US Federal Court Order

[Guest forum4]

Our pension plan has an early retirement provision at age 55, with benefit reduction of 50%. NRA is age 65. We had a former employee with a grievance and went to court in 1995. The attorney of the former employee produced an agreement where, among other things, requires the plan to pay the NRA benefit at age 55 (without reduction). This is just a brief over view of the situation and the question is "can a US Federal Court Order mandate a pension plan to make payment not available or different from that in the document?"

[Guest b2kates]

it is unclear from your explanation if the agreement was produced by the ex employee's attorney or issued by the court.

In general a court can not order a plan to do more than the plan agreement states; however, a court order could be fashioned to " treat the employee" as if he was 65 when he was only 55. This treatmen could create future discrimination issues related to other similarly situated employees.

It has not been uncommon for early retirement enducements to give employees additional years of service credit.

[Guest mjb]

Cts cannot require that a plan pay benefits that are not permitted under the tems of the plan. Who were the parties to the agreement? Was the agreement filed with the court as part of the settlement or dismissal of an action. Last question: What does the plan's lawyer say about the enforceability of the agreement?

[Guest Harry O]

Sounds like a settlement agreement. If the employer is the plan sponsor and was presumably a party to the settlement agreement, there is nothing wrong with the employer agreeing to amend the plan to provide such a benefit. If the employee is an NHCE you should be o.k.

[david rigby]

"The attorney of the former employee produced an agreement...."

Where is your attorney is this discussion? Heed the previous answers.

[Guest forum4]

The document presented is a settlement agreement. The case was dismissed by the district court. The attorney for the employer drafted the settlement agreement - this attorney no longer does work for the employer and the person signing as the employer is longer here. The former employee in question was a NHCE and one point of her grievance was that her service before age 25 was improperly excluded for benefit accrual (hired in 1971). Until 1976, our pension plan required an employee to be age 25 before participating in the plan. Doesn't this open way for other people to try and recoup service that was excluded from the plan (during periods permitted by the document)?

[Guest b2kates]

Without knowing the facts of the grievance or the terms of the settlement, yes it could open the door for others to make similar claims; but they would be all fact specific.

To make a more informed determination you should engage qualified ERISA counsel. Generally, since TEFRA service has counted since age 21 and should not be an issue for later hired employees.

[Guest Harry O]

Anyone can make a claim about anything.

There is no law that prohibits an employer from amending a plan to grant a benefit to a targeted participant as long as you comply with the various tax-qualification rules (e.g., 401(a)(4), 411(b), 415, etc.). Since your former employee was an NHCE you are probably o.k. Moreover, you are probably compelled to make the required amendments and pay the agreed to benefit by virtue of the settlement agreement. I would endorse the other posters' suggestion to consult with your ERISA counsel.

[Guest mjb]

Settling a claim with one litigant is not precedent for the claims of other participants since settlements are entered into to cut the costs of litigation and are not an admission of guilt. Further the dismissal of the case by a ct would be more of a deterrant to claims by other participants. (why a settlement was entered into after the claim was dismissed is beyond me- maybe the employer wanted to avoid the cost of defending an appeal).

As for the validiity of the settlement you need to get an answer from your counsel as to whether it is binding on the plan.