Change in Interpretation Eliminating Unreduced Benefits for Terminated Vested Participants Violates ERISA?ÇÖs Anti-Cutback Rule

An employer?ÇÖs defined benefit plan provided unreduced early retirement benefits starting at age 60 for terminated vested participants and had been consistently so interpreted for a number of years. The employer later determined that early retirement benefits should be actuarially reduced, made a ?Ç£clarifying?Ç¥ amendment to the plan, and thereafter either reduced or stopped making pension payments to allegedly ?Ç£overpaid?Ç¥ participants whose benefits began before the changed interpretation and amendment. The U.S. Court of Appeals for the Third Circuit upheld a district court determination that the employer had violated ERISA?ÇÖs anti-cutback rule and awarded the employees the withheld payments plus interest. In dismissing the employer?ÇÖs arguments, the Third Circuit found that requiring claims exhaustion would have been futile and that the employer could not rely on favorable provisions in an SPD when the SPD clearly stated that in the event of any conflict with the plan, the plan terms would prevail. Cottillion v. United Ref. Co., Nos. 13-4633 & 13-4743 (3d Cir. Mar. 18, 2015).