RESPONDENT:Thomas E. Heinz, et al.
LOCATION:Elk Grove Unified School District
DOCKET NO.: 02-891
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Seventh Circuit
CITATION: 541 US 739 (2004)
GRANTED: Dec 01, 2003
ARGUED: Apr 19, 2004
DECIDED: Jun 07, 2004
David M. Gossett – argued the cause for respondents
David M. Gossett – argued the cause for Respondents
John P. Elwood – argued the cause for Petitioner, on behalf of the United States, as amicus curiae
Melvin Radowitz – for AARP as amicus curiae urging affirmance
Mary Ellen Signorille – for AARP as amicus curiae urging affirmance
Thomas C. Goldstein – argued the cause for Petitioner
Facts of the case
Thomas Heinz worked as a construction worker for 20 years, then retired. Upon retirement, he began to receive pension payments from the Central Laborers’ Pension Plan. He continued to receive the pension after he took another job as a supervisor in the construction industry. The pension plan had a list of occupations that a recipient could not work in while receiving pension payments, but construction supervisors were not included. After two years, however, Central Laborers’ Pension amended the list of prohibited professions to include construction supervisors. As a result, Heinz stopped receiving his pension payment. He and Richard Schmitt, a friend who was in the same situation, filed suit in federal district court. They claimed that the amendment, because it was passed after they had already started receiving the benefits, violated the “anti-cutback” provision of the Employee Retirement Income Security Act (ERISA) of 1974. ERISA states that amendments to a pension plan may not decrease the “accrued benefit of a participant.” Because the amendment barred them from receiving payments that they were otherwise eligible for, Heinz and Schmitt claimed that it had reduced their “accrued benefit.” Central Laborers’ Pension, however, argued that the men were still eligible to receive the same pension, they just could not receive it while working as construction supervisors. Because the value of the plan itself had not been changed, only the stipulations for receiving it, the pension plan managers argued that the amendment did not violate ERISA.
The federal district court sided with the pension plan. A divided Seventh Circuit Court of Appeals panel, however, reversed the decision, writing that “an amendment placing materially greater restrictions on the receipt of the benefit ‘reduces’ the benefit just as surely as a decrease in the size of the monthly benefit payment.”
Did Central Laborers’ Pension violate the “anti-cutback” provision of the Employee Retirement Income Security Act of 1974 when it added to a list of positions that temporarily disqualified pension holders from receiving their benefits?
Media for Central Laborers’ Pension Fund v. Heinz
Audio Transcription for Opinion Announcement – June 07, 2004 in Central Laborers’ Pension Fund v. Heinz
William H. Rehnquist:
The opinion of the Court in No. 02-891, Central Laborers’ Pension Fund versus Heinz will be announced by Justice Souter.
David H. Souter:
This case comes to us on writ of certiorari to the United Sates Court of Appeals for the Seventh Circuit.
The Employee Retirement Security Act known as ERISA was intended to protect employees’ justified expectations of receiving the benefits their employers promise them.
To that end, ERISA’s anti-cutback rule prohibits any amendment of an employee pension plan that would reduce a plan participant’s accrued pension benefits.
Respondents Heinz and Schmitt are retired construction workers covered by a multi employer pension plan that is administered by the petitioner, Central Laborers’ Pension Fund.
When Heinz and Schmitt retired, the terms of their pension plan allowed them to receive pension benefits and still take post-employment work as construction supervisors, as they did.
In 1998 however, the plan was amended to prohibit supervisory work and Heinz and Schmitt’s pension benefits were suspended when they refused to quit their jobs.
The question is whether ERISA’s anti-cutback rule prohibits applying the 1998 plan amendments to Heinz and Schmitt.
We must decide, in other words, whether the plan reduced already accrued benefits when it expanded the categories of post-retirement employment that triggers suspension of those benefits.
In an opinion filed with the Clerk today, we hold that the amendment did reduce accrued benefits and accordingly we affirm the Seventh Circuit.
As a matter of commonsense, a participant’s benefits cannot be understood without reference to the conditions imposed on receiving those benefits.
An amendment placing materially greater restrictions on the receipt of the benefits therefore reduces the benefit just as surely as a decrease in the size of the monthly pension benefits.
Heinz and Schmitt worked in accrued pension benefits under a plan with terms allowing them to supplement retirement income by working as construction supervisors and they were being reasonable if they relied on those terms in planning their retirement.
The 1998 amendment undercut any such reliance paying retirement income only if the respondents accepted a substantial curtailment of their opportunity to do the kind of work they knew.
We simply do not see how, in any practical sense, this change of terms could not be viewed as shrinking the value of the respondents’ pension rights and reducing the benefits that they had already earned.
Our reading is confirmed by an internal revenue service regulation that it adopts justice reading of ERISA’s anti-cutback rule.
The regulation allows employers to modify the pension packages they are offering to their employees so long as any changes applies solely to the portion of an employee’s retirement benefits earned his compensation for future employment.
The IRS regulations treats such a plan modification very differently however when an employer attempts to add new conditions to the receipt of benefits already accrued.
The rule in that case is categorical, “the addition of objective conditions with respect to a pension benefit that is already accrued violates the anti-cutback rule.”
So far as the IRS regulations are concerned, the any anti-cutback provision flatly prohibits plans from attaching new conditions to benefits that an employee has already earned.
The fact that the Internal Revenue Service has taken different positions and less formal settings is not relevant here.
Speaking in its authoritative voice, the IRS has long since approved the interpretation of the ani-cutback rule that we adopt today.
Justice Breyer has filed a concurring opinion in which the Chief Justice and Justices O’Connor and Ginsburg joined.