Pension plan’s interpretation of its break-in-service rules upheld on appeal

A pension plan did not act arbitrarily and capriciously when it interpreted its break-in-service rules to exclude, for benefit accrual purposes, five of an employee’s 36 years of service because those five years occurred prior to a break in service lasting five years, the U.S. Court of Appeals in New York City (CA-2) has ruled in a summary order affirming a district court ruling.

Break in service

An employee worked for an employer for five years, from 1969 to 1973, and then for 31 years, from 1979 to 2009. When he retired, the pension plan did not count for accrual purposes the years of service from 1969 to 1973. Based on 31 years of service, the plan determined his monthly pension to be $3,720. In contrast, the employee (and later his widow) argued that his benefit should be based on 36 years of service, which would increase his monthly pension to $4,320.

Plan interpretation

The appellate court affirmed the district’s ruling regarding the pension fund’s interpretation of the plan. The plan was not arbitrary and capricious when it interpreted plan terms to exclude the five-year period from 1969 to 1973 from his accrued benefit because of the break in service. The outcome of separate litigation regarding the plan’s pre-ERISA break-in-service provision (see McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 99 Civ. 9054, 2004 WL 2050166 (DC NY 2004)), did not require the plan to adopt the participant’s interpretation in this case.

Discovery not necessary

The court rejected the participant’s contention that summary judgment by the district court was improper without permitting discovery into the consistency of the fund’s interpretation. The case turned solely on interpretation of the plan. In any event, the participant failed to allege in the complaint that any inconsistency in interpretation had occurred.

Source: Gannon v. NYSA-ILA Pension Trust Fund and Plan (CA-2).

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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