It may be a good bit cheaper for companies to pull out of industrywide pension plans from here on out. The U.S. Court of Appeals in Boston last month struck down as unconstitutional a provision of the 1980 Multiemployer Pension Plans Amendments Act that gave benefit plan trustees considerable clout in disputes that developed when an employer quit a plan.
The main purpose of the legislation was to ease pressure on the Pension Benefit Guaranty Corp. to fulfill promises made by plans that go under. To stop companies from abandoning underfunded benefit programs and leaving remaining members with an unfairly heavy burden, the law said that when a company pulled out, it was immediately liable for its share of any unfunded vested obligations of the plan.
Where the lawmakers ran into deep water was in trying to discourage wrangling over the size of those unfunded obligations. Any current dollar amount, of course, is based on assumptions about health and accident rates, how much longer workers will be paying into a pension fund before retiring, and how much interest the lump sum payment will earn before it must be paid out. Congress wanted to keep the bickering about those assumptions to a minimum, both to speed up payments and to keep pension fund assets from being eaten up in litigation.
The pension law achieved those goals far too well, the appellate judges decided. The statute said that any disagreement between a company and the plan's trustees should go to arbitration, but that the arbitrator should presume that the trustees are correct. It is up to the company to show that the actuarial methods are wrong. And if the arbitrator comes out on the side of the trustees and the company wants to pursue the fight, the court reviewing the conflict should presume that the arbitrator is correct.
This double whammy makes it almost impossible for the company seeking a lower exit bill to win. And it is unfair -- and therefore unconstitutional -- on two counts, the judges explained on Aug. 6 in Fulton & Sons v. New England Teamsters and Trucking Industry Pension Fund. The procedure turns the normal litigation process on its head, they noted. Usually, the party trying to collect money has the burden of proving that the amount claimed as a liability is a correct amount. And that role reversal is made even worse by the fact that the plan trustees are hardly neutral. It is in their interests, the opinion says, to use the underwriting assumptions that will produce the highest cash payment into the fund from the firm that is pulling out.
In other cases, courts ruled that:
* Employes fired unlawfully because of their age can collect damages for future injuries, not just those in the past. Generally, plaintiffs in unfair firing cases can get money only for the pay and benefits lost between their dismissal and the final court action in their cases. But the U.S. Court of Appeals in Denver says that the Age Discrimination in Employment Act does not stop there; it also lets judges award a dollar sum equal to retirement benefits the workers would have accumulated in the future. Usually, the employe would get his or her job back, but when animosity over the legal challenge makes it look as though the working relationship would be strained, future damages are appropriate, the judges decided.
(EEOC v. Prudential Federal S&L, August 7)
* Subcontractors on government contracts who do not get paid cannot turn to the Treasury for their money. The Miller Act demands that every prime contractor on a federal job get a bond to insure payment to subcontractors. But the U.S. Court of Appeals in Chicago had to decide what happens when Washington does not enforce that statute and the prime contractor defaults. What happens is that the dispute stays between the private companies. The charge that the government should be liable because it was faulty in not monitoring the financial problems of its contractor is not something the courts will consider, the judges ruled.
(Arvanis v. Noslo Engineering, July 31)