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

DSiprens cea — |

, b FILED.

(ie) MAR 4 - 2004

No. 02-891 Loe FICE OF THE CLERK |

IN THE

SUPREME COURT OF THE UNITED STATES

CENTRAL LABORERS’ PENSION FUND,

Petitioner,

Vv.

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 AMICUS CURIAE OF AARP

IN SUPPORT OF RESPONDENTS

MARY ELLEN SIGNORILLE*

AARP FOUNDATION LITIGATION

MELVIN RADOWITZ

AARP

601 E Street, NW

Washington, DC 20049

(202) 434-2060

Counsel for Amicus Curiae AARP

*Counsel of Record

rs

- - > a a

2 LE AION AOR er RR Ce

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................000000. iii

INTEREST OF AMICUS CURIAE ...............5. 1

SUMMARY OF ARGUMENT .............0...000. 3

Ee 4

L. IF PENSION PLANS CAN CHANGE THEIR

RULES FOR RECEIPT OF PENSION BENEFITS

RETROACTIVELY, NO EMPLOYEE WILL EVER

BE ABLE TO MEANINGFULLY PLAN FOR

PTs 5506s codeccedescscecececeess 4

Il. NUMEROUS EMPLOYEES EXPECT THAT THEY

WILL WORK IN RETIREMENT IN ORDER TO

PEED EE EDs ce cccccccscvccececceses 7

A. Working as Construction Supervisors While

Receiving Benefits Earned as Construction

Laborers Was Perfectly Permissible at the

Time of Messrs. Schmidt and Heinz’s

Retirement and Should Not Be Disparaged as

ED ccddedencccscscccsecs 7

B. Messrs. Heinz and Schmidt’s Return to Work

Is Consistent Both with Employees’

Expectations of Working after Retirement and

Actual Labor Force Participation Trends .. . 9

od Individuals Generally Stay in the Work Force

and Return to Work After Retirement for

Financial ROGOGES. . o> ccecckeueeeeee 12

D. Individuals Who Continue to Work or Return

to Work Are Generally Employed in

Physically Less Demanding Jobs. ....... 13

Il. . CONGRESS DID NOT DISTINGUISH BETWEEN

SINGLE EMPLOYER AND MULTIEMPLOYER

PENSION PLANS CONCERNING HOW AND

WHEN AMENDMENTS IN PENSION PLAN

PROVISIONS MAY BE APPLIED TO

PARTICIPANTS IN PAY STATUS. .......... 14

CONCLUSION on ncccccccccccscsccsssueeeeeeenee 21

TABLE OF AUTHORITIES

CASES

Alessi v. Raybestos-Manhattan, Inc.,

eee ccccccescccoccecee 20

Bellas v. CBS, Inc., 221 F.3d 517 (3d Cir. 2000) ......... 2

Curtiss-Wright Corp. v. Schoonejongen,

eee ccc ccescccececccs 15, 19

Great-West Life & Annuity Ins. Co. v. Knudson,

ee ect c sees asececccs 2

Harris Trust & Sav. Bank v. Salomon Smith Barney Inc.,

EES SESE POTEET 2

Heinz v. Central Laborers Pension Fund,

303 F.3d 802 (7th Cir. 2002) .................... 8

Hozier v. Midwest Fasteners, Inc.,

a 16

Hughes Aircraft Co. v. Jacobson,

EEE 15, 19

In Re Balay, 113 B.R. 429 (Bankr. N.D. Tl. 1990) ....... 5

Izzarelli v. Rexene Products Co.,

24 F.3d 1506 (Sth Cir. 1994) ............0.000.8. 16

Lockheed Corp. v. Spink, 517 U.S. 882 (1996) ... 15, 19, 20

Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) ......... 2

iv

Nachman Corp. v. Pension Benefit Guaranty Corp.,

GEBGD. TPG ccccccccccccccecccsscccess 20

Pension Benefit Guar. Corp. v. Quiment Corp.,

711 F.2d 1085 (1st Cir. 1983) .............--2005- 5

Republic Indus. v. Teamsters Joint Council 83,

718 F.2d 628 (4th Cir. 1983) ...........020 ee eeee 5

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ....... 15

Slavsky v. New York City Police Department,

967 F. Supp. 117 (S.D.N.Y. 1997) ............---. 7

Varity Corp. v. Howe, 516 U.S. 489 (1996) ............ 2

Williams v. Cordis Corp., 30 F.3d 1429 (11th Cir. 1994) . 20

STATUTES, REGULATIONS AND

LEGISLATIVE HISTORY

Employee Retirement Income Security Act (ERISA),

PUBL. | TGS GE, cccccccccccccccecccccccs 2

Bs BB. FP UE. © FES ccccccccccccccccces 20

ERISA § 204(g), 29 U.S.C. § 1054(g) ......... 17, 20

ERISA § 302(c)(8), 29 U.S.C. § 1082(c)(8) ........ 18

Bs GREED ccccceceseceecececesoteocecssuste 17

Treas. Reg. § 1.401(a)(4)-13(c)(4)(i) ..... ee ee ee 18

Treas. Reg. § 1.401(a)(4)-13(c)(4){il) .......- 2 ee ee 19

Treas. Reg. § 1.401(a)(4)-13(c)(6) ...... 2... eee ee eee 19

Rev. Rul. 92-66, 1992-36 LR.B. 11 .................. 17

° —s il Sl ——

Vv

H.R. Rep. No. 533, 93rd Cong., Ist Sess. 1-2 (1973),

reprinted in 1974 U.S.C.C.A.N. 4639 ............ 14

S. Rep. No. 383, 93rd Cong., Ist Sess. 1 (1973),

reprinted in 1974 U.S.C.C.A.N. 4890 ............ 14

MISCELLANEOUS

AARP, 1998 AARP BABY BOOMER RETIREMENT SURVEY:

PRELIMINARY FINDINGS (July 16, 1998) (Prepared

for AARP by Roper Starch Worldwide) ........... 10

AARP, STAYING AHEAD OF THE CURVE 2003: THE AARP

WORKING IN RETIREMENT STUDY (2003) (Prepared for

RE GED Ce cccenesessscccessecess ll

AARP, STAYING AHEAD OF THE CURVE: THE AARP WorRK

AND CAREER STUDY (Sept. 2002) (Prepared for AARP

SSNS conccocccecesceseececsosoes 10, 12

60A AM. JUR. 2D Pensions and Retirement Funds

ed le a ee ee 7,8

COUNCIL OF ECONOMIC ADVISORS, ECONOMIC REPORT OF

THE PRESIDENT (Feb. 2004) .................04. 12

SIDNEY DAVIDSON, et al., FINANCIAL ACCOUNTING: AN

INTRODUCTION TO CONCEPTS, METHODS, AND USES

GG BEND cccvcccccccccesecccuceceseceecs 12

Economics of the Aging Revolution: Age Discrimination in

the Workplace, at

http:// inity.edu/~mkearl/ bem

Se CE GUE coccosccccccccssseses 16

vi

EMPLOYEE BENEFIT RESEARCH INSTITUTE, RETIREMENT

CONFIDENCE SURVEY (May 2002) (Survey prepared by

Mathew Greenwald & Assocs. in conjunction with EBRI

and American Savings Education Council) ........ 10

EMPLOYEE BENEFIT RESEARCH INSTITUTE, RETIREMENT

CONFIDENCE SURVEY (Oct. 1997), available at

http://www.ebri.org/rcs/1997/97rcs_es.htm (last visited

Feb. 26, 2004) (Survey prepared by Mathew Greenwald

& Assocs. in conjunction with EBRI and American

Savings Education Council) .................... 10

TERESA GHILARDUCCI, LABOR’S CAPITAL (1992) ....... 15

JORDAN GOODMAN, EVERYONE’S MONEY BOOK ON

RETIREMENT PLANNING, Pensions (2002) .......... 5

DAVD A. LITTELL, et al., FINANCIAL DECISION MAKING AT

RETIREMENT, Source of Retirement Income: Qualified

Retirement Plans and Health Insurance Planning for the

ee ED ME oc ccceconccecscccécces 6

JOHN T. MCCARTHY, FINANCIAL PLANNING FOR A SECURE

SE CUUED eccccccecseceseccococcscese 5

Colleen Medill, Targeted Pension Reform,

ee es BE ob bec esedcdedccdcceceoesc sce 5

ae —E - ~

vil

NATIONAL INSTITUTE ON AGING, THE HEALTH AND

RETIREMENT STUDY, HRS National Institute on Aging

Press Release (June 17, 1993), available at

hfyle=refOO8&xtyp=1 (Go to

http://hrsonline.isr.umich.edu/docs/background/

ref008a.html (last visited Feb. 26, 2004) (Survey

conducted by the University of Michigan Institute for

ED ie cn eked edeeeuseeneensent 9

CONSTANTUN PANIS, et al., SOCIAL SECURITY

ADMINISTRATION, THE EFFECTS OF CHANGING SOCIAL

SECURITY ADMINISTRATION’ S EARLY RETIREMENT AGE

AND THE NORMAL RETIREMENT AGE (June 2002)

(Prepared for SSA by RAND) ................ 4,14

SYLVIA PORTER, PLANNING YOUR RETIREMENT

(1991) 2.0.2.0... dbs tmaaainamesonts 5, 6, 12

JANE BRYANT QUINN, MAKING THE MOST OF YOUR MONEY,

How to Retire in Style (1997) ... 2... 6.60 e ce cens 12

Lorraine A. Schmall, Keeping Employer Promises when

Relational Incentives No Longer Pertain: “Right-

sizing” and Employee Benefits, 68 GEO. WASH. L. REV.

PPT TT TT TTT TTT TTT Tee 15, 16

Lea E. Selleck, Post-Retirement Employment Restrictions on

Public Employees in Kansas, 5 KAN. J.L. & PUB. POL'Y

PE EUGED cd avdccccccccccccsccctivsocecs 8

2003 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND

THE FEDERAL DISABILITY INSURANCE TRUST FUNDS,

EEE EE: eR ee Ee 12

vill

SOCIAL SECURITY ADMINISTRATION, DECIDE WHEN TO

RETIRE, at http://www.ssa.gov/retire2/index htm

(last visited February 27, 2004) .............0005. 4

PETER J. STRAUSS AND NANCY M. LEDERMAN, THE

COMPLETE RETIREMENT SURVIVAL GUIDE, Pension,

Benefits and IRAs (2d ed. 2003) .............0055: 6

Humphrey Taylor, The New Vision of Retirement is Very

Different Than the Traditional Image for Retirement,

THE HAR«IS POLL (May 15, 2002), available at

friend/index.asp?PID=301 (last visited Mar. 1, 2004) 10

U.S. DEPT. OF LABOR, BUREAU OF LABOR STATISTICS,

LABOR FORCE DATA FILES, Labor Force Participation

Rates, 2002-2012, at

U.S. DEPT. OF LABOR, BUREAU OF LABOR STATISTICS,

LABOR FORCE DATA FILES, Labor Force Participation

mates, 1980-2000, at

U.S. DEPT. OF LABOR, BUREAU OF LABOR STATISTICS,

OCCUPATIONAL OUTLOOK HANDBOOK, 2002-2003,

Construction Laborers 449, available at

http://www.bls.gov/oco/ocos248.htm

(last modified Feb. 27, 2004) ................ 13,14

ix

U.S. DEPT. OF LABOR, NATIONAL COMPENSATION SURVEY:

EMPLOYEE BENEFITS IN PRIVATE INDUSTRY

IN THE UNITED STATES, 2000, Bulletin 2555

PD pended ee eee eek ae cues a abes 15

U.S. DEPT. OF LABOR, TOP 10 WAYS TO BEAT THE CLOCK

AND PREPARE FOR RETIREMENT, at

iol /ebsa/publications/10

html (last modified Feb. 27, 2004) ................

Cathy Ventrell-Monsees, “Take the Money and Run or Ii's

Too Late Baby:” Early Retirement Incentives and the

ADEA, 29 U. MEM. L. REV. 83 (1999) ............

No. 02-891

IN THE

SUPREME COURT OF THE UNITED STATES

CENTRAL LABORERS’ PENSION FUND,

Petitioner,

Vv.

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 AMICUS CURIAE OF AARP

IN SUPPORT OF RESPONDENTS

INTEREST OF AMICUS CURIAE”

AARP, a nonpartisan nonprofit membership

organization of over 35 million persons, age 50 or older,

working or retired, is dedicated to addressing the needs and

Y No counsel for any party authored any portion of this brief. No

persons other than the amicus curiae, its members, or its counsel

made a monetary contribution to the preparation and submission of

this brief. The parties have filed letters with the Clerk expressing

their blanket consent to the filing of amicus briefs.

2.

interests of older Americans. Almost half of AARP’s members

are working. AARP seeks through education, advocacy, and

service to enhance the quality of life for all by promoting

independence, dignity and purpose.” In its efforts to promote

independence, AARP works to foster the economic security of

individuals as they age by attempting to ensure the availability,

security, equity, and adequacy of public and private pension,

health, disability and other employee benefits.

AARP’s members and other participants in private

employer-sponsored employee benefit plans rely on the

Employee Retirement Income Security Act (ERISA) to protect

their rights. 29 U.S:C. § 1001 et seg. It is crucial that

participants be able to rely on the pension benefits that have

been promised to them and which they have earned because the

quality of their lives in retirement depends heavily on their

eligibility for and the amount of their pensions. Participants

must know that once they have begun receiving pension

benefits that these benefits cannot be taken away. Thus,

application of plan amendments tightening suspension of

benefit rules to those participants who are already receiving

their pension benefits, not only will negatively impact their

retirement security, but may leave them with little or no time in

which to make up any shortfall.

Y As part of its advocacy efforts to ensure, to the greatest extent

possible, that participants and beneficiaries receive the benefit of

ERISA’s protections, AARP has participated as amicus curiae, both

jointly and singly, in numerous ERISA cases including those

involving ERISA § 204(g). See, e.g., Great-West Life & Annuity Ins.

Co. v. Knudson, 534 U.S. 204 (2002); Harris Trust & Sav. Bank v.

Salomon Smith Barney Inc., 530 U.S. 238 (2000); Mertens v. Hewitt

Assocs., 508 U.S. 248 (1993); Varity Corp. v. Howe, 516 U.S. 489

(1996); Bellas v. CBS, Inc., 221 F.3d 517 (3d Cir. 2000).

ee ——

. 3

Because this case will have a direct bearing on the

economic security of millions of Americans, including AARP

members, AARP respectfully submits this brief amicus curiae.

SUMMARY OF ARGUMENT

The issue before the Court in this case is very narrow —

may a pension plan tighten its suspension of benefits rule

limiting where participants may work after retirement and apply

this new rule to those participants who are already in pay status.

AARP submits that the answer to this question must be no.

If plans are permitted to change eligibility rules for

pension benefits, such as limiting where participants may work

after retirement, and apply those new rules to participants in

pay status, the impact on those participants will be significant.

Permitting plans to limit when and where individuals may work

after they are already in pay status makes meaningful retirement

planning impossible. Significantly, such plan amendments fly

in the face of workers’ expectations and labor force trends

indicating that more individuals are staying in the work force

after they “retire.” Moreover, although Congress permitted

plan sponsors to amend their pension plans, Congress

circumscribed such amendments by restricting how and when

they can be applied to participants. Congress did not

differentiate between multiemployer and single employer

pension plans in these restrictions on applying plan

amendments to those participants in pay status. For these

reasons, the decision of the Seventh Circuit should be affirmed.

-4-

ARGUMENT

I. IF PENSION PLANS CAN CHANGE THEIR

RULES FOR RECEIPT OF PENSION BENEFITS

RETROACTIVELY, NO EMPLOYEE WILL

EVER BE ABLE TO MEANINGFULLY PLAN

FOR RETIREMENT.

A “secure, comfortable retirement is every worker’s

dream.” SOCIAL SECURITY ADMINISTRATION, DECIDE WHEN

TORETIRE, at http://www.ssa.gov/retire2/index.htm (last visited

February 27, 2004). Financial security in retirement depends

on the employee’s decision and ability to participate in

meaningful retirement planning. /d.; see generally U.S. DEPT.

OF LABOR, TOP 10 WAYS TO BEAT THE CLOCK AND PREPARE

F OR RETIREMENT, at

www.dol.gov/ebsa/publications/10_ways to prepare.html (last

modified Feb. 27,2004). Retirement planning is the process by

which employees attempt to figure out how much money they

will need to live comfortably in retirement. Those employees

who participate in retirement planning are “forward-looking in

their labor force participation, consumption, and savings

decisions,” and “have a sense of when they will retire and make

tradeoffs . . . in order to accommodate [this] desired standard

of living during retirement.” CONSTANTUN PANIS, et al.,

SOCIAL SECURITY ADMINISTRATION, THE EFFECTS OF

CHANGING SOCIAL SECURITY ADMINISTRATION’S EARLY

RETIREMENT AGE AND THE NORMAL RETIREMENT AGE 53

(June 2002) (Prepared for SSA by RAND).

In the same manner as employers use pensions as a tool

for managing their workforce, employees use pensions as a tool

for managing their retirement security. Whether an employee

is a participant in a pension plan, under what conditions they

are eligible to receive their benefits, and the amount of those

-5-

benefits are essential for informed and meaningful retirement

planning. Thus, Congress included ERISA’s disclosure

provisions which require plan administrators to “provide

information to plan participants so that they can make rational

decisions in planning and saving for retirement.” Colleen

Medill, Targeted Pension Reform, 27 J. LEGIS. 1, 37 (2001).

Congress, moreover, made plan sponsors “accountable for the

pension benefits they promise to ensure that employees can

safely rely on these promises in their retirement planning.”

Pension Benefit Guar. Corp. v. Quiment Corp.,711 F.2d 1085,

1092 (1st Cir. 1983); see also Republic Indus. v. Teamsters

Joint Council 83,718 F.2d 628, 635 (4th Cir. 1983) (Congress

intended “heavy weight to be given to employees’ reliance on

ultimate realization of their vested benefits”); Jn Re Balay, 113

B.R. 429, 434 (Bankr. N.D. Ill. 1990) (“the Court must remain

mindful of the importance of ERISA-qualified plans and their

role in retirement planning”).

Pensions are always discussed as part of retirement

planning with the admonition to “verify information at the time

of retirement” and to rely only on written information, not

“hearsay.” SYLVIA PORTER’S PLANNING YOUR RETIREMENT 17

(1991). In abook published by the International Foundation of

Employee Benefit Plans, the author stresses the importance of

reading and understanding the individual’s pension plan

documents. JOHN T. MCCARTHY, FINANCIAL PLANNING FOR A

SECURE RETIREMENT 23 (1991). Not surprisingly, advice for

retirement planning includes obtaining and reviewing pension

plan documents in order to determine the criteria for receipt of

a pension and the different distribution options. As one author

put it: “You want to avoid nasty surprises come retirement

day.” JORDAN GOODMAN, EVERYONE’S MONEY BOOK ON

RETIREMENT PLANNING, Pensions 45 (2002).

6-

Resources for financial planners themselves recognize

that pension plans are complicated. Among other issues these

resources review are the ability of plan sponsors to change

pension plan formulas and the impact of such changes on the

amount of benefits that an individual may receive.

Significantly, financial planners do not reference the possibility

of changes to pension plan benefits after an individual is in pay

status. This failure to note even the possibility of a loss of

pension benefits after an individual is in pay status is in stark

contrast to the information these resources provide concerning

retiree health benefits and the recognition that plan sponsors

may readily be able to reduce or terminate these health benefits.

See, e.g, DAVID A. LITTELL, et al., FINANCIAL DECISION

MAKING AT RETIREMENT, Source of Retirement Income:

Qualified Retirement Plans and Health Insurance Planning for

the Older Client 79-109, 423-425 (Sth ed. 2001); see also

PETER J. STRAUSS AND NANCY M. LEDERMAN, THE COMPLETE

RETIREMENT SURVIVAL GUIDE, Pension, Benefits and IRAs

283-302 (2d ed. 2003).

Moreover, planning for retirement now necessarily

includes working, either full or part-time, during a portion of

retirement. Frequently, working during retirement is used as a

means for making ends meet or, at a minimum, as a means to

prevent an individual from dipping into capital assets. PORTER

at 24, 223-24.

Unfortunately, Messrs. Heinz and Schmidt were dealt

a nasty surprise after their retirement day. Because the Central

Laborers Pension Plan applied changes made to the plan’s

suspension of benefits rules limiting the types of positions

laborer retirees could work after Messrs. Heinz and Schmidt

were in pay status, no amount of retirement planning, reading

or understanding of their pension plan provisions would have

mattered in their case. There would be no way that they should

x %

have, would have or could have known of changes in the plan

rules affecting their pension benefits once they were in pay

status.

If pension plans can change their plan provisions to

apply to a participant who is already in pay status, retirement

planning will become meaningless. Not only will a pension

participant not be able to rely upon the plan documents, but the

pension benefit itself becomes illusory.

Il. NUMEROUS EMPLOYEES EXPECT THAT

THEY WILL WORK IN RETIREMENT IN

ORDER TO MAKE ENDS MEET.

A. Working as Construction Supervisors While

Receiving Benefits Earned as Construction

Laborers Was Perfectly Permissible at the

Time of Messrs. Schmidt and Heinz’s

Retirement and Should Not Be Disparaged

as Double Dipping.

Some amici disparagingly refer to Messrs. Heinz and

Schmidt’s reium to work as “double-dipping.” National

Coordinating Committee for Multiemployer Plans’

(“NCCMP”) Brief Amicus Curiae at 11; U.S. Brief Amicus

Curiae at 15. As a general rule, “an individual who is retired

from service with the state, a municipal corporation, or a

political subdivision of the state, may not engage in . . . double

dipping, where such individual simultaneously receives pension

benefits and compensation for postretirement public

employment or service.” 60A AM. JUR. 2D Pensions and

Retirement Funds § 1226 (2003) (emphasis added). See also,

Slavsky v. New York City Police Dep't, 967 F. Supp 117, 120

(S.D.N.Y. 1997) (the city’s failure to restrict pension payments

for workers in the private sector did not affect its ability to

“limit expenditures for those whom the public fisc is liable for

both the pension and employment benefits”); Lea E. Selleck,

Post-Retirement Emplc yre nt Restrictions on Public Employees

in Kansas, 5 KAN. J.L. « PuB. POL’Y 199, 208 (Spring 1996)

(noting that “restrictions are often not applied to those public

workers who secuie postretirement employment in the private

sector”). A number of state and local governments have anti-

double dipping statutes that “prevent a public pensioner who

reenters public employment from the simultaneous enjoyment

of both the pension and the compensation for subsequent

employment.” 60A AM. JUR. 2D at § 1226 (2003). At the same

time, while the notion of a public pensioner also working for

the same public employer may be viewed negatively in the

public realm, it is not unusual for private employers to rehire

post-retirement workers as consultants or other professionals.

Such a practice recognizes that “retirees may be particularly

suited to positions calling for great experience.” Selleck at 208.

Unlike in the public realm where the person double-

dipping is more than likely working in the same job and

receiving a pension, the position of construction supervisor is

neither covered by the pension plan nor in direct competition

with the jobs covered in the plan. As the Seventh Circuit

noted, “there is no question that at the time of plaintiffs’

retirement, the plan permitted the very practice that the Fund

now disparages — working as construction supervisors while

receiving benefits.” Heinz v. Central Laborers Pension Fund,

303 F.3d 802, 806 n.6 (7® Cir. 2002). The practice of working

as a construction supervisor while receiving benefits earned as

a construction laborer should not be considered “double

dipping,” with all of the negative connotations of that term,

when it was perfectly permissible at the time of Messrs. Heinz

and Schmidt’s retirement.

at. |

9.

B. Messrs. Heinz and Schmidt’s Return to

Work Is Consistent Both with Employees’

Expectations of Working after Retirement

and Actual Labor Force Participation

Trends.

Messrs. Heinz and Schmidt’s decision to work after

their retirement is consistent with the upward trend in labor

force participation as well as the expectation of employees that

they will continue to work after they “retire.” Over the past

decade, responses in a number of surveys to queries about

retirement plans and expectations have been pointing to a shift

in work and retirement patterns. Sizable portions of workers

report wanting or expecting to work in retirement. “To retire”

no longer necessarily means leaving the work force. For

example:

e 73 percent of employed respondents aged 5!-61

in the first wave of the Health and Retirement

Study say that they would like to continue doing

some paid work when they retire. NATIONAL

INSTITUTE ON AGING, THE HEALTH AND

RETIREMENT STUDY, HRS National Institute on

Aging Press Release (June 17, 1993), available

at http://hrsonline.isr.umich.edu/docs/

sho _refs.php?hfyle=refO08&xtyp=1 (Go to

bene Meracnlinn ich.edu/docs/

fref008a.htmi (last visited Feb. 26, 2004)

(Survey conducted by the University of

Michigan Institute for Social Research).

e 72 percent of all workers, 67 percent of

preboomers (ages 53 and older at the time of the

survey), 69 percent of early boomers (ages 45-

52), and 78 percent of late boomers (ages 34-

-10-

44) expect to work part time in retirement.

EMPLOYEE BENEFIT RESEARCH INSTITUTE,

RETIREMENT CONFIDENCE SURVEY (Oct. 1997),

availabie at http://www.ebri.org/rcs/1997

{97rcs es.htm (last visited Feb. 26, 2004)

(Survey prepared by Mathew Greenwald &

Assocs. in conjunction with EBRI and

American Savings Education Council).

80 percent of boomers think that they will work

at least part time when they retire. AARP, 1998

AARP BABY BOOMER RETIREMENT SURVEY:

PRELIMINARY FINDINGS 2 (July 16, 1998)

(Prepared for AARP by Roper Starch

Worldwide).

69 percent of persons aged 45-74 say they want

to work in some capacity in retirement. AARP,

STAYING AHEAD OF THE CURVE: THE AARP

WORK AND CAREER STUDY 8 (Sept. 2002)

(Prepared for AARP by RoperASW).

95 percent of preretirees aged 55-64 who plan

to retire expect to work in some capacity in

retirement. Humphrey Taylor, The New Vision

of Retirement is Very Different Than the

Traditional Image for Retirement, THE HARRIS

PoLL (May 15, 2002), available at

66 percent of workers aged 20 and older say

that they think they will work for pay after they

retire. EMPLOYEE BENEFIT RESEARCH

————— - —

a — -

INSTITUTE, RETIREMENT CONFIDENCE SURVEY

33 (May 2002) (Survey prepared by Mathew

Greenwald & Assocs. in conjunction with EBRI

and American Savings Education Council).

e 68 percent of workers aged 50-70 plan to work

in retirement or expect never to retire. AARP,

STAYING AHEAD OF THE CURVE 2003: THE

AARP WORKING IN RETIREMENT STUDY 4

(2003) (Prepared for AARP by RoperASW).

Workers’ expectations of continuing to work longer and

after retirement are consistent with historical and projected

labor force participation trends. A review of historical labor

force participation rates since 1980 show a slow but steady

increase in the number of people age 50 and up participating in

the workforce. U.S. DEPT. OF LABOR, BUREAU OF LABOR

STATISTICS, LABOR FORCE DATA Fites, Labor Force

Participation Rates, 1980-2000, at

bitp.//www.bls.sov/emp/emplabl.htm ne to

txt) (last modified Feb. 11, 2004). Projected labor force

participation rates for the near term also show a continuing

increase. U.S. DEPT. OF LABOR, BUREAU OF LABOR

STATISTICS, LABOR FORCE DATA FILES, Labor Force

Participation Rates, 2002-2012, at

attp//www.bls.sov/emp/emplab hi m (Go to

txt) (last modified Feb. IL, 2004). ‘Conneguentin, cuapension

of benefits rules that change after participants are in pay status

are counter to current labor force participation trends.

-12-

Cc. Individuals Generally Stay in the Work

Force and Return to Work After Retirement

for Financial Reasons.

Although people stay in the work force or return to

work for a variety of reasons, the primary motivating factor is

financial — that is, the need for money and access to health care

coverage. STAYING AHEAD OF THE CURVE at 8 (2002). Most

employees who have been surveyed who remain in the

workforce or return to work do so in order to make ends meet.

Almost three-fourths of people surveyed expect that they will

have to lower their standard of living in retirement. PORTER at

24, 223-24.

Even if an individual is fortunate enough to have earned

a pension benefit from a defined benefit pension plan, the

purchasing power of such a benefit is reduced yearly if there is

no cost of living adjustment. At 3% inflation, the purchasing

power of fixed annual pension from a defined benefit pension

plan is reduced by about one quarter after 10 years and in half

after 23 years.” Obviously, as the inflation rate increases, the

purchasing power decreases. SIDNEY DAVIDSON, ef al.,

FINANCIAL ACCOUNTING: AN INTRODUCTION TO CONCEPTS,

METHODS, AND USES 850 (4th ed. 1985). See generally JANE

BRYANT QUINN, MAKING THE MOST OF YOUR MONEY, How to

¥ The Social Security Administration will use 3% for its

intermediate Consumer Price Index assumption for years starting in

2007. 2003 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE

FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND THE FEDERAL

DISABILITY INSURANCE TRUST FUNDS, tb]. V.B1 (Mar. 2003). Since

1996, the rate of inflation for the Consumer Price Index-Urban has

ranged from a high of 3.4 % to a low 1.6%. COUNCIL OF ECONOMIC

ADVISORS, ECONOMIC REPORT OF THE PRESIDENT, tbl. B.64 (Feb.

2004).

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Retire in Style 842-43, 847, 849 (1997) (discussion of impact

of inflation on pension’s annual loss of purchasing power and

retirement security).

By the time Messrs. Heinz and Schmidt reach age 65,

the purchasing power of their pension, assuming an inflation

rate of 3%, would be reduced by over half from approximately

$1650 per month (Central Laborers’ Brief at 4) to

approximately $808.50 per month.” Given the loss of

purchasing power of their pensions over time, a competent

retirement planner would have suggested to Messrs. Heinz and

Schmidt that they return to work after they were in pay status.

D. Individuals Who Continue to Work or

Return to Work Are Generally Employed in

Physically Less Demanding Jobs.

According to the Bureau of Labor Statistics,

“[{cJonstruction laborers perform a wide range of physically

demanding tasks involving building and highway construction,

tunnel and shaft excavation, hazardous waste removal, and

demolition.” U.S. DEPT. OF LABOR, BUREAU OF LABOR

STATISTICS, OCCUPATIONAL OUTLOOK HANDBOOK, 2002-

2003, Construction Laborers 449, available at

http://www. bls.gov/oco/ocos248.htm (last modified Feb. 27,

2004). These jobs may require the laborers to “lift and carry

heavy objects, and stoop, kneel, crouch, or crawl in awkward

positions.” Jd.

Not surprisingly, several studies have shown that

retirement ages are lower for individuals, such as construction

° The Central Laborers’ Pension Plan provides no annual cost of

living adjustment to pension benefits and no actuarial adjustment for

the period of the suspension of benefits.

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laborers, who work in physically demanding occupations.

PANIS at 60. On the other hand, “individuals with flexible work

hours and the opportunity to perform less demanding work in

the same job tend to retire late.” Jd.

It is rational that an individual would not continue to

work in or return to the job of a construction laborer because of

the physical demands of that job. A position as a construction

supervisor would be less physically demanding than a

construction laborer. And, “[e]xperience in many construction

laborer jobs may allow some workers to advance to positions

such as supervisor or construction superintendent.”

OCCUPATIONAL OUTLOOK HANDBOOK at 450. Given the

physical demands of the job of construction laborers, Messrs.

Heinz and Schmidt’s decision to return to work as construction

supervisors, which at the time of their retirement was

permissible under the plan terms, was reasonable.

Ill. CONGRESS DID NOT DISTINGUISH BETWEEN

SINGLE EMPLOYER AND MULTIEMPLOYER

PENSION PLANS CONCERNING HOW AND

WHEN AMENDMENTS IN PENSION PLAN

PROVISIONS MAY BE APPLIED TO

PARTICIPANTS IN PAY STATUS.

The offering of pension plans in the United States is

voluntary. See, e.g., H.R. Rep. No. 533, 93rd Cong., Ist Sess.

1-2 (1973), reprinted in 1974 U.S.C.C.A.N. 4639, 4639-40; S.

Rep. No. 383, 93rd Cong., Ist Sess. 1 (1973), reprinted in 1974

U.S.C.C.A.N. 4890, 4890. Current law neither mandates that

a pension be offered to employees nor, if such a plan is offered,

the particular types or amounts of benefits that must be

provided to employees. A plan sponsor may design the pension

plan benefit structure as it sees fit as long as the plan does not

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violate any of ERISA’s substantive rules.” See Shaw v. Delta

Air Lines, Inc., 463 U.S. 85,91 (1983) (describing how ERISA

does not mandate that “employers provide any particular

benefits”). Thus, plan sponsors are “generally free” to amend

their employee benefit plans at any time. Such amendments

may include termination of a pension plan or change in the

types or amounts of benefits. See Hughes Aircraft Co. v.

Jacobson, 525 U.S. 432, 443-444 (1999); Lockheed Corp. v.

Spink, 517 U.S. 882, 889-91 (1996); Curtiss-Wright Corp. v.

Schoonejongen, 514 U.S. 73, 78 (1995).

Admittedly, pensions can be a useful tool to employers

and labor organizations with which they can recruit, retain and

manage a labor force. “Because ERISA does not mandate that

employers provide pensions to its employees, it must be that

‘employers use pensions as personnel devices that alter quit and

hiring decisions.” Lorraine A. Schmall, Keeping Employer

Promises when Relational Incentives No Longer Pertain:

“Right-sizing” and Employee Benefits,68 GEO. WASH. L. REV.

276, 290 (2000) (citing TERESA GHILARDUCCI, LABOR’S

CAPITAL at [X (1992)). For example, in order to decrease their

work forces and reduce costs, many employers have turned to

early retirement incentives, and some have amended their

~ The Central Laborers’ Pension Plan was designed to permit a

subsidized early retirement benefit based solely on years of credited

service with no age requirement. Approximately 16% of blue collar

and service employees who are covered by defined benefit plans

participate in plans providing an early retirement benefit with no age

requirement. U.S. DEPT. OF LABOR, NATIONAL COMPENSATION

SURVEY: EMPLOYEE BENEFITS INPRIVATE INDUSTRY IN THE UNITED

STATES, 2000, Bulletin 2555, tbl. 70 (Jan. 2003) (table showing

“Defined benefit plans: Requirements for early retirement, full-time

employees, private industry).

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existing pension plans to include early retirement windows,

which offer benefits during specified, limited periods of time.

See generally, Schmall, at 293-95. Employers and labor

organizations have resorted to service pensions such as the one

at issue here to legally push older workers out of the work force

and move in and promote younger workers. Economics of the

Aging Revolution: Age Discrimination in the Workplace, at

http://www trinity.edu/~mkearl/ger-econ. html (last visited Feb.

27, 2004).

Central Laborers’ Pension Plan and its amici argue that

if they cannot apply the changes to the suspension of benefits

rules immediately and to all participants, the impact on the

economics of the plan and the work force will not be felt

immediately. See Central Laborers’ Brief at 23-26; NCCMP

Brief Amicus Curiae at 10-11. However, all pension plans have

definite parameters in the types of changes Congress permitted

and when such changes may be applied to participants. Despite

the varying uses of plans as personnel devices, plan sponsors do

not have acompletely unfettered right to amend their employee

benefit plans. No substantive provision of ERISA may be

violated, no express term of the plan’s governing documents

may be violated, and ERISA’s procedures for adopting an

amendment must be followed. IJzzarelli v. Rexene Products

Co., 24 F.3d 1506, 1524 (Sth Cir. 1994); Hozier v. Midwest

Fasteners, Inc., 908 F.2d 1155, 1162 (3d Cir. 1990). Congress

circumscribed the application of pension plan changes to

prevent the reduction of accrued benefits, even though the

consequence is that the economic impact of such changes will

take a period of time to be effective. By so doing, Congress

balanced changes needed for financial reasons and for

management of the work force for employers and labor

organizations with the impact on the individual.

_ - a eee

ee .er*

i.

As an example, “[eJarly retirement windows that are

offered year in and year out cause problems for employers and

employees when the windows become viewed as entitlements

Or permanent features of benefit plans.” Cathy Ventrell-

Monsees, “Take the Money and Run or It’s Too Late Baby:”

Early Retirement Incentives and the ADEA, 29 U. MEM. L.

REV. 783, 822 (1999). “[{RJegulations [interpreting IRC

§ 411(d)(6)] preclude a pattern of plan amendments that would

make benefits available only for a limited period of time if the

plan amendments give rise to a reasonable expectation that the

benefit is an ongoing feature of the plan, and therefore a

valuable right." Rev. Rul. 92-66, 1992-36 LR.B. 11.

Repeated pension plan amendments to allow for such factors as

early retirement windows therefore become “treated as

provided under the terms of the plan, without regard to the

limited periods of time.” Jd. Congress, thus, balanced

permitting employers to use early retirement incentives to

decrease their work force with the reasonable expectations of

employees if such incentives were used on a regular basis.

Likewise, the plan sponsor here should not be able to change

the suspension of benefit rules to act as a spigot to manage the

flow of unionized workers into the work force at will. See

generally, Central Laborers’ Brief at 23. Instead, Congress’

balance must be met.

Another example is where a plan sponsor decides to

change its benefit formula in order to reduce costs. Let us

assume the following as an illustration:

A plan sponsor decides to reduce the formula

for determining the amount of pension benefits

from:

© IRC § 411(d)(6) is the Code counterpart of ERISA § 204(g), 29

U.S.C. § 1054(g).

-18-

1.5% multiplied by years of

service multiplied by the

average of the highest 5 years of

compensation (the old formula)

to

1% multiplied by years of

service multiplied by the

average of the highest 5 years of

compensation (the new formula)

(in essence lowering the

multiplier).

How would this change in benefit formula be applied to

participants who are in pay status? It would not” Those

participants would already have earned their benefits under the

old formula. If the new formula were permitted to be applied

to those persons who had taken their benefit, the pla would

have to recalculate their distribution and ask for a return of

monies. This would be particularly troublesome if the

participants had received their distribution as a lump sum.

Suspending a benefit after benefit distributions have begun is

no different than asking for a return of a paid benefit

distribution — it’s taking money away from a participant in pay

status.

This illustration of a change in the benefit formula

would apply to all current employees. The plan sponsor has a

choice of two methods for determining current employees’

benefits after the amendment. Treas. Reg. § 1.401(a)(4)-

” Decreases in accrued benefits are only permitted if they are made

in accordance with ERISA § 302(c)(8), 29 U.S.C. § 1082(c)(8), upon

a finding of the Secretary of substantial business hardship and the

unavailability or inadequacy of a waiver.

_——_

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13(c)(4)(i); Treas. Reg. § 1.401(a)(4)-13(c)(4)(ii). See Treas.

Reg. § 1.401(a)(4)-13(c)(6) for examples. No matter what

choice the plan sponsor makes, employees can never receive

less than what they have already earned at the time of the

change. The changes in benefit formula may only be applied

prospectively, not retroactively. Jd.

As shown above, Congress circumscribed how and

when plan amendments would be applied to participants in

single employer plans. There is nothing in the statute that

shows that Congress intended multiemployer pension plans to

be treated any differently than single employer plans in how

and when pension plan amendments may be applied to

participants. See Hughes Aircraft, 525 U.S. at 443-444;

Lockheed, 517 U.S. at 889-91; Curtiss-Wright, 514 U.S. at 80.

Here, the plan amendment tightening the suspension of

benefits rule should be treated no differently than an early

retirement incentive or a change in a benefit formula. The plan

sponsor cannot consistently offer early retirement incentives

without such incentives becoming a term of the plan. Likewise,

the plan sponsor cannot loosen and tighten its suspension of

benefits rules without the least restrictive provision becoming

a plan term. Nor can a plan sponsor plan reduce its benefit

formula and apply it to those who are in pay status.*- Similarly,

tightening suspension of rules and applying it to those in pay

status acts like change in benefit formula. But just like early

retirement incentives and changes in benefit formulas, a plan

* Although being in pay status provides protection from reductions

in benefits, being in pay status may also negatively affect a

participant. For example, if a participant chooses a joint and

survivor benefit (which generally results in a lower benefit) and the

spouse predeceases the participant, the plan has no obligation to

recalculate the participant’s benefit to pay a higher benefit.

-20- -21-

sponsor does have the choice of how to apply the amendment CONCLUSION

to current employees — it can either apply it only to those years

of service after the amendment was passed or apply it so that For the foregoing reasons, AARP urges the Court to

the employee gets the better benefit under the application of the affirm the Seventh Circuit’s decision.

new suspension of benefit provision. See Central Laborers’

Brief at 16-17.

Indeed, one of Congress’s purposes in enacting ERISA

was to ensure that “if a worker has been promised a defined March 4, 2004 Respectfully submitted,

benefit upon retirement . . . he actually receives it.” Alessi v.

Raybestos-Manhattan, Inc., 451 U.S. 504, 510 (1981). ERISA

“seek[s] to ensure that employees will not be left empty handed Mary Ellen Signorille

once employers have guaranteed them certain benefits.” (Counsel of Record)

Lockheed, 517 U.S. at 887; see also Nachman Corp. v. Pension AARP Foundation Litigation

Benefit Guar. Corp., 446 U.S. 359, 375 (1980). More

specifically, by enacting ERISA § 204(g), Congress saw fit to Melvin Radowitz

prevent plan sponsors from “pulling the rug out from under” AARP

pension plan participants so that participants received the

benefit they were promised. Williams v. Cordis Corp., 30 F.3d 601 E Street, NW

1429, 1431 (11th Cir. 1994). If the Court permits a pension Washington, DC 20049

plan to apply amendments to tighten eligibility rules to receive (202) 434-2060

pension benefits to participants who are already in pay status,

plan sponsors will readily be able to break their promises to Counsel for Amicus Curiae

employees, totally undermining the purpose of ERISA to AARP

provide employees with retirement security. ERISA § 2, 29

U.S.C. § 1001.