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

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(1!) “Sipreme Court us. ‘|

No. 02-891 FILED

| a i 2004

IN THE | OFFICE OF THE CLERK

Supreme Court of the United States

CENTRAL LABORERS’ PENSION FUND,

Petitioner,

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

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

BRIEF FOR THE NATIONAL COORDINATING

COMMITTEE FOR MULTIEMPLOYER PLANS, THE

LABORERS’ INTERNATIONAL UNION OF NORTH

AMERICA, THE MECHANICAL CONTRACTORS

ASSOCIATION OF AMERICA, THE UNITED

ASSOCIATION OF JOURNEYMEN AND

APPRENTICES OF THE PLUMBING AND PIPE

FITTING INDUSTRY OF THE UNITED STATES AND

CANADA, THE SHEET METAL AND AIR

CONDITIONING CONTRACTORS’ NATIONAL

ASSOCIATION, THE SHEET METAL WORKERS’

INTERNATIONAL ASSOCIATION, THE NATIONAL

ELECTRICAL CONTRACTORS ASSOCIATION AND

THE INTERNATIONAL BROTHERHOOD OF

ELECTRICAL WORKERS

AS AMICI CURIAE SUPPORTING PETITIONER

DONALD J. CAPUANO

SALLY M. TEDROW *

JOHN M. MCINTIRE

O* DONOGHUE & O° DONOGHUE LLP

4748 Wisconsin Avenue, NW

Washington, DC 20016

* Counsel of Record (202) 362-0041

Counsel for Amici Curiae National Coordinating Committee

for Multiemployer Plans, et al.

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

QUESTION PRESENTED

ERISA Section 203(a)(3)(B) authorizes a pension plan to

“suspend[]” the “payment of benefits” for the period that a

participant leaves retirement to return to the workforce in

certain capacities. ERISA Section 204(g), the “anti-cutback”

rule, forbids plan amendments that “decrease” previously

accrued pension “benefits.”

The question presented is whether a pension plan amend-

ment regarding disqualifying employment that is authorized

under ERISA Section 203(a)(3)(B) is nonetheless forbid-

den by Section 204(g) to the extent it applies to previously

accrued benefits.

(1)

TABLE OF CONTENTS

Page

| i

TARE Ge AU TIBOR TEES ..cccccsecccssccesessssccscsescescsseeses vi

Es ee l

SUMMARY OF ARGUMENT ................cccccccceeeeeeeeees 5

a 7

AN AMENDMENT TO A MULTIEMPLOYER

PENSION PLAN THAT, CONSISTENT WITH

ERISA SECTION 203(a)(3)(B), PROVIDES FOR

THE SUSPENSION OF PAYMENT OF

RETIREMENT BENEFITS DURING PERIODS

THAT A PARTICIPANT, AFTER RETIRING,

ENGAGES IN CERTAIN EMPLOYMENT DOES

NOT VIOLATE THE ANTI-CUTBACK PROV-

ISIONS OF ERISA SECTION 204(g) ............000c000 7

A. Through ERISA Section 203(a)(3)(B)(ii),

Congress sought to protect multiemployer

pension plans, plan _ participants, con-

tributing employers and sponsoring labor

organizations from the adverse impact of

double dipping retirees ...............ccccceeceeeeeeeeees 7

1. As Congress has expressly recognized,

multiemployer pension’ plans serve a

unique function in providing retirement

income security for millions of Ameri-

cans who would not otherwise have access

(iii)

TABLE OF CONTENTS—Continued

2. Recognizing. the wique features and

potential vulnerability of multiem-

ployer pension plans and their sponsor-

ing entities, Congress created a special

mechanism both to protect the financial

well-being of plans and to enhance

SRRSATERE GREETING 2.cccccccccccsecececctiecesesecserecese

Multiemployer plan trustees periodically have

amended suspension of benefit rules in order

to address changing employment and

economic conditions, precisely as was

envisioned By Comgress ............cccc.ccsrssesssseccsesees

1. The factors and _ conditions’ which

prompted Congress to adopt ERISA

Section 203(a)(3)(B)(ii) are not static over

GR cesnnscenenmsnamasansesdelignmenaniingsemueestinndia

2. Multiemployer pension plan trustees have

used suspension of benefit pro-

visions to encourage retirees to reenter the

workforce and, when necessary, to

discourage retirees from remaining.............

Multiemployer plan trustees have administered

plans and adopted suspension of benefit

amendments in_ reliance on _ the stated

position of the Internal Revenue Service and

the courts; a change to that rule will have an

unfair adverse impact on _ plans, their

participants, contributing employers, and

SEU GRIUIED ccncessscenemanemeccmeemee

Page

TABLE OF CONTENTS—Continued

Prior to the decision below, multi-

employer pension plan trustees could rely

on a uniform body of authority to freely

adopt or amend suspension of benefit

provisions within the scope of

ERISA § 203(a)(3)( B)(ii) ..........ecceeeeeeeeeeees

For years, trustees of multiemployer

pension plans have taken their nght to

amend suspension of benefit provisions into

account when considering the feas-

The decision below, if adopted by the

Court, will have significant adverse

OED cecsssnsnscennsesensensemnasemssssnenmenmanaaens

Page

TABLE OF AUTHORITIES

CASES Page

Boggs v. Boggs, 520 U.S. 833 (1997).......cccccceeeees 22

NLRB v. AMAX Coal Co., 453 U.S. 322 (1981)... 8

Caterino v. Barry, 8 F.3d 878 (ist Cir. 1993)....... 26

Deak v. Masters, Mates and Pilots Pension Plan,

821 F.2d 572 (11th Cir. 1987) 0.0.0... eeeeeeeees 23

McDonald v. Pension Plan of the NYSA-ILA Pen-

sion Trust Fund, 320 F.3d 151 (2d Cir. 2003)... 22

Noell v. American Design, Inc., 764 F.2d 827

A ———————————— ll

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

a 23

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

Eee 24

STATUTES AND REGULATIONS

Employee Retirement Income Security Act of

1974, 29 U.S.C. § 1001—1169:

(EEE 7

Oa 4

(EE 11,21

( UG 5, 11,21

lle 21

, ) 11

OU passim

OO passim

QO 6, 7, 21, 22, 23

QQ. ee 22

(yy 11

ee 26

Internal Revenue Code (26 U.S.C.):

TR ORs SOR oe Ta 24

OS OID cecceccecessssscesesecscsccsessnssnnentenemsesmnemameneesien 24

Vii

TABLE OF AUTHORITIES—Continued

pt csiccrnmnizccntcnnninnciieapeieeninaninmamsasiees

Labor Management Relations Act of 1947, Pub.

L. No. 80-101, 61 Stat. 136, codified at 29

U.S.C. §§ 141—187;

EERE eee wee ee Se ee

Multiemployer Pension Plan Amendments, Pub.

L. No. 96-364, Stat. 1209-1210, 29 U.S.C.

§ 1001a ef seq.:

I seein aiiiiaaritiaa icici iat,

Sp SED ccnsrseenemnnccennenensectnensevesteinotainnisies

ED cenemomusnenssesnnnenmenmmmen

Retirement Equity Act of 1984, Pub. L. No. 98-

397, 9B Stat. 1426 (19B4) ...........0ccercerrerceeseesseeee

29 C.F.R.:

a ccrcnenessresietumcensenmienuinenens

MISCELLANEOUS

120 Cong. Rec. 29192, 29197 (daily ed. Aug. 22,

OEE EE I LL SEE AL

Fi Pa ncrnasicnavacnnntenvnitnieettsnnesuaniiiinsnemecsnsremasasitingaen

Si ap narsevensmnenscesemsesinssinimsmemenienmnmnnneiatesteimeneneenees

144 Cong. Rec. 7574, 7578 (daily ed. July 7,

uP aTaEE inenasensenenivannpenssnannnananeninnnabanenensedieampeetgenins

Vill

TABLE OF AUTHORITIES—Continued

Barron’s Online, Gene Epstein, “Retire? Hell

I, ails I icsctiicirinencateeiriaeeneiaiantian

Bureau of Labor Statistics, U.S. Dep’t of Labor.

Employee Tenure in 2000, (BLS newsletter,

Bureau of Labor Statistics, U.S. Dep’t of Labor,

Unemployment Rates and Levels in_ the

Construction Industry, 1974-2003 ............0...06.

Construction Lab. Rep. (BNA), “Policy Needs to

Address Worker Shortage Affecting All

Industries, House Panel Told,” v. 45, no. 2266

SI, Giiy Ge Presncanemensitesnsnsssssersssmnesenemnnsennn

Construction Lab. Rep. (BNA), “CPWR

Considers Research Agenda on Bargaining,

Workforce Issues, v. 44, no. 2177 (Apr. 29,

Construction Lab. Rep. (BNA), “Skilled Labor

Shortages Head List of Contractors’ Greatest

Concerns,” v. 45, no. 2259 (Jan. 5, 2000) .........

Construction Lab. Rep. (BNA), “AGC Report

Finds Continued Dominance of Market by

Open Shop, Skill Shortages,” 881, v. 46,

es OS

Construction Lab. Rep. (BNA), “Skilled

Shortages Prompts Contractors in Idaho to

Sign Pacts with Carpenters,” 717, v. 46, no.

ee ER, Gi ae vectetentatscceniecincemmnstanestonnes

Construction Lab. Rep. (BNA), “Parties in

Northwestern States Bargain in Heated, Full

Employment Economy,” 18, v. 46, no. 2267

Ps: ies Pi iia aataacienhciniendiea heerlen inate

Construction Lab. Research Council, “Craft

Labor Supply Outlook, 2000-2010,” 1998 ........

Page

TABLE OF AUTHORITIES—Continued

Daily Lab. Rep. (BNA), “Low Unemployment

Rates Prompt Employers to Turn to Untapped

Labor Pools,” S-7, no. 123 (June 26, 2000) ......

Daily Lab. Rep. (BNA), “Worker Shortages

Restrain Otherwise Robust Pace As New Pay

Schemes Abound,” no. 99 (May 24, 1999).......

Fed. Reg. 8894-8895 (Jan. 27, 1981)... eee

Internal Revenue Manual:

§ DFS. OD D.Dida 1 Prvcercsscccsecsesenesssessssssnnsosscsosocoense

SFE ES ccsccccseccssccsnsssssnnssensssosescssossssssneceseenees

N.Y. Times, Elsa Brenner, “Brighter Outlook for

Construction Workers” (Dec. 12, 1993)............

S. Rep. No. 93-383, at 50 (Aug. 21, 1973)............

Staff of the Joint Committee on Taxation,

General Explanation of the Tax Reform Act of

BG, FERN O P ccnnecernsnscensasscsesecsnsccsnscssnscenes

Wall St. J. Online, Jonathan Weil, “Golden

Triangle Boom Causes Labor Shortages”

GAGIR. Bip TGP ccccsscscscesssressnscersssmssensnsessssasecsseese

Wall St. J. Online, Rick Wartzman, “The Price of

Recovery: Builders’ Labor Squeeze” (Jan. 22,

Wall St. J. Online, Rebecca Blumenstein,

“Michigan and Ohio Compete for Workers

Amid Shortage” (June 10, 1997) ........cccccceeeeees

Wall St. J. Online, Kelly Greene, “Making it

Hard to Work” (Dec. 7, 2003) ...........ccccceeeeeeeeees

Wall St. J. Online, Kelly Greene, “Companies

Could Entice Older Workers to Stay On”

RG th cei cnienerneesstentnssanienenenemmensnsceen

Page

6, 23

TABLE OF AUTHORITIES—Continued

Wall St. J. Online, Marjorie Valbrun and Glenn

Burkins, “Tight Labor Market Causes Leaders

to Rethink Immigration Restrictions” (Feb. 10,

Webster’s Third New International Dictionary of

the English Language Unabridged (1992).........

Weinstein, Harriet and Wiatrowski, William J.,

Multiemployer Pension Plans, Compensation

and Working Conditions, Spring 1999 ..............

Page

INTEREST OF THE AMICI

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 In-

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

§ 1001—1169, and other laws affecting multiemployer plans.

Currently, 311 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.

The Mechanical Contractors Association of America

(MCAA), the National Electrical Contractors Association

(NECA), and the Sheet Metal and Air Conditioning

Contractors’ National Association (SMACNA) are nonprofit,

tax-exempt organizations representing the interests of

employers in a large segment of the high-skill and high-wage

construction trades. There are 2,200 employers affiliated

with the MCAA and its affiliated associations nationwide.

NECA has 4,420 member contractors in the United States

with an excess of 19,000 contractors who currently authorize

NECA and its local chapters to bargain on their behalf. There

are approximately 1,900 employer members of SMACNA

throughout the United States.

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

hereby state that no counsel for Petitioner or Respondents authored 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.

The contractors affiliated with these employer associations

specialize in an array of trades and crafts including electrical,

mechanical, plumbing, heating, ventilating and air condi-

tioning, architectural and industrial sheet metal, specialty

stainless steel, energy management and industrial testing.

Employer members work in a variety of industries including

construction, service, maintenance, utilities, telecommunica-

tions, broadcasting, manufacturing, transportation and gov-

ernment. The MCAA, NECA and SMACNA, their related

entities and their member employers are distinguished for

their longstanding and vast investment in the training and

development of high-skilled workforces. Through collective

bargaining with their union counterparts, member employers

sponsor and fund numerous multiemployer benefit plans

including apprenticeship and training plans, health and

welfare plans, and retirement benefit plans including

multiemployer defined benefit pension funds.

The Laborers’ International Union of North America, AFL-

CIO (LIUNA), the United Association of Journeymen and

Apprentices of the Plumbing and Pipe Fitting Industry of the

United States and Canada, AFL-CIO (UA), the Sheet Metal

Workers’ International Association, AFL-CIO (SMWIA)

and the International Brotherhood of Electrical Workers,

AFL-CIO (IBEW) are unincorporated labor organizations that

represent employees in a variety of trades. LIUNA, with over

800,000 members, is a diverse, multi-craft union representing

workers in various fields of construction, including highway,

tunnel, pipeline and building construction and hazardous

material removal. The UA, with over 300 local union

affiliates and approximately 326,000 members, both active

and retired, is a multi-craft union representing high-skilled

workers engaged in the fabrication, installation and servicing

of piping systems. The SMWIA, with a membership of

around 155,000—of whom 30,000 are retirees—represents

high-skilled sheet metal workers in industries such as

building and construction, shipyards, railroads, and service

and maintenance. The IBEW—which has over 780,000

members—trepresents employees who work in a variety of

industries, including utilities, construction, telecommunica-

tions, broadcasting, manufacturing, railroads and government.

Collectively, these labor organizations and their local

affiliates negotiate collective bargaining agreements on behalf

of workers throughout the country. Through the collective

bargaining process, these unions provide employers with a

highly skilled and trained workforce and strive to foster

industrial stability through labor-management cooperation.

The agreements negotiated by the LIUNA, UA, SMWIA and

IBEW on behalf of the employees they represent include

critical benefit packages that require signatory employers,

inter alia, to contribute to multiemployer pension plans.

Multiemployer pension plans provide pension coverage for

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

who participate in pension plans. By law, these plans are

administered by boards of trustees comprised of individuals

appointed by both labor and management; each trustee owes a

duty of loyalty to plan participants and beneficiaries. The

well-being and security of employees, retirees and their

dependents are directly impacted by multiemployer pension

plans, and interference with the maintenance and growth of

such plans is deemed to be contrary to the national public

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

The NCCMP and its member plans have a strong interest in

urging reversal of the decision below. If allowed to stand, the

holding will significantly and adversely impact the effective

administration and financial well-being of multiemployer

pension plans. It will detract from the ability of trustees to

employ ERISA’s “suspension of benefit” rules in response to

fluctuating employment and retirement patterns that impact

the plans’ current funding status. The NCCMP, the spons-

oring employer associations and the unions also have a strong

interest in protecting against the potential adverse impact of

“double dipping” on the funding of plans, especially in times

of economic distress or uncertainty.

The employer associations have a strong interest in ensur-

ing that their members’ employees participate in adequately

funded and efficiently administered pension plans so that the

value of employer contributions will ultimately translate into

valuable retirement benefits for current employees. The

employer associations also have a residual interest in seeing

that plans can respond to fluctuating labor markets by

enabling early retirees temporarily to rejoin the labor force.

Further, having made the financial contributions that have

funded the pensions of many double dipping retirees, these

amici have a stake in insuring that those contributions are not

used to subsidize the low-wage workforces of competitors

when work is scarce.

The union amici have a strong interest in ensuring that the

workers they represent will receive meaningful pension

benefits at retirement, especially those workers who, upon

retirement, have few additional sources of income or are

permanently disabled or are otherwise unable to return to the

workforce. The unions also have an interest in preserving the

job opportunities, wage rates and benefits of active em-

ployees, and in providing a steady and reliable stream of

skilled workers to signatory employers, which interests would

be undermined by the change to regulation of suspension of

benefit rules which is proposed in this case.

Finally, the NCCMP, the employer associations and the

unions fear that the decision below will expose a number of

? In the context of this case, double dipping occurs when a retiree who

is receiving pension benefit payments returns to employment while his

pension payments continue. Thus, pension payments subsidize his wages.

If a retiree returns to employment in the trade or craft covered by the plan

that provides his benefits, the retiree simultaneously may be accruing

additional pension benefits under the plan.

<me ee?

multiemployer pension plans to significant unanticipated

liabilities. Plan trustees have long relied on the position of

the courts and the Internal Revenue Service that amendments

like those challenged by the Respondents do not violate

ERISA’s anti-cutback rules. A reversal to this rule of law

would result in additional liabilities and reassessment of

longstanding funding assumptions, at the inevitable expense

of active plan participants and current retirees.

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.

SUMMARY OF ARGUMENT

A. Through Section 203(a)(3)(B) of ERISA, Congress

provided that certain specifically defined suspensions of

benefit payments were not to be construed as forfeitures of

accrued benefits prohibited under ERISA Section 203(a).

Section 203(a)(3)(B)(ii) permits a multiemployer pension

plan to suspend a benefit payment to a participant who would

otherwise be entitled to receive such payment but for the fact

of his return to specified categories of employment after

retirement. By this provision Congress intended to alleviate

the adverse impact double dipping participants can have on

the financial well-being of multiemployer plans, their par-

ticipants and beneficiaries, sponsoring employers, labor

markets, industrial stability, and wages and conditions of

employment in a particular industry.

B. Since the enactment of ERISA many multiemployer

pension plans have used the suspension provision of ERISA

Section 203(a)(3)(B)(iil) as a means of encouraging or

discouraging returns to employment by retirees in the relevant

industry. This provision, which limits the scope of ERISA’s

nonforfeiture rules, was intended as a tool multiemployer

pension plans could use 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

actuarial soundness and to protect the interests of actual

retirees and active non-retired participants.

C. For years, the Internal Revenue Service has consistently

approved plan amendments that have either introduced

suspension of benefit provisions or expanded the scope of

disqualifying employment for purposes of existing suspension

of benefit provisions. There is no evidence that the Internal

Revenue Service has ever challenged a plan’s adoption of a

suspension of benefit provision that falls within the scope of

ERISA Section 203(a)(3)(B). The longstanding position of

the IRS, which has been incorporated into the Service’s

Multiemployer Plan Examination Guidelines of the Internal

Revenue Manual,’ is supported by the plain meaning of the

statute and takes into account the diverse interests served by

the Act. Relying on the statute, prior court decisions and IRS

guidance, trustees of multiemployer pension plans have

amended plans either to add suspension of benefit provisions

or 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.

* See 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 Plan Guidelines”). The Multiemployer Plan

Guidelines set forth the technical guidance for the Service’s field

personnel, technical staff, and plan determination personnel. Internal

Revenue Manual § 4.72.14.1.

ARGUMENT

AN AMENDMENT TO A MULTIEMPLOYER

PENSION PLAN THAT, CONSISTENT WITH ERISA

SECTION 203(A)(3)(B), PROVIDES FOR THE

SUSPENSION OF PAYMENT OF EARLY RETIRE-

MENT BENEFITS DURING PERIODS THAT A

PARTICIPANT, AFTER RETIRING, ENGAGES IN

CERTAIN EMPLOYMENT DOES NOT VIOLATE

THE ANTI-CUTBACK PROVISIONS OF ERISA

SECTION 204(g).

A. Through ERISA Section 203(a)(3)(B)(ii), Congress

sought to protect multiemployer pension plans, plan

participants, contributing |§ employers and

sponsoring labor organizations from the adverse

impact of double dipping retirees.

1. As Congress has expressly recognized, multi-

employer pension plans serve a unique function in

providing retirement income security for millions

of Americans who would not otherwise have

access to pension coverage.

In ERISA, Congress declared that the private employee

benefit system is “affected with a national public interest,”

and determined that the regulation of private employee

benefit plans would be exclusively a federal concern. ERISA

Section 2(a), 29 U.S.C. § 1001(a). The Multiemployer

Pension Plan Amendments Act (“MPPAA”), Pub. L. 96-364,

Stat. 1209-1210, was adopted in 1980 to enhance the finan-

cial soundness of multiemployer pension plans” and to foster

* Multiemployer pension plans are maintained pursuant to collective

bargaining agreements. ERISA Section 3(37), 29 U.S.C. § 3(37). Multi-

employer plan assets are held in trust, and the plans are jointly adminis-

tered and equally represented by trustees appointed by management

and labor. Labor Management Relations Act of 1947 § 302(c)\(5)(B),

29 U.S.C. § 186(c)(5)(B).

their maintenance and growth. See MPPAA § 3, 29 U.S.C.

§ 1001a; Report of the House of Representatives Committee

on Education and Labor on H.R. 3904, H.R. Rep. No. 96-869,

pt. | (1980), reprinted in 1980 U.S.C.C.A.N. 2918. See also

NLRB v. AMAX Coal Co., 453 U.S. 322, 338 n.22 (1981).

MPPAA, which amended both ERISA and the Internal

Revenue Code, demonstrates Congress’s recognition of the

special needs of such plans, which serve millions of

employees, retirees and dependents.

Multiemployer plans fill an important need in industries in

which single employer pension plans cannot suffice to protect

the typical employee. Employees in industries such as

construction or trucking, which are characterized by irregular

employment or frequent shifts of workers between employers,

benefit from the availability of multiemployer plans.° Sim-

ilarly, these plans provide benefits at an affordable cost in

industries dominated by small employers such as garment

manufacturers, restaurants and service establishments, which

would not individually be able to support an adequate and

secure pension plan for their employees.

In general, multiemployer pension plans are designed to

allow employees to gain credits toward pension benefits from

work with multiple employers who contribute to the plans in

accordance with the terms of the employers’ collective

bargaining agreements. Some plans cover participants in a

trade or craft throughout the country, while others provide

coverage for employees of contributing employers in a

particular industry in a specific geographic area. In either

situation, workers are able to move from job to job while

continuing to earn credits toward their pension benefit.

* Among construction workers, the median tenure with an employer in

January 2002 was 2.8 years, compared with 3.5 years for all workers.

Bureau of Labor Statistics, U.S. Dep't of Labor, Employee Tenure

in 2000, (BLS newsletter, 2001), available at ftp://ftp.bls.gov/pub/

news.release/tenure.txt.

Moreover, because multiemployer pension plans continue

even if particular employers go out of business, such plans

help protect workers from the potentially devastating con-

sequences of business downsizing, mergers and closings.

While multiemployer plans generally function in the same

manner as their single-employer counterparts, certain features

of multiemployer defined benefit pension plans’ reflect the

special needs of their participants. For instance, multi-

employer plans are far more likely to include provisions that

allow for portability of pension credits among different

multiemployer plans. Such programs ensure that participants

will vest in and receive a meaningful pension benefit even

though they may work in numerous jurisdictions covered by

numerous plans. Over 60 percent of multiemployer plans

have such portability provisions, compared with 3 percent of

single employer plans. ’

° Three out of five multiemployer pension plans are defined benefit

plans. Defined benefit plans, like the plan administered by the Petitioner,

cover approximately 80 percent of multiemployer pension plan partici-

pants. Defined benefit pension plans generally provide for a benefit stated

in the form of a life annuity with benefit formulas based on a number of

factors requiring a variety of actuarial projections. By contrast, money

purchase plans, 401(k) plans and other defined contribution plans provide

for contributions in specified amounts to be made to separate “individual

accounts” for each participant. Typically, multiemployer defined contri-

bution plans do not include suspension of benefit provisions. Most of

these plans provide lump sum benefit options or purchase annuity

contracts from insurance companies with the assets held in a participant's

individual account.

” Other notable distinctions include the fact that only 69 percent of

single employer plans provide for disability retirement benefits, compared

with 91 percent of multiemployer plans. Also, multiemployer plans are

far more likely to provide full pension restoration if a spouse predeceases

the participant and are far more likely to provide survivor benefits to

children. Harriet Weinstein and William J. Wiatrowski, Multiemployer

Pension Plans, Compensation and Working Conditions, Spring 1999, at

21, available at http://www.bls.gov/opub/cwce/archive/spring 1 999art4 pdf.

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 Congress has recognized,

these subsidized early retirement pensions serve an important

function in physically demanding occupations:

[Cjonstruction 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.”

Thus, participants who will not reach normal retirement

age under a plan for many years will nonetheless be eligible

for a subsidized early retirement benefit if they have

completed a minimum number of years of service. Signifi-

cantly, because the benefits are subsidized, they are more

expensive to the plan than benefits provided on or after

normal retirement age.

2. Recognizing the unique features and potential

vulnerability of multiemployer pension plans and

their sponsoring entities, Congress created a

special mechanism both to protect the financial

well-being of plans and to enhance industrial

stability.

Under Section 203(a)(3)(B)(ii) of ERISA, a multiemployer

plan may include provisions suspending retirement benefit

payments when the retiree returns to work in the same

"144 Cong. Rec. 7574, 7578 (daily ed. July 7, 1998) (statement of

Sen. D’ Amato).

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

geographic area covered by the plan without violating the

nonforfeitability requirements set forth in Section 203(a).”

Employment that will trigger suspension of benefit payments

is commonly referred to as “disqualifying employment.”'°

Thus, if a retiree enters disqualifying employment, ERISA

Section 203(a)(3)(B)(ii) provides that the plan’s temporary’ |

withholding of benefit payments while the retiree works in

* In adopting Section 203, Congress recognized the need to ensure that

pension rights, once they are required to be vested, may not be lost by an

employee. S. Rep. No. 93-383, at 50 (Aug. 21, 1973), reprinted in | Leg.

Hist. at 1118. A form of forfeiture prevalent before the enactment of

ERISA that particularly concerned Congress, known as “bad boy” clauses,

serve to deprive an employee of a benefit simply because he later went to

work for a competitor, or in some other way demonstrated “disloyalty” to

the employer. See id.;. Noell v. American Design, Inc., 764 F.2d 827

(11th Cir. 1985) (discussing the relationship between ERISA’s vesting

requirements and a plan’s bad boy clauses).

' Since 1981, regulations promulgated by the Department of Labor

have specified a range of permissible definitions of disqualifying employ-

ment. See 29 CFR §2530.203-3 et seq.

'' The word “suspend” (the term used in Section 203(a)(3)(B)) means

“to cause (as an action, process, practice, use) to cease for a time : stop

temporarily. . .” Webster's Third New International Dictionary of the

English Language Unabridged (1992) (def. 2a). A suspension of pension

payments under Section 203(a)3)(B) is clearly a temporary action. It

ceases when the participant stops working in disqualifying employment or

on the participant’s “required beginning date,” see I.R.C. § 401(aX(9)(C),

whichever is earlier.

A suspension of benefit payments in theory could become permanent if

a participant died with no survivor benefit payable, but this circumstance

would not render the suspension a forfeiture due to a separate provision of

the Act. See ERISA Section 203(a(3)A) (“A right to an accrued benefit

derived from employer contributions shall not be treated as forfeitable

solely because the plan provides that it is not payable if the participant

dies (except in the case of a survivor annuity which is payable as provided

in Section 205)), 29 U.S.C. §1053(a)(3)(A).

disqualifying employment will not be deemed a forfeiture of

an accrued benefit under Section 203(a) of the Act.

Multiemployer plans may adopt suspension of benefit rules

restricting post-retirement employment to the full extent

permitted under Department of Labor regulations, they may

narrowly tailor restrictions on post-retirement employment to

certain types of employment that fall within the range

permitted by the regulations, or they may choose not to

restrict post-retirement employment at all. Trustees of multi-

employer plans have come to regard suspension of benefit

rules as an important element of plan design which primarily

helps trustees respond to funding issues which can be

impacted by retiree reemployment in the industry covered

by a plan.

Relevant considerations such as the actuarial soundness of

pension plans, industrial stability, conditions of employment,

and investment performance of fund assets are not fixed in

time but are impacted by 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 pertain 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.

The plans’ need for flexibility and the ability to protect

against the adverse effects of double dipping were driving

forces behind Section 203(a)(3)(B). Senator Williams, Chair-

man of the Senate Committee on Labor and Public Welfare,

detailed the congressional purpose in the following terms:

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....

120 Cong. Rec. 29928, 29930 (daily ed. Aug. 22, 1974),

reprinted in 3 ERISA Leg. Hist. of the Employee Retirement

Income Security Act of 1974, at 4738 (“ERISA Leg. Hist.”).

Senator Javitz echoed these sentiments:

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 interest of the union are

not adversely affected to a substantial degree.

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

reprinted in 3 ERISA Leg. Hist. 4772. Representative Dent

outlined the role Department of Labor regulations would play

to further the purposes articulated by his Senate counterparts:

[T]he conferees expressly provided in Section

203(a)(3)(B) that a plan be permitted to suspend bene-

fits under certain circumstances. This section further

authorizes the Secretary to prescribe regulations neces-

sary 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 industry;

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

onerous and costly administrative procedures imposed

upon the plan by these provisions.

120 Cong. Rec. 29192, 29197 (daily ed. Aug. 22, 1974),

reprinted in 3 ERISA Leg. Hist. at 4669.

Accordingly, Section 203(a)(3)(B) fairly may be said to

provide a safe harbor for multiemployer pension plans within

which they may adopt suspension of benefit provisions

tailored to particular plan needs at any given time without

running afoul of ERISA’s rules governing forfeitures.

B. Multiemployer plan trustees periodically have

amended suspension of benefit rules in order to

address changing employment and _ economic

conditions, precisely as was envisioned by Congress.

ERISA Section 203(a)(3)(B) is an unusual provision of the

Act in that its purpose, as articulated by its drafters, is

directed to some extent toward matters beyond plans and their

participants. Congress recognized that in order to have well-

funded pension plans and secure, meaningful retirement

benefits for participants, it was appropriate under certain

circumstances to permit plan sponsors to limit the adverse

impact that payment of pension benefits to active employees

may have on the industry that funds the plan. It follows that

the scope of a plan’s suspension provisions can be tailored to

reflect the economic conditions of the underlying industry at

given points in time.

1. The factors and conditions which prompted

Congress to adopt ERISA Section 203(a)(3)

(B) (ii) are not static over time.

Although employer contributions made on behalf of

retirees when they were active participants help to fund their

pension benefits, multiemployer defined benefit plans also

rely on current employer contributions to fund the pension

benefit obligations of retirees and current employees. Conse-

quently, periods of high unemployment will significantly

impact the actuarial soundness of these plans. On the other

hand, periods of low unemployment create their own set of

problems for contributing employers and underlying Indus-

tries—most significantly, skills shortages. Deep and frequent

fluctuations between periods of high and low unemployment

are commonplace in the industries in which multiemployer

plans predominate, and can have a debilitating effect on

plan funding.

Since the enactment of ERISA, nationwide unemployment

- rates in the construction industry have fluctuated from levels

as low as 8 to 9 percent in the mid 1970’s to levels as high as

18 to 23 percent in the early 1980’s. By the end of the

1990’s, which was characterized by a boom in construction,

unemployment levels retreated back down to 6 to 9 percent.

In between these long-term trends, the construction industry

experienced regular double digit percentage swings in unem-

ployment levels from year to year. -

These pronounced cyclical patterns of unemployment gen-

erate their own set of problems for the affected industries.

During downturns, there is typically a corresponding exodus

of skilled workers from the industry, with workers leaving a

depressed trade or craft permanently for better opportunities

elsewhere. Conversely, during boom periods, shortages in

skilled labor cause tremendous problems for employers and

their customers. See “Skilled Labor Shortages Head List of

Contractors’ Greatest Concerns,” Construction Labor Report,

v. 45, no. 2259 (Jan. 5, 2000).

Nationwide trends only tell part of the story. More refined

studies show that even greater volatility in employment

'2 See Bureau of Labor Statistics, U.S. Dep’t of Labor, Unemployment

Rates and Levels in the Construction Industry, 1974-2003 (Series

LFS2101060020(1) and LFS2202060020(1).

cycles is found among local and regional areas and among the

various trades. In a 2000 report by the Associated General

Contractors, for example, surveys showed that although

skilled bricklayers, operating engineers, electricians, sheet.

metal workers, plumbers and pipe fitters were scarce in

Delaware, there was no shortage of available carpenters,

cement masons, iron workers, roofers and laborers in that

state. In that same study, the data for neighboring Maryland

showed the opposite result. Similarly, during a period when

Mississippi Valley contractors described the workforce for all

craft classifications as plentiful, most crafts were reported to

be in short supply in Virginia and the Carolinas. '°

While the construction industry has addressed labor short-

ages in the past through recruitment and training programs,

those approaches alone have offered little immediate relief,

oftentimes adding to the ranks of the unemployed once a

boom recedes. An alternative to these approaches is to fill

openings for skilled trades with retirees. Reentry of retirees

into the workforce provides immediate relief to employers by

providing a pool of candidates who arrive ready with the

'? See “AGC Report Finds Continued Dominance of Market by Open

Shop, Skill Shortages,” Construction Lab. Rep. (BNA) 881, v. 46,

no. 2295, Sept. 27, 2000; see also “Skilled Shortages Prompts

Contractors in Idaho to Sign Pacts with Carpenters,” Construction Lab.

Rep. (BNA) 717, v. 46, no. 2291, Aug. 23, 2000 (regarding the shortage

of skilled carpenters in Boise); “Low Unemployment Rates Prompt

Employers to Turn to Untapped Labor Pools,” Daily Lab. Rep. (BNA)

S-7, no. 123, June 26, 2000 (regarding the labor market in New England);

“Parties in Northwestern States Bargain in Heated, Full Employment

Economy,” Construction Lab. Rep. (BNA) 18, v. 46, no. 2267, Mar. 1,

2000; Jonathan Weil, “Golden Triangle Boom Causes Labor Shortages,”

Wall St. J. Online, Apr. 22, 1998 (Southeast Texas); Rick Wartzman,

“The Price of Recovery: Builders’ Labor Squeeze,” Wali St. J. Online,

Jan. 22, 1997 (California); Rebecca Blumenstein, “Michigan and Ohio

Compete for Workers Amid Shortage,” Wall St. J. Online, June 10, 1997

(Michigan and Ohio); ‘Elsa Brenner, “Brighter Outlook for Construction

Workers,” N.Y. Times, Dec. 12, 1993, 13 WC, at | (White Plains, NY).

requisite experience and skills.'* The challenge in relying on

this supplemental retiree workforce is to provide an incentive

for the retirees’ return and a disincentive for them to remain

in the event high unemployment returns.

2. Multiemployer pension plan trustees have used

suspension of benefit provisions to encourage

retirees to reenter the workforce and, when

necessary, to discov-rage retirees from remaining.

Double dipping undoubtedly effects a drain on the re-

sources of multiemployer pension plans ‘While employer

contributions on behalf of vested and non-vested active

participants provide an inflow of assets into the plan with no

concomitant outflow to these participants, double dipping

retirees receive subsidized benefit payments from the fund

while taking jobs that could be filled by the active vested

or non-vested participants. Moreover, while some double

dipping retirees may return to covered employment and have

contributions made to the plan on their behalf, others may go

to work for competing employers who do not contribute to

the plan and who enjoy significantly lower labor costs than

'* See Craft Labor Supply Outlook, 2000-2010, Construction Lab.

Research Council , 1998; Kelly Greene, “Making it Hard to Work,” Wall

St. J. Online, Dec. 7, 2003; Kelly Greene, “Companies Could Entice

Older Workers to Stay On,” Wall St. J. Online, Nov. 20, 2002; “Policy

Needs to Address Worker Shortage Affecting All Industries, House Panel

Told,” Construction Lab. Rep. (BNA) 1425, v. 45, no. 2266, Feb. 23,

2000; Gene Epstein, “Retire? Hell No!,” Barron’s Online, Mar. 27, 2000;

Marjorie Valbrun and Glenn Burkins, “7ight Labor Market Causes

Leaders to Rethink Immigration Restrictions,” Wall St. J. Online, Feb. 10,

2000; “Worker Shortages Restrain Otherwise Robust Pace As New Pay

Schemes Abound,” Daily Lab. Rep. (BNA), no. 99, May 24, 1999;

“CPWR Considers Research Agenda on Bargaining, Workforce Issues,”

Construction Lab. Rep. (BNA), v. 44, no. 2177, Apr. 29, 1998.

the employers whose contributions funded those retirees’

pension benefits, health benefits and training. '°

Nevertheless, current conditions in a specific industry,

trade or craft, such as a regional skills shortage at times of

full employment, may indicate that a degree of double

dipping is in the best interest of the plan. This also offers

retired participants an opportunity to supplement their

incomes without harming the plan’s overall financial well-

being. Most multiemployer pension plans have been

amended over time to provide for the suspension of benefits

under some prescribed conditions. However, the range

among plans for what constitutes “disqualifying employ-

ment,” especially before normal retirement age, is drama-

tic and—like the industries themselves—often subject to

change. '°

'° See discussion, supra, at 13-14 (thus, Congress’ concern that multi-

employer pension plans would help to subsidize the labor costs of

employers who pay low wages and little or no benefits).

Department of Labor acknowledged that multiemployer plans could adopt

a wide range of suspension of benefit rules:

It should be noted that Section 203(a)(3)(B) and this regulation do -

not require plans to provide for or impose suspensions of benefits.

In addition, while a suspension may not be imposed unless the

requirements of the Act and this regulation would be met, the

Department is of the view that a plan which has elected to provide

for suspension of benefits is not required to provide for suspension

of benefits to the fullest extent that the Act and this regula-

tion would permit. For example, a plan could provide that “Sec-

tion 203(a)(3)(B) service” . . . would result when an employee

contemplates 60 or more hours of service in a calendar month in the

relevant type of employment. . . As another example, a multi-

employer plan could provide that the “geographic area covered by

the plan” does not include all the territory which would qualify for

inclusion under the Act and this regulation. . .

< enle pe

For example, many plans may draft suspension provisions

that are triggered only by full-time work or that limit

suspensions to those retirees who primarily work “with the

tools” and do not serve as supervisors. Many other plan

trustees choose to apply the strictest suspension rules

available under the Act and regulations, with the knowledge

that restrictions can be eased to accommodate changed

conditions (such as the commencement of a large public

project) which demand that employers retain a particularly

large workforce for an extended period of time.

It is true, as the court below noted, that plan rules that use a

narrow definition of disqualifying employment effectively

permit many early retirees to engage in double dipping. Pet.

App. 10a n.6. The practice, however, is often a mixed

blessing, and a plan’s circumstances can readily change so as

to render double dipping an undue burden on the plan and on

other participants. As discussed above, the trustees of-a

multiemployer plan may choose to abide a certain level of

double dipping when economic conditions in a specific

industry, trade or craft so warrant and when the plan’s current

funding permits.'’ When those conditions change, pians

require the ability to re-adjust their suspension rules.

Department of Labor, Office of Pension and Welfare Benefit Programs,

“Minimum Standards for Employee Benefit Plans; Suspension of Benefit

Rules; Final Rules and Proposed Rulemaking,” Fed. Reg. 8894-8895

(Jan. 27, 1981).

'’ Indeed, the unprecedented performance of the U.S. financial markets

and generally high employer contribution levels during the 1990s

compelled multiemployer pension plan trustees to either provide greater

benefits or subject their contributing employers to onerous tax liabilities.

See generally, \.R.C. §§ 404(a)(1 (A) and 412(a) (limiting the amount

deductible in any year for contributions to a qualified pension trust to the

amount necessary to satisfy the minimum funding standard). ~

What is more, plans must continually meet ERISA’s

minimum funding standards notwithstanding the fact that

plan assets are typically invested in equity and fixed income

securities subject to the vagaries of Wall Street. Moreover,

the total amount of employer contributions, which provides

the ongoing funding to such plans, is based solely on the

hours worked by the employers’ employees, even in times of

high unemployment.'* Thus, multiemployer pension plans

have often exercised the option of amending their suspension

of benefit provisions in a way that restricts the employment

opportunities available to early retirees who want their bene-

fit payments to continue. As we discuss below, such

amendments have proceeded with the full knowledge and

blessing of the relevant regulatory agency, the Internal

Revenue Service.

'* For multiemployer defined benefit plans, suspension rules are

especially valuable in the trustees’ efforts to regulate funding require-

ments. An employer sponsoring a single employer defined benefit plan

has complete control over how its plan will be funded and will generally

seek to fund the plan within the range prescribed in I.R.C. §§ 412 and

404(a)(1). By contrast, multiemployer defined benefit plans are funded

through contributions made by numerous employers who are required to

pay rates fixed in accordance with collective bargaining agreements with

durations of several years or more. Such contribution rates typically

cannot be changed during the term of collective bargaining agreements to

accommodate deficits or surpluses, and negotiated contribution rates must

be sufficient to pay future benefits. Thus, multiemployer plan sponsors do

not control, but merely anticipate, the amount of contributions coming

into the fund from year to year.

C. Multiemployer plan trustees have administered

plans and adopted suspension of benefit amend-

ments in reliance on the stated position of the

Internal Revenue Service and the courts; a change

to that rule will have an unfair adverse impact on

plans, their participants, contributing employers,

and labor organizations.

1. Prior to the decision below, multiemployer

pension plan trustees could rely on a uniform

body of authority to freely adopt or amend

suspension of benefit provisions within the scope

of ERISA §203(a)(3)(B) (ii).

For many years, the Internal Revenue Service and the

courts, relying on the plain meaning, purpose and structure of

the statute, have recognized that a “suspension” of benefit

payments under ERISA Section 203(a)(3)(B) is not a de-

crease, reduction or elimination of an accrued benefit within

the meaning of Section 204(g) of ERISA. Specifically, the

Service and the courts have construed Section 203(a)(3)(B) as

a special provision defining the scope of vested rights under

Section 203(a).'” This construction gives effect to Congress’s

intent, clearly articulated in the legislative history of Section

203(a), not to protect the ability of early retirees working in

203(a)(3)(B) employment to continue receiving benefit

payments while so employed. The majority below, in con-

travention of the statutory purpose, would create such a right

'° See cases cited in note 24 and accompanying text. In contrast to

those holdings, the majority below finds that ERISA Section 204(g)

implicitly prohibits amendments that suspend benefit payments of retirees.

If in fact Congress sought to prohibit plan amendments that suspend

benefit payments of retirees who are reemployed in 203(a)(3)(B) service,

one may wonder why Congress did not expressly provide for this in

Section 203? Congress could readily have done this, having included in

ERISA Section 203(c) detailed rules relating to amendments altering

vesting schedules. See Section 203(c) of ERISA, 29 U.S.C. § 1053(c).

based upon a misinformed interpretation of ERISA Sec-

tion 204(g)(2).7”

The Petitioner fairly details the deficiencies that underscore

the reasoning of the majority below that a “suspension” under

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

ERISA Section 204(g).’' As Petitioner explains, the major-

ity’s reading of the Act is contrary to fundamental precepts of

Statutory interpretation, its interpretation of amendments to

ERISA Section 204(g) is contrary to the legislative history of

the Retirement Equity Act of 1984, and its holding is contrary

both to applicable regulations and the repeatedly stated

position of the Internal Revenue Service.

The importance of the longstanding position of the Service

to the sponsors and administrators of multiemployer pen-

sion plans cannot be overstated. Trustees of pension plans

affiliated with the NCCMP have requested advance approval

from the Internal Revenue Service regarding the continued

qualification of their plans before adopting suspension of

benefit rules or amending existing rules so as to expand the

scope of disqualifying employment for all participants, active

and retired. Many other plan trustees have adopted amend-

ments and filed amended and restated plans with the Service

for determination of continued tax-qualified status, disclosing

that their plans have been amended to include or expand

* The distinctions between ERISA’s vesting provisions and its accrual

provisions are critical ones. See, e.g., McDonald v. Pension Plan of the

NYSA-ILA Pension Trust Fund, 320 F.3d 151, 159 (2d Cir. 2003):

Congress has treated accrued benefits and vested benefits differ-

ently. The Supreme Court has found ERISA to be “an intricate,

comprehensive statue.” Boggs v. Boggs, 520 U.S. 833, 834 (1997).

ERISA is a complicated enough statute without the courts soldering

new Sections onto it.

*"'In this regard, Judge Cudahy’s dissent also offers a discerning

refutation of the reasoning underpinning the majority's decision below.

suspension of benefit provisions without regard to a partic-

ipant’s status as a retiree.

In all of these instances, the Service has either given its

prior blessing when requested, or it has approved the

amendments after the fact.”” No such suspension amendment

has been challenged or rejected by the Service on the

that it allegedly violated ERISA’s anti-cutback provision.

In accordance with prior opinions of other circuits, ** the Fifth

Circuit’s unanimous holding in Spacek v. Maritime Ass'n,

134 F.3d 283 (5" Cir 1998) expressed full concurrence with

this interpretation of the Act.

The position of the Internal Revenue Service regarding

Section 203(a)(3)(B) is expressly set forth in its Multi-

employer Plan Guidelines, which state that “[a]n amendment

that reduces I.R.C. 411(d)(6) protected benefits on account of

203(aX3)(B) service does not violate ILR.C. 411(d)(6).”

Multiemployer Plan Guidelines § 4.72.14.3.5.3(7). This

declaration carries considerable weight, since the Guidelines

set forth the technical guidance for the Service’s field

personnel, technical staff, and plan determination personnel.

Multiemployer Plan Guidelines § 4.72.14.1. When reviewing

22 See also U.S. Cert Amicus Br. 13-14.

31¢ such an amendment did violate Section §204(g) (I.R.C.

§ 411(d)(6)), 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 I.R.C. § 411(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 plan. . .”).

4 See Whisman v. Robbins, 55 F.3d 1140, 1147 (6th Cir. 1995) (rec-

ognizing that ERISA Section 204(g) “involve[s] a reduction or

elimination of accrued benefits and retirement-type subsidies, not a

suspension, as is the case here”); Deak v. Masters, Mates and Pilots

Pension Plan, 821 F.2d 572, 575 n.5 (11th Cir. 1987) (explaining that

under ERISA a pension that is “fully vested . . . cannot be reduced, but it

can be suspended”).

a multiemployer plan for compliance with ERISA and the

Service’s myriad regulations, IRS personnel rely on the

Guidelines to determine whether the plan is a qualified

plan pursuant to I.R.C. § 401(a) and thus entitled to favorable

tax treatment.

Accordingly, with the full blessing of the Internal Revenue

Service, trustees of multiemployer pension plans have

repeatedly exercised the authority to adopt and expand

disqualifying employment provisions within the scope of

Section 203(a)(3)(B)ii) and Department of Labor

Regulations.

2. For years, trustees of multiemployer pension plans

have taken their right to amend suspension of

benefit provisions into account when considering

the feasibility of providing particular benefits.

The Respondents assert that by law they were entitled to

rely on receipt of their monthly pension payment in order to

supplement their income. Pet. App. 10a n.5. However,

ERISA’s vesting rules place express limits on a participant’s

right under that Act to pension payments while working in

203(aX(3)(B) service.” Thus, any right Respondents had to

*° It is also notable that the Respondents were in their early forties at

the time they brought this action. Both ERISA and the Internal Revenue

Code show that distributions to younger reemployed “retirees” from tax-

qualified plans are generally disfavored. For example, I.R.C. § 72(t)

places a 10-percent additional tax on early distributions from qualified

retirement plans. The legislative history of that provision of the Code

provides—

Although Congress recognized the importance of encouraging

taxpayers to save for retirement, Congress also believed that tax

incentives for retirement savings were inappropriate unless the

savings generally were not diverted to nonretirement uses. One

way to prevent such diversion was to impose an additional income

tax on early withdrawals from tax-favored retirement arrangements

benefit payments while employed in 203(a)(3)(B) service

arose out of the plan document, not ERISA, and was limited

by the trustees’ discretion and the trustees’ amendment

powers as set forth in the plan.

By contrast, the reliance of plan trustees on the ability to

amend suspension of benefit rules has a firm legal basis. The

flexibility to revise suspension rules has been a significant

factor in the trustees’ consideration of adjustments and

improvements in benefit levels, which are often necessary

and desirable in the face of increases in the cost of living.

When trustees and plan actuaries consider benefit improve-

' ments, including but not limited to those relating to

subsidized early retirement benefits, they rely on the existing

statutory and regulatory scheme as interpreted and applied by

the Service and by the courts. Thus, for example, when the

trustees of the Central Laborers’ Pension Fund considered

whether that plan could afford to provide early retirees with a

heavily subsidized Service-Only Pension, the trustees and

their actuaries were entitled to include the power to suspend

benefit payments in their equation. Plan amendments

relaxing and tightening suspension of benefit rules within the

scope of 203(a)(3)(B) are among the tools Congress provided

to protect plan assets,”° and trustees have been entitled to rely

upon the continuing viability of that tool.

in order to discourage withdrawals and to recapture a measure of the

tax benefits that had been provided.

STAFF OF THE JOINT COMMITTEE ON TAXATION, GENERAL EXPLANATION

OF THE TAX REFORM ACT OF 1986, at 713-14 (May 4, 1987) (emphasis

added).

funding for the benefit of all participants and beneficiaries is fully

consistent with the overarching fiduciary obligations of plan trustees. See

Caterino v. Barry, 8 F.3d 878, 883-884 (ist Cir. 1993) (discussing how

defined benefit multiemployer plan trustees may balance the interests of

3. The decision below, if adopted by the Court, will

have significant adverse impacts.

The majority below dismisses the adverse impact its ruling

will have on the Central Laborers’ Pension Fund, its

participants and beneficiaries, noting that the plan can simply

“curb[ | certain reemployment prospectively.” Pet. App. 10a

n.6. Similarly, in their brief in opposition to the petition for

writ of certiorari, the Respondents contend that if the

financial integrity of a pension plan is in jeopardy, the

trustees may seek the protections of ERISA Section 302(c)(8)

relating to cutbacks of accrued benefits in times of “sub-

stantial business hardship.” This myopic view—putting aside

the gross unfairness of imposing such measures on a plan that

has operated in full compliance with existing law—ignores

the broader implications that such a change would have for

multiemployer plans.

The new rule of law suggested by the decision below

would require plan trustees to find ways to shift the financial

burden of funding double dippers’ benefit payments to other

classes of plan participants. The group most likely to be

affected consists of active participants whose future rate of

benefit accruals can be reduced by amendment. Current and

future retirees may also find that they receive fewer and

smaller benefit increases, as plans adjust their funding

assumptions to account for the new obligations imposed by

such a ruling.

For those multiemployer plans unfortunate enough to have

to seek relief under the substantial business hardship

exception of ERISA Section 302(c)(8), the damage will be far

greater. Indeed, the majority below and the Respondents fail

to appreciate what is well understood by the amici: distressed

multiemployer pension plans do not attract new employers

“actuarially-favored” groups against the interest of providing a “guar-

anteed decent pension for all longtime workers.”).

and pose a strong disincentive for current employers to

continue contributing after their contracts expire. These hard-

ships are compounded in the case of multiemployer pension

plans with large proportions of older participants, in which a

steady stream of new participating employers is a key aspect

to their financial stability. Any employer considering

participation in a multiemployer defined benefit plan must

account for the fact that the contributions it makes to the plan

will fund not only the pensions of its own workers but the

plan’s entire accumulated liabilities, including the benefits of

other employers’ active employees, inactive employees,

retirees, and any double dipping retirees.

Moreover, the highly likely result of the ruling proposed by

Respondents would be that plans would be amended

prospectively so as to implement the strictest suspension

provisions possible under Department of Labor regulations.

This will mean that future early retirees will experience

suspensions that current early retirees do not. It will mean

that plan sponsors will no longer be able to use adjustments in

their suspension of benefit provisions to encourage older

experienced workers to temporarily return to covered em-

ployment in times of skills shortages. Moreover, during

periods of high unemployment, pension plans will be far less

likely to enhance early retirement benefits and subsidies to

encourage workers to accept early retirement, knowing that

these employees cannot be wooed back to work later by the

easing of suspension rules.

The new rule would also clearly have an adverse effect on

plans that have previously amended their suspension of

benefit provisions to suspend benefits of current retirees.

Funds, like the Petitioner, would now incur unanticipated

liability for benefit payments withheld on account of

previously adopted amendments expanding disqualifying

employment. Prospectively, retirees who had refrained from

reentering the workforce because of such an amendment may

now reenter “disqualifying employment” while receiving

benefits under the plan, thus taking jobs away from

individuals who do not have the luxury of supplemental

“retirement” income.

Such funds will also be required to amend their suspension

rules once again, and in so doing they will be forced to

consider adoption either of different rules applicable to

different retirees or—more likely—different rules applicable

to benefits accrued during different time periods. Thus, some

funds may feel compelled to adopt and apply the strictest

available suspension rules to future accruals, adding further

complications to benefit calculations for future retirees. Both

the plan amendment process and the incorporation of

additional computations into benefit calculations of future

retirees would impose an additional burden on plans, contrary

to Congress’ stated intent to insulate them from onerous and

costly administrative procedures in carrying out suspen-

sion rules.

In summary, by imposing a major new restriction on plans

that have long relied on a contrary rule, adoption of the

holding below may set in motion a series of events that will

disserve the interests of multiemployer plans, retirees, active

employees, sponsoring employers and labor organizations.

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted,

DONALD J. CAPUANO

SALLY M. TEDROW *

JOHN M. MCINTIRE

O’ DONOGHUE & O’ DONOGHUE LLP

4748 Wisconsin Avenue, NW

Washington, DC 20016

* Counsel of Record (202) 362-0041

Counsel for Amici Curiae National Coordinating Committee

for Multiemployer Plans, et al.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.