Employee Not Eligible for Early Retirement Benefits After Resignation

December 14, 2005 (PLANSPONSOR.com) - The US District Court for the Northern District of Mississippi has ruled that a voluntary early retirement plan sponsor was correct in denying benefits to an employee who terminated six weeks prior to the plan's adoption.

According to the court, Patsy Fowlkes informed Schering-Plough in November 2002 that she intended to leave the company.   Schering-Plough asked Fowlkes to continue working until June 11, 2003.   Fowlkes was age 49 when she left the company and turned age 50 later in 2003.

The company announced the new voluntary early retirement program six weeks after Fowlkes left.   According to plan provisions, employees who were age 50 or older during 2003 with at least five years of vesting service would be credited with an additional five years of service and five years of age for pension purposes.   The plan was later amended to specify that any employee who terminated employment with the company in 2003 would not be eligible to participate in the early retirement program unless he or she was eligible for either a normal (age 65) or early (age 55) retirement under Schering-Plough’s pension plan.

Fowlkes applied for benefits under the early retirement program, but was denied because she was not eligible for early retirement when she left the company.   Fowlkes sued the employer alleging that the denial was arbitrary and capricious in violation of the Employee Retirement Income Security Act (ERISA).

The court granted summary judgment in favor of Schering-Plough, noting that it was undisputed that Fowlkes was not age 55 when she left the company.   Additionally, the court said a finding for Fowlkes would contradict the intention of the plan of inducing active employees to retire early.

The case is Fowlkes v. Schering-Plough Corp. Voluntary Early Retirement Program, N.D. Miss., No. 1:05CV14-P-D, 11/29/05.