By Pension and Benefits Editorial Staff
A multiemployer plan owed a participant over $200,000 in prejudgment interest on a lump-sum payment the plan made after it acknowledged that for years it had failed to pay the participant the total monthly benefit to which he was entitled under the plan, the U.S. Court of Appeals in Cincinnati (CA-6) has ruled. The district court abused its discretion when it based its ruling denying the request for interest on the level of culpability of the plan instead of on the need to compensate the participant for his economic injury.
“30 and Out” benefit. In 1986, a multiemployer pension plan participant first applied for benefits under the plan’s “30 and Out” feature. Under the provision, a participant who had accrued at least 30 years of benefit-service credits could retire at any age and elect a $1,000 monthly benefit. The plan denied his application. In 1990, he reapplied for “30 and Out.” This time, the plan concluded the participant had accrued 25.42 years of service and began paying him an early deferred vested pension benefit of only $387.86 per month.
Subsequently, in December 2011, the Mid-America Pension Rights Project sent the plan a letter on the participant’s behalf, seeking an explanation of how the benefit was calculated and supporting documentation. In January 2014 the plan reversed itself and paid the participant a lump-sum 30-and-Out pension benefit in the amount of $235,446.52. This sum reflected 30 years of benefit-service credits, less the early deferred pension benefit payments already received. The payment, however, included no interest for the time the benefits were withheld.
The participant filed suit under ERISA Sec. 502(a)(1)(B) seeking the unpaid interest on the retroactive pension benefit payment, requesting an interest rate “equal to the return on investment” that the fund had earned. He also claimed statutory damages under ERISA Sec. 502 for the plan’s alleged failure to provide documents. Subsequently he amended his complaint to allege that he was entitled to $1,500 per month, rather than the $1,000 per month on which the lump sum was based.
The district court ruled in favor of the plan and the participant appealed.
Interest award. The Sixth Circuit held that the district court abused its discretion by declining to award the participant interest based on its finding that “’the cause for delay is equally shared by both the Pension Fund, which did not initially grant the participant a 30-and-Out benefit, and [the participant], who waited at least sixteen years to even broach the issue.’” The appellate court explained, however, that an award of prejudgment interest is not intended to penalize the trustee but to serve as compensation for the use of money withheld. Thus, the factors to consider in evaluating a claim for interest generally focus on the loss sustained by the participant and the allocation of funds to compensate for the loss, not on the culpability of the fund.
The district court failed to examine the extent of the participant’s economic injury, including determining the rate of inflation over the period the lump-sum was withheld, estimating the increase in the cost of living and considering any other potential measures of his economic injury. On remand, the district court should consider these and similar factors.
Increased benefit. The appellate court upheld the district court’s dismissal of the participant’s claim for a $500 increase in his monthly 30-and-Out benefit. The participant never raised the issue before the plan trustees and thus failed to exhaust his administrative remedies. In addition, the court explained, even if it were to reach the merits of the issue, the record shows that the participant retired too early to claim entitlement to the higher benefits.
Statutory penalties. The appellate court also remanded for further consideration the participant’s assertion that the plan failed to timely provide a “PensionPLUS” booklet. Reviewing the lower court’s ruling for abuse of discretion, the appellate court determined the lower court erred by deciding the participant’s claim based on whether the plan SPD was provided, instead of whether the separate PensionPLUS book was provided.
Source: Mulder v. Local 705, International Brotherhood of Teamsters, Pension Fund (CA-6).
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