August 24, 2019

Tenth Circuit: ERISA Plan Consultant Did Not Act as ERISA Fiduciary When Calculating Benefits

The Tenth Circuit Court of Appeals issued its opinion in Lebahn v. National Farmers Union Uniform Pension Plan on Monday, July 11, 2016.

Trent Lebahn contacted a consultant hired by his company’s employee pension plan for information regarding his monthly distribution amount. The consultant told Mr. Lebahn that he would receive $8,444.18 per month and verified the amount when Mr. Lebahn asked her to double-check. He retired and began receiving the monthly payments, only to be informed a few months later that he had been being overpayed by nearly $5,000 per month. The plan’s attorney told Mr. Lebahn that he would need to return over $43,000 in overpayments. Unable to retire on the plan’s true monthly distribution, Mr. Lebahn tried to go back to work, but could not find a job. Mr. Lebahn and his wife sued under ERISA, arguing that the plan, the pension committee, and the consultant’s employer incurred liability under theories of breach of fiduciary duty and equitable estoppel. The defendants moved for dismissal based on failure to state a claim, which the district court granted, and the Lebahns appealed.

On appeal, the Tenth Circuit first addressed the Lebahns’ claims for breach of fiduciary duty. The district court dismissed the claims because the consultant had not acted as an ERISA fiduciary when calculating the pension benefits. The Tenth Circuit agreed, finding that because the consultant lacked discretionary authority in administering the pension plan, she was not a plan fiduciary and therefore the district court properly dismissed the claims.

The Tenth Circuit found that the district court also correctly dismissed the Lebahns’ equitable estoppel claims. The district court found that the Lebahns had failed to plead facts to satisfy two of the five prongs of equitable estoppel: awareness of the true facts and justifiable reliance. The Lebahns failed to adequately address justifiable reliance on appeal and therefore forfeited their argument.

The Tenth Circuit affirmed the district court’s dismissal of the Lebahns’ claims.

Tenth Circuit: Unambiguous Language of Pension Plan Precludes Relief Sought

The Tenth Circuit Court of Appeals issued its opinion in Martinez v. Plumbers & Pipefitters National Pension Plan on Wednesday, July 29, 2015.

Joseph Martinez was a long-term participant in the Plumbers and Pipefitters National Pension Plan, a multiemployer defined benefit pension plan governed by ERISA. In 2004, Martinez retired from plumbing and utilized the Plan’s contingent early retirement pension. He simultaneously applied for Social Security disability benefits but was denied, causing his provisional early retirement pension to automatically convert into a non-disability Early Retirement Pension. In 2006, Martinez decided to return to work and his Early Retirement Pension benefits were suspended pursuant to the Plan’s provisions. When he retired again in 2009, Martinez’s Early Retirement Pension benefits resumed after a six-month suspension period. Martinez again applied for Social Security disability benefits and this time was approved. He sought to convert his Early Retirement Pension into a Disability Pension at that time, which would have provided him a much larger monthly stipend. The Plan administrator denied his request based on the Plan language.

Martinez utilized the Plan’s appeal process and appealed the adverse determination to the Plan’s Board of Trustees, arguing (1) because he now met the criteria for disability under the plan, his benefits should be converted to disability benefits; (2) the SSA’s favorable determination should trigger an automatic conversion under the Plan; and (3) he was entitled to an adjustment because his return to work and subsequent re-retirement resulted in a new effective date of benefits. The Trustees upheld the denial of benefits, maintaining that the Plan provisions precluded him from converting his benefits. Martinez next sought review in state court, and the Plan removed to federal court. The district court also affirmed the denial of benefits for the same reasons as the Trustees. Martinez appealed to the Tenth Circuit.

The Tenth Circuit reviewed the Plan and determined that the Plan language unambiguously precluded the relief sought by Martinez. The Plan contains specific provisions for conversion to disability benefits, which did not apply to Martinez’s situation, and also contains language for the situation where an early retirement pensioner returns to work for a period of time. The Tenth Circuit expressed sympathy for Martinez but upheld the Plan’s denial of benefits.

Tenth Circuit: Bankruptcy Exemption for Retirement Plan Property Not Applicable When Property Withdrawn from Plan

The Tenth Circuit Court of Appeals issued its opinion in In re Gordon: Gordon v. Wadsworth on Friday, June 26, 2015.

In this bankruptcy appeal, the Gordons claimed $2,051 in their savings account as an exempt asset under C.R.S. § 13-54-102(1)(s) because the money represented a lump-sum distribution from their retirement plan and had not been commingled with other funds. The bankruptcy trustee objected on the ground that the exemption for retirement plans does not apply once the money is withdrawn from the plan. The bankruptcy judge agreed with the trustee’s objection and denied the Gordons’ motion for reconsideration. On appeal, the U.S. District Court for the District of Colorado affirmed, as did the Tenth Circuit.

The Tenth Circuit evaluated the language of C.R.S. § 13-54-102(1)(s), which exempts property held in or payable from retirement plans from levy and sale under writ of execution. The Gordons argued that the legislature intended to create an exemption from all retirement funds, regardless of whether they remained in the plan. The Tenth Circuit disagreed, finding the plain language of the statute precluded this reading. The Tenth Circuit found no statutory support for the Gordons’ argument.

The Tenth Circuit affirmed the district court and denied the Gordons’ request to certify questions of law to the Colorado Supreme Court.

Colorado Supreme Court: Health Savings Account Not Retirement Account for Garnishment Exemption Purposes

The Colorado Supreme Court issued its opinion in Roup v. Commercial Research, LLC on Monday, June 1, 2015.

Health Savings Account—Statutory Exemptions From Garnishment—CRS § 13-54-102(1)(s).

In this decision, the Supreme Court held that a Health Savings Account (HSA) is not a “retirement plan” within the meaning of Colorado’s exemption statute. An HSA is not intended to replace income lost as a result of retirement; it is intended to cover medical costs incurred at any point during a person’s lifetime. The General Assembly has not chosen to provide an exemption for HSAs in the relevant statutes. Accordingly, the Court affirmed the judgment of the court of appeals.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Supreme Court: PERA Members Have No Continual Right to Cost of Living Adjustments

The Colorado Supreme Court issued its opinion in Justus v. State of Colorado on Monday, October 20, 2014.

Colorado Public Employee’s Retirement Association Pension Plan (PERA)—Cost-of-Living Adjustment—Contracts Clauses of U.S. and Colorado Constitutions.

In this decision, the Colorado Supreme Court determined whether Colorado PERA members have contractual rights for life without change to the cost-of-living adjustment (COLA) formulas in place at their respective retirements. On summary judgment, the district court ruled that PERA retirees had no such contract right to an unchangeable COLA formula.

The court of appeals disagreed. It determined that the retirees have a contract right, and remanded for further review to determine whether Senate Bill 10-001 violated the Contract Clauses of the U.S. and Colorado Constitutions.

The Court held that the 2010 PERA legislation did not establish any contract between PERA and its members entitling them to perpetual receipt of the specific COLA formula in place on the date each became eligible for retirement or on the date each actually retires. The judgment of the court of appeals was reversed and the trial court’s summary judgment order dismissing this case was upheld.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Supreme Court: No Temporal Limitation in Statutory Language for Reduction in Unemployment Insurance Benefits

The Colorado Supreme Court issued its opinion in Industrial Claim Appeals Office v. Colorado Department of Labor and Employment on Monday, July 1, 2013.

Unemployment Benefits—Retirement Contributions—Offset Provision.

Respondent worked for the Colorado Department of Labor and Employment (Department) for a number of years, and then retired. The Department made contributions to respondent’s retirement fund, and once she retired, she began receiving retirement payments from that fund. When she was involuntarily separated from her job with the Department during a second period of employment, she applied for and was awarded unemployment benefits. Respondent’s benefits were discontinued when a panel of the Industrial Claim Appeals Office (Panel) reasoned that respondent was ineligible to receive unemployment benefits under the “offset provision” of CRS § 8-73-110(3)(a)(I)(B), which provides that “an individual’s weekly benefit amount shall be reduced (but not below zero) by . . . [t]he prorated weekly amount of a pension, retirement or retired pay, or annuity that has been contributed to by a base period employer.” The court of appeals reversed, holding that the offset provision applies only when the employer has contributed to the claimant’s retirement fund during the base period employment that made him or her eligible for unemployment benefits.

The Supreme Court reversed the judgment of the court of appeals. The offset provision applies when a claimant is receiving payments from a retirement fund “that has been contributed to by a base period employer.” In contrast to the definition of employer, which specifically includes a time frame during which the employing unit must pay wages, and in contrast to the definition of base period, which describes the time frame for determining eligibility for benefits, the offset provision contains no temporal limitation. Therefore, it applies any time the employer has contributed to the retirement fund from which the claimant is receiving payments, regardless of when the contributions were made. Accordingly, the Court held that respondent’s unemployment benefits can be offset by the retirement benefits she is receiving from a base period employer.

Summary and full case available here.