Incorporation of Internal Revenue Guidance in Suspension of Benefits Cases
Chavis v. Plumbers and Steamfitters Local 486 Pension Plan is a case from the Maryland district court involving tax-qualified union pension fund trustees' decision to deny or suspend pension benefits to plan participants who retired from their union positions before age 62, but continued to work for the same employers in non-union management positions. Importantly, the pensioners had a plan in place with their employers to continue working, albeit in a different, nonunion position.
As such, they were charged with engaging in “unauthorized employment” under the plan, and having never separated from service. The pensioners’ claim that trustees impermissibly looked to the Internal Revenue Code (IRC) rather than solely at plan provisions when deciding to suspend benefits was rejected. The court found that the pensioners were effectively attempting to read the relevant plan provisions in a vacuum, ignoring the Plan’s provisions that incorporated the IRC provisions as well as the preamble’s directive that the plan maintain tax-qualified status. When considering the stated IRC provisions, it was clear that pension payments were impermissible insofar as made before participants attained age 62 who had not separated from employment.
This case reiterates that a plan must consider the IRC and other regulatory framework, not just the plan document, when reviewing suspension of benefit questions. Additionally, the Court placed importance on sections of the Plan that sought to incorporate the IRC, or to generally seek to retain tax-qualified status.