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Court Strengthens Rights of Young Pensioners

Early retirees who take another job are entitled to the benefits they've earned, justices rule.

June 08, 2004|David G. Savage | Times Staff Writer

WASHINGTON — Workers who take early retirement are entitled to receive the full monthly pensions they have earned, the Supreme Court ruled Monday, saying that the trustees of a pension plan may not change the rules and suspend the benefits of some retirees who take new jobs in the same industry.

The 9-0 decision strengthens the pension rights of millions of American workers. Surveys have found that three-fourths of today's workers say they expect to work after they retire. Many say they plan to retire early, confident that a pension and a second job will allow them to live comfortably.

But until Monday, there had been some doubt whether they could count on receiving their already-earned pension benefits if they took a new job.

Bush administration lawyers had argued that pension funds needed "flexibility" to protect their plans' assets. Funds that serve multiple employers in the same industry should be allowed to suspend the benefits of early retirees who engage in "double-dipping" by taking another job within the industry, administration lawyers said.

They also argued that a suspension of a monthly pension benefit is not a reduction in the pension, since the worker can receive full pension again by quitting.

The Supreme Court rejected both arguments Monday.

As "a matter of common sense," suspending a pension is the same as reducing a pension, said Justice David H. Souter, and federal law requires that retired workers "receive the benefits their employers promise them."

The ruling restores the benefits of an Illinois construction worker who retired early and later went to work as a supervisor.

By age 39, Thomas Heinz had earned enough pension credits to retire with a monthly benefit from the Central Laborers' Pension Fund. Under its rules, the benefit would be suspended if a retiree took another job as a "union or nonunion construction worker" in the area. Upon his retirement in 1996, Heinz took a job as a construction supervisor, a position that was not covered by his pension plan.

Two years later, however, the Central Laborers' Pension Fund changed its rules and suspended monthly benefits to any retiree who took any job "in any capacity in the construction industry." Heinz was told that his pension had been suspended.

He sued, contending that the cutoff of his monthly payment was a "cutback" in his benefits that violated the Employee Retirement Income Security Act. That law says that an "accrued benefit of a participant under a plan may not be decreased by amendment of the plan."

Souter described that as a central feature of the pension law, because it prevents employers from changing the rules after workers have earned a benefit.

But a second provision in the same law allows pension funds serving multiple employers to suspend benefits during difficult periods for those who retire and take new jobs "in the same industry." Congress wanted to protect the jobs of employed workers when it amended the law.

An estimated 9.5 million people are covered by these pension plans, which are common in such industries as construction, trucking and mining.

The case, Central Laborers' Pension Fund vs. Heinz, highlighted a clash between the two parts of the same law.

In Monday's ruling, the Supreme Court stressed that the anticutback provision trumps the suspension of benefits for retirees who return to work.

"We simply do not see how, in any practical sense, this change of terms would not be viewed as shrinking the value of Heinz's pension rights and reducing his promised benefits," Souter said.

Had the justices agreed with the administration, the ruling could have had an impact on the retirement plans of many Americans. A narrow decision could have given more leeway to the trustees of multi-employer pension plans. A broader decision saying that a "suspension" in benefits is not a reduction in a pension could have affected all those who are relying on a pension plan.

Instead, the court adopted the view that pension plans cannot take away earned benefits.

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