Appeal from the United States District Court for the Central District of Illinois, Peoria Division. No. 99-CV-1388--Joe Billy McDade, Chief Judge.
Before Cudahy, Rovner, and Williams, Circuit Judges.
The opinion of the court was delivered by: Williams, Circuit Judge
We are asked to decide whether a pension plan amendment which expands the types of post-retirement employment that trigger mandatory suspension of early retirement benefits violates ERISA's "anti-cutback" rule, 29 U.S.C. § 1054(g), when applied to suspend the benefits of the plaintiffs, who retired before the amendment. The district court, relying on Spacek v. Maritime Ass'n, 134 F.3d 283 (5th Cir. 1998), granted judg ment on the pleadings in favor of the defendant pen sion fund. We reject the Fifth Circuit's interpretation of 29 U.S.C. § 1054(g) and hold that the amendment, which had the effect of reducing the plaintiffs' early retirement benefits, violates the anti-cutback rule. *fn1
The facts are not in dispute. Plaintiffs Thomas E. Heinz and Richard J. Schmitt, Jr., are participants in a multiemployer pension plan administered by defendant Central Laborers' Pension Fund. Both plaintiffs, who were 39 years old when they retired in 1996, qualified for and began receiving monthly benefits payments under a "service-only pension," which was available to participants who retired at any age, so long as they had earned 30 or more pension credits. The monthly payments available under the service-only pension were the same as those available at normal retirement age--that is, the benefits were not actuarially reduced to take into account that payments began at an earlier age and would continue over a longer period. The monthly amount was determined based on the contribution rates at which the required 30 pension credits were earned.
Under the plan, monthly benefit payments for those retiring before age 60, like the plaintiffs, were subject to suspension for periods during which the participants worked in certain "disqualifying employment." At the time of plaintiffs' retirement, disqualifying employment was defined in the plan (for employees retiring before age 60) as employment:
in a job classification of any type specified and covered in a collective bargaining agreement or in any occupation or job classification where contributions are to be made to the Fund pursuant to a written agreement (either as a union or non-union construction worker).
After their retirement, plaintiffs obtained jobs as supervisors in the construction industry, which was not disqualifying under the existing definition. For two years the plaintiffs worked as construction supervisors while collecting monthly pension benefits. Then, in 1998, the plan was amended and the definition of disqualifying employment was expanded to include (for participants who retired before age 53) work "in any capacity in the construction industry (either as a union or non-union construction worker)." *fn2 The Fund construed this amended definition as covering plaintiffs' supervisory work and suspended their monthly benefit payments.
The plaintiffs sued the Fund and, on cross motions for judgment on the pleadings, the district court entered judgment for the Fund. The district court, after careful analysis, held first, that the anti-cutback rule does not apply to suspensions of early retirement benefits payments triggered by disqualifying employment, and second, that the Fund's interpretation of the amended definition of disqualifying employment to include supervisory work was not arbitrary and capricious. The plaintiffs appeal on both grounds.
ERISA does not require employers to provide pension or early retirement benefits, or mandate a particular level of benefits. Hickey v. Chicago Truck Drivers, Helpers and Warehouse Workers Union, 980 F.2d 465, 468 (7th Cir. 1992). Instead, "ERISA protects the benefits described in the Plan by ensuring that, if a pensioner is promised a benefit and fulfills the conditions required to receive it, the pensioner will actually receive the described and promised benefit." Id. at 469. ERISA protects benefits from forfeiture through detailed rules regulating vesting and accrual rates, which ensure the participant's right to receive promised benefits notwithstanding his or her consent to plan provisions that would otherwise require forfeiture. See JOHN H. LANGBEIN & BRUCE A. WOLK, PENSION AND EMPLOYEE BENEFIT LAW 121-22 (3d ed. 2000).
One limited exception to the non-forfeiture rules is that pension plans may contain provisions requiring the suspension of monthly benefit payments if a participant works in certain jobs after retirement. See 29 U.S.C. § 1053(a)(3)(B)(ii); ERISA § 203(a)(3)(B). Under this exception, multiemployer plans may provide for suspension of benefit payments if the retiree works "in the same trade or craft, and the same geographic area covered by the plan." Id. For early retirement benefits, plans may contain even broader limitations on re-employment, according to a Department of Labor regulation promulgated under ERISA § 203(a)(3)(B). See 29 C.F.R. § 2530.203-3(a). The plaintiffs do not contend that the restrictions on post-retirement employment contained in the plan, either before or after the 1998 amendment, violate these restrictions. Instead, they assert that the amendment, which expanded the scope of disqualifying employment, violated the anti-cutback rule of § 1054(g). We review de novo the district court's decision to grant judgment on the pleadings in favor of the Fund. See Velasco v. Ill. Dept. of Human Servs., 246 F.3d 1010, 1016 (7th Cir. 2001).
A. Plan Amendments Under 29 U.S.C. § 1054(g)
Plan amendments are permitted under ERISA, see 29 U.S.C. § 1102(b)(3), but an amendment may not decrease benefits that have already accrued. See LANGBEIN & WOLK, supra at 160. According to paragraph (1) of the anti-cutback rule:
The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(c)(8) or 1441 of this title. 29 U.S.C. § 1054(g)(1); ERISA § 204(g)(1). *fn3
"Accrued benefit" is defined under ERISA as "the individual's accrued benefit determined under the plan . . . expressed in the form of an annual benefit commencing at normal retirement age." 29 U.S.C. § 1002(23). This definition has been interpreted to include retirement benefits and to exclude "ancillary benefits not directly related to retirement benefits" like insurance or disability benefits, see 26 C.F.R. 1.411(a)-7; Hickey, 980 F.2d at 468, and some courts, relying on this definition, have held that early retirement benefits were likewise excluded. See Meridith v. Allsteel, Inc., 11 F.3d 1354, 1359-60 (7th Cir. 1993), overruled by Ahng v. Allsteel, Inc., 96 F.3d 1033, 1036 (7th Cir. 1996); Bencivenga v. Western Penn. Teamsters and Employees Pension Fund, 763 F.2d 574, 577-78 (3d Cir. 1985).
Paragraph (2) of § 1054(g), added by the Retirement Equity Act of 1984, P.L. 98-397, makes clear, however, that early retirement benefits are within the protection of the anti-cutback rule. Under that new provision, the test is not whether the amendment decreases "accrued benefits," but rather whether the amendment "has the effect of--eliminating or reducing" early retirement benefits attributable to service before the amendment:
For purposes of paragraph (1), a plan amendment which has the effect of--
(A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as ...