Amicus Curiae Brief — Central Laborers' Pension Fund v. Heinz

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No. 02-891

Supreme Court of the Gnited States

CENTRAL LABORERS’ PENSION FUND,

Petitioner,

Vv.

THOMAS E. HEINZ and RICHARD J. SCHMITT, JR..

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

BRIEF AMICUS CURIAE OF THE

NATIONAL COORDINATING COMMITTEE

FOR MULTIEMPLOYER PLANS

IN SUPPORT OF PETITIONER

DONALD J. CAPUANO

SALLY M. TEDROW *

JOHN M. MCINTIRE

O° DONOGHUE & O° DONOGHUE

4748 Wisconsin Avenue, N.W.

Washington, D.C. 20016

* Counsel of Record (202) 362-0041

Counsel for the National Coordinating Committee

for Multiemployer Plans

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

® =

TABLE OF CONTENTS

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INTEREST OF THE NATIONAL COORDINATING

COMMITTEE FOR MULTIEMPLOYER PLANS...

THE DECISION BELOW, IN DIRECT CON-

FLICT WITH DECISIONS OF THE FIFTH

AND SIXTH CIRCUITS, WILL HAVE

IMMEDIATE AND SERIOUS ADVERSE

CONSEQUENCES FOR MULTIEMPLOYER

PENSION PLANS NATIONWIDE...................

A. Suspension of benefit rules are a key

component of most multiemployer plan

provisions providing for early retirement

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B. The decision below, and its direct conflict

with the law in other circuits, will place an

unacceptable administrative burden on

multiemployer plans, to the detriment of

millions of plan participants.....................

THE DECISION BELOW IS NOT ONLY IN

CONFLICT WITH THE LAW OF OTHER

CIRCUITS, IT DIRECTLY CONTRADICTS

AUTHORITATIVE = INTERPRETATIONS

OF THE INTERNAL REVENUE SERVICE...

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TABLE OF AUTHORITIES | TABLE OF AUTHORITIES—Continued

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wa son ooeweedindaaatig 9 H.R. 2 (as introduced), 93rd Cong., Ist Sess.

Christensen v. Harris County, 529 U.S. 576 (1973), — rinted in Subcomm. —— Labor of

ESET 16 Senate Comm. on Labor and Puan Wermse,

Egelhoff v. Egethoff, 532 U.S. 141 (2001) secccsene . 94th Cong., 2d Sess., Legislative History of

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Varsic v. United States District Court for the a Service Announcement 90-2) (Agr. 5, 16

Central District of California, 607 F.2d 245 [hee ee

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Whisman v. Robbins, 55 F.3d 1140 (6th Cir.

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144 Cong. Rec. 7574 (daily ed. July 7, 1998)........ 10

IN THE

Supreme Court of the United States

No. 02-891

CENTRAL LABORERS’ PENSION FUND,

Petitioner,

Vv.

THOMAS E. HEINZ and RICHARD J. SCHMITT, JR.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

BRIEF AMICUS CURIAE OF THE

NATIONAL COORDINATING COMMITTEE

FOR MULTIEMPLOYER PLANS

IN SUPPORT OF PETITIONER

INTEREST OF THE NATIONAL COORDINATING

COMMITTEE FOR MULTIEMPLOYER PLANS

The National Coordinating Committee for Multiemployer

Plans (“NCCMP”) is a nonprofit, tax-exempt organization

that has participated for over a quarter of a century in the

development of employee benefits legislation and regulations

promulgated to implement the Employee Retirement Income

Security Act of 1974 (“ERISA” or “Act”), 29 U.S.C. § 1001,

et seq., and other laws affecting multiemployer plans.’

' Pursuant to Rule 37.6 of the Rules of the Court, the undersigned

hereby state that no counsel for Petitioner or Respondents authored

Currently, 309 multiemployer pension plans are affiliated

with the NCCMP. These affiliated plans cover a majority of

the participants in multiemployer plans throughout the nation

and are representative of the multiemployer plan community

generally. The NCCMP has frequently participated as amicus

curiae in the United States Supreme Court and the federal

courts of appeal.

Multiemployer plans provide pension coverage for some

ten million American workers, one-fifth of all workers who

participate in pension plans. Congress has recognized that the

continued well-being and security of employees, retirees and

their dependents are directly impacted by multiemployer

plans, and that interference with the maintenance and growth

of such plans is contrary to the national public interest.

29 U.S.C. §§ 1001(a)(1), (3) and (c)(2).

The decision below, if allowed to stand, will significantly

detract from the ability of plan trustees to employ ERISA’s

“suspension of benefit” rules in response to fluctuating

employment and retirement patterns, while at the same time

making subsidized early retirement benefits available to those

participants who need them the most. The applicable statutes,

regulations and regulatory interpretations have long allowed

pension plans a degree of flexibility when defining the scope

of work an early retiree may engage in without foregoing

receipt of his retirement benefits. The decision of the two-

member majority below—in direct conflict with the unani-

mous decisions of two sister circuits—will restrict the

historical ability of multiemployer pension plans to tailor

such suspension of benefit provisions to current employment

conditions, and hence to protect the actuarial soundness of

these plans.

any part of this brief. Moreover, no person or entity other than the

NCCMP made a monetary contribution to the preparation or submission

of this brief.

Further, the decision below will effectively force multi-

employer pension plans throughout the country to review

existing early retirement provisions and, very likely, to enact

plan amendments that conform to the rule announced by the

two-member majority below, notwithstanding the fact that a

contrary rule prevails in two other circuits. Such a process

will impose unnecessary administrative burdens on these

plans, and may well come at the expense of enhanced

early retirement options and future benefit increases for

participants.

Accordingly, the NCCMP and its constituent groups have a

strong interest in supporting the granting of the petition

herein and in urging the reversal of the decision below. The

NCCMP believes that a resolution by this Court of the

conflict between the circuits will serve to ensure that

multiemployer pension plans continue to have the flexibility

they require to determine the conditions under which early

retirees can continue to collect a pension while receiving

income from current employment. Both Petitioner and

Respondents have consented to the filing of this brief, as is

evidenced by letters of consent that have been filed with the

Court.

INTRODUCTION

The decision below concerns the extent to which a

multiemployer pension plan may revise its rules pertaining to-

suspension of early retirement benefits when a retiree reenters

employment. Under section 203(a)(3)(B) of ERISA, a

multiemployer plan may include provisions suspending

retirement benefits when the retiree returns to work in the

same industry, in the same trade or craft, and in the same

geographic area covered by the plan.’ Multiemployer plans

? Section 203(a(3)B) provides, in relevant part, that

A right to an accrued benefit derived from employer contri-

butions shall not be treated as forfeitable solely because the plan

commonly refer to employment that will trigger suspension

of benefits as “disqualifying employment.” (App., at 4a.)

When a retiree re-enters disqualifying employment, ERISA

§ 203(a)(3)(B) provides that the plan’s withholding of that

retiree’s benefit will not be deemed a forfeiture of an accrued

benefit under section 203(a) of the Act, 29 U.S.C. § 1053(a).”

Since 1981, regulations promulgated by the Department of

Labor pursuant to section 203(a(3)(B)’ have specified a

range of permissible definitions of disqualifying employment.

Multiemployer plans may adopt suspension of benefit rules

restricting post-retirement employment to the full extent

provides that the payment of benefits is suspended for such period

as the employee is employed, subsequent to the commencement of

payment of such benefits —

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(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.”

29 U.S.C. § 1053(aX3)\B) and codified as section 41 1(aX3)(B) of the

Internal Revenue Code, 26 U.S.C. § 411(aX3)(B). Multiemployer

pension plans are subject to Title Il of ERISA (codified as amendments to

the Internal Revenue Code (“Code”)), which duplicates portions of Title |

of ERISA (codified at Title 29 of the U.S.C.) including ERISA’s

provisions on vesting and accrual. Under Reorganization Plan No. 4 of

1978, §101, 43 Fed. Reg. 47713, the Internal Revenue Service was given

authority over ERISA’s funding, participation, vesting and benefit accrual

provisions.

* See Suspension of Benefits Rules, 43 Fed. Reg. 59098, 54099 (pro-

posed Dec. 13, 1978) (to be codified at 29 CFR Part 2530) (Preamble to

proposed DOL suspension of benefit rules wherein the agency explained

that “the inclusion of the suspension provisions in section 203(a)(3) of the

Act indicated that Congress intended to permit plans to provide for the

permanent withholding of pension benefits under certain circumstances.”

* See 29 CFR § 2530.203-3 et seq.

permitted under the regulations, or they may narrowly tailor

restrictions on post-retirement employment to certain types of

employment that fall somewhere within the range permitted

by the regulations, or they may choose not to restrict post-

retirement employment at all. Trustees of multiemployer

pension plans have come to regard suspension of benefit rules

as an important element of plan design which offers them

flexibility in regulating early retirement benefits, if needed.

Relevant considerations such as industrial stability, con-

ditions of employment and earnings, and the actuarial

soundness of pension plans are not fixed in time but are

impacted by wide fluctuations in unemployment rates, the

relative aging of a workforce, the vagaries of financial

markets, or other unforeseen events that impact the entire

economy, specific industries or particular regions. The

trustees of multiemployer pension plans, representing both

labor and management, are uniquely qualified to assess those

circumstances insofar as they are pertinent to their own plans

at any given time. Using that expertise, the trustees can

employ a suspension of benefit provision as a dynamic and

adaptable tool for addressing a number of economic

exigencies. This approach is completely in keeping with

Congress’s intent in adopting section 203(a)(3)(B).°

* See section 302(c\5) of the Labor Management Relations Act, 29

U.S.C. § 186(c)(5).

* See, e.g., 120 Cong. Rec. 29192, 29197 (daily ed. Aug. 20, 1974)

(statement of Rep. Dent), reprinted in 3 Leg. Hist. At 4669:

[T}he conferees expressly provided in section 203(a3)(B) that a

plan be permitted to suspend benefits under certain circumstances.

This section further authorizes the Secretary [of Labor] to prescribe

regulations necessary to carry out the purposes of this provision. It

is contemplated that those regulations would permit a plan's

provisions concerning suspension to take into account the particular

facts and circumstances of the industry; the objectives of industrial

stability; the conditions of employment and earnings in the indust:y;

the benefit payment period of the plan; and the burden of onerous

The decision below neither considers these realities

nor acknowledges the underlying purpose of section

203(aX(3)(B). If left intact, it will significantly restrict the

manner in which the trustees of multiemployer pension plans

may exercise the discretion granted them under ERISA’s

suspension of benefit provision. It achieves this harm-

ful result by construing a “suspension” under section

203(a)(3)(B) of ERISA as the equivalent of an “elimination”

or “reduction” of early retirement benefits in violation of

section 204(g) of ERISA.’ The decision is in direct conflict

with the construction given the statute by the Internal

Revenue Service—the administrative agency charged with its

and costly administrative procedures imposed upon the plan by

these provisions.

See also 120 Cong. Rec. 29928, 29930 (daily ed. Aug. 22, 1974) (state-

ment of Sen. Williams), reprinted in 3 Leg. Hist. At 4738:

The type of suspensions contemplated by this provision are those

which prevent plan assets from being used to pay retirement

benefits to persons who have, in fact, returned to work for

employers covered by the plan. Also contemplated are provisions

designed to protect participants against their pension plan being

used, in effect, to subsidize low-wage employers who hire plan

retirees to compete with, and undercut the wages and working

conditions of employees covered by the plan. .. .

And 120 Cong. Rec. 29928, 29942 (daily ed. Aug. 22, 1974) (statement of

Sen. Javits), reprinted in 3 Leg. Hist. At 4772:

The purpose of this limited exception to what is generally a rule

precluding divestiture of vested benefits is to protect unions against

undercutting of wage scales and the additional expense generated by

the need to subsidize retirement benefits for those who have left the

work force as well as retirement benefits for those continuing to

work—if such a course was required... . The purpose of the

suspension rule is to protect the legitimate interests of the union

with respect to those persons who have really not retired and not to

penalize retirees where, on balance, the interests of the union are not

adversely affected to a substantial degree.

*29 U.S.C. § 1054(g); 26 U.S.C. § 411(d)(6).

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enforcement—and the prior decisions of the Fifth Circuit in

Spacek v. Maritime Ass'n, 134 F.3d 283 (Sth Cir. 1998), and

the Sixth Circuit in Whisman v. Robbins, 55 F.3d 1140 (6th

Cir. 1995).

SUMMARY OF REASONS FOR REVIEW

Since the enactment of ERISA many multiemployer

pension plans have used ERISA section 203(a)(3)(B) as a

means of encouraging or discouraging returns to employment

by early retirees in the relevant industry. The section was

intended as a tool to deal with the economic exigencies that

may affect a particular industry or a plan’s actuarial

soundness at any given time. For suspension of benefit rules

to be effective over time, multiemployer plans must have the

flexibility to expand the scope of disqualifying employment

when economic conditions warrant, in order to maintain the

actuarial soundness of the plan and to protect the welfare of

actual retirees, active non-retired participants, and con-

tributing employers.

Relying on the statute, prior court decisions and IRS

guidance, trustees of multiemployer pension plans have

after amended plans to expand definitions of disqualifying

employment without reason to fear they might be violating

the anti-cutback rule of ERISA section 204(g), the provision

erroneously relied upon by the majority below. The decision

below places a new and completely unwarranted constraint on

the trustees’ ability to tailor their suspension of benefit rules

to changing economic conditions. The trustees of the many

multiemployer pension plans that have expanded definitions

of “disqualifying employment” through amendment must

now assess which circuit’s law might conceivably apply to

such amendments, whether further plan amendments should

be adopted, and even whether it is administratively feasible to

bifurcate “disqualifying employment” rules on a circuit-by-

circuit basis. This is flatly contrary to the salient purpose of

Congress, vigilantly enforced by this Court, that ERISA plans

be subject to a nationally uniform set of rules that will avoid

such administrative nightmares.

If the ruling below is allowed to stand, it will likely compel

most trustees to reform their plans and review and amend

current suspension rules, if only in an excess of caut 9n. It is

contrary to the national interest to allow the opinion of a two-

judge majority to trigger the imposition of such a substantial

administrative burden and expense on hundreds of pension

plans serving one-fifth of all American pension participants.

Unfortunately, the decision wi'l also probably serve as a

deterrent to adoption of any but the strictest of suspension of

benefit rules. And, because the actuarial soundness of many

plans will be adversely impacted by administrative efforts to

comply with the Seventh Circuit’s decision, sponsors of these

plans likely will be compelled to adopt amendments calling

for significant reductions in the rate of future benefit accruals

for all plan participants.

REASONS FOR REVIEW

I. THE DECISION BELOW, IN DIRECT CON-

FLICT WITH DECISIONS OF THE FIFTH AND

SIXTH CIRCUITS, WILL HAVE IMMEDIATE

AND SERIOUS ADVERSE CONSEQUENCES

FOR MULTIEMPLOYER PENSION PLANS

NATIONWIDE.

A principal goal of ERISA was to enable plan sponsors to

establish and maintain a uniform administrative scheme for

disbursement of benefits. Fort Halifax Packing Co. v. Coyne,

482 U.S. 1, 9 (1987). As this Court has recognized, such

uniformity is impossible if plans are subject to different legal

requirements in different parts of the country. L£gelhoff v.

Egelhoff, 532 U.S. 141, 148 (2001). Obligating a plan to

satisfy a regional rule pertaining to benefits that is more

costly than rules in effect elsewhere either puts the plan to the

administrative burden of adopting different rules for different

regions, or forces it to structure its entire system of benefits to

the “least common denominator” rule of a particular region,

contrary to ERISA’s statutory scheme. See Fort Halifax

Packing Co., 482 U.S. at 10, discussing Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504 (1981). That is precisely the

potential result in this case, since multiemployer plans will

have to consider whether they will attempt to somehow com-

ply with two distinctly different rules of law or whether they

will simply conform to the least common denominator, to the

potential detriment of the great majority of plan participants.

A. Suspension of benefit rules are a key compo-

nent of most multiemployer plan provisions

providing for early retirement benefits.

Multiemployer pians fill an important need in industries

(such as construction or trucking) which are characterized by

irregular employment or frequent shifts of workers between

employers. Multiemployer plans also serve as a vehicle for

providing benefits at an affordable cost in industries domi-

nated by small employers, such as garment manufacturers,

restaurants and service establishments.

In addition to providing workers in such industries with

benefit portability, which allows employees to move

from employer to employer without penaity, multiemployer

plans help protect workers from the potentially devastating

consequences of business downsizing, mergers and closings.

Multiemployer pension plans continue even if particular

employers go out of business, so that workers who lose

their jobs in such circumstances remain protected in their

pension benefits. Because of the often transitory nature

of their employment and/or the small size of their employers,

many employees would be unable to participate in any

employee benefit plan were it not for the existence

of multiemployer plans.

Another characteristic of multiemployer pension plans,

especially those providing benefits to participants in the

construction industry and related trades and crafts, is that they

typically offer early retirement benefits, which are often

subsidized, i.e., the benefits are not actuarially reduced to

account for early retirement.* As illustrated in the case

below, a participant who will not reach normal retirement age

under a plan for many years will nonetheless be eligible for a

subsidized early retirement benefit if he or she has completed

a minimum number of years of service.’ Because the benefits

are subsidized, they are more expensive to the plan than

benefits provided on or after normal retirement age.

The trustees of the Petitioner multiemployer plan amended

the plan in 1998 to expand the definition of disqualifying

employment to include work “in any capacity in the

construction industry” to discourage a high rate of early

retirement that was causing actuarially significant losses to

the plan. This is a useful mechanism in industries of a

cyclical nature, like construction, and potentially in any

industry experiencing the vagaries of the current economy. A

* See, e.g., 144 Cong. Rec. 7574, 7578 (daily ed. July 7, 1998 (state-

ment of Sen. D’ Amato):

[C]onstruction work is physically hard, and is often performed

under harsh climatic conditions. Workers are worn down sooner

than those in most other industries. Often, early retirement is a

must. Multiemployer pension plans accommodate these needs of

their covered workers by providing for early retirement, disability,

and service pensions that provide a subsidized, partial or full

pension benefit.

* The Respondents were each 39 years old when they qualified for the

Petitioner plan’s “service-only pension.” To be eligible for the service-

only pension, a participant had to have earned 30 or more pension credits.

Normal retirement age under the plan was 65. Nevertheless, the service-

only pension provided the Respondents with monthly benefit payments

that were not actuarially reduced to account for payments which began at

an earlier age and which would continue for a longer period. (Petitioner’s

Brief, p. 3; App., 4a.)

flexible suspension of benefits rule can be used to encourage

early retirement pensioners to re-enter the workforce at times

of economic boom and, conversely, to discourage “double

dipping”'® during times of economic downturn. ''

‘The majority’s opinion chides the Fund for pointing out that

broadening the definition of disqualifying employment was necessary to

curb the practice of “double dipping,” which was causing a depletion of

Fund assets. The majority apparently believed that the Fund was

criticizing a practice which existed under the plan before the amendment,

ie, receipt of an early retirement benefit by retirees who were not

actually retired from the industry. (App. 10a-1 1a, n.6.) This misses the

point that a certain level of double dipping may be acceptable and even

desirable in times of high employment when, for example, a shortage of

skilled journeymen may be plaguing a particular trade or craft and a pool

of able-bodied retirees can be a welcome source of qualified journeymen.

However, when bleaker economic conditions prevail, double dipping

works a hardship on multiemployer plans, the predominant number of

which are defined benefit plans. Defined benefit plans must continually

meet ERISA’s minimum funding standards (section 412 of the Code)

notwithstanding the facts that (1) plan assets are typically invested in

equity and fixed income securities subject to the vagaries of Wall Street,

and (2) the ongoing funding of such plans is dependent upon the flow of

employer contributions based on hours worked by employees, even in

times of high unemployment.

'' To illustrate the usefulness of occasional adjustments in a plan’s

definition of disqualifying employment, one may consider the examples

of a multiemployer pension plan that provides a subsidized early

retirement benefit to participants with at least 20 years of service. For a

number of years the plan includes a suspension of benefit rule that defines

disqualifying employment to the full extent provided under Department of

Labor regulations. In 1995, a 42 year old participant who has earned 20

years of service under the plan retires and begins receiving benefits. He

cannot return to employment covered by the plan without having his

benefits suspended. In 2000, employers contributing to the plan raise

concerns that there is a shortage of qualified construction workers. To

encourage retirees like the participant to return to covered employment,

the trustees of the plan decide to amend the plan to provide that retirees

who return to employment covered by the plan will not have their benefits

suspended. In 2002, unemployment among construction workers spikes

upward while the reemployed participant and numerous other retirees

Prior to the Seventh Circuit’s decision below, multi-

employer pension plans were able to, and did, act to expand

and contract definitions of disqualifying employment through

plan amendment, based on statutory, regulatory and judicial

precedent clearly authorizing such actions. See Spacek v.

Maritime Ass'n, 134 F.3d 283 (Sth Cir. 1998) and authority

cited therein; Whisman v. Robbins, 55 F.3d 1140, 1147 (6th

Cir. 1995).

B. The decision below, and its direct conflict with

the law in other circuits, will place an

unacceptable administrative burden on multi-

employer plans, to the detriment of millions of

plan participants.

The decision below will clearly and directly impact the

administration of multiemployer pension plans that are either

administered in the states of Illinois, Indiana and Wisconsin,

or that have participants working or residing in those states.

Moreover, given ERISA’s liberal venue provision whereby a

suit may be brought (1) where the plan is administered;

(2) where the breach took place, or (3) where a defendant

resides or may be found,” it is conceivable that a suit

challenging an amendment similar to those considered by the

continue working in covered employment and receiving subsidized early

retirement benefits (double dipping). To protect unemployed participants

of the plan who are neither eligible for retirement benefits nor, at the time,

accruing service credits towards retirement, the trustees choose to expand

the definition of “disqualifying employment” to again include

employment covered by the plan in order to discourage double dipping

and reduce unemployment among active participants.

'2 ERISA section 502(e\(2), 29 U.S.C. § 1132(e)(2); see also Varsic v.

United States District Court for the Central District of California, 607

F.2d 245, 248 (9th Cir. 1979) (giving liberal interpretation to ERISA’s

venue provision).

courts in Spacek and Heinz could be brought against almost

any multiemployer plan in a federal court in Illinois, Indiana

or Wisconsin.

The conflict between the circuits places trustees of multi-

employer plans in an untenable position in the event they

either seek to amend or have previously amended a plan to

expand the definition of disqualifying employment. Trustees

of plans that are either administered in the Seventh Circuit or

have a large number of participants in the region will have

little choice but to amend their plans to comply with the

holding of the two-judge majority below, notwithstanding the

nationwide weight of authority to the contrary.

Other plans face a more perplexing dilemma. For trustees

of plans administered outside the Fifth, Sixth or Seventh

Circuits, and which have little or no contact with those

circuits, the decision to amend a plan or enforce an existing

amendment that expands the definition of disqualifying

employment cannot be made without acknowledging the

conflict between the circuits.'? Trustees must then decide

whether the plan should assume the risk of litigation and

enforce these provisions or submit de facto to the authority of

the two-judge majority below, which significantly restricts

the ability of the plan to adapt to changing employment

conditions.

Similarly, large nationwide plans not administered in the

Seventh Circuit, but with participants residing within the

Seventh Circuit, must either bow to the least common

"it is important to keep in mind that the suspension of benefit

provision of a plan must be read in the context of the entire plan. In this

regard, the impact of the decision below is not limited to the

administration of the plan, but also goes to the trustees’ consideration of

benefit improvements. If the trustees heed the Seventh Circuit’s holding,

they will be required to reconsider generous early retirement benefits for

reasons of actuarial soundness. It is thus likely that retirees will be

penalized by the plan’s need to accommodate the ruling below.

denominator and adhere to the ruling below, or. attempt to

craft a piecemeal approach to their suspension of benefit

rules, an administratively burdensome task which would be

all but impossible to accomplish.'* This Court has previously

decried such results, in which conflicting rules of law force a

plan either to adhere to the least common denominator or to

adopt an administratively burdensome scheme at the possible

sacrifice of higher benefit levels in the future. See Fort

Halifax Packing Co. v. Coyne, 482 U.S. at 10-11.

From an administrative standpoint, the NCCM? cannot

foresee a multiemployer plan overcoming the practical

difficulties of establishing a scheme for complying with both

Heinz and Spacek/Whisman. Unless the Court grants this

petition and resolves the conflict, trustees of many

multiemployer plans may feel compelled to amend their plans

to comply with the decision below, incurring significant

administrative costs and potentially jeopardizing future

benefit increases. ;

The adverse impact of the majority opinion below is hardly

limited to the administrative burden it will create for plan

trustees. The decision also strips multiemployer plans of an

effective tool trustees have relied on for over thirty years to

help safeguard the actuarial soundness of such plans and to

protect contributing employers and their employees. In so

doing, the court below has placed the interests of reemployed

early retirees over the interests of all other plan participants

'* The Heinz decision leaves fund administrators to ponder a number of

questions. For example, if a plan opts to apply Heinz only in cases within

the jurisdiction of the Seventh Circuit, should it look to where the retiree

resides or where “disqualifying work” is performed? If a retiree in Iilinois

moves to Pennsylvania, or vice versa, which rule should apply? And, if a

plan opts to apply Spacek only to retirees residing in Mississippi,

Louisiana and Texas, how should retirees who relocate to Texas be

treated? These conundrums underscore the reason Congress sought to

avoid a “patchwork scheme of regulation” in the first place. Fort Halifax

Packing Co. v. Coyne, 482 U.S. at 11.

(including active employees, unemployed participants and

actual retirees), and the employers who contribute to such

plans. As a consequence, the court has frustrated the primary

= Congress when it included section 203(a)(3)(B) in

Act.

Il. THE DECISION BELOW IS NOT ONLY IN

CONFLICT WITH THE LAW OF OTHER

CIRCUITS, IT DIRECTLY CONTRADICTS

AUTHORITATIVE INTERPRETATIONS OF

THE INTERNAL REVENUE SERVICE.

The Petitioner fairly details the deficiencies that underscore

the Seventh Circuit’s reasoning that a “suspension” under

ERISA section 203(a)(3)(B) equates to a “reduction” under

ERISA section_204(g).'° The Petitioner correctly observes

that the reasoning of the decision below contradicts the

language of the statute, applicable legislative history, and—

an issue focused on herein—applicable regulations and the

authoritative position of the Internal Revenue Service.

The majority opinion below “rejects as unpersuasive” IRS

guidance provided to its field examiners that “{ajn

amendment that reduces I.R.C. 411(d)(6) protected benefits

on account of 203(a\(3)(B) service does not violate I.R.C.

of the Internal Revenue Manual, at 4.72.14.3.5.3(7)

(“Suspension of Benefits”) (May 4, 2001) (available on

WESTLAW RIA-IRM database) (hereinafter “Multiemployer

'* Judge Cudahy, in dissent, persuasively refutes the reasoning of the

° If such an amendment did violate section 41 1(d)(6) of the Code, the

plan would be treated as not satisfying the requirements of ERISA’s

minimum vesting standards and would risk losing its tax qualified status.

See Code section 41 1(d\(6)A) (“A plan shall be treated as not satisfying

the requirements of this section if the accrued benefit of a participant is

decreased by an amendment of the pian. . .”).

Plan Guidelines”). According to the majority, a “single

statement” in the IRS manual cannot be deemed to represent a

longstanding agency interpretation. (App. 22a n.17.)

The majority’s analysis, however, overlooks several sig-

nificant points. First, the Multiemployer Plan Guidelines set

forth the technical guidance for the Service’s field personnel,

technical staff, and plan determination personnel. Miulti-

employer Plan Guidelines, at 4.72.14.1. The provision noted

by the court is in fact one of seven detailed subsections

dedicated solely to the examination of a multiemployer plan’s

suspension of benefit provisions. /d. 4.72.14.3.5.3(1), et seq.

Second, the final Multiemployer Plan Guidelines were issued

(post-Spacek) by the Service after it published proposed

examination guidelines with a request for public comment.

See Revenue Service Announcement 96-25 (Apr. 8, 1996).

Finally, the court’s intimation that the position taken by the

IRS in the Multiemployer Plan Guidelines was not fully

thought through fails to recognize that the provision is

consistent with and, indeed, complements Treas. Reg.

1.411(c)-1(f), a regulation previously promulgated by the

Service. The regulation provides that “[n]o adjustment to an

accrued benefit is required on account of any suspension of

benefits if such suspension is permitted under section

203(aX3)(B) of [ERISA]... .” Accordingly, it is clear that

the IRS considers a suspension under section 203(a)(3)(B) not

to constitute a reduction in a participant’s accrued benefit,

contrary to the majority opinion below.

Clearly, the IRS guidance set forth in the Multiemployer

Plan Guidelines is worthy of a degree of deference not

afforded it by the majority below. See Christensen v. Harris

County, 529 U.S. 576, 590-91 (2000) (Scalia J. concurring)

(listing cases where this Court accorded deference to

authoritative agency guidance in various forms).

CONCLUSION

For the foregoing reasons, the NCCMP respectfully urges

the Court to review the decision below.

Respectfully submitted,