Court Denies Terminated Employees’ Claim for Pensions

October 18, 2013 ( – A federal appellate court found former employees’ reliance on a statement they would be eligible for pension benefits was not reasonable.

Based on all the documents the employees received, the 3rd U.S. Circuit Court of Appeals said the case is analogous to situations in which participants know the plan sponsor reserves the right to alter or eliminate benefits at any time. The employees had been provided a Q&A upon hiring that indicated they may qualify for a defined benefit pension plan. According to the court, even if one thought the Q&A’s statement about eligibility for a pension plan meant there was a defined benefit plan, as opposed to a 401(k) plan, there were several subsequent communications making it clear that no defined benefit plan participation was offered until 2010.

The court cited previous decisions in which it said “a participant’s reliance on employer representations regarding benefits may never be ‘reasonable’ where the participant is in possession of a written document notifying him of the conditional nature of such benefits.”

In addition, the court found no support for the employees’ claim that extraordinary circumstances exist. “Far from being the victims of a ‘network of misrepresentations,’ the Employees were plainly put on notice by the General Overview, the 2004 CBA, the 2007 CBA, and the 2010 MOU that they had not been granted participation in any ALICO defined benefit pension plan prior to 2010,” the court wrote in its opinion.

The employees worked in the claims department of The Union Labor Life Insurance Company, Inc. (ULLICO) when it entered into agreements to outsource its claims administration services to The Amalgamated Life Insurance Company (ALICO) beginning May 10, 2004. Under those agreements, PSC employees would have the opportunity to work for ALICO. The agreements did not, however, require ALICO to maintain their pension benefits, nor did they provide for the transfer to ALICO of any part of ULLICO's defined benefit pension plan.

ULLICO provided the employees with letters informing them about the transition of their employment to ALICO, which told them ALICO's “offer of employment likely will include permanent changes in the salary, benefits, and other terms and conditions of employment that you have experienced with ULLICO.” The following week, ALICO distributed a Q&A document to the employees which responded to the question “[I]s there a Pension Plan?” by stating that “[t]here is a 3-year eligibility period for PSC employees to join the Amalgamated Life staff pension plan. Once you become eligible, the 3-year wait period will be credited towards the 5-year vesting requirement.” At around the same time, ALICO distributed to the employees a document providing a general overview of certain employment benefits which referred to a 401(k) savings plan but did not mention a defined benefit pension plan.

Two subsequent collective bargaining agreements (CBAs) with the Industrial, Technical and Professional Employees Union did not contain any provision that entitled the employees to participate in ALICO's defined benefit pension plan, although they did provide that they could participate in a 401(k) savings plan. A third agreement provided that the employees would become participants in a defined benefit pension plan, but would accrue benefits only after January 2011.

On October 8, 2010, ALICO informed the employees that it was closing the facility in which they worked, and their employment was terminated on October 29, 2010. Following their termination, the employees filed a complaint alleging they had been improperly denied benefits under ALICO's defined benefit pension plan.

A federal district court granted summary judgment to ALICO, and the appellate court affirmed.

The opinion in Jenkins v. United Labor Life Company, is here.