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AARP Seeks to Prohibit Pension Plans From Retroactively Applying Changed Rules

AARP  filed a friend-of-the-court brief in Cotillion v. United Refining supporting a class of employees whose benefits were reduced after the plan administrator reinterpreted a plan provision.


Plaintiffs were employed by United Refining Co. and participated in the company's pension plan for salaried employees. Both plaintiffs fulfilled the vesting requirements of the plan and ended their employment with the company before they met the plan’s early retirement date. Both plaintiffs were told that they fulfilled the requirements for receiving unreduced retirement benefits at the age of 60.

After plaintiffs retired, the company changed the plan document to reflect an actuarial reduction for any participant who elected to receive benefits prior to normal retirement date, the month in which the participant turned 65. The plan administrator sent letters to terminated vested participants informing them of the change. Three years after their benefits were cut, the pension plan informed the employees that they owed money to the plan because they had been incorrectly receiving benefits.

Plaintiffs filed a class action lawsuit alleging violations of the federal anti-cutback rule. A federal district court determined that the sole issue to decide was whether United Refining violated  anti-cutback provisions in the federal Employee Retirement Income Security Act (ERISA) by retroactively reducing participants' accrued early retirement benefits. ERISA prevents plan administrators from amending plans to reduce participants' accrued benefits. To prevail on their anti-cutback claim, the plaintiffs needed to demonstrate that United Refining amended the plan and the amendment decreased an accrued benefit. The court agreed with plaintiffs that because several plan documents referenced a plan section that provided a benefit calculation formula without an early retirement offset, the plan’s interpretation actually followed the plan provisions at the time the benefits were earned. The subsequent change was an amendment to the plan. The court rejected United Refining’s argument that the reduction was permissible due to a miscalculation of the benefits and found in favor of the plaintiff class. United Refining appealed to the U.S. Court of Appeals for the Third Circuit.

AARP’s brief, filed by AARP Foundation Litigation attorneys, argued that U.S. Supreme Court precedent prohibits a plan administrator from changing the rules to apply to benefits that participants have already earned. The brief also reviewed the policy reasons for enactment of ERISA, which was to protect participants and beneficiaries, not plans and employers.

What’s at Stake

This case is important to people over the age of 50 in particular because they must be able to count on the benefits, which they have already earned, and not have them taken away.

Case Status

Cotillion v. United Refining is before the U.S. Court of Appeals for the Third Circuit.