The U.S. Ct. of Appeals for the Third Circuit held March 9 that the Int’l Bhd. of Teamsters Local 641 Pension Fund — which allows represented employees to transfer service credits earned while working under the jurisdiction of other IBT locals, but had a 15-year vesting threshold — violated Employee Retirement Income Security Act which requires a 10-year vesting period.
The pension plan, known as a pro-rata pension plan, was available to certain employees who had been represented by other IBT locals but didn’t attain a minimum of 10 years with any one employer within the jurisdiction of Local 641 in Northern N.J. The fund calculated participants’ pension based on the amount of pension they would have been entitled to had they earned all of their combined pension credits under Local 641’s jurisdiction. The pro-rata pension was generally paid only to employees who earned a minimum of 15 years of combined service credits.
Stanley Smith earned service credits with two participating IBT locals before he entered employment that drew him under Local 64’s jurisdiction. In accord with reciprocal agreements with the other locals, the Local 641 fund accepted service credits Smith earned while within the jurisdiction of the other two funds. When Smith applied for a pension from the Local 641 fund at age 65, the local informed him he had earned 11 years of service credit — four years with Local 641 and seven years with the other two locals. The Local 641 fund denied Smith’s pension application, saying he needed 15 years of credit before he could receive pension benefits.
Smith sued under ERISA, alleging the Local 641 fund’s 15-year service credit requirement violated ERISA and constituted a breach of fiduciary duty. The U.S. Dist. Ct. for N. J. concluded the pro-rata pension was not governed by ERISA’s 10-year vesting requirements and dismissed the case. The appeals court reversed. Local 641 argued that ERISA § 203’s minimum 10-year vesting standards didn’t apply. It maintained that ERISA § 203(b)(1)(C) permitted the fund to disregard years of service earned under other plans for vesting purposes.
The appeals court rejected Local 641’s argument. Although a plan is not required to provide benefits, ERISA provisions become applicable after benefits are provided. The appeals court further rejected Local 641’s contention that even if § 203(a) was applicable, § 203(b)(1)(C) allowed the fund to disregard service with any employer for any period in which the employer did not maintain the Local 641 fund plan. [BNA 3/14/00]