Retiree COLA Elimination UpHeld

August 12, 2002 ( - A federal appeals court ruled that pension trustees were not out of bounds when they cut out cost of living adjustments for certain retirees.

The US Fourth Circuit Court of Appeals pointed out that a restoration of the eliminated increases would “threaten the stability of the plan.”

The action stems from the Transportation Communications International Union’s retirement plan trustees’ decision in 1991 to amend the plan to add a COLA benefit. It was discovered in 1993 that the COLA amendment was based on an incorrect valuation of the plan’s liabilities that had resulted in a liability increase by approximately $20 million. 

The new plan trustees in 1993 decided to freeze the COLAs for plan participants who had not yet retired, and to continue such COLAs for participants who had retired before the 1991 amendment was enacted.  They then amended the plan in 1997 to rescind the COLAs and filed a class action against all plan participants seeking a declaration that its pullback of the COLA amendment was binding on all plan participants.

Plaintiff Robert Devlin, a plan participant, was named as a class representative in the action. However, Devlin refused to accept the position.

The appeals judges ruled that the new trustees didn’t violate ERISA by cutting the cost of living adjustments.

The case is Scardelletti v. Debarr, 4th Cir, No. 99-2619, unpublished 8/8/02.