Employees' Benefits not Unfairly Reduced upon Sale of Division, Court Rules

December 3, 2004 (PLANSPONSOR.com) - A federal court has ruled that 46 employees' benefits were not unfairly reduced when their division was sold off to the division's managers.

>Former employees of Dun & Bradstreet Corp. had claimed that when their group – the receivable management services division – was sold to the division’s managers, they were improperly denied severance benefits and that the summary plan document (SPD) violated the Employee Retirement Income Security Act (ERISA).

>Regarding the ERISA claim, the employees argued that since the SPD did not give a detailed explanation of how benefits would be reduced, it violated ERISA. By using a 6.5% discount rate of retirement benefits, and by simply stating that the benefits would be “actuarially reduced,” the employees claimed that they had been denied their rightful benefits. With their former plan at Dun & Bradstreet, the discount rate was a significantly lower 3%.

>Ruling for the defendants in the case, Judge Stefan Underhill of the US District Court for the District of Connecticut stated that “there is nothing in the language of the relevant ERISA statue indicating the an SPD must disclose how a benefit reduction is calculated.” Instead, an SPD must only spell out the circumstances under which benefits might be reduced, Underhill ruled.

>Underhill also ruled that Dun & Bradstreet’s plan document explicitly stated that benefits would not have to be maintained if job termination was due to a merger, sale, spin-off, or reorganization. Since they employees were transferred to the new company following the sale of the division, they would fall under this category, according to Underhill.

>The case, McCarthy v. Dun & Bradstreet Corp, is available here .