A pension plan is an employee benefit plan established or maintained by an employer (or employee organization) that provides retirement income for employees. Primarily, pension plans are funded by the employer. More recently, traditional pension plans are becoming less available. Companies have replaced them with alternative plans (like 401(k) retirement savings plans) because they are less costly for employers. Some companies, like UPS, still have pension plans in place for their employees. However, when UPS reclassified some of their positions from nonunion to union it negatively impacted those employees’ pension plans. Consider the following:
Ralph Gragg worked for UPS as a driver hauling freight for approximately thirty years. When UPS decided to reclassify Mr. Gragg’s position, he transitioned from being a nonunion worker to a union worker. With his new classification status, his pension plan would then be funded by two distinctly different pension plans that existed within UPS. Each pension plan had a “Social Security Leveling Option” that would “increase the beneficiary’s monthly benefit before age 65 and thereafter reduce it by the amount of his Social Security benefit.” Gragg v. UPS Pension Plan, 55 F.4th 1059, 1061 (6th Cir. 2022). Mr. Gragg selected the “Social Security Leveling Option” for both of his pension plans. Each plan sent Mr. Gragg a letter that indicated what his payments would be before and after receiving his Social Security benefit. Each plan indicated that his monthly payment would be reduced by $1754 (the anticipated amount for his Social Security benefit).
However, when Mr. Gragg retired and began collecting his Social Security benefit each plan was reduced by his Social Security benefit for a combined total of $3508. When Mr. Gragg inquired about the discrepancy with each plan individually, they both responded with complicated messages that, in the end, indicated that the “reduced benefit amount was the correct amount.” Id. So, in November of 2020 Mr. Gragg filed a lawsuit against the UPS Pension Plan. He asserted a claim under the Employee Retirement Income Security Act, 29 U.S.C. § 1132 (a)(1)(B), that alleged that both pension plans paid him less than he was entitled to each month. Namely, $1754 less due to both plans being reduced by that exact amount.
The District Court for the Southern District of Ohio originally dismissed his claim. The lower court based their rationale on the timing of Mr. Gragg’s claim. The district court posited that Mr. Gragg was told about the reductions ten years prior to his suit. Thus, the time has passed for Mr. Gragg to seek a remedy from the courts. However, the Sixth Circuit Court of Appeals disagreed. The limitations period for an ERISA claim “to recover benefits due” under a plan does not expire before the alleged underpayment on which the claim is based. Id. Even though each plan did in fact notify Mr. Gragg about the anticipated payments he should receive before and after collecting his Social Security benefits. He was not “injured” in the eyes of the law until he received the first underpayment. Before the alleged underpayment occurred, Mr. Gragg would not have had a claim that would be viewed as justiciable under Article III of the Constitution. Id. at 1062. The 6th Circuit explained there is a difference between a ”dispute” and an “injury” in terms of a claim accruing. Id. Therefore, Mr. Gragg’s claim was timely, and he may now argue against having his pension plans reduced by $3508.
If you have questions about your pension plan or have experienced a situation similar to Mr. Gragg, call us today at (859) 225-3731 or visit us here to request a free consultation with one of Mehr Fairbanks’ attorneys.
*The information contained within this post should not be considered legal advice or legal representation.