In the case of Gruber v. PPL Retirement Plan, the 3rd U.S. Circuit Court of Appeals vacated an earlier ruling by the U.S. District Court for the Eastern District of Pennsylvania and found in favor of the plaintiff.
The 3rd Circuit found the subsidy “only benefited a class of participants who were eligible for early retirement …Therefore, contrary to PPL’s assertion and the District Court’s conclusion, this benefit was an employer subsidy for early retirement.” The court pointed out that “PPL itself initially treated the GP 401 benefit as a subsidy for early retirement.” The District Court and PPL claimed that the subsidy was provided due to a reduction in force.
The plaintiff’s husband was a participant of the PPL Retirement Plan and worked at PPL Corporation till 2009. The plaintiff and her husband were divorced in 2005. Part of their divorce settlement included a QDRO, which entitled the plaintiff to a portion of her husband’s pension benefits under the retirement plan. The plan administrator approved the QDRO, stipulating that the plaintiff would receive “the actuarial equivalent of 53% of the present value of the participant’s accrued benefit in the plan.” Also stipulated was that if the plaintiff’s husband retired before age 65, the amount payable to the plaintiff would “be recalculated to include 53% of the value of any employer subsidy for early retirement.”
In 2009, the plaintiff's husband was forced into early retirement as part of a companywide reduction in force, which triggered his subsidized early retirement benefit. The husband also qualified for an additional plan benefit under a policy known as GP 401, which granted certain employees "enhanced pension benefits."
The plaintiff requested that her payments, as per the QDRO, be recalculated to include her share of the GP 401 fully subsidized early retirement benefit. The plan administrator denied her claim and later appeal "on the reasoning that the GP 401 was payable due to the reduction in force, not for early retirement."
The plaintiff then filed suit under the Employee Retirement Income Security Act (ERISA) to seek her share of the GP 401 benefits. The District Court ruled in favor of the defendant, interpreting the phrase in the QDRO "any employer subsidy for early retirement" as being "because of early retirement." Since the husband's termination of employment was due to a reduction in force, the District Court felt that the GP 401 benefit "did not constitute an employer subsidy for early retirement … and that [the plaintiff] was not entitled to 53% of the amount."
The 3rd Circuit's opinion can be found here.