Articles Posted in US Court of Appeals for the Third Circuit

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A “top-hat” plan “which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees,” 29 U.S.C. 1101(a)(1), 1051(2), 1081(a)(3), need not comply with many of the substantive provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Sikora sought to recover pension benefits under ERISA through the University of Pittsburgh Medical Center and its Health System and Affiliates Non-Qualified Supplemental Benefit Plan. The district court held, and the Third Circuit affirmed, that he was not entitled to obtain such relief because he sought benefits under a top-hat plan. The courts rejected Sikora’s argument that the defendants were required to prove that plan participants had bargaining power before a court could conclude that he participated in a top-hat plan. Plan participant bargaining power is not a substantive element of a top-hat plan. View "Paul Sikora v. University of Pittsburgh Medical Center" on Justia Law

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Union Pacific employee Dowling became totally disabled by multiple sclerosis in 1997. His disability benefits ended in 2012 when he reached age 65 and began to draw a pension. Instead of calculating Dowling’s pension based on Dowling’s last 10 years of actual work—ending in 1997—the administrator operated as if Dowling had worked and been paid his final base salary— $208,000 per year— for his credited years of service, until his retirement in 2012, even though Dowling had not actually worked during that period. Dowling is covered by a 277-page retirement plan composed of introductory material, 19 articles of content, and various appendices—none of which explicitly address Dowling’s precise situation. The administrator’s interpretation provides Dowling with a lower monthly payment than he expected. Dowling challenged the administrator’s decision as contradicting the plan’s plain language. In Dowling’s suit under ERISA, 29 U.S.C. 1132(a)(1)(B), the district court found the plan ambiguous and the administrator’s interpretation reasonable. The Third Circuit affirmed. The plan’s terminology, silence, and structure render it ambiguous, so the plan accords the plan administrator discretion to interpret ambiguous plan terms. The mere existence of a conflict of interest is alone insufficient to raise skepticism of the plan administrator’s decision. View "Dowling v. Pension Plan for Salaried Employees of Union Pacific Co." on Justia Law

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Union Pacific employee Dowling became totally disabled by multiple sclerosis in 1997. His disability benefits ended in 2012 when he reached age 65 and began to draw a pension. Instead of calculating Dowling’s pension based on Dowling’s last 10 years of actual work—ending in 1997—the administrator operated as if Dowling had worked and been paid his final base salary— $208,000 per year— for his credited years of service, until his retirement in 2012, even though Dowling had not actually worked during that period. Dowling is covered by a 277-page retirement plan composed of introductory material, 19 articles of content, and various appendices—none of which explicitly address Dowling’s precise situation. The administrator’s interpretation provides Dowling with a lower monthly payment than he expected. Dowling challenged the administrator’s decision as contradicting the plan’s plain language. In Dowling’s suit under ERISA, 29 U.S.C. 1132(a)(1)(B), the district court found the plan ambiguous and the administrator’s interpretation reasonable. The Third Circuit affirmed. The plan’s terminology, silence, and structure render it ambiguous, so the plan accords the plan administrator discretion to interpret ambiguous plan terms. The mere existence of a conflict of interest is alone insufficient to raise skepticism of the plan administrator’s decision. View "Dowling v. Pension Plan for Salaried Employees of Union Pacific Co." on Justia Law

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St. Peter’s, a non-profit healthcare entity, runs a hospital. It is not a church, but has ties to a New Jersey Roman Catholic Diocese. The Bishop appoints most members of its Board of Governors and retains veto authority over Board actions. The hospital has daily Mass and Catholic devotional pictures and statues throughout the building. In 1974, St. Peter’s established a non-contributory defined benefit retirement plan; operated the plan subject to the Employee Retirement Income Security Act (ERISA); and represented that it was complying with ERISA. In 2006 St. Peter’s filed an IRS application, seeking a church plan exemption from ERISA, 26 U.S.C. 414(e); 29 U.S.C. 1002(33). In 2013, Kaplan, who worked for St. Peter’s until 1999, filed a putative class action alleging that St. Peter’s did not provide ERISA-compliant summary plan descriptions or pension benefits statements, and that, as of 2011, the plan was underfunded by more than $70 million. While the lawsuit was pending, St. Peter’s received an IRS private letter ruling. affirming the plan’s status as an exempt church plan for tax purposes. The Third Circuit initially affirmed denial of a motion to dismiss, concluding that St. Peter’s could not establish an exempt church plan because it is not a church. Following consideration by the U.S. Supreme Court in 2017, the Third Circuit vacated and reversed. View "Kaplan v. Saint Peter's Healthcare System" on Justia Law