Pre-ERISA years of service prior to age 22 can be excluded in applying ERISA’s vesting standards, according to a 7th Circuit Court of Appeals decision affirming the district court’s ruling. [Silvernail v. Ameritech Pension Plan, CA7, 05-1535]
The plaintiff commenced employment at the company in February 1967 at age 18. Under all applicable pre-ERISA versions of the plan, the plaintiff would not have been vested in pension accruals when he left the company in January 1978 at age 29, although all plaintiff’s years would have been counted under one of the pre-ERISA vesting designs. The plan’s ERISA amendment adopted a 10-year cliff vesting schedule, but excluded years served prior to age 22, relying on ERISA §203(b)(1)(A), thereby leaving the individual 0% vested.
The individual sought to lean on excerpts from legislative history to contend that Congress had not intended the age-22 eligibility condition to strip away vesting credit he had earned under the plan’s pre-ERISA design. Not only did the appellate court reject the congressional intent argument where ERISA’s own language was found to be unambiguous, but the court seemed offended by the plaintiff’s version of legislative history, which the court characterized as “short, highly selective snippets that have been taken out of context.” Chides the court -
Such use of authority amounts at best to sloppy lawyering, and at worst it is an attempt to mislead us.
In one divertingly intriguing twist born out of very recently evolving precedent, the plaintiff sought to have the Supreme Court’s 2004 decision in Heinz carry water for him. The appellate court rejected that argument . . . but let’s quote the court again here, since we no doubt will visit this issue again -
[Plaintiff] apparently confuses a policy amendment that reduces a worker’s actual accrued benefits, which was the issue in Heinz and which ERISA prohibits, with an amendment that changes how an employee becomes vested. He believes, mistakenly, that since [the employer] was all the while paying into a pension trust on his behalf, denying him vesting credit between ages 18 and 22 was tantamount to depriving him of benefits he had earned during those years. Benefit accrual and vesting are related but different concepts.
(I’m curious, for instance, as to whether that distinction colors Example 4 under Prop. Reg. §1.411(d)-3(a)(4), included as part of the IRS reaction to Heinz.)