DC to DB Transfer Elimination Upheld

A federal appellate court has agreed with a lower court judge that an employer was allowed to drop an option allowing participants to move defined contribution plan assets to a defined benefit program.

The 1st U.S. Circuit Court of Appeals says that shipper DHL Holdings did not violate the Employee Retirement Income Security Act (ERISA) anti-cutback mandate with its late-2004 change in plan options, and upheld the lower court ruling on grounds that the change was permitted under Treasury Department regulations, even if it diminished an accrued benefit.

The 1st Circuit decision came in a case filed by plaintiff Jeffrey R. Tasker who, according to the court, sued DHL after discovering the rule change when he tried to exercise the asset transfer option in 2008. The DC to DB transfer option had been in place when Tasker retired in March 2004 when he was 57, according to the court.

Circuit Judge Bruce M. Selya said the appellate panel was not ignoring Tasker’s plight, considering the annuity on which he sought to collect was worth about half what he anticipated because of the rule change governing the inter-plan transfer.

“This is a hard case — hard in the sense that it requires us to deny relief to a plaintiff for whom we have considerable sympathy. After all, the plaintiff worked for many years, planned for his retirement, and now finds that the annuity he can collect is roughly half the size that he had anticipated,” Selya wrote in the appellate ruling. “On general notions of fairness, the plaintiff deserves better. But this case — like most hard cases — cannot be decided on generalized notions of fairness. ERISA is a creature of statute, fleshed out by regulations. Subject to constitutional concerns not present here, courts must follow the path demarcated by Congress and the Executive Branch.”

Selya concluded: “Where, as here, the statute and the implementing regulations are clear, an inquiring court must follow their lead. No judge is free to disregard the law simply because he or she thinks that it would be fairer to do so in a given case.”

The case is Tasker v. DHL Retirement Savings Plan, 1st Cir., No. 09-2661.