First Circuit hears oral arguments in Tasker v. DHL (09-2661); whether Treasury regulation permits elimination of benefit transfers despite ERISA’s anti-cutback rule

First Circuit hears oral arguments in Tasker v. DHL (09-2661); whether Treasury regulation permits elimination of benefit transfers despite ERISA’s anti-cutback rule

On Tuesday, September 14, the First Circuit heard oral arguments in the case of Jeffrey R. Tasker v. DHL Retirement Savings Plan, et. al.  (Docket Number 09-2661). Click here to listen to the oral arguments.

Plaintiff Tasker had a defined benefit plan and a defined contribution plan through his employer, for which he worked for over thirty-two years. The company was acquired by a competitor in 2004, and the plans were merged into the competitor's defined benefit and defined contribution plans. All relevant features of Plaintiff's original plans were preserved, with one exception -- Tasker's ability to transfer funds from one plan to the other.  Plaintiff claimed that the elimination of that right to transfer funds violated ERISA's anti-cutback rule, 29 USCS § 1054(g). Specifically, Plaintiff claimed that in eliminating his right to transfer his balance and thereby take advantage of more favorable actuarial assumptions, DHL had violated the anti-cutback rule by "eliminating an optional form of benefit."

Defendants moved to dismiss, arguing that a Treasury Department regulation specifically permitted the elimination of such a right, even when it resulted in a reduction of accrued benefits. 26 C.F.R. § 1.411(d)-4, Q&A-2(b)(2)(viii) states that:

Provisions for transfer of benefits between and among defined contribution plans and defined benefit plans. A plan may be amended to eliminate provisions permitting the transfer of benefits between and among defined contribution plans and defined benefit plans.

Defendants claimed that the regulation meant exactly what it said: elimination of the right to transfer funds between plan accounts does not violate the anti-cutback rule. Plaintiff responded that the regulation allowed the elimination of the right to transfer funds only so long as such an amendment did not reduce the monthly annuity benefit to which he was entitled.

In Tasker v. DHL Ret. Sav. Plan, 2009 U.S. Dist. LEXIS 120937 (D. Mass. Nov. 20, 2009) [enhanced version available to lexis.com subscribers], the district court held that the regulation, by allowing the elimination of the ability to transfer funds, contemplated that such transfer could reduce or eliminate protected benefits. For this reason, even if the transfer right constituted an optional form of benefit, it could be eliminated without running afoul of the anti-cutback rule.

Lexis.com subscribers can view defendant's motion to dismiss, plaintiff's opposition, and defendant's reply filed in Tasker v. DHL Ret. Sav. Plan, 2009 U.S. Dist. LEXIS 120937 (D. Mass. Nov. 20, 2009)