Xerox Corp. retirees, who brought a lawsuit against the company for changing how their pension benefits were calculated, may have to wait a little longer for a decision from the courts.
A decision this week by the U.S. Court of Appeals for the Second Circuit remanded the case back to the U.S. District Court of the Western District of New York where it originated.
Pension plan participants had sued in 2006 because they said Xerox not only changed how their pension benefits were calculated, but didn’t tell them it did so.
The U.S. Court of Appeals sided with the retirees, but the U.S. Supreme Court said that the courts didn’t have the authority to tell a company how to manage its retirement plan.
The initial lawsuit was brought by Paul Frommert, who retired from Xerox after 39 years as a regulatory-compliance manager. He believed his pension benefits would equate to $3,000 a month, but because he left the company for four years and came back, his pension became subject to a different pension calculation that reduced his payout to zero, according to the Wall Street Journal.
The Second Circuit Court of Appeals twice ruled in the employees’ favor and asked Xerox to recalculate the benefits. Xerox then appealed to the Supreme Court.
“The Supreme Court reversed our most recent decision, holding that we had erred in holding that, having found the plan administrator’s first interpretation of the retirement plan to be invalid, the district court could properly refuse to defer to the plan administrator’s subsequent interpretation of the plan,” according to the Appeals Court decision.
On remand, the district court held that the plan administrator’s proposed offset was a reasonable interpretation of the retirement plan and that the retirement plan gave adequate notice of the offset to plan participants. In essence, the plan administrator was allowed to reduce the benefits of those Xerox employees who had left the company and then been rehired. The employees who left in the ‘80s took a lump sum payout of their pension benefits and when they were rehired, plan administrators reduced benefits based on the payout amount.
Plaintiffs argued that the plan administrator’s interpretation violated ERISA’s notice provisions and is an unreasonable interpretation of the retirement plan. They also argued that the district court erred in failing to permit plaintiffs to conduct discovery concerning whether the plan administrator was operating under a conflict of interest.
The Appeals Court believes that the proposed offset is an unreasonable interpretation of the retirement plan and that it violates ERISA’s notice provisions.
“Although we uphold the challenged discovery order, we vacate the judgment and remand the case to the district court for further proceedings,” the Appeals Court ruled.