Two present employees and one former employee filed the suit in the U.S. District Court for the Northern District of Texas challenging the firms’ decision to freeze accruals to Acme’s defined benefit plan and reduce the company matching contribution rate in its 401(k) plan. The plaintiffs contend that the acquisition agreement by which Berkshire Hathaway acquired Acme approximately 14 years ago requires Acme to permit participants to accrue additional defined benefits indefinitely, at the same rate that benefits were being accrued at the time of the acquisition, and to make additional 401(k) matches forever, at the same rate as the matches at the time of the acquisition.
The complaint seeks restitution for participants because “Berkshire Hathaway’s agreement is either an amendment to the retirement plans, in which case the employees are entitled under [the Employee Retirement Income Security Act] to the enforcement of the retirement plans in accordance with their terms, or, in the alternative, it is a contract for the benefit of the employees, and its breach entitles the employees to damages.”
In a press release related to the suit, Berkshire Hathaway says it “strongly believes this interpretation of the acquisition agreement is clearly wrong and expects that its actions will be upheld by the courts.” The press release quotes an extended section of the acquisition agreement at issue in the suit:
“For purposes of all employee benefit plans (as defined in Section 3(3) of ERISA) and other employment agreements, arrangements and policies of Parent under which an employee’s benefit depends, in whole or in part, on length of service, credit will be given to current employees of the Company for service with the Company prior to the Effective Time, provided that such crediting of service does not result in duplication of benefits. Parent shall, and shall cause the Company to, honor in accordance with their terms all employee benefit plans (as defined in Section 3(3) of ERISA) and other employment, consulting, benefit, compensation or severance agreements, arrangements and policies of the Company (collectively, the “Company Plans”); provided, however, that Parent or the Company may amend, modify or terminate any individual Company Plans in accordance with the terms of such Plans and applicable law (including obtaining the consent of the other parties to and beneficiaries of such Company Plans to the extent required thereunder); provided, further, that notwithstanding the foregoing proviso, Parent will not cause the Company to (i) reduce any benefits to employees pursuant to such Plans for a period of 12 months following the Effective Time, (ii) reduce any benefit accruals to employees pursuant to any such Plans that are defined benefit pension plans, or (iii) reduce the employer contribution pursuant to any such Plans that are defined contribution pension plans.
“The Company shall amend its Supplemental Executive Retirement Plans to provide that, effective as of the Closing, participants who have been ( or would have been) employed by the Company for 10 years or more as of the later of the Closing Date of December 31, 2000, shall be entitled to benefits under such plan upon termination of employment, if terminated within 12 months after the Effective Time, as if such participant was 55 years old at the date of such termination, subject to the other provisions of such plan.”
The complaint in Hunter v. Berkshire Hathaway is here.
« Employees Need Help Planning for Retirement Health Care Costs