Amicus Curiae Brief — Central Laborers' Pension Fund v. Heinz
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No. 02-891
In the Supreme Court of the Gnited States
CENTRAL LABORERS’ PENSION FUND, PETITIONER
THOMAS E. HEINZ AND RICHARD J. SCHMITT, JR.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
BRIEF FOR THE UNITED STATES AS
AMICUS CURIAE SUPPORTING PETITIONER
THEODORE B. OLSON
Solicitor General
Counsel of Record
EILEEN J. O'CONNOR
Assistant Attorne y General
EDWIN S. KNEEDLER
Deputy Solicitor General
JOHN P. ELWOOD
Assistant to the Solicito?
General
KENNETH L. GREENE
JOHN A. DUDECK, JR.
Attorneys
De part» ent of Justice
Washi gton, D LZO5 380-000]
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BEST AVAILABLE COPY
QUESTION PRESENTED
The “anti-cutback” rule in Section 204(g) of the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
1054(g), generally prohibits any amendment of a qualified
pension plan that has the effect of eliminating or reducing an
early retirement benefit attributable to services provided by
a participant before the amendment.
The question presented is whether an amendment to a
multiemployer pension plan that provides for the suspension
of the payment of early retirement benefits during periods
that a participant, after retiring, is again employed in the
same industry is a prohibited elimination or reduction of
benefits when applied to employees who retired before adop-
tion of the amendment.
(I)
TABLE OF CONTENTS
Interest of the United States
Statement
Summary of argument
Argument:
An amendment to a multiemployer pension plan
that expands the types of post-retirement employ-
ment that trigger suspension of benefit payments
within the limits permitted by ERISA Section
203(a)(3)(B) may be applied to participants who
retired before the amendment without violating
CCRC DOGG occcscsccczccnszcscsscsssecccsecasscvecscenseceossvessssscessacocoes
A. The text and structure of ERISA establish
that a plan may apply amended suspension
provisions to current retirees without “reduc-
ing” benefits in violation of Section 204(g) .............
B. The legislative history of the Retirement
Equity Act of 1984 confirms that Congress
did not intend Section 204(g) to prohibit
amendments to disqualifying employment
ND ctrcecenennenscssssnscsnesassnsssemacnnesseqnecnsnsecotnenmessees
C. The Department of the Treasury has long taken
the position that a suspension of benefit pay-
ments authorized by Section 203(a)(3)(B) does
not reduce benefits, and that application of
amended suspension-of-payment provisions
to benefits attributable to service prior to the
amendment does not violate Section 204(g) ...........
D. The court of appeals’ rule would create un-
warranted administrative burdens and harm
(III)
oie
—
IV
TABLE OF AUTHORITIES
Cases: Page
Alaska Dep't of Envtl. Conservation v. EPA,
No. 02-658 (Jan. 21, 2004) 26
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504
(1981) 10, 11, 15, 25
Amato v. Western Union Int'l, 773 F.2d 1402
(2d Cir. 1985) 20
Bellas v. CBS, Inc., 221 F.3d 517 (3d Cir. 2000) .............. 17
Bencivenga v. Western Pa. Teamsters & Employers
Pension Fund, 763 F.2d 574 (3d Cir. 1985) .........0000ese0 20-21
Boeing Corp. v. United States, 537 U.S. 437
ED ccnemmmnnnee 25
Bragdon v. Abbott, 524 U.S. 624 (1998) ........c.cccccccssesesereee 26
Davis v. Michigan Dep't of Treasury, 489 U.S.
ee 9
Fort Halifax Packing Co. v. Coyne, 482 U.S. 1
GREED enensnsseneeene 14
Gade v. National Solid Wastes Mgmt. Ass'n,
Des Gn ED ereeestnentemnseimemmen 10
Great-West Life & Annuity Ins. Co. v. Knudson,
Ce )
Heath v. Varity Corp., 71 F.3d 256 (7th Cir. 1995) .......... 30
Hughes Aircraft Co. v. Jackson, 525 U.S. 432
REE Aes ae OE 6-7, 17, 18
Inter-Modal Rail Employees Ass'n v. Atchison,
Topeka & Santa Fe Ry., 520 U.S. 510 (1997) ............00.. 30
Mead Corp. v. Tilley, 490 U.S. 714 (1989) ..........ccccccceeeeee 17
Smith v. CMTA-IAM Pension Trust, 654 F.2d 650
Ge Ge SED exnenseemensnne 15
Spacek v. Maritime Ass'n, ILA Pension Plan,
134 F.3d 283 (5th Cir. 1998) ...........ccccccceeees 4, 7, 19, 21, 22, 24
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504
Ne 27
V
Cases—Continued: Page
Washington State Dep't of Soc. & Health Servs. v.
Guardianship Estate of Keffeler, 537 U.S. 371
(2003) 27
Statutes and regulations:
- Employee Retirement Income Security Act of 1974,
29 U.S.C. 1001 et seq.:
Tit. I, 88 Stat. 832 (29 U.S.C. 1001 et seq.) 1, 10
29 U.S.C. 1002(2)(A) 16
29 U.S.C. 1002(19) ll
29 U.S.C. 1002(23) 16, 17
29 U.S.C. 1002(24) 12
29 U.S.C. 1053 (§ 203) 11, 18, 20, 21, 23
29 U.S.C. 1053(a) (§ 203(a)) 11, 12, 13
29 U.S.C. 1053(a)(1) ($ 203(a)(1)) 11,18
29 U.S.C. 1053(a)(3) (§ 203(a)(3)) 12, 13
29 U.S.C. 1053(a)(3)(A) 12
29 U.S.C. 1053(a)(3)(B) (§ 203(a)(3)(B)) ............ passim
29 U.S.C. 1053(a)(3)(B)(ii) 13
29 U.S.C. 1053(a(3)(C) 12
29 U.S.C. 1053(aX(3)(D) 12
29 U.S.C. 1053(a)(3)(E (ii) 13
29 U.S.C. 1053(aX(3F) , 12
29 U.S.C. 1053(c)(1)(A) 20
29 U.S.C. 1053(e)(1)(B) 20
29 U.S.C. 1054 (§ 204) 10
29 U.S.C. 1054(b)(1) 10
29 U.S.C. 1054(g) (§ 204(g)) passim
29 U.S.C. 1054(g)(1) (§ 204(g)(1)) .. 2, 28
29 U.S.C. 1054(g)(2) (§ 204(g)(2)) passim
29 U.S.C. 1054(g)(2)(A) 4
29 U.S.C. 1082(¢)(2) 28
29 U.S.C. 1083(b)(4) 28
29 U.S.C. 1132 (§ 502) 4
Tit. II, 88 Stat. 898 1,10
VI
Statutes and regulations—Continued: Page
Tit. IV, 88 Stat. 1003 (29 U.S.C. 1301 et seq.):
29 U.S.C. 1341a(d) 13
29 U.S.C. 1342(d)(1 (Av) 13
29 U.S.C. 1426 12, 20
29 U.S.C. 1441 12, 13, 20
29 U.S.C. 1441 (a) ..... 13
29 U.S.C. 1441(d)(1) 14
Internal Revenue Code (26 U.S.C.):
Section 411(a) .......c.cceseseseeeee 12
a 11
ee ee 11
Section 411(a)(3) ..........ccececersscerereees ssinsaeniaiaaiiimeaiiaaaniias 12
ETERS rae ae Te OCU 2
TERENCE ae ee aE 14
TTT Ne caer a 12
| TTT Ne ae nee 10
a iia initiaited 2, 11, 21, 26, 27
I races ici eaaan inner iienitineeaietaenenes 21
TTT ee ee 4
TE TE TTR eee a ee TA ern TO EEE 14, 20
Retirement Equity Act of 1984, Pub. L. No. 98-397,
Is, TIT iceieeesintiheiihiatinnietniteiiiieabuianlbicaald adaiaasaatonenerits 7
I ona nnsecictaitiahtement asta cacineeteeerints 21
CE 11,17
TEE TTT ENE eI 28
26 C.F.R.:
I 23
SE aon enn eae eo 27
29 C.F.R.:
LRTI ne ete eae NLL eT 20
Hn 19
Reorg. Plan No. 4 of 1978, § 101, 92 Stat. 3799 .............. 1, 2, 24
Miscellaneous:
130 Cong. Rec. (1984):
IG ceenmssesscsssssemenecensssmseremmmnamenassessemenmmemammammaninsssen 22
IED cremesmnsnsenmenneanmmmetniennemmmmmmannsten 22
en
Vil
Miscellaneous—Continued:
Defined Benefit Listing of Required Modifications
and Information Package:
(1984) ‘
(1987)
(2000) <http://www.irs.gov/pub/irs-tege/db_Irm.
pdf>
42 Fed. Reg. (1977):
p. 42,318
p. 42,339
53 Fed. Reg. (1988):
p. 26,050
p. 26,053
65 Fed. Reg. (2000):
Sg yyy :
p. 53,902
H.R. Rep. No. 655, 98th Cong., 2d Sess. (1984) 20...
IR-82-139, 1982 WL 210486 (Dec. 3, 1982) ........ccccessseeeeeeees
I.R.S. Notice 82-23, 1982-2 C.B. 752 ..........csscsseresserseseesersevees
John H. Langbein & Bruce A. Wolk, Pension.and
Employee Benefit Law (3d ed. 2000) .........csesseceevees
Multiemployer Plan Examination Guidelines
(2001) (available at WESTLAW, RIA-IRM
GURTREND cence
1 Richard J. Pierce, Jr., Administrative Law
ee En
Rev. Rul. 81-140, 1981-1 C.B. 180 ..........ccsessssssssscseseseneneeenees
S. Rep. No. 575, 98th Cong., 2d Sess. (1984)...
3 Staff of the Subcomm. on Labor of the Senate
Comm. on Labor and Public Welfare, 94th Cong., _
2d Sess., Legislative History of the Employee Retire-
ment Income Security Act of 1974 (Comm. Print
BPCED cnnsenmsnssssspemmesemenssenenmesnsememnemesnsmmannanans
T.D. 7501, 1977 WL 52383 (Apr. 25, 1977) .......cccesesesereereneee
Webster’s Third New International Dictionary
:
SSS SS BS
In the Supreme Court of the Anited States
No. 02-891
CENTRAL LABORERS’ PENSION FUND, PETITIONER
Vv.
THOMAS E. HEINZ AND RICHARD J. SCHMITT, JR.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
BRIEF FOR THE UNITED STATES AS
AMICUS CURIAE SUPPORTING PETITIONER
INTEREST OF THE UNITED STATES
This case presents the question whether an amendment to
a multiemployer pension plan that permits the plan to sus-
pend payment of early retirement benefits during periods
that a retired participant is again employed in the same
industry constitutes a reduction of benefits prohibited by
Section 204(g) of the Employee Retirement Income Security
Act of 1974 (ERISA), 29 U.S.C. 1054(g). With certain
exceptions, the Secretary of the Treasury has authority to
interpret and administer the provisions of Title I of ERISA
relating to the vesting and accrual of benefits under qualified
pension plans, as well as the corresponding provisions of
Title Il of ERISA relating to the qualification of pension
plans for favorable tax treatment. See Reorg. Plan No. 4 of
1978, § 101, 92 Stat. 3790. That authority encompasses both
(1)
2
» 204.) of ERISA and its counterpart in the Internal
ode (Code), 26 U.S.C. 411(d)(6), which imposes
. requirements. The Secretary of Labor has more
ropera. authority to interpret and administer Title I of
LISA, ineluding Section 203(a)(3)(B), 29 U.S.C.
13) B), and its Code counterpart, 26 U.S.C.
lia 8), which govern the suspension of benefit pay-
luring periods in which retired participants are
employed in certain capacities. See 92 Stat. 3790. The
nited States filed an amicus curiae brief in this case at the
petition stage in response to this Court’s order inviting the
Soheitor General to express the views of the United States.
STATEMENT
Section 204(g) of the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. 1054(g), provides
that an amendment to a pension plan may not decrease the
“accrued benefit” of a pension plan participant, and further
provides that a plan amendment that has the effect of
“eliminating or reducing” an early retirement benefit
attributable to-service before the amendment shall be
treated as a prohibited decrease of accrued benefits. 29
U.S.C. 1054(g)(1) and (2). A separate provision of ERISA,
Section 203(a)(3)(B), 29 U.S.C. 1053(a)(3)(B), authorizes a
multiemployer pension plan to provide for the suspension of
the payment of benefits to retirees during periods in which
they are employed in the same industry, trade or craft, and
geographic area covered by the plan. This case presents the
question whether an amendment to a niultiemployer pension
plan that permits the pian to suspend payment of early re-
tirement benefits during periods that a participant, after
retiring, is again employed in the same industry constitutes
a prohibited reduction of the benefits themselves under
Section 204(g). In the judgment of the United States,
amendments permitting such suspensions or expanding the
3
scope of employment triggering such suspensions may be
applied to current retirees without violating Section 204(g).
The language and structure of ERISA show that Congress
distinguished between temporary suspension of benefit
payments authorized by Section 203(a)(3)(B) and reductions
in the accrued benefits themselves (that is, the participant’s
entitlement under a plan, ordinarily based on his years of
service and compensation history and ordinarily expressed
as a defined periodic payment at normal retirement age).
Accordingly, a suspension of benefit payments permitted by
Section 203(a)(3)(B) does not reduce a participant’s accrued
benefits under the plan. A plan amendment that permits
such a suspension or expands the scope of employment that
will trigger a suspension likewise does not constitute a
prohibited reduction in benefits.
1. Respondents are participants in a multiemployer de-
fined benefit pension plan that is administered by petitioner
Central Laborers’ Pension Fund. Respondents retired in
1996, when they were each 39 years old. Upon retirement,
they began receiving monthly benefit payments under a so-
called “service only” pension (i.e., a pension supplying bene-
fits calculated only on their length of service and supported
entirely by employer contributions). Those payments were
available to plan participants who retired at any age, so long
as they had earned a threshold number of pension credits.
Under the plan, the monthly early retirement benefit
payments were the same as the payments available at
normal retirement age. Thus, the pension provided a “sub-
sidized” retirement benefit, in that payments were not
actuarially reduced to take into account the fact that pay-
ments began earlier and would likely continue over a longer
period. Pet. App. 4a. Under the plan, monthly benefit
payments for persons who retire before age 60 are sus-
pended during periods when the retirees thereafter work in
certain “disqualifying employment.” At the time respon-
4
dents retired, the plan defined “disqualifying employment”
as employment “in a job classification of any type specified
and covered in a collective bargaining agreement or in any
occupation or job classification where contributions are to be
made to the Fund pursuant to a written agreement (either
as a union or non-union construction worker).” Jbid.
After their retirement, respondents obtained jobs as
supervisors in the construction industry. That type of
employment was not then “disqualifying employment” under
the plan, and respondents therefore continued to receive
their monthly payments. Two years after respondents
retired, the plan was amended to expand the definition of
“disqualifying employment” to include (for participants who
retire before age 53) work “in any capacity in the construc-
tion industry (either as a union or non-union construction
worker).” Pet. App. 5a. The plan construed the amended
definition of “disqualifying employment” to encompass the
supervisory work performed by respondents. Accordingly,
after providing respondents notice, the plan suspended their
monthly benefit payments. /bid.
2. Respondents brought this action against the plan
under Section 502 of ERISA, 29 U.S.C. 1132, to obtain
payment of the suspended benefits. Respondents claimed
that the plan amendment defining “disqualifying employ-
ment” to include supervisory work violates Section 204(g) of
ERISA, 29 U.S.C. 1054(g), by “reducing an early retirement
benefit.” 29 U.S.C. 1054(g)(2)(A); 26 U.S.C. 411(d)(6)(B)(i).
The district court ruled in favor of the plan. Pet. App.
33a-45a. Relying on Spacek v. Maritime Ass’n, ILA Pension
Plan, 134 F.3d 283 (5th Cir. 1998), the court held
hat the amendment to the plan did not violate Section 204(g)
because it involved a “suspension of benefit payments”
expressly authorized by ERISA rather than a prohibited
“reduction of benefits.” Pet. App. 37a-38a. The court ex-
plained that, “unlike a reduction in benefits situation, * * *
5
the suspension is temporary in nature and completely under
the control of the retirees who can avoid or terminate
suspension of benefit payments by declining or terminating
disqualifying employment.”’ Jd. at 38a.
3. A divided panel of the court of appeals reversed. Pet.
App. 3a-3la. The court recognized that the “suspension” of
benefit payments during respondents’ employment as super-
visors was only temporary under the plan (ibid.), and
acknowledged that suspension under “a pre-existing plan
provision * * * would not decrease accrued benefits.” Jd.
at 20a; accord id. at 14a n.10. The majority nevertheless
concluded that the amendment permitting suspension of
benefit payments effected a permanent “reduction” of re-
spondents’ total early retirement benefits because respon-
dents would “never recover[] the payments lost during the
employment period.” Jd. at 10a. The majority also noted
that respondents had “lost * * * the right to continue to
work in the industry while receiving monthly benefit
payments” (ibid.), and suggested that the loss of that right
also “was a reduction of early retirement benefits within the
plain meaning of [Section 204(g)(2)].” bid.
Judge Cudahy dissented. Pet. App. 24a-3la. He con-
cluded that an amendment permitting “suspension” of bene-
fit payments authorized by Section 203(a)(3)(B) does not
violate Section 204(g)’s prohibition on the “reduction” of
benefits (id. at 24a-26a), finding that conclusion to be “firmly
support[ed]” (id. at 26a) by the legislative history of Section
204(g)(2) and administrative interpretations of ERISA’s
benefit accrual provisions. Judge Cudahy also reasoned that
“the broadening of the ban on ‘double dipping’ ”—drawing a
pension funded by the construction industry while still
1 The district court also rejected respondents’ contention that peti-
tioner acted arbitrarily and capriciously by construing the amended defini-
tion of “disqualifying employment” to encompass supervisory work. Pet.
App. 38a-45a. That issue is not before the Court.
6
working in that industry—“seems not inequitable,” id. at
25a, because “the suspension of pension payments does not
reduce the recipient’s current income because the temporar-
ily lost pension income is replaced by earned income * * *
from the very same construction industry.” [bid.
SUMMARY OF ARGUMENT
The court of appeals erred in holding that Section 204(g)
of ERISA prohibits applying to current retirees (and
existing benefit accruals) a plan amendment that expands
the types of post-retirement employment that trigger tem-
porary suspension of early retirement benefit payments.
The language and structure of ERISA show that Con-
gress did not consider the temporary suspension of benefit
payments authorized by Section 203(a)(3)(B) to constitute a
“reduc[tion]” in benefits. It follows from that conclusion that
a plan amendment permitting the suspension of benefit pay-
ments under Section 203(a)(3)(B) likewise would not result in
a reduction of benefits prohibited by Section 204(g). ERISA
consistently distinguishes between a “reduction of benefits”
and an authorized “suspension of benefit payments.” In this
case, that distinction reflects the particular purpose served
by the suspension of benefit payments during disqualifying
reemployment under Section 203(a)(3)(B). Congress ex-
pressly authorized plans to suspend benefit payments during
periods of reemployment for the purpose of preventing par-
ticipants from engaging in “double-dipping” through post-
retirement employment in the same industry, so that current
employees will not be required to fund the benefits of re-
tirees while competing against them for wages, and to avoid
the diversion of plan resources from those who have fully
retired to those who continue to earn income by working.
Such suspensions do not constitute reductions in benefits
because, unlike reductions, they are by definition temporary,
and they do not affect the “defined level of benefits” (Hughes
4
Aircraft Co. v. Jacobson, 525 U.S. 432, 440 (1999)) to which a
participant is entitled under the plan. As soon as respon-
dents cease disqualifying employment, their pension pay-
ments will resume at precisely the same defined level as
before. In addition, Congress provided that although such
suspensions result in the permanent loss of individual pay-
ments during the months an employee is engaged in dis-
qualifying employment, the suspension does not effect a
prohibited forfeiture of the participant’s “right to an accrued
benefit.” 29 U.S.C. 1053(a)(3)(B). As the Fifth Circuit
properly concluded, “an amendment authorizing such a sus-
pension does not serve to decrease a participant’s accrued
benefits, and thus cannot violate [Section 204(g)].” Spacek v.
Maritime Ass’n, ILA Pension Plan, 134 F.3d 283, 291 (1998).
The legislative history of the Retirement Equity Act of
1984 (REA), Pub. L. No. 98-397, 98 Stat. 1426, which made
clear that Section 204(g) applies to early retirement benefits,
confirms that understanding. To begin with, REA was
designed simply to clarify that Section 204(g) applies to both
normal retirement benefits and early retirement benefits,
and did not change the basic meaning of the word “benefit.”
Because an amendment expanding the types of disqualifying
employment under a suspension provision consistent with
Section 203(a)(3)(B) would not violate the anti-cutback rule if
it were applied to suspend fully accrued normal retirement
benefits, it would not violate the rule if similarly applied to
early retirement benefits. In addition, the principal House
sponsor of the legislation explicitly stated that it would in no
way affect suspension of benefit payments under Section
203(a)(3)(B).
Two decades of regulatory practice support the conclusion
that application of amended suspension-of-payment pro-
visions to current retirees and existing accruals does not
violate the anti-cutback rule. Regulations issued by the
Department of the Treasury have long provided that plans
8
need not adjust the accrued benefit of participants to account
for suspensions of payments under Section 203(a)(3)(B),
because ERISA deems that the withholding of such benefit
payments does not effect a prohibited forfeiture of those
accrued benefits. In addition, Internal Revenue Service
(Service) documents published as sample plan language for
employers since at least 1984 have said that plan sponsors
may adopt amendments that introduce suspensiom pro-
visions, without indicating that such amendments must be
limited to benefits accruing in the future. Consistent with
those documents, the Service has routinely approved such
plan amendments. The Service recently incorporated that
view into the Internal Revenue Manual, which explicitly
provides that an amendment that suspends benefit payments
“on account of [Section] 203(a)(3)(B) service does not violate
[the anti-cutback rule].” Multiemployer Plan Examination
Guidelines 4.72.14.3.5.3(7) (2001) (available on WESTLAW,
RIA-IRM database).
Finally, the court of appeals’ rule would disadvantage plan
participants, by diverting plan resources from those who
have fully retired, by requiring current employees to
continue to fund the benefits of early retirees while com-
peting with them for wages, and by giving plans the incen-
tive to adopt and retain the most stringent disqualifying
employment provisions. The court of appeals’ rule also
would impose significant administrative burdens on plan
administrators by requiring them to track which suspension
provisions apply to which accruals.
ARGUMENT
AN AMENDMENT TO A MULTIEMPLOYER PEN-
SION PLAN THAT EXPANDS THE TYPES OF POST-
RETIREMENT EMPLOYMENT THAT TRIGGER
SUSPENSION OF BENEFIT PAYMENTS WITHIN
THE LIMITS PERMITTED BY ERISA SECTION
203(a)(3)(B) MAY BE APPLIED TO PARTICI-
PANTS WHO RETIRED BEFORE THE AMEND-
MENT WITHOUT VIOLATING SECTION 204(g)(2)
A. The Text And Structure Of ERISA Establish That A
Plan May Apply Amended Suspension Provisions To
Current Retirees Without “Reducing” Benefits In
Violation Of Section 204(g)
The court of appeals held that “a pension plan amendment
which expands the types of post-retirement employment
that trigger mandatory suspension of early retirement
benefits violates ERISA’s ‘anti-cutback’ rule * * * when
applied to” persons who retired before the date of the
amendment. Pet. App. 3a. Indeed, the court indicated that
its holding extended to the suspension of benefits that are
attributable to service before the date of the amendment,
even if the participant had not yet retired at the time of the
amendment. Jd. at 10a n.6. The court reached those
conclusions based on its understanding of the “plain mean-
ing” of Section 204(g)’s prohibition on “reducing a[] * * *
benefit” (29 U.S.C. 1054(g)(2)), viewing the provision in
isolation. See Pet. App. 7a- 10a. The court failed to consider
Section 204(g) within the context of the “comprehensive and
reticulated” (Great-West Life & Annuity Ins. Co. v. Knud-
son, 534 U.S. 204, 209 (2001)) scheme enacted by Congress.
See generally Davis v. Michigan Dep't of Treasury, 489 U.S.
803, 809 (1989) (“It is a fundamental canon of statutory con-
struction that the words of a statute must be read in their
context and with a view to their place in the overall
10
statutory scheme.”). While the court of appeals’ interpreta-
tion of Section 204(g) “might be plausible were [this Court]
to interpret that provision in isolation, * * * it simply is not
tenable in light of [ERISA’s] surrounding provisions.” Gade
v. National Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 99 (1992)
(opinion of O’Connor, J.). Read in context, Section 204(g)
does not prohibit application of amended suspension-of-pay-
ment provisions to participants who have already retired or
to the benefits of future retirees attributable to service
before the amendment.
1. ERISA prescribes distinct rules governing the accrual
and vesting of pension benefits, which operate to “assur[e]
that employees obtain rights to at least portions of their
normal pension benefits even if they leave their positions
prior to retirement.” Alessi v. Raybestos-Manhattan, Inc.,
451 U.S. 504, 510 (1981).
a. ERISA’s benefit-accrual rules, set forth in Section 204
of the Act, 29 U.S.C. 1054, set minimum requirements for the
rate at which plan participants earn benefits, esseatially to
ensure that accrual is not so “backloaded” (delayed) as to
make the nominal legal right under a plan to a pension of
little value because limited or no benefits have actually
accrued by the time the participant retires. See generally
John H. Langbein & Bruce A. Wolk, Pension and Employee
Benefit Law 153-154 (3d ed. 2000). Section 204(b) requires
that defined benefit plans satisfy one of three alternative
minimum benefit-accrual formulas. See 29 U.S.C. 1054(b)(1);
see also 26 U.S.C. 411(b)(1).2 Section 204(g), at issue here,
2 Title II of ERISA amended various provisions of the Internal
Revenue Code involving the qualification of pension plans for special tax
treatment in order to conform those provisions to the substantive require-
ments established by Title I of ERISA. The Internal Revenue Code thus
contains counterparts to many provisions of Title I of ERISA, including
both Sections 203 and 204. See generally Pension and Employee Benefit
Law, supra, at 91 (noting that tax provisions contained in “Titie II of
ERISA|] tend[} to duplicate the substantive regulation of ERISA’s [Title
a OOOO ee net AMI gal MN ge A me -
— a
11
provides that the benefits a participant has accrued in the
pension plan may not be decreased by an amendment to the
plan. As revised by the Retirement Equity Act of 1984
(REA), Pub. L. No. 98-397, § 301(a), 98 Stat. 1451, Section
204(g) further provides that a plan amendment that has the
effect of eliminating or reducing an early retirement benefit
attributable to service before the amendment “shall be
treated as reducing accrued benefits.” 29 U.S.C. 1054(g)(2);
see also 26 U.S.C. 411(d)(6).
b. ERISA also prescribes minimum requirements for the
“doctrinally distinct” (Pension and Employee Benefit Law,
supra, at 122) subject of the vesting of benefits. ERISA’s
vesting rules, set forth in Section 203 of the Act, 29 U.S.C.
1053, govern the time in which an employee’s claim to
accrued benefits becomes “nonforfeitable,” meaning “uncon-
ditional” and “legally enforceable against the plan.” 29
U.S.C. 1002(19). ERISA’s vesting rules thereby prevent
“practices unduly delaying an employee’s acquisition of a
right to enforce payment of the portion of benefits already
accrued.” Alessi, 451 U.S. at 513. They also restrict the
ability of plans to forfeit that right once it is acquired,
thereby preventing pension benefits from being forfeited as
a sanction “for quitting, for misconduct, or upon discharge.”
Pension and Employee Benefit Law, supra, at 121. Section
203(a) provides that an employee’s rights in his accrued
benefit derived from his own contributions are nonforfeitable
(i.e., vested) immediately as they accrue, and also establishes
alternative minimum schedules for the vesting of accrued
benefits derived from employer contributions. 29 U.S.C.
1053(a)(1) and (2); 26 U.S.C. 411(a)(1) and (2). Section 203(a)
also requires a pension plan to provide that a participant
must have a right to receive his normal retirement benefit
I} on such matters as funding and vesting”); id. at 235-237 (listing Code
sections that are counterparts to ERISA Title I provisions).
12
when he attains normal retirement age, 29 U.S.C. 1053(a);
see also 26 U.S.C. 411(a), which typically is 65 years of age.
29 U.S.C. 1002(24); 26 U.S.C. 411(aX(8). ERISA contains no
analogous rules regarding the vesting of early retirement
benefits. Thus, many plans provide for early retirement
benefits that are subject to various conditions, such as
service conditions that exceed the normal service conditions
for vesting of the accrued benefit, age conditions, and a wide
range of contingencies.
Section 203(a)(3) sets forth several exceptions to these
general rules of nonforfeitability. These exceptions provide
that a participant’s “right to an accrued benefit” derived
from employer contributions “shall not be treated as
forfeitable” solely because the plan provides that the benefit
is not payable or the payment of benefits is suspended or
reduced in specified circumstances. See 29 U.S.C. 1053(a)(3).
The exception at issue here, Section 203(a)(3)(B), provides
that a right to accrued benefits derived from employer con-
tributions shall not be treated as forfeitable if the plan
provides that “the payment of benefits is suspended for
such period as the [participant] is employed, subsequent to
the commencement of payments of such benefits,” during
periods of specified employment.’ 29 U.S.C. 1053(a)(3)(B).
For single-employer plans, disqualifying employment is
limited to reemployment for the same company. For multi-
3 In addition to authorizing suspension of benefit payments during
periods of disqualifying employment, Section 203(a)(3) also provides that a
right to an accrued benefit shall not be treated as forfeitable if benefits are
not paid: (1) because of the participant’s death (29 U.S.C. 1053(a)(3)(A));
(2) because of a retroactive plan amendment on account of substantial
business hardship (29 U.S.C. 1053(a)(3)(C)); (3) because of the participant’s
withdrawal of his mandatory employee contributions from a plan that
provides for such contributions (29 U.S.C. 1053(a)(3)(D)); or (4) because
the plan is amended to reduce benefits or payment of benefits is sus-
pended under 29 U.S.C. 1426 and 1441 as part of the termination of a
multiemployer plan (29 U.S.C. 1053(a)(3)(F)); see also 26 U.S.C. 411(a)(3).
|
13
employer plans of the sort at issue here, receipt of benefit
payments may be conditioned on the participant’s refraining
from employment “in the same industry, in the same trade or
craft, and the same geographic area covered by the plan.” 29
U.S.C. 1053(a)(3)(B)ii). Section 203(a)(3)(B) authorizes the
Secretary of Labor to prescribe such regulations as may be
necessary to carry out its purposes.
2. The language and structure of ERISA show that
Congress did not consider the temporary suspension of bene-
fit payments authorized by Section 203(a)(3) to constitute a
“decrease” or “reduction” in the participant’s accrued bene-
fits under the plan, which will once again be paid to him if he
leaves disqualifying employment. Those provisions likewise
show that a plan amendment permitting such a suspension of
payments does not reduce the participant’s benefits in vio-
lation of Section 204(g). ——s
a. The language of ERISA consistently distinguishes be-
tween a “reduction of benefits” and a “suspension of benefit
payments.” See, e.g., 29 U.S.C. 1341a(d) (plan sponsor of
terminated plan “shall reduce benefits and suspend benefit
payments in accordance with [29 U.S.C.] 1441”) (emphasis
added); 29 U.S.C. 1342(d)(1A)(v) (providing trustee ap-
pointed to terminate plan with power “in the case of a multi-
employer plan, to reduce benefits or suspend benefit
payments under the plan”) (emphasis added). Several pro-
visions also specifically distinguish between an authorized
suspension of benefit payments and amendments undertaken
to reduce benefits. Indeed, one such provision appears in
Section 203(a) itself. See 29 U.S.C. 1053(a)(3)(E)(ii) (stating
that a participant’s right to an accrued benefit under a multi-
employer plan shall not be treated as forfeitable solely
because “the plan is amended to reduce benefits under
section 1425 or 1441 of this title, or * * * benefit payments
under the plan may be suspended under section 1426 or 1441
of this title”) (emphasis added); see also 29 U.S.C. 1441(a)
14
(providing that in certain situations involving terminated
benefit plans, the plan sponsor “shall amend the plan to
reduce benefits, and shall suspend benefit payments, as
required by this section”) (emphasis added); 26 U.S.C.
411(a)(3)(F). The text of ERISA thus reflects that Congress
drew a distinction between a reduction of a participant’s
benefits as calculated under the rules of the plan and an
authorized suspension of benefit payments to a participant
and treated them differently. Cf. Fort Halifax Packing Co.
v. Coyne, 482 U.S. 1, 8 (1987) (“The words ‘benefit’ and ‘plan’
are used separately throughout ERISA, and nowhere in the
statute are they treated as the equivalent of one another.
Given the basic difference between a ‘benefit’ and a ‘plan,’
Congress’ choice of language is significant in its pre-emption
of only the latter.”).
The court of appeals found this textual distinction
insignificant. In its view, although the words had distinct
meanings in some applications, that did not mean that a plan
amendment permitting suspensions of benefit payments
would not “reduce benefits” within the meaning of Section
204(g). Pet. App. 12a-14a; see also Br. in Opp. 16. However,
there is nothing in the text of ERISA to suggest that an
amendment respecting authorized suspension of benefit
payments is to be treated as a reduction of accrued benefits
within the meaning of Section 204(g). Indeed, the only
provision of ERISA of which we are aware that speaks of
suspension of benefit payments having the effect of a
- reduction does not speak of a reduction of benefits—the
language used by 204(g)(2)—but a reduction of “the sum of
such payments.” 29 U.S.C. 1441(d)(1) (emphasis added); see
also 26 U.S.C. 418E(a) (payments shall be suspended “to the
extent necessary to reduce the swum of such payments and
the payments of such basic benefits”) (emphasis added).
b. This distinction ERISA draws between reductions in
benefits and suspension of benefit payments is not merely a
15
semantic one. In this case, for example, it reflects the special
purposes served by the suspension of benefit payments per-
mitted by Section 203(a)(3)(B). Congress expressly author-
ized the suspension of benefit payments during periods of
reemployment to prevent “double-dipping” through post-
retirement employment in the same industry, trade or craft,
and geographic area. As Congress clearly recognized, such
“double-dipping” disadvantages the employees who must
continue to fund the benefits of retirees, while competing
with them for the same wages; indeed, retirees may be able
to undercut active employees because they can afford to
work at lower salaries because of their pension income. See,
e.g., 3 Staff of the Subcomm. on Labor of the Senate Comm.
on Labor and Public Welfare, 94th Cong., 2d Sess.,
Legislative History of the Employee Retirement Income
Security Act of 1974, at 4376 (Comm. Print 1976) (ERISA
Leg. Hist.) (statement of Sen. Williams); id. at 4772 (state-
ment of Sen. Javits); see also Smith v. CMTA-IAM Pension
Trust, 654 F.2d 650, 658 n.9 (9th Cir. 1981). Double-dipping
also diverts plan resources from those who have fully retired
to those who continue to earn income by working. Cf. Alessi,
451 U.S. at 514 (noting that offsetting payments to a
participant also receiving Social Security benefits “would
advantage all participants [and) * * * would permit a
higher average pension payout for each participant”). To
permit plans to prevent double-dipping, Congress
specifically provided that they may suspend benefit
payments during periods of disqualifying employment
without the suspension constituting a prohibited forfeiture of
the benefits the participant has accrued under the plan.
Moreover, the congressional debates preceding enactment of
ERISA evinced a desire that “a plan’s provisions concerning
suspension [could] take into account” various factors about
industrial conditions that necessarily are not static: “the
particular facts and circumstances of the industry; the
16
objectives of industrial stability; [and] the conditions of
employment and earnings in the industry.” 3 ERISA Leg.
Hist. 4669 (statement of Rep. Dent). These considerations
suggest that Congress envisioned that suspension provisions
would be subject to amendment.
ce. In addition, the language Congress chose in Section
203(a)(3)(B) and Section 204(g) reflects two fundamental
differences between a “suspension of benefit payments” and
a “reduction of benefits.” First, a “suspension”—like the
suspension at issue here—ordinarily is temporary (see
Webster’s Third New International Dictionary 2303 (1993)
(“temporary withholding”)), while a “reduction” has no such
temporal limitation and is typically permanent or of
indefinite duration. See id. at 1905. The court of appeals
considered the temporary suspension at issue here to be a
permanent reduction only because it overlooked the second
fundamental difference—that between an “accrued benefit”
and a “benefit payment”—and thus erroneously held that
the temporary suspension “reduce[d] the participant’s total
early retirement benefits by an amount determined by how
long the disqualifying work continues.”* Pet. App. 10a.
4 The court of appeals also erred to the extent it held that respondents
had lost the “right” to continue to work in the construction industry while
receiving retirement payments from that industry. Pet. App. 10a. To
begin with, such a “right” would not be within the scope of benefits
ERISA was designed to regulate or the ordinary understanding of
ERISA benefits. See 29 U.S.C. 1002(2)(A) (stating that an “employee
pension benefit plan” is designed to “provide[] retirement income to em-
ployees”), 1002(23) (defining “accrued benefit”). In any event, respon-
dents lacked a statutorily protected right to receive such payments while
working, for the plan retained the right to amend its “disqualifying
employment” provision in the manner authorized by Section 203(a)(3)(B).
See J.A. 37. Since the plan’s amendment provision authorizes the plan to
adopt a “disqualifying employment” provision under which “the payment
of benefits is suspended” during periods of specified post-retirement
employment, the adoption of such a provision does not result in the loss of
any legally cognizable “right” to work in disqualifying employment while
receiving benefits or the loss (or reduction) of an “accrued” benefit.
17
Contrary to the court of appeals’ belief,-a participant’s
“accrued benefit” under a plan is not defined as the total sum
of the payments he or she actually receives over the course
of retirement. Rather, a participant’s “accrued benefit” rep-
resents his available entitlement under the plan (ordinarily
based on the participant’s years of service and compensation
history), which is typically expressed in terms of a defined
level of periodic payments at normal retirement age. See 29
U.S.C. 1002(23) (defining “accrued benefit” as “the in-
dividual’s accrued benefit determined under the plan and
* * * expressed in the form of an annual benefit com-
mencing at normal retirement age”); see also Hughes Air-
craft Co. v. Jacobson, 525 U.S. 432, 440 (1999) (describing
“accrued benefits” as “a right to a certain defined level of
benefits”); cf. Mead Corp. v. Tilley, 490 U.S. 714, 717 (1989)
(stating that a defined benefit plan provides “a fixed level of
benefits”).
d. When Congress amended Section 204(g) as part of the
REA to make clear that the provision applies to early retire-
ment benefits, it did so by prohibiting plan amendments
having the effect of eliminating or reducing an early retire-
ment “benefit” (rather than “accrued benefit”), see REA
§ 301(a), 98 Stat. 1451; 29 U.S.C. 1054(g)(2). That difference
in terminology, however, reflects no difference in substance,
because the amendment was simply added to address
uncertainty about whether early retirement benefits are
accrued benefits. See pp. 20-21, infra. And Congress
explicitly equated “benefits” and “accrued benefits” for these
purposes by providing that an amendment that has the effect
of reducing an early retirement benefit will be treated as
reducing “accrued benefits.” 29 U.S.C. 1054(g)(2). The
amendment thus did not expand the basic scope of what
Section 204(g) protects. Cf. Bellas v. CBS, Inc., 221 F.3d
517, 523 (3d Cir. 2000) (while “Congress did modify section
204(g) in [the REA] to the end that early retirement benefits
18
and retirement-type subsidies were defined as being accrued
for purposes of ERISA’s anti-cutback provisions,” “the
definition of an accrued benefit has not been modified”).
e. A benefit payment is a single periodic (typically
monthly) payment. The nonreceipt of periodic payments
because of a suspension authorized by Section 203(a)(3)(B)
does not result in a “reduction of benefit” if the participant’s
entitlement to “a certain defined level of benefits” (Hughes
Aircraft, 525 U.S. at 440) remains the same under the plan.”
Under that understanding, suspension of respondents’ bene-
fit payments pursuant to Section 203(a)(3)(B) does not re-
duce their benefits. As soon as respondents cease their dis-
qualifying employment—either by fully retiring, by entering
a different industry or trade, or by leaving central Illinois
—their pension payments will resume at precisely the same
defined level as before.°
3. The text of Section 203 itself confirms that suspension
of benefit payments during periods of disqualifying employ-
ment does not reduce a participant’s accrued benefit—and
that an amendment permitting such suspensions does not do
so either. Although the suspension of benefit payments
during periods of disqualifying employment results in the
° Thus, for example, if two participants of the same age and com-
pensation history had the same years of service with a company, and
therefore had the same “accrued benefit,” their “benefits” would be
considered the same although one had had payment of benefits suspended
during several months of disqualifying employment. By the same token,
the two employees would have the same “benefits” if one employee died
shortly after retirement and ceased receiving payments and the other
lived for thirty years after retirement.
6 Indeed, if the pension plan at issue here involved sufficient employee
contributions, instead of exclusively employer contributions, the benefit
payments would increase slightly. Because the participant retains an
absolute entitlement to recover his own contributions, see 29 U.S.C.
1053(a)(1), future payments would have to be increased to offset any loss
of payments derived from his own contributions during the period of
suspension.
19
plan “permanently withhold[ing}” payments that otherwise
would have been made during those months, I.R.S. Notice
82-23, 1982-2 C.B. 752; accord 29 C.F.R. 2530.203-3(d)(1)
(payment is “withheld permanently”), Section 203(a)(3)(B)
explicitly provides that the loss of those payments because of
disqualifying employment will not be deemed to effect a for-
feiture of a participant’s “right to an accrued benefit” (29
U.S.C. 1053(a)(3)(B)). Thus, Section 203(a)(3)(B) treats the
“accrued benefit” as remaining constant, and identifies the
potential issues resulting from a suspension of payments as
one of forfeiture of the right to that accrued benefit. Thus,
the text of Section 203(a)(3)(B) itself establishes that a parti-
cipant’s accrued benefit is not reduced by a suspension of
benefit payments during periods of disqualifying employ-
ment. It follows that “an amendment authorizing such a
suspension does not serve to decrease a participant’s accrued
benefits, and thus cannot violate [Section 204(g)].” Spacek,
134 F.3d at 291; accord Pei. App. 30a (Cudahy, J., dissenting)
(“To change the rules governing suspensions is merely to
create a suspension with a little different design than an
earlier one. The rules addressing the consequences of in-
voking a suspension necessarily encompass changes leading
to a new form of suspension.”). And because an amendment
expanding the types of disqualifying employment under a
suspension provision censistent with Section 203(a)(3)(B)
would not violate the anti-cutback rule of Section 204(g) if it
were applied to suspend fully accrued normal retirement
benefits, it would not violate the rule if similarly applied to
early retirement benefits.’ As set forth more fully below,
7 Respondents contend that under this reading of ERISA, “a plan
would be entitled to promulgate an amendment ‘suspending’ all early
retirement benefits for 18 months, without violating the cutback rule.”
Br. in Opp. 15. Respondents’ concerns about a lack of protection against
such an amendment are unfounded. ERISA and its implementing
regulations explicitly authorize suspension of benefit payments under only
20
giving early retirement benefits greater protection than
normal retirement benefits would be contrary to Congress’s
plain intent in enacting the REA.
Moreover, Section 203 contains its own prohibition on
certain types of plan amendments that affect benefit vesting
that parallels the protection of Section 204(g) for benefit
accrual. Section 203(c) prohibits plan amendments that alter
vesting schedules and that have the effect of reducing parti-
cipants’ nonforfeitable percentage of accrued benefits, unless
the amendment gives participants the option of having their
nonforfeitable percentage calculated under the pre-amend-
ment vesting schedule. See 29 U.S.C. 1053(c)(1)(A) and (B).
Because Section 203 contains its own limitation on plan
amendments—which does not apply ta amendments pro-
viding for suspension of payments as permitted by Section
203(a)(3)(B)—there is particular reason to conclude that
amendments involving suspension-of-payment provisions are
not governed by a separate limitation on plan amendments
contained in another section of ERISA addressing the dis-
tinct subject of the accrual of benefits.
B. The Legislative History of the Retirement Equity Act
of 1984 Confirms That Congress Did Not Intend
Section 204(g) To Prohibit Amendments To Dis-
qualifying Employment Provisions
Under ERISA as originally enacted, it was uncertain
whether early retirement benefits were “accrued benefits.”
See, e.g., Amato v. Western Union Int'l, 773 F.2d 1402, 1407,
1414 (2d Cir. 1985) (holding that early retirement benefits
are “accrued” for purposes of anti-cutback rule); Bencivenga
v. Western Pa. Teamsters & Employers Pension Fund, 763
F.2d 574, 577-578 (3d Cir. 1985) (“Case law also supports the
two circumstances—during periods of disqualifying employment and
during plan termination or insolvency. See, e.g., 29 U.S.C. 1426, 1441; 26
U.S.C. 418E(a); 29 C.F.R. 2530.203-3.
21
conclusion that early retirement benefits are not accrued
benefits under ERISA.”). It was also unclear, therefore,
whether Section 204(g) as originally enacted prevented plans
from decreasing early retirement benefits. See Pension and
Employee Benefit Law, supra, at 164. In 1984, Congress
enacted the Retirement Equity Act, which made clear that
early retirement benefits are protected by Section 204(g)
against reduction by plan amendment. See REA § 301, 98
Stat. 1451. The REA added language to both ERISA
Section 204(g) and its Internal Revenue Code counterpart
(26 U.S. 411(d)(6)) providing that a plan amendment that has
the “effect of eliminating or reducing an early retirement
benefit or a retirement-type subsidy * * * with respect
to benefits attributable to service before the amendment
shall be treated as reducing accrued benefits.” 29 U.S.C.
1054(g)(2) (emphasis added); see also 26 U.S.C. 411(d)(6)(B).
As the language of the provision itself indicates, the
amendment was enacted for the purpose of affording early
retirement benefits “the same form of protection from reduc-
tion by amendment accorded to accrued benefits.” Spacek,
134 F.3d at 291. The Committee Reports emphasized that
the new language of Section 204(g)(2) merely “clarifies the
scope of the prohibition against [benefit] decreases” and
“would not affect the application of any other provision of
the Code.” S. Rep. No. 575, 98th Cong., 2d Sess. 28 (1984);
accord H.R. Rep. No. 655, 98th Cong., 2d Sess. 25-26 (1984)
(stating that Section 204(g)(2) “codifies present law”).
Nothing in the REA suggests an intent to intrude upon the
nonforfeitability rules and exceptions that Congress had
already established in Section 203, or to depart from the
understanding that a suspension of benefit payments pur-
suant to a plan provision authorized by Section 203(a)(3)(B)
does not result in a decrease of accrued benefits. As the
Spacek court concluded, because the amendment of a dis-
qualifying-employment provision of a plan permitted by
22
Section 203(a)(3)(B) does not abridge the “accrued benefits”
of plan participants with respect to normal retirement bene-
fits, “then it also cannot violate [Section 204(g)] if applied to
early retirement benefits.” 134 F.3d at 291.
Representative William Clay, the “principal sponsor” (130
Cong. Rec. 23,488 (1984)) of the House bill that embodied the
amendment to Section 204(g), made this point clear during
the congressional debates (id. at 23,487 (emphasis added)):
I wish to further clarify the anti cutback provisions of
Section 301 of the bill. Those provisions are not intended
to apply to benefit changes authorized by existing law.
* * * Nor do those provisions in any way apply to or
affect the provisions of ERISA section 203(a)(3)(B) and
[Internal Revenue Clode section 411(a)(3)(B) relating to
the suspension of benefits for postretirement employ-
ment, including the authorization for multiemployer
plans to adopt stricter rules for the suspension of
subsidized early retirement benefits.
As the court emphasized in Spacek, Representative Clay’s
statement indicates that Section 203(a)(3)(B) of ERISA
“authorizes the very type of [plan] amendment at issue in
this case [for employees who retire under a qualified plan],
and * * * [Section 204(g)] in no way limits this authoriza-
tion.” 134 F.3d at 290.
The court of appeals found Representative Clay’s remarks
to be “ambiguous at best” (Pet. App. 16a) and discounted
them because it could identify no other support in the
legislative history for Representative Clay’s explanation of
the amendment. Jbid. As the dissent below correctly ob-
served, however, the “effort of the majority to explain away
this comment is unconvincing” (id. at 26a), because the
“legislative history * * * fits so closely with the interpreta-
tion founded on plain meaning.” Ibid. Respondents likewise
err in contending (Br. in Opp. 18) that Representative Clay’s
23
statements “merely stressed * * * that REA did not alter
Section 203’s distinction between what forms of suspensions
may be promulgated for ‘normal’ retirement benefits as
compared to early-retirement benefits.” There would have
been no need for Representative Clay to make a statement
having the meaning that respondents attribute to it. By its
own terms, Section 204(g)(2) applies only to “plan amend-
ment{s]” (29 U.S.C. 1054(g)(2)), and would have no applica-
tion to an unamended suspension provision of a plan that
differentiated between suspension of normal retirement
benefits and early retirement benefits.
C. The Department Of The Treasury Has Long Taken
The Position That A Suspension Of Benefit Payments
Authorized By Section 203(a)(3)(B) Does Not
Reduce Benefits, And That Application Of Amended
Suspension-Of-Payment Provisions To Benefits Attri-
butable To Service Prior To The Amendment Does
Not Violate Section 204(g)
1. More than two decades of regulatory practice supports
the conclusion that application of amended suspension-of-
payment provisions to current retirees and existing accruals
does not violate the anti-cutback rule. Since 1977, the
Department of the Treasury has taken the position in formal
regulations that “[nJo adjustment to an accrued benefit is
required on account of any suspension of benefits if such
suspension is permitted under [ERISA] § 203(a)(3)(B).” 42
Fed. Reg. 42,318, 42,339 (1977); 26 C.F.R. 1.411(c¢)-1(f).°
8 Although this regulation is codified in Title 26 of the Code of Federal
Regulations, the Department of the Treasury has made clear that its regu-
lations implementing the Internal Revenue Code provisions of ERISA
also apply to the corresponding sections in Title I of ERISA. See, e.g., 53
Fed. Reg. 26,050, 26,053 (1988) (“The regulations under section 411 are
also applicable to provisions of Title I [of ERISA).”); see also 65 Fed.
Reg. 53,901, 53,902 (2000) (“Treasury regulations issued under section
411(d)(6)(B) of the Code apply as well for purposes of Section 204(g)(2) of
24
Accord T.D. 7501, 1977 WL 52383 (Apr. 25, 1977) (explaining
the addition of paragraph (f)); Rev. Rul. 81-140, 1981-1 C.B.
180 (stating that when a retiree is employed “in section
203(a)(3)(B) service, the nonforfeitability requirements are
not violated even though actuarial adjustments to the
employee’s accrued benefit in a defined benefit plan are not
made”). The Department has explained that no such adjust-
ment is required in the case of suspensions of benefit
payments under Section 203(a)(3)(B) because under the text
of ERISA, “a plan may permanently withhold a participant’s
pension payment (without a prohibited forfeiture [of bene-
fits} resulting) for any month in which the participant is
employed in ‘section 203(a)(3)(B) service.’” I.R.S. Notice 82-
23, supra; accord [R-82-139, 1982 WL 210486 (Dec. 3, 1982).
As the Fifth Circuit correctly concluded in Spacek, “because
the reduction in total benefits paid over the lifetime of the
plan participant as a result of the suspension need not be
accounted for actuarially in computing the participant’s
accrued benefit under [29 U.S.C.] § 1054(c)(3),” an amend-
ment authorizing such a suspension “does not serve to de-
crease the participant’s accrued benefits, and thus cannot
violate [Section 204(g)].” 134 F.3d at 291.
The court of appeals majority found that Treasury regula-
tion unpersuasive. See Pet. App. 17a-2la. In the court’s
view, it is “irrelevant” (id. at 19a) that suspension of normal -
retirement benefit payments during periods of disqualifying
employment is not deemed to affect accrued benefits,
because under Section 204(g)(2), amendments that have the
effect of reducing early retirement benefits shall “be treated
as reducing accrued benefits.” Jd. at 18a; see also Br. in Opp.
18-19. The court erred. First, the court failed to appreciate
the import of the regulation, which is that because the mere
ERISA.”). See generally Reorganization Plan No. 4 of 1978, § 101, 92 Stat.
3790.
25
suspension of benefit payments 1s not deemed to cause a
reduction in the accrued benefit of a participant under the
plan, an amendment permitting such a suspension would not
result in a “reduction.” Congress presumably was aware of
this regulation when it enacted the REA in 1984, and
expected that a suspension of early retirement benefit
payments would no more constitute a reduction in such
“benefits” than a suspension of normal retirement benefit
payments would result in a decrease in “accrued benefits.”
Cf. Boeing Corp. v. United States, 537 U.S. 437, 457 (2003)
(Congress’s failure to reject interpretation of statute set
forth in regulations during subsequent enactments “is
persuasive evidence that Congress regarded that regulation
as a correct implementation of its intent.”); Alessi, 451 U.S.
at 519 (noting that “when it enacted ERISA, Congress knew
of the IRS rulings permitting integration and left them in
effect”). Second, the court of appeals’ reading would have
the perverse result of giving early retirement benefits
protection under Section 204(g) superior to that granted
normal retirement benefits, contrary to Congress’s clear
intent of merely extending them equivalent protection.
2. In addition, the Department of the Treasury’s practice
for nearly twenty years has reflected its view that plan
amendments that introduce suspension provisions or expand
the scope of disqualifying post-retirement employment
under Section 203(a)(3)(B) can be applied to benefits attri-
butable to service prior to the amendment. The Internal
Revenue Service (Service) periodically publishes a Listing
of Required Modifications (LRM) setting forth “samples of
plan provisions that have been found to satisfy cer-
tain specific requirements of the Internal Revenue Code,” so
as “to assist sponsors [of pension plans] who are drafting or
redrafting plans to conform to applicable law and
regulations.” Defined Benefit Listing of Required Modifica-
tions and Information Package cover page (2000)
<http://www.irs.gov/pub/irs-tege/db_Irm.pdf>. Since at least
1984, the Service has explicitly stated in its LRMs that
existing plans may adopt a suspension-of-payment provision
under Section 203(a)(3)(B), without indicating that such an
amendment must be limited to new plans or new accruals.
See, e.g., id. at 111; Defined Benefit Listing of Required
Modifications and Information Package 44-46 (1987); De-
fined Benefit Listing of Required Modifications and Infor-
mation Package 44-45 (1984). The Service reports that
during that period, it has consistently approved plan amend-
ments that introduced suspension provisions or expanded
the scope of disqualifying employment without requiring the
plans to apply those provisions to new accruals only.
More recently, and after notice and comment, the Internal
Revenue Service incorporated its longstanding view into its
Multiemployer Plan Examination Guidelines, a manual that
sets forth technical guidance for Service field personnel. The
Guidelines state that “[aJn amendment that reduces IRC
411(d)(6) protected benefits on account of [Section]
203(a)(3)(B) service does not violate IRC 411(d)(6).” Multi-
employer Plan Examination Guidelines 4.72.14.3.5.3(7) (2001)
(available on WESTLAW, RIA-IRM database). This posi-
tion is entitled to deference as the considered judgment of
the agency charged with administering and implementing
both Section 204(g), its Code counterpart, 26 U.S.C.
411(d)(6), and most of the other accrual and vesting pro-
visions of ERISA, based on its long experience and
confirmed after public notice and comment. The “‘well-
reasoned views’ of an expert administrator rest on ‘a body
of experience and informed judgment to which courts and
litigants may properly resort for guidance.” Alaska Dep’t
of Envtl. Conservation v. EPA, No. 02-658 (Jan. 21, 2004),
slip op. 21 (quoting Bragdon v. Abbott, 524 U.S. 624, 642
(1998)); id. at 22 (“Cogent ‘administrative interpretations
. . not [the] products of formal rulemaking . . . neverthe-
27
less warrant respect.”) (quoting Washington State Dep't of
Soc. & Health Servs. v. Guardianship Estate of Keffeler, 537
U.S. 371, 385 (2003)) (alterations in original). Such views
warrant “serious consideration” because of the agency’s
“unique advantages” stemming from its “day-to-day efforts
to implement its statutory mission.” 1 Richard J. Pierce, Jr.,
Administrative Law Treatise § 6.4, at 334 (4th ed. 2002).
3. The court of appeals erred (Pet. App. 21a) in
concluding that a Treasury regulation implementing the
Internal Revenue Code counterpart of the anti-cutback rule
(26 U.S.C. 411(d)(6)) supports its conclusion in this case.
That regulation specifies that a plan may not be amended to
add new conditions that restrict the availability of a “section
411(d)(6) protected benefit that has already accrued.” 26
C.F.R. 1.411(d)-4 Q&A-7. By its own terms, however, that
regulation has no relevance to plan amendments that pro-
vide for suspension of benefit payments in accordance with
Section 203(a)(3)(B). Because a participant does not have a
right to be free from a post-retirement employment-dis-
qualification provision that (as in this case) conforms to
Section 203(a)(3)(B), he is not “protected” against the re-
sulting suspension of benefit payments. The regulation on
which the court of appeals relied therefore is simply
inapplicable to this case. Moreover, the Service does not
construe this regulation to prohibit plan amendments per-
mitting suspension of benefit payments under Section
203(a)(3)(B), but rather, as explained above, has explicitly
concluded that amendments permitting suspension of pay-
ments “on account of 203(a)(3)(B) service does not violate
{the anti-cutback rule].” Multiemployer Plan Examination
Guidelines 4.72.14.3.5.3(7). Cf. Thomas Jefferson Univ. v.
Shalala, 512 U.S. 504, 512 (1994) (“We must give substantial
deference to an agency’s interpretation of its own regula-
tions.”).
D. The Court Of Appeals’ Rule Would Create Unwar-
ranted Administrative Burdens And Harm Plan Parti-
cipants
Because plan investments, retirement rates, and industry
conditions are not static, trustees of multiemployer pension
plans historically have been permitted to revise the terms of
disqualifying-employment provisions to promote industrial
stability and the actuarial soundness of pension plans. See
Br. Amicus Curiae for Nat’] Coord. Comm. for Multi-
employer Plans at Pet. Stage (NCCMP Cert. Amicus Br.) 2-
8, 9-12. Thus, for example, plans have amended the
definition of “disqualifying employment” to relax restrictions
on reemployment when unemployment rates in an industry
are low to encourage retirees to return to the workforce, and
to reinstate more restrictive suspension provisions during
economic downturns, when active workers are having dif-
ficulty finding employment and plan investments are
performing more poorly. The traditional flexibility to make
such adjustments has permitted plan trustees better to
control the financial soundness of the plan on whose solvency
all participants depend, in the face of underperforming plan
investments or reductions in plan funding stemming from
declining employment. Plan boards of trustees—which
under federal law must be composed equally of repre-
sentatives of labor and management, see 29 U.S.C.
186(c)(5)(B)—are well situated to evaluate current circum-
stances and tailor plan amendments to address them fairly.’
See generally NCCMP Cert. Amicus Br. 5-6.
® The court of appeals suggested (Pet. App. 11a n.6) there was no need
for such flexibility, saying that Congress afforded plans all the relief
necessary by permitting plan amendments that reduce accrued benefits in
the case of “substantial business hardship.” 29 U.S.C. 1082(c)(2); see 29
U.S.C. 1054(g)(1). However, amendments are possible under the “sub-
stantial business hardship” provision only when the plan is on the verge of
insolvency. See 29 U.S.C. 1083(b)(4). There is no reason to believe that
The court of appeals’ construction of Section 204(g) would
impose unjustified burdens on both multiemployer plan
participants and administrators by eliminating plans’ long-
standing flexibility to adjust reemployment restrictions in
light of local economic conditions and the state of plan
finances. Affirmance of the court of appeals’ decision would
have the effect of locking current reemployment restrictions
in place for all benefits attributable to service prior to the
amendment, and would on balance divert plan resources
away from future retirees and persons who have fully
retired in favor of current retirees who are still earning
income by working within the same industry. The diversion
of resources is particularly difficult to justify where, as here,
participants essentially have “retired” into a job promotion,
moving from employment as a construction worker into a
supervisory position. Furthermore, because the court of
appeals’ rule essentially would prohibit changes that affected
already accrued benefits (regardless of whether the partici-
pant had already retired), see Pet. App. 10a n.6, it would be
extremely burdensome for pension plans that do amend their
suspension provisions to track which suspension provisions
apply to which accruals.
A holding that plans lack the flexibility to apply an
amendment to suspension provisions to benefits of current
retirees and other benefits attributable to service prior to
the amendment would in the long run disadvantage workers,
because plans would have incentives to adopt the most
restrictive reemployment conditions at the outset to avoid
administrative burdens and potentially crippling outlays. As
this Court noted in the related context of employee welfare
benefit plans, “(giving [funds] th{e] flexibility [to amend
Congress intended to reserve the flexibility to use a mechanism with
relatively mild effects on retirees who necessarily are currently employed
for situations in which there is a prospect that a multiemployer plan will
fail and adversely affect tens of thousands of employees and retirees.
30
their plans] also encourages them to offer more generous
benefits at the outset, since they are free to reduce benefits
should economic conditions sour. If employers were locked
into the plans they initially offered, ‘they would err initiaily
on the side of omission.’” Jnter-Modal Rail Employees
Ass’n v. Atchison, Topeka & Santa Fe Ry., 520 U.S. 510, 515
(1997) (quoting Heath v. Varity Corp., 71 F.3d 256, 258 (7th:
Cir. 1995)).
CONCLUSION
The judgment of the court of appeals should be reversed.
Respectfully submitted.
THEODORE B. OLSON
Solicitor General
EILEEN J. O’CONNOR
Assistant Attorney General
EDWIN S. KNEEDLER
Deputy Solicitor General
JOHN P. ELWooD
Assistant to the Solicitor
General
KENNETH L. GREENE
JOHN A. DUDECK, JR.
Attorneys
JANUARY 2004
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