Consolidated Cases v. Ibew Local Union No 102 Employee Pension Plan

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 08-3743, 09-2030 (Consolidated Cases); and 08-3924
CLEMENT BATTONI, Jr.; RAYMOND GIULIANO;
JAMES W. VREELAND;
RAYMOND S. DEMARCO, Jr.; MARK F. SHUBIAK;
NEIL BATTONI;
CHARLES R. WALLER,
Appellees in 08-3743 and 09-2030
Cross-Appellants in 08-3924
v.
IBEW LOCAL UNION NO 102 EMPLOYEE PENSION
PLAN; IBEW LOCAL UNION NO 102 EMPLOYEE
WELFARE FUND; JOHN E. MCHUGH;
RICHARD D. LESSNER; LEWIS S. WEINSTOCK;
ALAN M. GOLUB; REGINA DELESKY; JOHN DOES 1-
10; JANE DOES 1-10;
Trustees of the IBEW Local Union No 102 Employee Pension
Plan and /
or the IBEW Local Union No 102 Employee Welfare Fund, as
Trustees and Individually,
Appellants in 08-3743 and 09-2030
Cross-Appellees in 08-3924

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2
On Appeal from the United States District Court
for the District of New Jersey
District Court No. 2-05-cv-00934
District Judge: The Honorable Faith S. Hochberg
Argued January 12, 2010
Before: SCIRICA, Chief Judge, BARRY, and SMITH,
Circuit Judges
(Filed: February 5, 2010)
Robert E. Bartkus (argued)
Robert W. Delventhal
DILLON, BITAR & LUTHER
53 Maple Avenue
P.O. Box 398
Morristown, NJ 07960
Counsel for Appellees in 08-3743 and 09-2030,
Cross-Appellants in 08-3924
Michael T. Scaraggi (argued)
ORANSKY, SCARAGGI, BORG & ABBAMONTE
175 Fairfield Avenue, Suite 1A
West Caldwell, NJ 07006
Counsel for Appellants in 08-3743 and 09-2030,
Cross-Appellees in 08-3924

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3
OPINION
SMITH, Circuit Judge.
This appeal requires us to consider the scope of the
Employee Retirement Income Security Act’s (“ERISA”) Anti-
Cutback rule, 29 U.S.C. § 1054(g). Certain current and retired
members of a union (the “Battoni Plaintiffs”) challenged an
amendment to their welfare plan (the “Disputed Amendment”)
as an unlawful cutback of their accrued benefits under their
pension plan. We must determine whether the Disputed
Amendment, which conditions receipt of healthcare benefits
under a welfare plan on non-receipt of an accrued benefit under
a pension plan, violates the Anti-Cutback rule. In light of
ERISA’s statutory text and our precedent, we conclude that the
Disputed Amendment violated the Anti-Cutback rule by
constructively amending the pension plan in a manner that
decreased an accrued benefit under that plan. Accordingly, we
will affirm the District Court’s judgment in favor of the Battoni
Plaintiffs.

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4
I.
A.
In November 1999, the Local 675 and the Local 102
chapters of the International Brotherhood of Electrical Workers
(“IBEW”) merged. As a result of the merger, the Local 675
chapter was dissolved and its members were transferred to the
Local 102 chapter. The chapters’ pension and welfare plans
were also combined.
Before the merger, the Local 675 Pension Plan permitted
plan participants to choose between a lump sum pension benefit
or a periodic monthly benefit. The Local 102 Pension Plan, on
the other hand, provided only a periodic monthly benefit to its
participants. After the merger, the two pension plans were
combined into one—the Local 102 Pension Plan. To
accommodate the lump sum pension benefit option that was
included in the Local 675 Pension Plan, the Local 102 Pension
Plan was amended to provide former Local 675 members the
right to receive a lump sum benefit for pre-merger accruals.
Post-merger accruals, however, could be applied only towards
a periodic monthly benefit.
The chapters’ welfare plans were combined by
transferring the Local 675 members to the Local 102 Welfare
Plan. That plan provided eligible retirees healthcare benefits for
themselves and their spouses. To receive these benefits, a

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5
retiree was required to satisfy certain conditions outlined in the
plan. Shortly after the merger, the Local 102 Welfare Plan was
amended to include a new condition on the receipt of healthcare
benefits. This amendment, the Disputed Amendment,
conditioned a retiree’s receipt of healthcare benefits on the
retiree’s not choosing the lump sum pension benefit offered
under the Local 102 Pension Plan. The Disputed Amendment
stated, in relevant part, that:
Retired employees who elect a lump sum pension
benefit in lieu of periodic monthly benefits from
[the] IBEW Local 102 Pension Plan and/or from
another Local Union IBEW Pension Plan shall
not be eligible for continued [healthcare]
coverage.
Before the addition of the Disputed Amendment, a former Local
675 member could elect to receive the lump sum pension
benefit provided under the Local 102 Pension Plan and still
receive healthcare benefits under the Local 102 Welfare Plan.
B.
A group of current and retired members of the Local 102
chapter who were formerly members of the Local 675 chapter,
the Battoni Plaintiffs, challenged the Disputed Amendment,
alleging, among other things, that it violated the Anti-Cutback
rule. The Battoni Plaintiffs filed suit in the United States

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The Battoni Plaintiffs filed a cross-appeal, arguing that1
the District Court improperly denied them relief on their other
claims against the Union: (1) violation of ERISA’s Anti-
Interference rule, 29 U.S.C. § 1140, and (2) breach of contract.
They also explained that their breach of fiduciary duty claim
had not yet been addressed on the merits because they had
succeeded on their Anti-Cutback rule claim at trial. Because we
are affirming the District Court’s judgment, we need not
address the Battoni Plaintiffs’ cross-appeal.
6
District Court for the District of New Jersey, naming the Local
102 Pension and Welfare Plans and the current and former
trustees of those plans (collectively, the “Union”) as defendants.
After a bench trial, the District Court concluded that the
Disputed Amendment violated the Anti-Cutback rule and
entered judgment in favor of the Battoni Plaintiffs. The Union
then filed this timely appeal.1
II.
The Union appeals from the District Court’s judgment
entered after a bench trial. The District Court had jurisdiction
over the case under 28 U.S.C. § 1331. We have jurisdiction
under 28 U.S.C. § 1291. When reviewing a judgment entered
after a bench trial, we exercise “plenary review over [the]
[D]istrict [C]ourt’s conclusions of law” and its “choice and
interpretation of legal precepts.” Am. Soc’y for Testing &

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It is undisputed that ERISA sections 302(d)(2), 292
U.S.C. § 1082(d)(2), and 4281, 29 U.S.C. § 1441, do not apply
in this case.
7
Materials v. Corrpro Cos., 478 F.3d 557, 566 (3d Cir. 2007)
(internal quotations omitted). Findings of fact are reviewed for
clear error. Id.
III.
The Anti-Cutback rule states: “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
302(d)(2) or 4281.” 29 U.S.C. § 1054(g)(1). To state a claim2
for violation of ERISA’s Anti-Cutback rule one must show (1)
that a plan was amended and (2) that the amendment decreased
an accrued benefit. See id.
The Union concedes that the lump sum pension benefit
offered under the Local 102 Pension Plan was an “accrued
benefit,” 29 U.S.C. § 1002(23). It argues that the Disputed
Amendment lawfully amended a welfare benefit plan—such
benefits are exempt from coverage under the Anti-Cutback rule,
29 U.S.C. § 1051(1)—without disturbing the Battoni Plaintiffs’
rights to the lump sum pension benefit offered under the Local
102 Pension Plan. This argument cannot succeed in this case.

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8
A.
The first question that must be resolved is whether the
Disputed Amendment, by conditioning the receipt of welfare
benefits on a retiree not exercising her right to receive a lump
sum pension benefit under the Local 102 Pension Plan,
constituted an amendment to the Local 102 Pension Plan. See
29 U.S.C. § 1054(g)(1). Because the Disputed Amendment
constructively amended the right to receive a lump sum pension
benefit under the Local 102 Pension Plan, we conclude that the
first requirement of an Anti-Cutback claim was satisfied.
1.
Our view of what constitutes an “amendment” to a
pension plan has been construed broadly to protect pension
recipients. See, e.g., Hein v. FDIC, 88 F.3d 210, 216 (3d Cir.
1996); accord Hunter v. Caliber Sys., Inc., 220 F.3d 702, 712
(6th Cir. 2000). That being said, the Union’s argument that it
did not amend the Local 102 Pension Plan has a certain
superficial appeal because welfare and pension plans
undoubtedly serve different purposes under ERISA’s scheme.
The former provide healthcare and unemployment benefits and
the latter provide retirement income benefits:
“ERISA recognizes two types of employee
benefit plans: pension plans and welfare plans.”
In re. Unisys Corp. Retiree Med. Benefit

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9
“ERISA” Litig., 58 F.3d 896, 902 (3d Cir. 1995).
Welfare plans provide “medical, surgical, or
hospital care or benefits, or benefits in the event
of sickness, accident, disability, death or
unemployment[.]” 29 U.S.C. § 1002(1). Pension
plans provide retirement income to employees or
result in a deferral of income by employees for
periods extending to the termination of covered
employment or beyond. Id. § 1002(2)(A).
In re Lucent Death Benefits ERISA Litig., 541 F.3d 250, 253
(3d Cir. 2008). According to the Union, the Disputed
Amendment amended the welfare plan and thus was exempted
from the Anti-Cutback rule. 29 U.S.C. § 1051(1). The Anti-
Cutback rule, however, cannot be employed in such an overly
simplistic, robotic fashion.
We must examine the Disputed Amendment closely to
determine its true character before we declare it solely a welfare
plan amendment and exempt from the Anti-Cutback rule. An
evaluation of the amendment’s benefit characteristics, which are
independent of the formal placement of the amendment, is
necessary. See In re Lucent Death Benefits ERISA Litig., 541
F.3d at 256. “The type of benefit provided, not other
considerations, determines whether a plan [amendment amends
a] pension plan or a welfare plan.” Id.; see Rombach v. Nestle
USA, Inc., 211 F.3d 190, 193-94 (2d Cir. 2000).
As a general rule, an amendment amends a pension plan

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10
“to the extent that by its express terms or as a result of
surrounding circumstances . . . [it] provide[s] retirement income
to employees, or . . . results in a deferral of income by
employees for periods extending to the termination of covered
employment or beyond[.]” 29 U.S.C. § 1002(2)(A) (defining
“pension plan”); see In re Lucent Death Benefits ERISA Litig.,
541 F.3d at 255-56; Rombach, 211 F.3d at 193-94 (concluding
that disability provisions in pension plan constituted a welfare
plan); McBarron v. S & T Indus., Inc., 771 F.2d 94, 98 (6th Cir.
1985) (holding that disability provision in comprehensive
retirement plan constituted a welfare plan). “[T]he words ‘to
the extent that’ rather than ‘solely’ clearly indicate that
Congress intended to allow any plan or part of a plan,”
McBarron, 771 F.2d at 98, to be considered a pension plan or
a welfare plan, see id. See also In re Lucent Death Benefits
ERISA Litig., 541 F.3d at 255; Rombach, 211 F.3d at 193. As
such, the “meaning and function” of the amendment determines
whether it modifies a pension plan, a welfare plan, or both. In
re Lucent Death Benefits ERISA Litig., 541 F.3d at 255 (citing
Rombach, 211 F.3d at 194).
2.
The Disputed Amendment is part of the Local 102
Welfare Plan “to the extent” that it pertains to welfare benefits,
29 U.S.C. § 1002(1), and part of the Local 102 Pension Plan “to
the extent” that it pertains to pension benefits, 29 U.S.C. §
1002(2)(A). See In re Lucent Death Benefits ERISA Litig., 541

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We have already held that even when there is “no3
evidence in the record that the actual text of the [pension plan]
11
F.3d at 255-56; see also Rombach, 211 F.3d at 193-94;
McBarron, 771 F.2d at 98. The Disputed Amendment
constructively amended the pension plan by adding a condition
to the receipt of a benefit accrued under that plan. If a retiree
elects to receive the lump sum pension benefit under the Local
102 Pension Plan she loses healthcare benefits under the Local
102 Welfare Plan. Thus, the Disputed Amendment necessarily,
“by its express terms or as a result of surrounding
circumstances,” 29 U.S.C. § 1002(2)(A), amended the Local
102 Pension Plan. See In re Lucent Death Benefits ERISA
Litig., 541 F.3d at 255-56; see also Rombach, 211 F.3d at 193-
94; McBarron, 771 F.2d at 98. Assuming, hypothetically, that
the Local 102 Pension Plan did not exist, an amendment
conditioning receipt of healthcare benefits on not receiving
accrued benefits under that plan would be nonsensical.
Moreover, if the Disputed Amendment were added to the Local
102 Pension Plan instead of the Local 102 Welfare Plan, it
would retain the exact same meaning and function. See In re
Lucent Death Benefits ERISA Litig., 541 F.3d at 255. Thus,
even though the Disputed Amendment was added to the Local
102 Welfare Plan and certainly dealt with healthcare benefits,
it also “function[ed]” to condition receipt of the lump sum
pension benefit under the Local 102 Pension Plan on non-
receipt of healthcare benefits under the Local 102 Welfare Plan.
Id.3

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was amended or modified in any way,” a mere “erroneous
interpretation of a plan provision that results in the improper
denial of benefits to a plan participant may be construed as an
‘amendment’ for the purposes of [the Anti-Cutback rule].”
Hein, 88 F.3d at 216. Accordingly, it is no stretch for us to
conclude that an amendment to the Local 102 Welfare Plan
constructively amended the Local 102 Pension Plan. See id.;
see also In re Lucent Death Benefits ERISA Litig., 541 F.3d at
255.
12
B.
Having determined that the Disputed Amendment
amended the Local 102 Pension Plan, the next inquiry is
whether the amendment decreased an accrued benefit. See 29
U.S.C. § 1054(g)(1). The Union argues that the Disputed
Amendment merely restricts access to healthcare benefits and
does not decrease any accrued benefit. But because the
Disputed Amendment imposed a condition on the receipt of the
lump sum benefit under the Local 102 Pension Plan, it
decreased an accrued benefit. “[A]t the moment [a] new
condition is imposed, the accrued benefit becomes less
valuable[.]” Cent. Laborers’ Pension Fund v. Heinz, 541 U.S.
739, 746 (2004). The Treasury Regulations for the Internal
Revenue Code (“IRC”) provision corresponding to the Anti-
Cutback rule further confirm this conclusion. 26 C.F.R. §§

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“Regulations prescribed by the Secretary of the4
Treasury under [section 411 of the IRC ] apply to the minimum
participation, vesting, and funding standards set forth in
[ERISA].” Bellas v. CBS, Inc., 221 F.3d 517, 523 n.3 (3d Cir.
2000) (quoting 29 U.S.C. § 1202(c)). “Accordingly, the . . .
[Anti-Cutback rule,] and [section 411 of the IRC] are meant to
be interpreted consistently.” Bellas, 221 F.3d at 523 n.3; see id.
at 524 n.5 (citing 26 C.F.R. § 1.411(d)-4); Cent. Laborers’
Pension Fund, 541 U.S. at 747 (“Although the [Treasury
Regulations] refer only to the [IRC] version of the anti-cutback
rule, they apply with equal force to [ERISA’s Anti-Cutback
rule].”).
13
1.411(d)-4, Q-7, A-7.4
1.
In Central Laborers’ Pension Fund, the Supreme Court
considered “whether the [Anti-Cutback] rule prohibits an
amendment expanding the categories of postretirement
employment that triggers suspension of payment of early
retirement benefits already accrued.” 541 U.S. at 741. It held
that such an amendment was prohibited in part because the
imposition of a new condition on an accrued benefit decreased
the value of that accrued benefit. Id. at 746.
Thomas Heinz, a retiree who participated in a pension
plan administered by the Central Laborers’ Pension Fund,
worked in the construction industry before retiring. Id. at 741.

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The Central Laborers’ Pension Fund also raised other5
arguments not relevant to the instant case.
14
Heinz’s pension plan contained a “disqualifying employment”
provision that stated that monthly retirement payments would be
suspended if he accepted work as a “union or non-union
construction worker.” Id. at 742. The provision did not cover
work as a “construction supervisor.” Id.
After retiring, Heinz began working as a construction
supervisor while receiving pension payments. Id.
Approximately two years later, the pension plan’s
“disqualifying employment” provision was amended to include
any job in the construction industry. Id. Heinz was warned that
he would lose his monthly pension payment if he continued to
work as a construction supervisor. Id. Despite the warning,
Heinz continued to work as a construction supervisor and his
monthly pension payments were suspended because of his
ongoing violation of the amended “disqualifying employment”
provision. Id. Heinz sued the pension fund to recover the
suspended benefits, alleging that the amended “disqualifying
employment” provision violated the Anti-Cutback rule. Id. at
742-43.
In its defense, the Central Laborers’ Pension Fund
argued that it did not decrease an accrued benefit because
Heinz’s monthly pension payments were merely suspended, not
outright eliminated. Id. at 745. The Supreme Court explained5

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that the pension fund’s distinction between suspension and
elimination “misse[d] the point” of the Anti-Cutback rule. Id.
The imposition of the condition itself was what devalued the
accrued benefit:
The real question is whether a new condition may
be imposed after a benefit has accrued; may the
right to receive certain money on a certain date be
limited by a new condition narrowing that right?
In a given case, the new condition may or may
not be invoked to justify an actual suspension of
benefits, but at the moment the new condition is
imposed, the accrued benefit becomes less
valuable, irrespective of any actual suspension.
Id. at 746 (emphasis added).
The same reasoning applies here. The Local 102
Pension Plan, like Heinz’s pension plan, imposed a new
condition on the receipt of an accrued benefit. The Battoni
Plaintiffs’ lump sum pension benefits accrued before the
Disputed Amendment was added to the Local 102 Welfare Plan.
Yet the Disputed Amendment conditioned the receipt of those
accrued benefits on forfeiting healthcare benefits. This “new
condition,” id., in and of itself, decreased the value of the lump
sum pension benefit, see id.

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See, e.g., 26 C.F.R. § 1.411(d)-3(a)(2)(i) (“For6
purposes of determining whether a participant's accrued benefit
is decreased, all of the amendments to the provisions of a plan
affecting, directly or indirectly, the computation of accrued
benefits are taken into account.”); id. § 1.411(d)-3(b)(1)(ii)
(explaining that Anti-Cutback rule applies to benefits that can
only be realized through the occurrence of an “unpredictable
contingent event”); id. § 1.411(d)-4, A-2(a)(1) (“[In general, a]
plan is not permitted to be amended to eliminate or reduce a
section 411(d)(6) protected benefit that has already accrued, . .
. even if such elimination or reduction is contingent upon the
employee’s consent.”); id. § 1.411(d)-4, A-2(a)(3)(i) (“The
prohibition against the reduction or elimination of section
411(d)(6) protected benefits already accrued applies to plan
mergers, spinoffs, transfers, and transactions amending or
having the effect of amending a plan or plans to transfer plan
benefits.”); id. § 1.411(d)-4, A-2(c)(1) (“A plan amendment
violates the requirements of section 411(d)(6) if it is one of a
series of plan amendments that, when taken together, have the
effect of reducing or eliminating a section 411(d)(6) protected
benefit in a manner that would be prohibited by section
411(d)(6) if accomplished through a single amendment.”).
16
2.
The Treasury Regulations for the IRC’s counterpart to
ERISA’s Anti-Cutback rule bolster our conclusion. Those
regulations direct us to construe broadly the Anti-Cutback rule
to cover direct and indirect amendments to pension plans. The6
Treasury Regulations state that the imposition of conditions on

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accrued benefits violates the Anti-Cutback rule:
Q-7: May a plan be amended to add . . .
conditions restricting the availability of a section
411(d)(6) [the IRC’s provision corresponding to
ERISA’s Anti-Cutback rule] protected benefit?
A-7: No. The addition of . . . objective
conditions with respect to a section 411(d)(6)
protected benefit that has already accrued violates
section 411(d)(6). Also, the addition of
conditions (whether or not objective) or any
change to existing conditions with respect to
section 411(d)(6) protected benefits that results in
any further restriction violates section 411(d)(6).
26 C.F.R. §§ 1.411(d)-4, Q-7, A-7; Cent. Laborers’ Pension
Fund, 541 U.S. at 747 (“So far as the [Treasury] [R]egulations
are concerned, . . . the anti-cutback provision flatly prohibits
plans from attaching new conditions to benefits that an
employee has already earned.”).
IV.
The Disputed Amendment constructively amended the
pension plan because it conditioned receipt of the lump sum
pension benefit, an accrued benefit, on surrendering healthcare
benefits provided by the welfare plan. See 29 U.S.C. §
1002(2)(A); see also In re Lucent Death Benefits ERISA Litig.,
541 F.3d at 255-56. This condition on the receipt of the lump

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sum pension benefit decreased the value of that benefit in
violation of the Anti-Cutback rule. See Cent. Laborers’
Pension Fund, 541 U.S. at 746; see also 26 C.F.R. §§ 1.411(d)-
4, Q-7, A-7. Thus, we will affirm the District Court’s judgment
that the Disputed Amendment violated ERISA’s Anti-Cutback
rule.

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