Previous Retiree Not Excluded From Pension Increase

December 27, 2002 ( - A pension plan revision that excludes certain retirees from a potential increase is invalid due to its adoption outside the employer's own plan amendment procedures, the US District Court for the District of Maine ruled, according to Washington-based legal publisher BNA.

In Warren v Cochrane, the court found that the provision of the plan amendment excluding retirees not in pay status at the time of the amendment was invalid. “Informal or unauthorized modification of pension plans is impermissible under ERISA,” according to the ruling issued by Magistrate Judge David Cohen.

The Facts

Harold Warren retired from Guy Gannett Publishing Co at the age of 55 in 1988.   For his future pension benefits, Warren elected deferred payments, approximately $250 per month, which he began receiving in 1995.

In January of 1991, Gannett’s board of directors approved an amendment to the company’s pension plan, increasing benefits. During the drafting of the resolution to increase pension payments, the company treasurer explained that Gannett’s management determined the deferred vested group of employees, of whom Warren was a member, would be excluded from the increase.

However, in a later memorandum received by the board and Warren, Gannett said all retirees would benefit from the pension increase.

Upon learning benefits were set to increase, Warren contacted Gannett claiming he was entitled to the increase, but Gannett denied his claim after finding Warren was not in pay status at the time of the amendment. Warren sued, alleging Gannett’s decision violated the Employee Retirement Income Security Act (ERISA).

Invalid Amendment

Considering Gannett’s argument that it was previously determined the deferred vested group was to be excluded from the pension increase, the court found the resolution ultimately incorporated into the plan did not state that this group was to be excluded.

Since the exclusion was not incorporated into the resolution, the amendment “was not adopted in accordance with Gannett’s own plan-amendment procedures, as required by ERISA, and accordingly is invalid.”