Fed Workers Lose Initial Pension Legal Battle

October 10, 2002 (PLANSPONSOR.com) - A group of current and former Federal Reserve employees lost their first legal battle in their attempts to force the central banker from collecting for an overfunded pension plan and to give back some past contributions.

US District Judge Colleen Kollar-Kotelly threw out the Fed workers’ suit because she said the Fed is immune from most lawsuits, which means she has no legal jurisdiction to proceed, a Dow Jones news report said.

Attorney Michael Bentzen, who represents the workers, told Dow Jones that his clients plan to take the case to a federal appeals court.

The employees, all hired before 1984, sued the Fed’s Board of Governors in 2000 over the over-funded plan that drains 7% of their annual salaries. The case was filed by 101 past and present Fed employees on behalf of a class that includes roughly 1,400, many of whom still work at the Fed, according to Dow Jones.

She said that her court didn’t have jurisdiction under a law that sends many cases to federal claims court. However, she noted that the lawsuit might not have any better luck in that venue because the Fed isn’t mentioned in the law that allows the government to be sued.

In addition to the Fed sovereign immunity arguments, Kollar-Kotelly made clear that she saw other holes in the plaintiffs’ argument. For example, the Fed is the creator of the pension plan, not its administrator, and therefore doesn’t have a fiduciary duty to the employees, the judge wrote, according to the Dow Jones story.

Also, District of Columbia contract law precludes any claim of unjust enrichment because the Fed and the employees had a contract governing the pension plan.

Federal Reserve officials declined to comment on the case.