Raetsch v. Lucent Techs., Inc.

Raetsch v. Lucent Techs., Inc.

Opinion

SHERIDAN, U.S.D.J.

This matter comes before the Court on cross-motions for summary judgment concerning the standard of review and meaning of a provision of ERISA which allows transfers of excess pension funds to an account to pay retiree health benefits costs without taxation. 26 U.S.C. § 420. The background for this matter is set forth in the Court's Opinion dated October 26, 2006 (Raetsch 1). To the extent practicable, the Court adopts the facts of Raetsch 1 herein, and repeats them only as needed for contextual purposes. In Raetsch 1, the Court opined that plaintiff had no private right of action to challenge  [*2] the propriety of a so called "§ 420 transfer" of excess pension funds to an account which funds payment of retiree medical benefits pursuant to ERISA, 29 U.S.C. §1001, et seq., but may seek damages for breach of the Plan. In addition, the Court held that the retirees must exhaust any plan remedies prior to instituting suit.

Prior to 1990, assets of a defined benefit pension plan could not revert to an employer. In 1990, Congress modified the statute through enactment of §420 to permit employers to transfer excess pension funds, without taxation, to an account which provides medical benefits to retirees. 26 USC § 401(h). In granting this limited exception, Congress attached some conditions. One such condition is the maintenance of effort requirement ("MOE"). MOE is measured in one of two ways -- cost or benefit maintenance. In 1990, the MOE required an employer who diverts excess pension funds to pay retiree medical benefits to maintain the same level of employer-provided health expenditures during the year of the transfer, plus the four succeeding years. This is known as the maintenance of cost ("MOC") standard. See H.R. 103-8261I (1994). The statute read in pertinent part:

(3) Minimum  [*3] cost requirements. (A) In general. The requirements of this paragraph are met if each group health plan or arrangement under which applicable health benefits are provided provides that the applicable employer cost for each taxable year during the cost maintenance period shall not be less than the higher of the applicable employer costs for each of the 2 taxable years immediately preceding the taxable year of the qualified transfer.

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