156 § 1, eff. July 14, 1977, amending N.J.S.A.

34:15-29.

® Subsequent to the filing of the complaint, the defendant has been

making the deductions in plaintiffs’ pension benefits and has made

it clear that it will continue to do so.

45a,

Appendix D

Utility Workers Union of America v. Consumers Power

Co., No. 7-71747 (E.D.Mich., filed June 13, 1978). The

defendant’s response was not a claim of prejudice by rea-

son of a belated addition to plaintiffs’ bag of legal theories

of recovery.’ Instead, the defendant responded by refer-

ring the court to another case® in the same court, the East-

ern District of Michigan, which was decided contrary to

the Utility Workers case.

The defendant, as I have noted, admits all of the ma-

terial allegations necessary to a decision on the question

of whether ERISA itself bars the offset involved, includ-

ing that the pension plan falls within the coverage of

RISA. See 29 U.S.C. § 1003.

Thus, I perceive no prejudice to the defendant in ad-

dressing the issue of the lawfulness of the offsetting in

question under 29 U.S.C. § 1053 of ERISA. See 5 Wright

& Miller, Federal Practice and Procedure, Civil, § 1219.9

7 The defendant contended only that the ERISA claim was “en-

tirely outside the scope of the pleadings and proof now before the

court” and that the Utility Workers case was therefore irrelevant.

Letter to Court, dated July 26, 1978.

® Bordine v. Evans Product Co., No. 7-71652 (E.D. Mich., filed

April 6, 1978).

’ Once a federal court has removal jurisdiction, a party may

amend his complaint to assert a federal claim that could not have

heen presented in the state court. Freeman v. Bee Machine Co.,

319 U.S. 448 (1943). This court has removal jurisdiction over

plaintiffs’ breach of contract claim which was asserted in state court.

See n.3 supra. Thus, under Freeman, the plaintiffs could have

amended their complaint here to assert the unlawfulness of the offset

provision under ERISA, 29 U.S.C. § 1053, a claim over which

this court has original subject matter jurisdiction under 29 U.S.C.

§ 1132(f).

46a

Appendix D

The Offset Provision of the Pension Plan Is

Unlawful Under ERISA

The minimum vesting standards provision of ERISA,

29 U.S.C. § 1053, provides in pertinent part that:

(a) Each pension plan shall provide that an em-

ployee’s right to his normal retirement benefits is

nonforfeitable upon the attainment of normal retire-

ment age and in addition shall satisfy the require-

ments of paragraphs (1) and (2) of this subsection.

(1) A plan satisfies the requirements of this

paragraph if an employee’s rights in his accrued

benefit derived from his own contributions are non-

forfeitable.

(2) A plan satisfies the requirements of this

paragraph if it satisfies the requirements of sub-

paragraph (A), (B), or (C).

(A) A plan satisfies the requirements of this

subparagraph if an employee who has at least

10 years of service has a nonforfeitable right to

100 percent of his accrued benefit derived from

employer contributions,’®

1° Subparagraph (B) provides for an alternate pension plan under

which an employee can obtain a nonforfeitable right to an increas-

ingly higher percentage of his accrued benefit derived from employer

contributions depending upon his years of service. For example,

an employee who has served at least 5 years would have a non-

forfcitable right to 25% of his accrued benefit, while an employee

who had served at least 15 years would have a nonforfeitable right

to 100% of his accrued benefit.

(Footnote continued on following page)

47a,

Appendix D

In Utility Workers, it was held that a provision in a pen-

sion plan falling within the coverage of ERISA which pro-

vides that retirement pension benefits are to be offset

against worker’s compensation benefits is unlawful under

ERISA, 29 U.S.C. § 1053. This court is in full agreement

with the well-reasoned opinion in that case.”

Under ERISA, a pension plan must provide that an

employee’s rights in his accrued benefits derived from his

own contributions is nonforfeitable.!* The pension plan

must also provide that an employee has a nonforfeitable

right to a certain percentage of his accrued benefit derived

(Footnote continued from preceding page)

. Subparagraph (C) provides for yet a third alternate pension

plan under which an employee can obtain a nonforfeitable right to

an increasingly higher percentage of his accrued benefit derived

from employer contributions depending upon his years of service

and his age. For example, where an employee has served at least

5 years and the sum of his age and service is at least 45, he has

a nonforfeitable right to 50% of his accrued benefit; but where

an employee has at least 10 years of service and the sum of his

age and service is at least 55, he has a nonforfeitable right to 100%

of his accrued benefit.

It is immaterial whether plaintiffs’ pension plan is one predi-

cated upon subparagraph (A), (B), or (C) of 29 U.S.C. § 1053

(a) (2).

1! This court rejects the contrary holding in the case of Bordine,

supra note 9, at 4.

12 ERISA does not provide for any exceptions to the nonforfeit-

ability requirement in the case of accrued benefits derived from

employee contributions.

48a

Appendix D

from employer contributions,” the particular percentage

depending upon (1) his years of service or (2) his years

of service and his age.

When a pension plan, such as the one under considera-

tion here, makes the employee’s right to a certain per-

centage of his accrued benefit derived from employer con-

tributions conditional upon a factor other than years of

service or years of service and age, the plan is unlawful,

unless the factor is one of those set forth in 29 U.S.C.

§ 1053(a) (3).

The pension plan herein makes the plaintiffs’ rights to

their accrued benefits conditional upon their not obtaining

worker’s compensation benefits. Such a factor is not one

of those set forth in 29 U.S.C. 4 1053(a)(3).1* As a result,

the pension plan is unlawful.”

8 The court will assume that plaintiffs’ pension plan is fully

funded by the defendanit.

#29 U.S.C. § 1053(a) (3) legalizes pension plans which provide

that an employee’s right to an accrued benefit is forfeitable if he

dies, if he is employed in certain types of industries, if certain

amendments are made retroactive, or if he withdraws any amount

attributable to the benefit derived from mandatory contributions

made by him.

1° Tn addition to Utility Workers, see also Riley v. MEBA Pen-

sion Trust, 570 F.2d 406, 409 (2d Cir. 1977).

49a

Appendix D

The Offset Provision of the Pension Plan

Is Void Under the “Unless Prohibited By

Law” Clause of the Pension Plan

As noted previously, the Pension Plan Agreement be-

tween the defendant and the plaintiffs’ union provides

that retirement pension benefits may be offset against

worker’s compensation benefits “unless prohibited by law.”

At the final hearing in this case on May 15, 1978, the

testimony established that after a number of years’ ab-

sence from the General Motors’ pension plan, the offset

provision reappeared in the 1970 pension plan.’* The

testimony also established that it was the defendant which

proposed the reinsertion of the offset provision into the

pension plan because there had been a “deluge” of work-

er’s compensation cases from which the defendant sought

“relief.”7 The “unless prohibited by law” clause was

also proposed by the defendant. The “unless prohibited

by law” clause “meant just as the language indicated,

pure and simple, that if there were states then having

state laws which prohibited an offset and if in the future

there would be state laws that prohibited offset that would

be applicable and it was just that pure and simple.’

sion plans. All three plans contain the “unless prohibited by law”

clause. Stipulation of December 7, 1977.

Testimony of Hubert Clodfelder, Union Negotiator, Hearing

of May 15, 1978, Tr. at 8. The pension plan being negotiated was

to apply to 130 General Motors’ plants located in at least thirty

states.

18 Jd. at 10.

50a

Appendix D

The defendant admits that the deductions it is making

in plaintiffs’ retirement pension benefits are prohibited

by the recent amendment to New Jersey’s Worker’s Com-

pensation Act. The defendant contends, however, that

that amendment is unconstitutional under the Supremacy

Clause of the United States Constitution, in that it has

been preempted by ERISA, 29 U.S.C. § 1144(a),’ which

provides that:

(a) Except as provided in subsection (b) of this

section, the provisions of this subchapter and sub-

chapter III of this chapter shall supercede any and

all State laws insofar as they may now or hereafter

relate to any employee benefit plan described in

section 1003(a) of this title and not exempt under

section 1003(b) of this title. This section shall take

effect on January 1, 1975.

As I have already indicated in the preceding section of

this opinion, the offset provision of the pension plan is un-

lawful under ERISA, 29 U.S.C. § 1053. The New Jersey

statute, insofar as it is merely duplicative of ERISA, is

preempted by that federal statute. Rogers v. Larson, 563

F.2d 617, 621 (3d Cir. 1977), appeal filed, 46 U.S.L.W. 3529

(U.S. Jan. 20, 1978).

The defendant also contends that the New Jersey statute is

preempted by the National Labor Relations Act, as amended, 29

U.S.C. § 141 et seq. This contention, however, is without merit,

since the parties specifically agreed that the offset provision of the

pension plan would be inapplicable if it was prohibited by state

law. By applying the recent amendment to New Jersey’s Worker's

Compensation Act to bar the offset of pension benefits against

worker’s compensation benefits, this court would be doing nothing

more than enforcing the agreement between the parties reached

after the give and take of collective bargaining.

Sla

Appendix D

However, assuming arguendo that ERISA does not out-

law the offset provision of the pension plan, it becomes

necessary to determine whether the specific preemptive

langu. ge of ERISA, 29 U.S.C. § 1144(a), renders the New

Jersey statute null and void as applied to the facts of this

ease. If the New Jersey statute is not preempted by

ERISA, the offset provision of the pension plan was ren-

dered null and void by the “unless prohibited by law” clause

of the pension plan when the recent amendment to New

Jersey’s Worker’s Compensation Act became effective on

July 14, 1977.

In determining whether the New Jersey statute is pre-

empted,” this court is guided by the opinion of the Court

of Appeals for the Third Circuit in the case of Rogers v.

Larson, supra at 620-21, wherein the court discussed the

three preemption “tests”:

The Supreme Court has... established three grounds

upon which a local statute may be deemed pre-

empted by federal law. It will be pre-empted (1)

if “Congress has unmistakenly so ordained,” or (2)

if “the nature of the regulated subject matter per-

mits no other conclusion” but pre-emption, or (3)

if it violates the Supremacy Clause by standing “as

an obstacle to the accomplishment and execution of

*°The court reiterates that this discussion is predicated upon

the assumption that the offset provision of the pension plan is not

unlawful under ERISA.

52a

Appendix D

the full purposes and objectives of Congress.” (cita-

tion omitted)**

The touchstone of all three preemption tests is Congres-

sional intent to preempt. Rogers v. Larson, supra at

621 n.8.

The defendant contends that the New Jersey statute is

preempted under the first preemption test, in that Con-

gress, through the specific preemptive language of ERISA,

29 U.S.C. § 1144(a), “unmistakenly” intended to preempt

this state law.”

It is true that under ERISA, 29 U.S.C. § 1144(a), all

state laws which “relate to” any employee benefit plan

covered by ERISA are superseded. Although the New

*1 With respect to the last two tests, the court explained that:

We understand the second test to mean that the subject

matter of the federal and local laws is such that the two

laws or regulatory schemes must inherently either conflict

or be duplicative. That is, under this test it is impossible

for there to be local regulation in the subject area that does

not conflict with or duplicate federal regulation.

The third test is applied when there is room in the sub-

ject area for both federal and local regulation. ‘This test

requires the court to examine both statutory schemes to de-

termine if they can co-exist or if they conflict.

Rogers v. Larson, 563 F.2d 617, 621 (3d Cir. 1977), appeal filed,

46 U.S.L.W. 3529 (U.S. Jan. 20, 1978).

22 The defendant does not argue that the New Jersey statute is

preempted under either preemption test (2) or (3). It is clear

to this court that the statute is not preempted under either of those

tests.

—

53a

Appendix D

Jersey statute undoubtedly “relates to” pension plans in

the broadest dictionary sense of that term, this court can-

not agree with the defendant that the New Jersey statute

“relates to” pension plans within the meaning of ERISA,

29 U.S.C. § 1144(a). Congress, to be sure, must have in-

tended by that language to occupy the entire field of pen-

sion plan law to the exclusion of all state regulation. See

Allied Structural Steel Co. v. Spannaus, 46 U.S.L.W. 4887,

4889 n.8 (U.S. June 28, 1978); Malone v. White Motor

Corp., 46 U.S.L.W. 4295 n.1 (U.S. April 3, 1978) ; Marshall

v. Chase Manhattan Bank, 558 F.2d 680, 683 (2d Cir. 1977 ).

However, the New Jersey statute at issue here is in no

way concerned with pension plans qua pension plans. On

the contrary, the New Jersey statute is solely concerned

with protecting the employee’s right to worker’s compensa-

tion disability benefits. This is clear from the language

of the statute itself. The statute provides that worker’s

compensation benefits may be set off against disability

pension benefits, but not against retirement pension bene-

fits. Thus, under the statute an employee is not entitled

to double compensation for a work-related disability, once

under the Worker’s Compensation Act, and once under

his pension plan. On the other hand, an employee is en-

titled to be compensated at least once for his work-related

disability. It is self-evident that if an employee can receive

compensation for his work-related disability under New

Jersey’s Worker’s Compensation Act just to have an equal

amount taken away from his retirement pension benefits,

the employee, in reality, has been deprived of compensation

for his work-related disability.* Utility Workers Union

*8It is obvious that an employer could not justify, upon any

rational basis, giving one employee less retirement pension benefits

than another employee solely on the basis that the former employee

has a work-related disability while the latter does not.

54a’

Appendix D.

of America v. Consumers Power Co., supra, slip op. at 16.

n.12. The New Jersey statute forbids such a result.

Congress, by enacting ERISA, and the specific pre-

emptive language of 29 U.S.C. 4 1144(a), could not have

intended to prohibit states from protecting an employee’s

state-created right to worker’s compensation benefits by

enacting laws such as the one New Jersey enacted here.

That Congress recognizes state law preeminence in the

field of worker’s compensation law is clear from ERISA

itself which exempts from the coverage of ERISA an

employee benefit plan “maintained solely for the purpose

of complying with applicable workmen’s compensation

laws... .” 29 U.S.C. § 1003(b) (4).

That New Jersey had a strong interest in enacting the

recent amendment to its Worker’s Compensation Act can-

not be denied. That Act “was intended to place the cost

of accidental injuries which are work-connected upon em-

ployers, who may provide for them as operating expenses.

Renshaw v. United States Pipe & Foundry Co., 30 N.J.

458 (1959); T’occt v. Tessler and Weiss, Inc., 28 N.J. 582

(1959).” Daniello v. Machise Express Co., 119 N.J. Super

20, 24 (LawDiv. 1972), aff'd, 122 N.J. Super 144 (App.

Div. 1973). Where a disability is compensable under that

statute, a common law suit by the employee against his:

employer is unavailable. Dudley v. Victory Lynn Lines,

Inc., 32 N.J. 479 (1960). Consequently, if an employer can

avoid his statutory duty to provide compensation to his

** This court assumes that plaintiffs’ pension plan is not such

a plan. Nevertheless, 29 U.S.C. § 1003(b)(3) is relevant to de-

termining Congressional intent with respect to the term “relate to”

in 29 U.S.C. § 1144(a).

55a

Appendix D

employees for work-related disabilities, the employee is

without any remedy at all. If an employer can reduce an

employee’s retirement pension benefits by an amount equal

to the employee’s award of worker’s compensation disabil-

ity benefits, the employer has accomplished just that—he

has avoided his statutory obligation to compensate the em-

ployee for his work-related disability. Thus, New Jersey

had a strong interest in closing that “loophole” in its Work-

er’s Compensation Act by enacting the recent amendment

under consideration here.

In Farmer vy. Carpenters, 430 U.S. 290, 302 (1977), the

Supreme Court stated that:

Our cases indicate, however, that inflexible applica-

tion of the [preemption] doctrine is to be avoided,

especially where the State has a substantial interest

in regulation of the conduct at issue and the State’s

interest is one that does not threaten undue inter-

ference with the federal regulatory scheme.

While it is true that the Court in that case was speak.

ing of the National Labor Relations Act, as amended,

which, unlike ERISA, does not contain specific preemptive

language, the statement is nevertheless relevant in dis-

cerning Congressional intent with respect to the term

“relate to” in ERISA, 29 U.S.C. § 1144(a).

The State of New Jersey’s substantial interest in enact-

ing the recent amendment to its Worker’s Compensation

Act has already been demonstrated. Moreover, this court

cannot discern how that amendment threatens any inter-

ference with the federal regulatory scheme of ERISA,

let alone undue interference. Finally, since the amend-

ment simply does not relate to pension plans qua pension

plans, but is instead directed towards protecting an em-

56a

Appendix D

ployee’s right to worker’s compensation benefits, this court

concludes that Congress did not intend to preempt the

amendment by enacting ERISA and the preemptive lan-

guage of 29 U.S.C. § 1144(a).”5

CoNncLUSION

I hold as follows:

1. Plaintiffs are entitled to the relief they seek be-

cause the offset provision of their pension plan is

unlawful under ERISA, 29 U.S.C. § 1053.

2. Assuming arguendo that Congress did not out-

law the offset provision by enacting ERISA, Con-

gress did not intend ERISA to prohibit the states

from outlawing such offset provisions. Conse-

quently, the plaintiffs are entitled to the relief they

seek because the offset provision of the pension plan

was rendered null and void by the “unless prohibited

by law” clause of the pension plan when the State

of New Jersey amended its Worker’s Compensation

Act on July 14, 1977 so as to prohibit offsets of re-

tirement pension benefits against worker’s compen-

saiton benefits.

Freperick B. Lacey

United States District Judge

Dated: August 24, 1978

*5 Plaintiffs’ contention that 29 U.S.C. § 1144(a) is inapplicable

to the case at bar by reason of 29 U.S.C. § 1144(b)(1) is without

merit. That provision provides as follows:

(b)(1) This section shall not apply with respect to any

cause of action which arose, or any act or omission which

occurred, before January 1, 1975,

Consequently, this co:rt has found it necessary to consider the

meaning of 29 U.S.C. § 1144(a) as applied to the facts of this

case.

57a

Appendix D

Opinion of the United States District Court for the

District of New Jersey (December 20, 1978)

UNITED STATES DISTRICT COURT

District or New Jersey

Civil No. 77-1644

La.

—

Henry BuozynskI, et al.,

Plaintiffs,

GeneraL Motors Corporation,

Defendant.

Lacey, D.J.

The defendant moves for reconsideration of this court’s

decision embodied in an opinion and order filed August

24, 1978. That decision invalidated reductions by the de-

fendant in the pension payments made to the plaintiffs in

an amount equal to the value of payments received under

the New Jersey Worker’s Compensation Act, N.J.S.A. 34:15

et seq. Struck down was the pension plan’s provision al-

lowing this offset, Article TV, Section 2, on two separate

grounds: first, that the offsets were unlawful under 29

U.S.C. § 1053; second, even if Congress did not forbid these

pension deductions, New Jersey was not barred by the

preemption doctrine from passing a law which effectively

58a.

Appendix D

outlawed this offset under the “unless prohibited by law”

clause of the plan.

The defendant, in its motion to reconsider, challenges

both rationales upon which the earlier decision was

grounded.

29 U.S.C. § 1053

The defendant’s action, I previously had held, violated

the minimum vesting section of ERISA, 29 U.S.C. § 1053,

by failing to make nonforfeitable the plaintiffs’ rights to

their retirement benefits. The defendant, arguing that the

offsets do not constitute a forfeiture within the meaning

of ERISA, relies on Treas. Reg. § 1.411(a)-4(a), which

provides:

Furthermore, nonforfeitable rights are not to be

considered to be forfeitable by reason of the fact

that they may be reduced to take into account bene-

fits which are provided under the Social Security

Act or under any other Federal or State law and

which are taken into a -ount in determining plan

benefits.

Two courts have applied this regulation to hold that

deducting worker’s compensation payments from pension

payments does not offend ERISA’s nonforfeitability re-

quirement. Bordine v. Evans Products Co., 453 F.Supp.

19 (K.D. Mich. 1978) ; Pavlovic v. Chrysler Corp., Civ. No.

7-70438 (E.D. Mich. January 10, 1978).

Plaintiffs have placed in issue the validity of the afore-

said regulation. Although Treasury Regulations are ac-

1 Contra, Utility Workers Union v. Consumers Power Co., 453

F.Supp. 447, 455 n.11 (E.D. Mich. 1978).

59a

Appendix D

corded great respect and are not lightly overruled, see

Bingler v. Johnson, 394 U.S. 741, 479-51 (1969), a Treasury

Regulation that is inconsistent with Congressional enact-

ments cannot stand. United States v. Cartwright, 411 U.S.

546, 557 (1973). A regulation will be struck down if it is

inconsistent with the plain wording of a federal statute,

Busse v. Commissioner, 479 F.2d 1147, 1152-53 (7th Cir.

1973), or if the regulation “conflict[s] with the philosophy

and avowed purpose of legislation.” New York Shipbuild-

mg Corp. v. United States, 237 F.Supp. 995, 999 (D.N.J.

1965), aff'd, 362 F.2d 551 (3d Cir. 1966) (per curiam).

Thus, the existence of a regulation does not end the inquiry.

First, the plaintiffs claim the Secretary of the Treasury

is powerless to prescribe regulations affecting pension

rights under 29 U.S.C. § 1053. This contention is without

merit.

Thus, 29 U.S.C. § 1202(¢) provides:

Regulations prescribed by the Secretary of the

Treasury under sections 410(a), 411, and 412 of Title

26... shall also apply to the minimum participation,

vesting, and funding standards set forth in parts 2

and 3 of subtitle B of subchapter I of this chapter.

Treas. Reg. § 1.411(a)-4(a) was issued to give guidance

in interpreting 26 U.S.C. § 411; and 29 U.S.C. § 1053, en-

titled “minimum vesting standards,” is located in part 2

of subtitle B of subchapter I. Accordingly, the Secretary

of the Treasury had the authority to promulgate a binding

regulation regarding § 1053.

Next to be considered is whether the aforesaid regula-

tion is consistent with ERISA. The defendant’s argument

that it is requires careful analysis. First, the defendant

points to 26 U.S.C. § 401, which states the requirements

60a

Appendia D

for qualifying a pension plan. One requirement is that

the plan be nondiscriminatory. A plan is not considered

discriminatory “merely because the contributions or bene-

fits ... differ because of any retirement benefits created

under State or Federal law.” § 401(a)(5). In interpreting

this statute, the Internal Revenue Service has ruled that

a plan could provide that worker’s compensation benefits

could be offset against pension benefits without the plan

being discriminatory. Rev.Rul. 68-243. Next, the defend-

ant notes that Congress, in enacting ERISA, did not mod-

ify of 26 U.S.C. § 401(a)(5). Also, Congress explicitly

stated that it “intend[ed] that the anti-discrimination rules

of present law in areas other than the vesting schedule are

not to be changed.” H.R. Rep. No. 93-1280, 93rd Cong., 1st

Sess., reprinted in [1974] U.S. Code Cong. & Ad. News

5038, 5058. Thus, defendant argues, because the pre-

ERISA rules permitted deductions for worker’s compen-

sation benefits and this policy regarding nondiscrimination

was continued by Congress, it therefore follows that Treas.

Reg. § 1.411(a)-4(a) is consistent with ERISA generally

and with § 1053 in particular.

This convoluted skein of reasoning is unconvincing. First,

it is questionable that Congressional intent concerning 26

U.S.C. § 401 indicates anything at all about Congressional

intent as to nonforfeitability under § 1053. See Riley v.

MEBA Pension Trust, 570 F.2d 406, 409 n.3 (2d Cir. 1977).

The legislative history of ERISA underscores this. Under

the heading of “permitted forfeitures of vested rights,”

Congress declared that “an employee’s rights, once vested,

are [with certain exceptions] not to be forfeitable for any

reason. An employee’s rights to benefits attributable to

his own contributions may never be forfeited.” H.R. Rep.

No. 93-1280, 98rd Cong., Ist Sess., reprinted in [1974] U.S.

6la

Appendix D

Code Cong. & Ad. News 5038, 5052. The report th@ lists

a series of exceptions to the principle that an employee's

vested rights are not forfeitable. None of these exceptions

mention worker’s compensation.

Another difficulty with the defendant’s interpretation

results from ERISA’s handling of the term nonforfeitable.

29 U.S.C. § 1002(19) provides the definition.2? Under this

section only the exceptions specifically included in § 1053

are consistent with nonforfeitability. Worker’s compen-

sation does not appear. Only deductions included in § 1053

(a)(3) are exceptions to § 1002’s definition of nonforfeit-

ability. See Riley v. MEBA Pension Trust, supra, 570

F.2d at 409; Utility Workers Union v. Consumer Powers

Co., supra, 453 F.Supp. at 456; Keller v. Graphic Systems

of Akron, Inc., 422 F.Supp. 1005, 1008 (N.D. Ohio 1976).

Based on these cases, I must conclude it is clear that

Congress expected that pension benefits would generally

be nonforfeitable, and that employees would forfeit bene-

fits only under narrowly defined circumstances. Regu-

lations promulgated must assist in achieving this goal.

See United States v. Bacto-Undisk, 394 U.S. 784 (1969) ;

New York Shipbuilding Corp. supra. Treas. Reg. §1.411(a)-

* The term “nonforfeitable” when used with respect to a pension

benefit or right means a claim obtained by a participant or his bene-

ficiary to that part of an immediate or deferred benefit under a

pension plan which arises from the participant’s service, which is

unconditional, and which is legally enforceable against the plan.

For purposes of this paragraph, a right to an accrued benefit from

employer contributions shall not be treated as forfeitable merely

because the plan contains a provision described in § 1053(a) (3)

of this title.

62a

Appendix D

4(a), by impeding the attainment of this goal, is incon-

sistent with the statute. Accordingly, the defendant’s

reliance on it as a source of expanding the scope of per-

missible deductions from pension payments is misplaced.

Section 1053 forbids the offsets found in the defendant’s

plan.®

’ The defendant makes two other arguments to sustain its posi-

tion. Noting that the same phrase appears in both 26 U.S.C. § 401

(a)(S) and in 29 U.S.C. § 1082(c)(4)(A), the defendant takes

this as evidence of the continued vitality of Rev.Rul. 68-243, which

upheld offsets for Worker’s Compensation as not being discrimi-

natory for the purposes of 26 U.S.C. § 401(a) (4), suggesting that

§ 1053 also allows offsets. As was said in Utility Workers Union,

supra: “The language of the statute is clear and unambiguous.

The reasoning of the defendant is tenuous and speculative. The

Court chooses to follow the plain meaning of the statutory language.”

453 F.Supp. at 456.

The defendant also refers the court to 29 C.F.R. § 2605, stress-

ing the language in the definitions in subsection 2:

“Pension Benefit” means a benefit payable as an annuity,

or one or more payments related thereto, to a participant

who permanently leaves . . . which payments by themselves

or in combination with Social Security, Railroad Retire-

ment, or workmen’s compensation benefits provide a sub-

stantially level income to the recipient.

Under this regulation, the defendant argues, the Pension Benefit

Guarantee Corporation (PBGC) has authorized reducing pension

benefits if worker’s compensation is provided. This regulation

suffers from the same defects as does the Treasury Regulation,

(Treas, Reg. § 1.411(a)-4(a), except that it is without a statutory

basis and derives no support from the legislative history.

63a

Appendia D

N.J.S.A. 34:15-29

The defendant aiso argues that the court erred in find-

ing that the New Jersey law forbidding the offsets* (L.

1977, ¢.156 § 1, eff. July 14, 1977, amending N.J.S.A.

34:15-29) was not preempted by ERISA. The Third Cir-

cuit Court of Appeals recently enumerated the three

grounds for preempting a state statute. In its motion

for reconsideration, the defendant strongly contends that

the New Jersey statute is invalid due to the second ground:

“‘the nature of the regulated subject matter permits no

other conclusion’ but pre-emption.” Rogers vy. Larson,

563 F.2d 617, 621 (3d Cir. 1977), appeal filed, 46 U.S.1.W.

8529 (U.S. Jan. 20, 1978) (citations omitted). Elaborat-

ing further, the court stated that this basis for preemp-

tion existed when “the subject matter of the federal and

local laws ... must inherently either conflict or be dupli-

*The defendant again argues that preemption should be found

under 29 U.S.C. § 1144(a) because the New Jersey law “relates

to” pension plans. The defendant cites several cases in which

preemption has been found. While those cases are useful in il-

luminating the Congressional intent underlying ERISA, the cases

are not dispositive. “Our prior cases on pre-emption are not pre-

cise guidelines in the present controversy, for each case turns on

the peculiarities and special features of the federal regulatory scheme

in question.” City of Burbank v. Lockheed Air Terminal, Inc.,

411 U.S. 624, 639 (1973) (citations omitted), The same is also

true with respect to the state regulation in question, for whether

preemption by ERISA can be found will depend on the exact nature

of the state laws. Compare National Carriers’ Conference Comm.

v. Heffernan, 454 F.Supp. 914 (D. Conn. 1978) and Standard Oil

Co, of Cal. v. Agsauld, 442 F.Supp. 695, 707 (N.D. Cal. 1977)

with Stone v. Stone, 450 F.Supp. 919, 931-33 (N.D. Cal. 1978 )

and Gast v. State, 47 U.S.L.W. 1067 (Oct. 31, 1978 Oregon). The

court's conclusion that the New Jersey Worker’s Compensation Law

does not “relate to” pensions will be adhered to. See also Johnston

v. Johnston, 47 U.S.L.W. 2331 (Oct. 27, 1978 California).

64a

Appendix D

cative. That is, under this test it is impossible for there

to be local regulation in the subject area that does not

conflict with or duplicate federal regulation.” Jd.

For the purpose of analyzing preemption, this court, in

its earlier opinion, assumed arguendo that ERISA did

not forbid the offsets and that the New Jersey law was

not on its face inconsistent with the federal enactment.

If Congress had plainly declared that deductions for

worker’s compensation payments were allowed, or if the

New Jersey law frustrated the Congressional purpose,

then the Supremacy Clause would compel the striking

down of New Jersey’s law. Ray v, Atlantic Richfield Co.,

46 U.S.L.W. 4200, 4201 (1978). Thus, in treating the

preemption question, it will continue to be assumed that

Congress has not addressed the permissibility of offsets,

either to allow them or to prohibit them.’ Under this

assumption, it is clear the New Jersey statute is not pre-

empted, based upon the wording of the second ground of

Rogers v. Larson, supra. It neither duplicates nor con-

flicts with ERISA.

This conclusion, aside from being compelled by Rogers

v. Larson, supra, also follows from general principles

of preemption. In a field historically falling within the

sphere of state regulation, preemption will not be found

unless a clear Congressional intent to preempt is found.

Jones v. Rath Packing Co., 480 U.S. 519, 525 (1977). As

determined in my earlier opinion, that clear expression

5 Consonant with the earlier opinion, the court still views the

legislative history as being one consistent with the forbidding of

offsets. To the extent that this history reveals Congressional intent

to be unclear, in no way can the legislative history be said to sup-

port the contrary conclusion, that offsets were to be permitted.

65a

Appendiz D

of intent is absent. New Jersey’s statute lies within the

allowable range of police activity that gives rise to the

presumption against preemption.

States possess broad authority under their police

power to regulate the employment relationship to

protect workers within the State. Child labor laws,

minimum and other wage laws, laws affecting oc-

cupational health and safety, and workmen’s com-

pensation laws are only a few examples.

De Canas v. Bica, 424 U.S. 351, 356 (1976) (emphasis

added)

After noting that the California statute challenged as

being preempted belonged in the category of traditional

state police powers, the Court found no preemption unaer

the preemption test that “the nature of the... subject

matter permits no other conclusion.” Jd., quoting Florida

Lime & Avocado Growers, Inc. v. Paw, 373 U.S. 132

(1963). Rogers v. Larson, supra, derives from this por-

tion of De Canas its second ground for preemption; this

shows that New Jersey’s strong interest in worker’s

compensation will be a significant factor militating against

finding preemption.

Another important rule in deciding preemption eases

is that state and federal regulatory schemes shorld be

harmonized, if possible. “[W]e may not overlook the

body of law relating to the sensitive interrelationship

between statutes adopted by the separate, yet coordi-

nate, federal and state sovereignties.” Merrill Lynch

Pierce Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 127

(1973). The Court then went on to hold that California

could apply its statute voiding restraints on competition,

66a

Appendix D

despite the fact that the rule which the petitioner sought

to enforce had been promulgated pursuant to federal

statute. The Court observed that “California has mani-

fested a strong policy of protecting its wage earners from

what it regards as undesirable economic pressures af-

fecting the employment relationship. This policy pre-

vails in the absence of interference with the federal regu-

latory scheme.” Jd. at 139-40.

Accordingly, given that the New Jersey statute neither

duplicates nor conflicts with ERISA, that Worker’s Com-

pensation forms an area of strong public interest to New

Jersey, see Memorandum Opinion at 9-10, and that the

court is under a duty due to the nature of the federal

system to try to validate proper exercises of the state

police power, preemption does not exist. The offsets by

the defendant are therefore barred by the “unless pro-

hibited by law” clause.

CoNCLUSION

Upon reconsideration, the previous decision of this court

is followed.

Freperick B. Lacry

United States District Judge

Dated: December 20, 1978

67a

Appendix D

Amended Order Filed April 5, 1979

UNITED STATES DISTRICT COURT

For tHe District or New Jersey

Civil Action No. 77-1644

(Hon. Frederick B. Lacey)

»™

—

Ilenry Buczynsk1, ALtex Borusovic anp Oruer Retirers

SIMILARLY SITUATED,

Plaintiffs,

THE GENERAL Morors Corporation,

Defendant.

The matter having come for trial before Honorable Fred-

erick B. Lacey, U.S.D.J., upon the verified complaint and

action for injunction of plaintiffs, Henry Buezynski and

Alex Borusovie, and the class represented by them (Lester

Weiner and Associates, Esqs., appearing for the plaintiffs,

and Carpenter, Bennett & Morrissey, Esqs., appearing for

defendant), and the court having certified the action as a

class action, and the court having considered the testimony,

stipulations of fact, briefs, memoranda, and arguments of

counsel, and the court having filed a memorandum opinion

on August 24, 1978 and the court having given recon-

sideration to its decision upon defendant’s motion for

68a

Appendix D

reconsideration, and the court having filed its opinion on

December 20, 1978;

Irv 1s Heresy Orperep that the defendant, General Mo-

tors Corporation, is hereby permanently enjoined from

making any deductions from retirement pensions payable

to the plaintiffs and class members, other than benefits

payable by reason of disability, pursuant to Article IV,

section 2 of the General Motors Corporation Hourly-Rate

Employes Pension Plan; and

Ir 1s Furrner Orperep that defendant shall pay over

to each plaintiff and class member the amount of money

deducted from his or her basic pension benefits, which

benefits have been made payable as a result of having

reached normal retirement age (together with interest from

the date of deduction), within 30 days from the date

of the Order; provided that in the event this court’s

judgment that the deduction violates 29 U.S.C. § 1053

is reversed, that defendant shall pay over within 30 days

from the date of the entry of this Order all sums de-

ducted from any retirement plan benefits, other than bene-

fits payable by reason of disability (together with in-

terest from the date of deduction), on or after July 14,

1977; and

Ir 1s FurtHer Orverep that the provisions of this order

are stayed during the pendency of the appeal.

Frederick B. Lacey

United States District Judge

Dated: April 3, 1979

69a

APPENDIX E

Relevant Statutory Provisions

29 U.S.C. §1002(19)

(19) The term “nunforfeitable” when used with respect

to a pension benefit or right means a claim obtained by

a participant or his beneficiary to that part of an im-

mediate or deferred benefit under a pension plan which

arises from the participant’s service, which is uncondi-

tional, and which is legally enforceable against the plan.

For purposes of this paragraph, a right to an accrued

benefit derived from employer contributions shall not be

treated as forfeitable merely because the plan contains

a provision described in section 1053(a)(3) of this title.

29 U.S.C. §1053(a)

§ 1053. Minimum vesting standards

(a) Each pension plan shall provide that an employee’s

right to his normal retirement benefit is nonforfeitable

upon the attainment of normal retirement age and in

addition shall satisfy the requirements of paragraphs (1)

and (2) of this subsection.

(1) A plan satisfies the requirements of this para-

graph if an employee’s rights in his accrued bene-

fit derived from his own contributions are non-

forfeitable.

(2) A plan satisfies the requirements of this para-

graph if it satisfies the requirements of subpara-

graph (A), (B), or (C).

70a

Appendia E

(A) A plan satisfies the requirements of this

subparagraph if an employee who has at least

10 years of service has a nonforfeitable right

to 100 percent of his accrued benefit derived from

employer contributions.

(B) A plan satisfies the requirements of this

subparagraph if an employee who has completed

at least 5 years of service has a nonforfeitable

right to a percentage of his accrued benefit de-

rived from employer contributions which percent-

age is not less than the percentage determined

under the following table:

Nonforfeitable

Years of service: percentage

re SSE SEO Re EMEA RAE LS ER, 25

UD: - snake inplephleiatinelasatblaethetacnsiounsaptainesig latent 30

BERETS ATONE WE aT Ne ENED: OPN 35

Sg EAS SRA ER BG Oe St RAC IE Oe Feed 40)

RT ae TMT PR PETE oS OES ORE 45

UN | siibsbcilaaeensilb ccinihaenicesdenaceadambibadaadicoanedce tae 50

yO RPE TS SR SC oer RO AT oN UA NE 60

STAR ao! SAORI SRN A le ROO 70

SF Melb iedticdaippienedibies tmisdoparpiamcoioeiata cineca 80

PANNE DEL vente EMER RASS 1 ne LOE Tees IED 90

Sa 100.

(C)(i) A plan satisfies the requirements of this

subparagraph if a participant who is not separated

T71la

Appendia E

from the service, who has completed at least 5

years of service, and with respect to whom the

sum of his age and years of service equals or

exceeds 45, has a nonforfeitable right to a per-

centage of his accrued benefit derived from em-

ployer contributions determined under the follow-

ing table:

and sum of age

If years of service and service then the nonforfeit-

equal or exceed— equals or exceeds—able percentage is—

i denidisspeimendsecnheshibasdabaaiia AIP sotcebtiliianlaiheiouctulsbiass 50

OI visiassendesisaditsipiiateniinns 60

1 Gckaiipadiietesieoiaiaibhiabeaicin 49 ... ” 70

_ LENSES VEE a in ID. iacintibltncsaiaparatiiidiiatd 80

IP deitlshanittaeeeslbndeohiveicaisbtiand BP inesdiigticatiieeainipheibion 90

beeen SS ne Sl) Ie SOD cshinsiigpliblicniitanicecniae 100.

(ii) Notwithstanding clause (i), a plan shall not

be treated as satisfying the requirements of this

subparagraph unless any participant who has

completed at least 10 years of service has a non-

forfeitable right to not less than 50 percent of

his accrued benefit derived from employer con-

tributions and to not less than an additional 10

percent for each additional year of service there-

after.

(3)(A) A right to an accrued benefit derived from em-

ployer contributions shall not be treated as forfeitable sole-

ly because the plan provides that it is not payable if the

72a

Appendix E

participant dies (except in the case of a survivor annuity

which is payable as provided in section 1055 of this title).

(B) A right to an accrued benefit derived from employer

contributions shall not be treated as forfeitable solely be-

cause the plan provides that the payment of benefits is

suspended for such period as the employee is employed,

subsequent to the commencement of payment of such bene-

fits— |

(i) in the case of a plan other than a multiem-

ployer plan, by an employer who maintains the plan

under which such benefits were being paid; and

(ii) in the case of a multiemployer plan, 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 Secretary shall prescribe such regulations as may be

necessary to carry out the purposes of this subparagraph

including regulations with respect to the meaning of the

term “employed”.

ployer contributions shall not be treated as forfeitable

solely because plan amendments may be given retroactive

application as provided in section 1082(¢)(8) of this

title.

(D)(i) A right to an accrued benefit derived from em-

ployer contributions shall not be treated as forfeitable

solely because the plan provides that, in the case of a par-

ticipant who does not have a nonforfeitable right to at

least 50 percent of his accrued benefit derived from em-

73a

Appendix E

ployer contributions, such accrued benefit may be for-

feited on account of the withdrawal by the participant

of any amount attributable to the benefit derived from

mandatory contributions (as defined in the last sentence

of section 1054(c)(2)(C) of this title) made by such par-

ticipant.

(ii) Clause (i) shall not apply to a plan unless the

plan provides that any accrued benefit forfeited under

a plan provision described in such clause shall be re-

stored upon repayment by the participant of the full

amount of the withdrawal described in such clause plus,

in the case of a defined benefit plan, interest. Such in-

terest shall be computed on such amount at the rate de-

termined for purposes of section 1054(¢)(2)(C) of this

title (if such subsection applies) on the date of such re-

payment (computed annually from the date of such with-

drawal). In the case of a defined contribution plan the

provision required under this clause may provide that

such repayment must be made before the participant has

any 1-year break in service commencing after the with-

drawal.

(iii) In the case of accrued benefits derived from em-

ployer contributions which accrued before September 2,

1974, a right to such accrued benefit derived from em-

ployer contributions shall not be treated as forfeitable

solely because the plan provides that an amount of such

accrued benefit may be forfeited on account of the with-

drawal by the participant of an amount attributable to

the benefit derived from mandatory contributions, made

by such participant before September 2, 1974, if such

amount forfeited is proportional to such amount with-

T4a

Appendix E

drawn. This clause shall not apply to any plan to which

any mandatory contribution is made after September 2,

1974. The Secretary of the Treasury shall prescribe such

regulations as may be necessary to carry out the pur-

poses of this clause.

(iv) For purposes of this subparagraph, in the case

of any class-year plan, a withdrawal of employee con-

tributions shall be treated as a withdrawal of such con-

tributions on a plan year by plan year basis in succeed-

ing order of time.

(v) Cross Reference.—

For nonforfeitably’ where the employee has a non-

forfeitable right to at least 50 percent of his ac-

crued benefit, see section 1056(¢c) of this title.

29 ULS.C. §1144(a)

SUPERSEDURE; EFFECTIVE DATE

(a) Except as provided in subsection (b) of this sec-

tion, the provisions of this subchapter and subchapter

III of this chapter shall supersede any and all State

laws insofar as they may now or hereafter relate to any

employee beoofit plan described in section 1003(a) of this

title and not exempt under section 1003(b) of this title.

This section shall take effect on January 1, 1975.

75a

Appendix E

N.J.S.A. 34:15-29. Compensation preferential lien; claim

not assignable; set offs

The right of compensation granted by this chapter shall

have the same preference against the assets of the em-

ployer as is now or may hereafter be allowed by law

for a claim for unpaid wages for labor. Claims or pay-

ments due under this chapter shall not be assignable,

and shall be exempt from all claims of creditors and

from levy, execution or attachment. The right of com-

pensation granted by this chapter may be set off against

disability pension benefits or payments but not shall be

set off against employees’ retirement pension benefits or

payments. Amended by L.1977, ¢.156, $1, eff. July 14,

1977.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.