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CCH® PENSION — 03/29/11

Participant not entitled to restoration of suspended benefits because he was "reemployed"

A pension plan participant was not entitled to the restoration of his suspended benefits because he was "reemployed" by his company within the meaning of the plan terms, according to the U.S. Court of Appeals in New York City (CA-2) in Cirincione v. Plumbers Local Union No. 200 Pension Fund.

After working several years for a company, a pension plan participant decided to retire. He applied for and received an early retirement pension and received benefits for several years. After charges were brought against his company and him for personally submitting fraudulent payroll records to avoid paying the company's employees prevailing wages as required under state law, he pleaded guilty for falsifying business records. In the plea agreements, he represented that he was the owner and president of the company with full authority to bind the company. From the plea agreements, the pension plan became aware that the participant had maintained some substantial continuing control over the company's operations and, thus, was not actually retired. Therefore, the pension plan suspended his benefits and demanded that he reimburse the plan for benefits he had already received. After an unsuccessful appeal, he sued the plan and its board of trustees to restore his benefits.

After the plan and trustees moved for summary judgment on the participant's claims, the district court entered judgment in favor of the plan and trustees. The participant appealed the grant of the summary judgment.

Participant was "reemployed"

Under the plan terms, retirees under the age of 65 (which the participant was throughout the time period in question) receiving pension benefits would have their benefits suspended "for any month that they were re-employed for one or more hours of service in the industry, trade or craft or geographic area." Based on the information in the plea agreements, the trustees had concluded that the participant remained employed by the company while he was receiving benefits. The court noted that the participant had acknowledged in his appeal to the trustees that he continued to receive a salary from the company as the president and an owner of the company. He had also conceded that he had worked for the company since retiring, but only "very rarely," and then typically only performing ministerial duties.

The participant argued that he had not been "reemployed" since his retirement because he was not an "employee" of the company since his retirement. The appellate court stated that it did not have to determine whether he was an employee because it agreed with the district court that an individual did not have to be an employee to be reemployed under the terms of the plan. The appellate court explained that, although the plan does not define "reemployed," the meaning can be found when viewed in context. Since the plan provides that a pensioner can be reemployed for performing as little as one hour of service, the term "reemployed" cannot be limited to employees of the company, but must also apply to individuals who become independent contractors in their retirement.

The court concluded that the participant was definitely "reemployed" within the meaning of the plan, based on his plea agreements, his statements before the trustees, and the fact that he continued to receive W-2 wages (over $300,000 a year) from the company during his retirement. The trustees' decision to suspend the participant's "benefits was not incorrect, much less arbitrary and capricious." Thus, the district court's judgment was affirmed.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

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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