Permission Granted for Increasing Plan's "Normal Retirement Age" from 65 to 67

Written by Hersh Stern Updated Tuesday, November 27, 2018

ERISA allowed an employer to amend its pension plan's definition of "normal retirement age" upward from the age of 65 to 67, the Tenth Circuit held (Lindsay v Thiokol Corp. (1997, CA 10) 1997 US App LEXIS 7904).

Thiokol Corp. amended its pension plan to change the definition of "normal retirement age" from the age of 65 to 67. Several former employees, who had taken early retirement and who would have been receiving greater benefits had the plan not been amended, claimed that the amendment violated ERISA 3(24).

Under ERISA 3(24), the term "normal retirement age" means the earlier of:

  1. the time a plan participant attains normal retirement age under the plan, or
  2. the latter of –(a) the time a plan participant attains 65, or(b) the 5th anniversary of the time a plan participant commenced participation in the plan.

The former employees argued that ERISA 3(24) permitted the plan to define "normal retirement age" only earlier than age 65, not later. But the court found no support for this argument in ERISA, and reasoned that if Congress had intended this result, it would have so provided. And nowhere in ERISA is the plan's "normal retirement age" required to be the same as that defined in ERISA for the purposes of the ERISA statutory requirements.

Also, even though the amended plan eliminated the further accrual of early retirement subsidies, it complied with the ERISA 204(g) anti-cutbacks rules because it preserved all retirements, including subsidies, that had accrued before the effective date of that amendment.

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The court also addressed the former employees' charge that there had been a violation of ERISA 203(a) which provides that a pension plan must provide that an employee's right to his normal retirement benefit is non-forfeitable upon the attainment of normal retirement age. Though used several times in ERISA, "early retirement benefit" is never specifically defined, the court noted. Where (as here) the normal retirement age under the plan is not less than 65 years, ERISA 203(a) means that each pension plan must provide that an employee's right to the greater of: (1) any pre-age 65 retirement benefit under the plan, and (2) the age 65 benefit under the plan, is non-forfeitable upon the attainment of normal retirement age. Since the plan so provided, there was no ERISA 203(a) violation.

Nor was there any violation of ERISA 206(a) (which relates to when the payment of benefits must commence) since the plan actually did begin paying benefits at age 65. Finally, the court rejected the charge that there had been a violation of ERISA 204(b)(1)(B) which provides that, under a defined benefit plan, the accrued benefit payable at normal retirement age must be equal to the normal retirement benefit. The court construed this requirement to mean that, for a particular plan year, the accrued benefit payable at age 65 must be equal to the benefit under the plan commencing at age 65. Since this is what the plan provided, this requirement was also satisfied.

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