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Employee Benefits Law Report

Reporting on recent trends and developments affecting employee benefits

The Supreme Court rescues Obamacare one more time

Posted in Health Care Reform

President Obama might want to invite Chief Justice John Roberts to the White House for a “thank you” dinner!

The United States Supreme Court today issued an opinion in King v. Burwell that upholds the Obama administration’s interpretation of language in the Affordable Care Act (the “ACA”) that concluded government subsidies to underwrite the cost of health care coverage are available to all qualifying Americans–and not just to those living in states that maintain their own heath care exchanges under the ACA.  In a 6-3 decision, Chef Justice Roberts authored the opinion of the court (just as he did in the Court’s landmark opinion in 2012 in National Federation of Independent Business v. Sebelius).  Specifically, the Court’s opinion upholds a ruling by the Internal Revenue Service that subsidies should be available both in states that have set up their own exchanges and in other states in which residents must purchase coverage through the federal government exchange.  Five other justices joined Chief Justice Roberts in his opinion, including Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.  Justice Antonin Scalia wrote a typically scathing dissent, and was joined in that dissent by Justices Clarence Thomas and Samuel Alito Jr.

The case centered on an interpretation of a phrase in the ACA that offers tax credits to individuals who purchase health care coverage on exchanges that are “established by the state.”  Chief Justice Roberts wrote that even though the language was problematic, the intent of Congress to provide the subsidies to all individuals was clear.  In perhaps the core (and ultimately most-quoted) statement in the opinion, Roberts wrote that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.  If at all possible we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

In his dissent, Justice Scalia forcefully expressed his view that the actions of majority were not designed to interpret the ACA but rather to save it—a job he believes is rightfully reserved to the legislature.  Scalia closed his dissent with a statement that is sure to gain much notice and notoriety when he wrote that “We should start calling this law SCOTUScare.”

This case does not deal with complicated constitutional principles, and at the end of the day simply preserves the status quo.  Having said that, most observers believed that a contrary ruling would have dealt a devastating blow to the essential operations of the ACA.  While other legal challenges to the ACA are being litigated, none of those cases seem to present such an existential threat to the ACA.  Still, the challenges are not over.  The ACA surely will be a centerpiece issue during the 2016 presidential campaign, and legislative efforts to repeal, defund or revise all or parts of the ACA will continue.  Although the battlefield may have changed, the battles will continue.

 

IRS issues 409A guidance—need to correct before the year of vesting

Posted in Tax Issues

The Office of Chief Counsel of the Internal Revenue Service (the “IRS”) recently confirmed that violations of Section 409A of the Internal Revenue Code (the “Code”) could be corrected without penalty in any taxable year before the taxable year in which an arrangement became vested. However, the IRS went on to clarify that the Code would require immediate recognition of taxable income of the amounts deferred and the assessment of an additional 20% tax if taxpayers waited until the taxable year of vesting to correct an error.

In Chief Counsel Advice 201518013 (the “CCA”),the IRS clarified what some perceived to be an ambiguity under previously issued proposed regulations describing Code Section 409A income inclusion issues. The proposed regulations explained that an employer generally could correct a Code Section 409A error before the arrangement vests without immediate income tax and additional taxes being imposed on the participant. Most practitioners agreed that an arrangement could be corrected without the risk of penalty so long as the compensation under the arrangement became vested no earlier than the taxable year after the taxable year of correction, and the IRS has confirmed that view in the CCA. What was less clear was whether a correction could be made without the risk of penalty if compensation became vested after the date of correction but still within the same taxable year in which the correction was made. In the CCA, the IRS explained that the correction technique works only when the compensation remains unvested throughout the entire taxable year in which the correction is made and vests no earlier than the taxable year after the taxable year of that correction.

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Supreme Court says give credit where credit is due

Posted in Tax Issues

In Comptroller of Treasury of Maryland v. Wynne, 135 U.S. 1787 (2015), the Supreme Court held that Maryland’s tax scheme was unconstitutional because it discouraged interstate commerce in violation of the Dormant Commerce Clause of the U.S. Constitution. Maryland’s tax scheme gave taxpayers credit for taxes paid to other states against the Maryland state income tax, but did not provide a credit against the county income tax. Therefore, out-of-state income was subject to double taxation, a tax burden not imposed on in-state income.

The Dormant Commerce Clause only gives Congress the ability to regulate interstate commerce, not intrastate commerce. However, shouldn’t activity prohibited at the state level also be prohibited at the municipal level? In Ohio, municipalities are given authority to impose taxes on personal income of both residents and non-residents. In effect, personal income made by an Ohio resident living in one municipality and working in another is taxed twice. In wake of Wynne, Ohio residents should look to a number of Constitutional and fairness arguments to consider whether Ohio’s municipal tax scheme could also be unconstitutional.

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Protection of ERISA’s statute of limitations is narrowed by the Supreme Court

Posted in ERISA Fiduciary Compliance, ERISA Litigation

The United States Supreme Court yesterday issued a unanimous opinion in Tibble et al. v. Edison International et al. vacating a Ninth Circuit Court of Appeals ruling that claims by employees of Edison International against the company over allegedly imprudent 401(k) plan investments were time-barred under applicable ERISA statute of limitation rules. The issue before the Court was whether a fiduciary breach claim can be brought under ERISA based on such an allegedly imprudent retirement investment when that investment initially was selected outside of ERISA’s applicable six-year statute of limitations. Writing for the Court, Justice Stephen Breyer stated that since plan fiduciaries have a continuing duty to monitor plan investments, any claims falling within that duty’s statute of limitations would be valid.

In this case, individual beneficiaries of the Edison International 401(k) Plan filed a lawsuit on behalf of the 401(k) Plan and similarly situated beneficiaries against Edison International and other related parties. The petitioners sought to recover damages for losses suffered by the Plan in addition to other equitable relief based on alleged breaches of the respondents’ fiduciary duties. Specifically, the petitioners argued that the respondents violated their fiduciary duties with regard to mutual funds added to the Plan in 1999 and in 2002. The action was filed by the petitioners in 2007. The underlying fiduciary claim was that the respondents imprudently selected six higher priced retail-class mutual funds as plan investments when materially identical but lower priced institutional-class mutual funds were available. Since ERISA generally requires a breach of fiduciary duty complaint to be brought no more than six years after the date of the last action that constitutes a part of the breach, the lower courts ruled that the petitioners’ complaint with respect the 1999 funds was barred under ERISA’s statute of limitations because those funds were added to the 401(k) Plan more than six years before the complaint was filed (the lower courts concluded that the attendant circumstances had not changed enough to require that review of the selected mutual funds by the respondents). On the other hand, the lowers courts concluded that the respondents’ failed to satisfy their fiduciary obligations with respect to the selection of the three funds in 2002 (and that portion of the lower court opinions may yet prove to be problematic in other similar situations).  While the rulings of the lower courts with respect to the 1999 funds likely cheered plan sponsors temporarily, the Court did not embrace the position of the lower courts and instead vacated the previous rulings and remanded the case back for further examination of the proper application of fiduciary obligations to the facts at hand.

Justice Breyer notes that the District Court in this case allowed the petitioners to argue that the complaint was timely with respect to the funds added in 1999. The petitioners argued that the respondents should have commenced a review and conversion of the higher priced retail-class mutual funds to lower priced institutional-class mutual because the previously selected funds incurred significant changes within the 6-year statute of limitations period. The District Court concluded, and the Court of Appeals later agreed, that the petitioners failed to show that changing circumstances would have required a prudent fiduciary to undertake a review of the funds within the 6-year statute of limitations period.

Breyer began his review by focusing on the language contained in ERISA’s statute of limitations rule. In that regard, he stated that ERISA Section 1113 reads, in relevant part, that “[n]o action may be commenced with respect to a fiduciary’s breach of any responsibility, duty, or obligation” after the earlier of “six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation.” Breyer noted that both prongs of the rule require that a breach or violation occurs within the applicable 6-year period. The petitioners contend that the respondents breached the duty of prudence by offering higher priced retail-class mutual funds when the same investments were available as lower priced institutional-class mutual funds. While in Breyer’s view, the Ninth Circuit Court of Appeals correctly focused on whether the last action that constituted a part of the breach occurred within the relevant 6-year period, he wrote that the lower court inappropriately concluded that only a significant change in circumstances could cause a new breach of a fiduciary duty.

The Court ultimately concluded that the lower courts erred by applying a statute of limitations bar to such a claim of a breach of fiduciary duty without considering the nature of that duty. The opinion states that the lower courts failed to recognize that under applicable trust principles a fiduciary is required to conduct a regular review of plan investments with the nature and timing of the review contingent on the circumstances. Citing a by-now familiar standard, Breyer noted that an ERISA fiduciary must discharge his or her responsibility “with the care, skill, prudence, and diligence” that a prudent person “acting in a like capacity and familiar with such matters” would use. When examining the range of that fiduciary duty, courts often look to the law of trusts. The Court went on to note that under trust law a fiduciary has a continuing duty to monitor plan investments and to remove imprudent ones (this continuing duty is in addition to the trustee’s duty to exercise prudence in selecting investments).  Since under trust law a fiduciary has a continuing duty of some kind to monitor investments and to remove imprudent ones, a petitioner should be permitted to allege that a fiduciary breached the duty of prudence by failing to properly monitor investments. In such a case, Breyer concluded that “so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.”

The Court in this decision expressed no view on the scope of the respondents’ fiduciary duty in this case.[1]  In effect, the case has been remanded so that the Ninth Circuit Court of Appeals can consider claims by the petitioners that the respondents breached their duties within the relevant 6-year statute of limitations period.  Breyer noted that on remand the Court of Appeals may conclude that the respondents did indeed conduct the sort of review that a prudent fiduciary would have conducted absent a significant change in circumstances.  Either way, the Court may well see this case again.

[1] The respondents argued that the petitioners failed to raise in the lower courts a claim that the respondents committed new fiduciary breaches due to a failure to monitor their investments. Given its decision to remand the case back to the Ninth Circuit Court of Appeals, the Court opted to let the Ninth Circuit resolve this ancillary issue.

 

 

Public companies should review stock option plans to ensure they qualify for exception to $1 million deduction limit

Posted in Executive Compensation, Retirement Plans, Tax Issues

The IRS and Treasury Department recently issued final regulations under Code Section 162(m) that, as the IRS describes it, “clarifies” stock and equity-based compensation plan drafting issues. Of course, whether something represents a clarification or a substantive change lies in the eye of the beholder (particularly if that beholder is a politician or regulator in need of political cover). In this case, however, the IRS generally is correct to describe the final regulations as clarifications. With respect to stock options and SARs, the new regulations reflect what were widely held opinions in the executive compensation community. With respect to restricted stock units (“RSUs”) and phantom stock granted by privately held companies that become publicly traded, the new regulations could be considered a more substantive change, but the IRS in effect has provided nearly four years’ worth of advanced notice of this change. The good news is that the new regulations should not affect most employers’ stock plans. Still, it would be wise for public companies to perform a review of these plans to confirm whether they qualify for the performance-based exception to the $1 million deduction limit under Code Section 162(m).

Code Section 162(m), generally

As background, Code Section 162(m) limits the deduction that a publicly traded company can take with respect to remuneration paid to its “covered employees”—its CEO and three most highly paid named executive officers (other than the CEO and CFO)—to the extent that such compensation exceeds $1 million. The deduction limit does not apply, however, to qualified performance-based compensation. Publicly traded companies often structure their equity based compensation plans in a manner to qualify the awards under those plans (options, SARs, RSUs, restricted stock, etc.) as performance-based compensation.

Options and SARs

In 2011, the IRS issued proposed regulations that “clarified” that the plan under which options and SARs were granted must specify the maximum number of shares relating to those awards that may be granted to any individual during a specified period. Most practitioners had long counseled their public company clients to put these individual limits in their plans to make sure these awards qualified as performance-based compensation under Code Section 162(m). Some commentators, however, argued that stating an aggregate share limit for all awards should be enough. The IRS rejected this view in the proposed regulations, stating that a per employee limit was necessary to assist a third party in determining the maximum amount of compensation that could be payable to any individual employee during a specified period.

The final regulations formally adopt this view. The one modification is that a plan may specify a maximum number of shares with respect to all types of awards (options, SARs, RSUs, restricted stock, performance shares) that may be granted to an employee during a specified period.

RSUs and phantom stock of private companies that become public

Additionally, the proposed regulations clarified that an existing limited transition period does not apply to grants of RSUs or phantom stock by a company that, at the time the grants are made, is not a publicly traded company in the event that the company later becomes a publicly traded company when the grants are still outstanding. This interpretation reversed a position taken by the IRS in previously issued private letter rulings. The transition period rule generally provides that compensation related to the exercise of stock options or SARs, or the substantial vesting of restricted stock, under a pre-existing plan will not be subject to the $1 million deduction limit for a limited grace period after the company becomes publicly traded. Many practitioners believed that this grace period would apply to phantom stock and RSUs as well, but the proposed regulations said that would not be the case. The final regulations adopt the interpretation of the proposed regulations. Commenters had requested that the relief extend to RSUs and phantom stock, but the IRS did not adopt these recommendations.

Effective dates

The per employee share limits portion of the proposed regulations were effective with respect to options and SARs granted on or after June 24, 2011. The final regulations state that this rule remains effective as of that date. The preamble explains that a transition period for that rule is not necessary because this interpretation did not represent a substantive change in the rules. On the other hand, the interpretation regarding RSUs and phantom stock awarded previously by privately held companies that become public companies will become effective on the date the final regulations are published in the Federal Register.

Again, because the final regulations confirm what the IRS has long been telling us about equity-based compensation awards, most publicly traded companies probably will not see much, if any, impact on their plans. Nevertheless, the publication of the final regulations represents a good opportunity to review these companies to make sure that the awards under their plans still qualify for the performance-based compensation exception to the $1 million deduction limit.

Ninth Circuit decision illustrates importance of clearly designating beneficiaries under a nonqualified plan

Posted in Retirement Plans

In a recent blog, we discussed the importance of clearly defining who is a “participant” in a nonqualified plan and who is a former participant or retiree. A more recent Ninth Circuit decision in E & J Gallo Winery v. Rogers highlights a related issue that faces tax-qualified and nonqualified plans alike—who is the beneficiary? While cases like this may not raise novel issues of law, they highlight a more mundane yet important issue of preparing plan documents clearly and in a manner that is consistent with their administration. Further, the Gallo decision highlights the importance of reminding plan participants to make sure that they have completed beneficiary designation forms and that those forms are up-to-date.

In the case, E & J Gallo Winery filed an interpleader action to determine the proper beneficiary under its Key Executive Profit Sharing Retirement Plan, a nonqualified deferred compensation plan (the “Plan”). Robert Rogers had accrued a benefit under the Plan before he died.  After his death, ambiguity arose as to who was Robert’s designated beneficiary entitled to receive his accrued benefit under the Plan. Michele McKenzie-Rogers, who was married to the deceased at the time of his death, had filed a motion for summary judgment arguing that she was the proper beneficiary under the Plan. The District Court denied this motion and instead held that Mark Rogers, Robert’s son from a prior marriage, was the proper beneficiary. McKenzie-Rogers appealed that decision, and upon hearing that appeal the Ninth Circuit affirmed the District Court’s decision.

The ambiguity arose over a letter that was sent by the Plan sponsor to Robert Rogers in 1988. The third paragraph of that letter explained to him that vesting, payment methods and “all other matters” under the Plan would be determined in accordance with the procedures set forth under Gallo’s tax-qualified plan document. According to McKenzie-Rogers, the “all other matters” language meant that the tax-qualified plan’s beneficiary rules, which paid benefits to the current surviving spouse, should apply to the nonqualified Plan as well. The District Court disagreed, holding that this interpretation was too broad, especially because the fourth paragraph in that letter clearly named Roger’s first wife as primary beneficiary and his son Mark as contingent beneficiary. However, Rogers’ first wife waived her rights as primary beneficiary under the Plan by signing a waiver and release in 1988. As a result of that waiver, the District Court concluded the participant’s son Mark became entitled to the benefits under the Plan as contingent beneficiary. Nothing in the Plan indicated that the participant’s subsequent re-marriage to McKenzie-Rogers canceled his prior beneficiary designations. Moreover, the Plan was exempt from ERISA’s spousal consent requirements (which, if applicable, automatically would have made McKenzie-Rogers the beneficiary when she married Rogers). The Ninth Circuit agreed with this analysis and affirmed the District Court’s decision.

Again, this decision provides two takeaway items for plan sponsors. One is to make sure that the plan document and communications with the participants clearly explain how participants may designate beneficiaries. The other is that plan sponsors should consider periodically sending reminders to participants to make sure that their beneficiary designation forms are up-to-date. Clear documentation and communication can help reduce ambiguity and help sponsors avoid this type of lawsuits in the future.

ERISA damages—two bites off the same apple are impermissible

Posted in ERISA Litigation, Retirement Plans

The United States Court of Appeals for the Sixth Circuit issued an en banc decision in Rochow v. Life Insurance Company of North America on March 5, 2015 that deals with the ability of a participant in a plan covered by ERISA to recover benefits due from that plan while simultaneously pursuing “other appropriate equitable relief” based on that same asserted injury. In a decision likely to be applauded by many plan sponsors, the court’s en banc decision concluded that both forms of recovery are inappropriate when based on the same injury except in limited circumstances—circumstances that were not satisfied in this case.

The facts of the case involve a claim for long term disability benefits filed by Daniel Rochow under a policy issued by Life Insurance Company of North America (“LINA”). After LINA denied that claim and all administrative appeals also were unsuccessful, Rochow filed an action in the United States District Court for the Eastern District of Michigan. That complaint sought to recover benefits due to Rochow under the applicable disability policy under ERISA Section 502(a)(1)(B) and to seek appropriate equitable relief to redress an alleged fiduciary breach under ERISA Section 502(a)(3). Continue Reading

Supreme Court revisits Obamacare

Posted in Health Care Reform

Veteran observers of the United States Supreme Court regularly and wisely advise not to make too much out of the questions asked by the justices during oral argument as a predictor of ultimate outcome.  Having said that, the first reaction of those who follow these oral arguments (often including some of those veteran observers) invariably is an attempt to weigh the likely judicial mindsets of the justices by the questions asked at oral argument (other than for Justice Clarence Thomas, who traditionally does not ask questions at oral arguments).  Why should today be any different?

The Court heard oral argument on Wednesday, March 4 in King v. Burwell, a case that goes to the core functionality of the Affordable Care Act (the “ACA”) by raising the issue whether four words in the body of the ACA (for the curious, those four words as “established by the State”) mean that subsidies payable by the federal government to defray the cost of health care coverage are only available to residents in states that have established their own health care exchanges.  The plaintiffs in the King v. Burwell case argue that subsidies should not be available to residents in states that have not adopted health care exchanges.  Under the ACA, states are not required to establish their own health care exchanges.  If a state chooses not to do so, the federal government is required to assume that responsibility.  Currently, 37 states have opted not to create their own state exchanges (thus relegating residents in those states to the federally-run health care exchange).  While this case does not deal with weighty issues of constitutional law, the stakes nonetheless are huge.  Most studies indicate that millions of Americans who currently have health care coverage (some studies peg that number as high as 9 million people) would lose that coverage if they lost entitlement to the subsidies because they could not afford to pay for coverage on their own.  The resulting loss of such a large number of customers would be expected to cause great havoc in the insurance market. Continue Reading

Expanding the definition of fiduciary under ERISA—déjà vu all over again

Posted in ERISA Fiduciary Compliance

The United States Department of Labor (the “DOL”) submitted to the Office of Management and Budget (the “OMB”) a revised version of the “conflict of interest” rule expanding the definition of the term “fiduciary” on Monday, February 23, 2015.  Generally, the OMB has up to 90 days to review rules, although review times can vary considerably.  Subsequent to the OMB review, the proposed rule is published and interested stakeholders are permitted to make comment on the proposed rule.

ERISA imposes certain obligations on persons who act as plan fiduciaries, including the imposition of liability for losses attributable to a failure to meet applicable fiduciary standards.  In that regard, under this standard fiduciary obligations may be imposed on investment advisors that provide investment advice to a plan in return for a fee or other compensation, whether payable directly or indirectly.  The DOL has become concerned over the last several years that the breadth of the current rule is both outdated and inadequate, and that it fails to reach certain investment professionals who provide investment services to plans and individuals with respect to retirement assets (including individual retirement accounts).

The DOL first attempted to revise this fiduciary standard back in 2010 with the publication of a proposal that many observers concluded would have expanded the breadth of the rule with respect to investment professionals.  That proposal ran into considerable headwind, and drew wide-ranging criticism both from the business community (including Wall Street) and from Congress.  Eventually that proposal was withdrawn, perhaps influenced by political considerations as the 2012 presidential campaign drew near.

Like in 2010, this new proposal presumably will aim at expanding the application of fiduciary burdens on persons that provide investment advice.  While the actual language of the new proposal is not scheduled to become public until it is published following OMB’s review, it seems likely to inspire the same wave of opposition that arose in 2010 (even though the political calculations might be different this time around).  As an indication of how political considerations at the White House may have evolved, President Obama took the somewhat unusual step of announcing the filing of the re-proposed rule at the OMB on February 23.  That speech followed closely behind a conference call on February 22 covering the benefits of the re-proposed rule that featured DOL Secretary Tom Perez.  To complete this “full court press,” the White House released both a fact sheet touting the proposed rule and a report from the Council of Economic Advisors that reviews the negative implications of conflicted investment advice.  Many observers thought the White House walked away from these proposals a few years ago in the face of considerable business and political pressure.  Such a tactical retreat seems less likely this time around, at least at the present time, and thus this initiative bears watching.

Who is “participant” in a nonqualified plan? Second Circuit case highlights importance of defined terms

Posted in Retirement Plans

One issue that sometimes arises when drafting a nonqualified plan document (or qualified plan for that matter) is how to define a “participant” in the plan. Typically, a plan will define “participant” broadly to include anyone who has an account balance or an accrued benefit under the plan and who has yet to be paid his or her complete benefit. This broad definition includes both active employees who generally are accruing additional benefits as well as former employees who no longer are accruing benefits but still are entitled to payments under the plan. Sometimes, however, an employer may not think in broad terms and instead want to use the term “participant” interchangeably with “employee.” Although courts typically show a certain measure of deference to employers in how they interpret their plans, a recent Second Circuit decision (Gill v. Bausch & Lomb, 14-1058, 2d Cir. 2014) reminds us that plan administrators should not get too carried away with relying on administrative discretion and should be mindful of the specific terms they use to define a participant.

Case Background

Bausch & Lomb (the “Company”) maintained a nonqualified deferred compensation plan (the “Plan”) that covered three retired executives. The Plan contained a change of control provision, pursuant to which a “participant’s” benefit would be converted to a cash lump-sum and paid within 15 days following a change in control of the Company. The applicable provision expressly referred only to “participants.” This latter point proved to be important because the Plan contained definitions of both “participants” and “retired participants.” In May 2007, a private equity firm acquired all of the outstanding shares of the Company, which triggered the change in control payments under the Plan. After the change in control, the Company’s Compensation Committee instructed the Plan’s trustee not only to provide lump sum payments to active participants but also to discontinue installment and annuity payments to the “retired participants” and instead pay them any remaining benefits in a lump sum as well.

The retired participants cried foul, in part because they alleged that the lump sum payments had actuarial values that were less than the actuarial equivalent of their remaining monthly benefits. They brought suit, alleging that the termination of the monthly benefits and the payment of the reduced lump-sum violated ERISA. The district court held that the Plan prohibited the cancellation of monthly benefits for retirees. The court allowed the retirees to retain the lump-sum payments they previously received and ordered the reinstatement of the monthly benefits to the retired participants, albeit at a lesser amount to reflect the lump sum payment the participants retained. The Second Circuit affirmed.

Interpretation of the Plan’s Defined Terms

The appeals court’s decision relied on the plain language of the Plan. The Company had tried to argue that retired participants should be viewed as a “subset” of participants, and thus subject to the lump sum cash-out provision upon a change in control.  In fact, many employers often view “participants” as covering both active employees as well as former employees or retirees who have not received full payment under the plan. The court rejected the Company’s argument, however, stating that the Plan clearly defined a “participant” as an active employee and a “retired participant” as a retiree. Even if the Company never intended to distinguish active and former employees in this manner, the court concluded it could not ignore the clear text of the Plan. The plain text clearly defined retirees as not being “participants” under the Plan. Because of that, the Company could not cash out their benefits upon a change in control.

Lessons

The lesson from the case is a straightforward one. It may be easy to think of “participants” interchangeably with employees, but it is important for employers to remember that until a final payment is made under a plan, former employees have rights under a plan too. Consequently, employers should be mindful of how a plan is designed to treat both active and former employees.