Ford Didn't Interfere with Benefits by Classifying Visteon Employees as Rehires
March 12, 2010 (PLANSPONSOR.com) – A federal appeals court has ruled that Ford Motor Company did not interfere with the retirement plan benefits of employees reacquired from two previously spun-off production facilities by classifying them as rehired rather than reinstated.
The 6th U.S. Circuit Court of Appeals said the
employees failed to establish an expectation of future pension benefits. The
appellate court agreed with a lower court finding that a 1991 Ford Policy
Directive divested all transferred employees of reinstatement rights, therefore
the plaintiffs, once transferred to Visteon in 2000, lost any expectation of
future pension benefits.
The court agreed with Ford that without such expectation,
the plaintiffs could not show that their classification by Ford as rehired (with
the resulting loss of service credit for the Visteon years) amounted to an
adverse action.
According to the court opinion, the plaintiffs worked for
Ford as salaried employees until 2000 when Ford transferred its interest in
Visteon Corporation, an automotive parts manufacturer where they worked, to its
stockholders and divested itself of Visteon’s operations. Ford and Visteon
executed an Employee Transition Agreement which required that Ford retain
liability for plaintiffs’ pension benefits insofar as they accrued prior to the
transfer and that Visteon establish a "substantially comparable"
retirement plan.
Also under the Agreement, Ford amended its Group
Retirement Plan so that each plaintiff’s combined years of Ford and Visteon service
counted toward early retirement eligibility, but each plaintiff’s monthly
benefit amount remained distinct from that calculation, based instead, in part,
on the employee’s Visteon salary.
More than three years after the spin-off, Ford again
amended the Group Retirement Plan to exclude any employee hired or rehired
after January 1, 2004, from participation and created a new defined contribution
pension plan. When Ford evaluated options for reacquiring Visteon in 2005, it
created three plausible models for employee transfer: return Visteon salaried
employees to Ford as new hires without regard to prior service and enroll them
in the new defined contribution plan; return Visteon salaried employees to Ford
as new hires without regard to prior service, but using combined Ford/Visteon
service to determine eligibility for, but not the amount of, retirement
benefits; and return Visteon salaried employees to Ford as reinstated Ford
employees with full Group Retirement Plan participation.
Ford chose the second of the three models, which meant
that the plaintiffs, though still eligible for early retirement based on
combined years of Ford/Visteon service, could receive only a portion of the
monthly benefit amount to which never-transferred employees were entitled. The plaintiffs
sued, contending that Ford classified them as rehired rather than reinstated in
order to interfere with their acquisition of benefits in violation of § 510 of
the Employee Retirement Income Security Act (ERISA), and seeking an order requiring
Ford to provide them pension benefits based on their combined years of service
at Ford and Visteon.
The case is
Ensley
v. Ford Motor co.,
6th Cir., No. 09-1470, unpublished 3/10/10.
Rebecca Moore
editors@plansponsor.com