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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0627%3A18

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2004
- **Citation:** 541 U.S. 739

## Text

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.

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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).

-13-

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

-15-

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).

-16-

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.

_——_

-19-

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0627%3A18. Public record. Not legal advice.