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IN THE SUPREME COURT OF THE UNITED STATES
- - - - - - - - - - - - - - - -X
CENTRAL LABORERS' PENSION FUND, Petitioner :
:
:
: :
No. 02-891

THOMAS E. HEINZ, ET AL.

- - - - - - - - - - - - - - - -X
Washington, D.C.
Monday, April 19, 2004
The above-entitled matter came on for oral

argument before the Supreme Court of 10:08 a.m. APPEARANCES:

the United States at

THOMAS C. GOLDSTEIN, ESQ., Washington, D.C.; on behalf of
the Petitioner.
JOHN P. ELWOOD, ESQ., Assistant to the Solicitor General,
Department of Justice, Washington, D.C.; on behalf of
the United States, as amicus curiae, supporting the
Petitioner.
DAVID M. GOSSETT, ESQ., Washington, D.C.; on behalf of the
Respondents.

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ORAL ARGUMENT OF

C O N T E N T S
PAGE

THOMAS C. GOLDSTEIN, ESQ.
On behalf of the Petitioner JOHN P. ELWOOD, ESQ.
On behalf of the United States,
as amicus curiae, supporting the Petitioner DAVID M. GOSSETT, ESQ.
On behalf of the Respondents REBUTTAL ARGUMENT OF
THOMAS C. GOLDSTEIN, ESQ.
On behalf of the Petitioner 55
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P R O C E E D I N G S (10:08 a.m.) CHIEF JUSTICE REHNQUIST: We'll hear argument Fund v.

02-891, the Central Laborers' Pension

Thomas E. Heinz. Mr. Goldstein. ORAL ARGUMENT OF THOMAS C. GOLDSTEIN ON BEHALF OF THE PETITIONER MR. GOLDSTEIN: Thank you, Mr. Chief Justice,

and may it please the Court: This is an multiemployer are ERISA pension case. pension plan. The petitioner The Each respondent accrued a each

plaintiffs pension

two plan

participants.

and took

early retirement

at age

39, and

claimed a full pension in the form of a life annuity. At issue authorizes the during the time construction in the case is a plan amendment. It

suspension of that they

retirees' benefit

payments as

choose to go Before

back to work the

supervisors.

amendment, construction

suspension was triggered laborer. The change

only by

work as a

gives rise

to an

important, albeit between such an to

highly technical, question about the relationship two provisions amended of ERISA. The question is: provision may

employment

suspension

apply

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previously accrued benefits?

The plan says

the answer is

yes; the participants say the answer is no. The expert agencies charged also spoken by to Congress with the question.

administering ERISA

have

They say that ERISA does they reached that

authorize such an amendment, and two ERISA

conclusion by construing the

provisions in para materia. Countless pension turn, have their plan relied on plans around the Nation, in

the agencies' for

guidance in and that

shaping is the

amendments

decades,

principal reason that the case is so important. QUESTION: given, does the In the -the in the IRS guidance that passed is on

--

has

actually

particular amendments? MR. GOLDSTEIN: It has, not in formal guidance.

The process is that you can -­ QUESTION: MR. layers of How does it do it? There -is there are a couple of the IRS publishes there has Required in the

GOLDSTEIN:

it.

The first of time. called It's For the

that

guidance ahead been something

about 2 decades, LRM, the List of

Modifications.

quoted in

--

it's quoted

Government's brief in particular. if you're going what you can do.

And that said to plans, a plan, here's

to adopt a plan or revise

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QUESTION: MR. step

Is this in the manual? Then there's a second. The

GOLDSTEIN: is that more

recently they

have published Manual, and

what's known as

to IRM, the Internal Revenue

that's guidance for IRS employees. And then there's a third level, and that is

plans can submit the IRS

their plan provisions and known as

amendments to on

for what are

determination letters

which the IRS signs off. QUESTION:

And so all three of those exist.

Do we -- do we have any indication of

how many determination letters have been issued? MR. GOLDSTEIN: the IRS was able to come they did say that their We don't. I don't think that

up with a particular number, but consistent practice for decades

has been to approve this particular -­ QUESTION: Is there anything to document that,

that it's been for decades?

I mean, the manual provisions

and the rest of -- of what you're describing is not -- not published. So where do we get the 2 decades from? MR. GOLDSTEIN: The We get that from, I guess, two

first is that there is the

document -- the

the series of documents known

as the LRM, the List of the plans for a

Required Modifications, that couple of decades, and it -it specifically

has guided

does not restrain plans in revisions to

its

addresses

plans,

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amendments, and

it doesn't say that you can only apply it payments that accrue in

a suspension provision to benefit the future. the

Beyond that, when it comes to, you know, what day in and day out, we just have their

IRS does

representation. QUESTION: Well, do you -- does -- does the list can -- can relate -­ relate to prior

specifically say that the amendments can, in fact, relate to or in

law

accrued -­ MR. GOLDSTEIN: QUESTION: No, it doesn't. There --

So, it leaves that question open. It -a it -literally in it its

MR. GOLDSTEIN: text it does, but as

practical

matter

doesn't

because, as

I was saying

to Justice Ginsburg, to plans and to

the LRM's

have addressed revisions

amendments, and

they haven't restrained in any way the ability to apply it to previous -­ QUESTION: inference, isn't it? MR. GOLDSTEIN: these documents work, It's true, but the -the way if But that's a pretty negative

as I

understand them,

is that

there's a restriction, something you can't do, they say it expressly. When you -- remember, the default rule under

ERISA, of course, is that you amendment, and then the --

are allowed to adopt a plan they -they articulate

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particular restrictions -­ QUESTION: when it says So I -- I think it's pretty explicit accrued benefit of a participant the

that the

under a plan may not be plan.

decreased by an amendment of

And I don't -- the trouble I'm having is it just seems to me utterly unrealistic to say that his accrued

benefit has not been decreased when he used work as a -- as a supervisor and

to be able to

continued to draw from How can

the plan. you

Now he cannot work

as a supervisor.

-- I mean, certainly if

you placed a dollar value on

his right to receive money from the plan, you would -- you would put who has a higher price on the right to draw to -- on the -a the individual still who

work as as

supervisor and to the

continue

money

opposed

person

doesn't have that right.

I mean, the -- the language just

seems to me utterly plain. MR. GOLDSTEIN: IRS has The -Justice Scalia, the

reason that the for

reached the opposite and I

conclusion the text

decades is threefold,

will focus on

because that's where you focus. it's going

But just to lay them out,

to be the text, the purposes of the suspension is section 203(a)(3)(B), and expectations. what will You focus

provision, which best protect

participants'

rightly on the text.

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The --

the key is what is a benefit versus what payments. As I said in the

suspension of benefit

introduction, the plan participants here

earned a benefit So

and that is a life annuity in a service only pension. they were able to retire and they got a life

annuity

that's available to them. QUESTION: It's the dollar amount that they're

entitled to which is the benefit. MR. GOLDSTEIN: QUESTION: know, they're still It is --

But that means you can say, well, you entitled to that dollar amount, but

they can only get it every other year. MR. GOLDSTEIN: QUESTION: That would be prohibited.

Would that limitation be okay? No, it wouldn't because it would

MR. GOLDSTEIN:

violate the vesting rules. Let me continue. and this is set There are two parts in ERISA, 1981. You

out in your Alessi opinion in

have to accrue a benefit and then you vest in the benefit. The accrual is when you've earned the benefit. They

earned the benefit.

They earned their pension.

Then they

had to vest in it; that is, though they've earned it, they have what Alessi it. And what calls a non-forfeitable right to provision does it benefit is a claim

a suspension exists. Their

says your

benefit still

life annuity.

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It exists. There's a

There is stream

an available that

stream of is

payments.

of payments

available every

single month.

That's the accrual rule. You have to have a right

Then you have to vest.

to claim it, and that's what a suspension provision does. QUESTION: It's not you that vests. It's the

pension that vests, isn't it? MR. vests, Mr. GOLDSTEIN: It is your If I claim to give it that you the

Chief

Justice.

could

language -­ QUESTION: choice of words. MR. GOLDSTEIN: I apologize. What I had Well, I was just questioning your

intended to say a benefit is:

is that your claim to it vests.

There is

out there, this life annuity.

And the question

do you have the right to

claim it in any particular

month? 204.

That's the structure of section 203 versus section

And what a suspension provision me just pause to say the court of

does -- and let

appeals acknowledged, when we suspend their

the plaintiffs benefit

acknowledged, that are not

payments, we

decreasing their

benefit.

What we're doing is that to a

they have sacrificed their claim given month. language, That's why of

particular benefit in any used the different

Congress

suspension

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benefit benefit.

payments

versus

the

actual

decrease

in

the

QUESTION:

Well, they concede

that with respect plan when

to the -- the decreases that were a term of the it accrued to them. MR. GOLDSTEIN: QUESTION: they? MR. nonetheless -­ QUESTION: Well, that's no concession. Well, it GOLDSTEIN: No, but the Well, they conceded -­

They don't concede anything more, do

concession

is,

MR. GOLDSTEIN: Souter. Here's why.

is we think,

Justice was

What

I think

Justice Scalia is that,

focusing on -when you break.

and I may

be mistaken --

look,

withhold that benefit payment, sort of give me a the money. You're decreasing is

They're not getting And in

their benefit.

the terminology of ERISA, that

actually not correct. QUESTION: -- my point, No. That wasn't my point at all. long time to make, My

which I took a

was that

the value of your right to a supervisor, is greater

money, even though you work as than your right to money which supervisor.

terminates as soon as you

begin to work as a

It's a less valuable benefit. MR. GOLDSTEIN: Fair enough.

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QUESTION:

And

that comes

right

within

the

The accrued benefit may not be decreased by an

MR. GOLDSTEIN: The real-world value, desirable. suspension

And

here is why

it does

not.

the sense that, look,

this is more has less For

I would rather have provisions than one

a benefit that that has

more.

example, hey, it's more likely I'm going to get the money. That is not a benefit within the meaning of ERISA. The

benefit ERISA

is the life annuity. of course, as

It's a -- this is -- the -­ often said, a highly

is,

you've

reticulated statute.

There are 3,978 pages of regulations font. The terms of art

implementing it in about 6-point are highly, highly technical, and annuity. It's not

the benefit is the life that I like it more.

just the sense

And I can give you an example. Section Justice, that 203(c) of ERISA -and, Mr. Chief

is reproduced in the yellow brief.

I don't

think it will be necessary for the Court it is at the bottom of 4a And this and 5a. This

to track it, but is a -of the plans

yellow brief.

is a provision under which

are authorized to change their vesting schedules. take an example. There are if over the two ways you can vest under

And so,

ERISA.

course of

7 years in

individual steps.

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Another is so-called got your benefit.

cliff vesting,

and that is,

you've

You've earned it, but until you've been claim to

in service for 5 years, you don't have any legal it notwithstanding that it's out there.

Plans under vesting rules credit, cliff

section 203(c) are

allowed to change their

so that if someone had the plan can,

earned 2 years of vesting change to a

nonetheless,

5-year

vesting provision. the bottom line is

Now, that's

all very complicated, but valuable in the

that it makes it less

real-world sense for the plan participants. QUESTION: future effect talking about Yes, but that -- that speaks to the

of such an amendment, and it -- when you're getting vesting, you can't have a

retroactive -- you would not already be vested. mean that if somebody vested after 2 years,

Does that they could

then adopt an amendment saying henceforth it's got to be 5 years and that applies to somebody who is already vested? MR. GOLDSTEIN: QUESTION: MR. Unquestionably, yes.

Does it really. Absolutely, yes, without any -­

GOLDSTEIN:

any doubt whatsoever. QUESTION: And what is the authority for that? That is section 203(c). you have less than Section of

MR. GOLDSTEIN: 203(c) explains service, you that if

3 years

are not allowed to

object to the

change in

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vesting conditions. that even though

There are rules under

ERISA that say effect, be

you've vested,

you can, in

divested. the -­

That's why it is

a very strange

structure of

QUESTION:

Well, they -- they wouldn't need that upon

provision if the principle of law that you're urging us existed. me, that I mean, the -- the whole reason, it to make that clear in a

seems to statutory

they had is that

provision decreasing

without it, of the

you plan

would and

obviously be the

the

value

violating

provision of whatever it is, 1054(g)(1). MR. GOLDSTEIN: There are two No. That's why this is in 1053. That provision that think

sets of restrictions.

I've just been describing would there's anybody who

not -- and I don't it would --

really contends

violate

1054, what we've been calling 204. You have -­ QUESTION:

It would violate 1053.

Which -- which part of 1053? It would violate the beginning to 1a of the -the

MR. GOLDSTEIN:

of 1053, Mr. Chief Justice. yellow brief, and excuse me places -­ QUESTION: Okay. --

Let me take you

the paragraphs involved and (B).

would be 1 Those are

1053(a)(2)(A)

Read them please. Yes, Mr. Chief Justice. The

MR. GOLDSTEIN:

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beginning of (2) says, except as provided which is not of this relevant, a plan satisfies it satisfies the

in paragraph 4, the requirements requirements of (A) or (B)

paragraph if

subparagraphs

(A) or (B).

And subparagraphs

which I'll read, give you that 5-year cliff vesting option or instead over the course of 7 years. A plan satisfies employee who has a non­

the requirements of has completed at

this subparagraph if an least 5 years service

forfeitable right to 100 percent of the employee's accrued benefit derived from employer contributions. is the other option, the 7 years. Now, I have the difference spoken and I've tried benefit and to emphasize of And then (B)

between a

the suspension

benefit payments,

but it is

also important to

deal with

the two other reasons that the Government -­ QUESTION: Let me just be sure I understand that This says you, in effect, That

argument again, Mr. Goldstein. can retroactively require

a longer vesting period.

would mean require a longer period before accrued benefit. MR. GOLDSTEIN: QUESTION: No.

you acquired an

That was 20 -- isn't that right? No, Justice Stevens. You would over

MR. GOLDSTEIN:

acquire the accrued benefit under 1054 as it accrued time.

What you would not do is vest in that benefit, your

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right to the benefit is not present. QUESTION: So accrued -the term, accrued

benefits, applies to benefits that have not yet vested. MR. GOLDSTEIN: QUESTION: That's exactly right.

I see. Yes. Let me just step back. that -- I'm not sure I

MR. GOLDSTEIN: QUESTION:

I'm not sure

understand that, but anyway, go ahead. MR. GOLDSTEIN: it then. I apologize. There are two Let me just step things that you your benefit

back and explain have to

do in order

to be able

to collect

under ERISA. 1054.

It has to accrue.

You have to earn it under

QUESTION:

Right. And you also have to vest in it

MR. GOLDSTEIN: under 1053. Justice hypothetical. hey, we're

Scalia,

you

had

intimated plan just

a say,

Well, look,

couldn't the

suspending your benefit 1054 because you

payments and wouldn't of the

that violate benefit. do it, would

lessened the value

The answer to that question is no. because it in would violate benefit and

You couldn't Someone would be

but -have

1053. you

vested

the

divesting them of it. Let me also take you -- because we do contend

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that we are entitled to -­ QUESTION: QUESTION: Vesting means -­ You're going pretty fast for me. Sorry. I just make sure I understand

MR. GOLDSTEIN: QUESTION: one thing? MR. GOLDSTEIN: QUESTION: period between the not

Could

Yes. that a delay in and the

You're saying time a

benefit accrues a

when it a

vests is

covered by

204(g), but

reduction of

benefit that

has already both accrued and vested is -- is

not covered by it or is -- you're saying they're the same. That's what you're saying -­ MR. GOLDSTEIN: QUESTION: QUESTION: QUESTION: Let me -­

-- for purposes of -Answer the question. Yes. No is the -- is the short answer You cannot decrease the

MR. GOLDSTEIN: and here's the longer

answer.

benefit even if it has not yet vested. clear.

Let's be perfectly

If I -- they have a life annuity and I were to say

instead of paying you $1,650 a month, I'm going to pay you $1,400 a month, notwithstanding that they haven't vested

in it, it still violates the accrual rule. But when you come to the question of the

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suspension of benefit payments, a different

which throughout ERISA is

concept than a decrease in benefits, when you

come to a suspension -- that is, your -- your claim to the benefit payment each month -- I'm taking that away from

you -- that's covered by 1053. plan amendment is -and

And our point is that this agrees -- is

the Government

authorized by 1053. I had said that I was also going to go beyond the

the -- move from the statute and the

text to the purposes underlying of participants'

protection

legitimate

expectations. But before doing that, I do want to point to the regulation, Justice Scalia, that addresses our

understanding of

what it is

to decrease, and

we contend notice and --

that the regulation,

which is published after deference.

comment, is entitled to Chevron is reproduced on

And it is

page 8a of the yellow

brief, and I will And it explains

just -- it's quoted in our brief as well.

that a decrease in a benefit is something that changes the computation of the benefit. benefit. This It's does not change the

computation of the device.

not just a

rhetorical

It is a theme that runs throughout the provisions

of ERISA. Briefly, statute and plan's with respect to the purpose of the is

expectations, the

critical point

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that the

suspension rule

cannot work

if it

-- this

is

section 203(a)(3)(B), the 1053 provision -- cannot work if it does not apply to already accrued benefits. The point

of the statute is to get people workforce. suspension influence And if you to

to move in and out of the allowed to apply your

are not

provision them in

existing to

retirees, you current

cannot

response

financial

conditions, the the

shape of

the construction

labor market, You have to be

shape of the current trucking market.

able to influence their decision whether or not to work or not to work. QUESTION: in your brief and Well, that -- that as set forth in -­ -- and you made it sound like a very made it,

significant, very important to me, sound like

power, but also you

it -- it gives almost no

effect at all

to the anti-cutback provisions. MR. GOLDSTEIN: QUESTION: I It does -­ this is a sweeping

mean, this --

authority you're arguing

for on behalf of

the plaintiff.

Oh, the economy is this way and that way. MR. GOLDSTEIN: is that Congress in Well, I think the critical point 1053, in 203, carefully

section

limited the power of the plans; that is, it's -- the right here is to receive your pension. in the control of the That right is completely They can choose not

participants.

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to

go back

to work

or to

go back to

work.

They will

receive their benefits. In addition, the the receipt of plan is only allowed payment during to limit

the benefit

periods of

reemployment in the same industry, same geographic hours of region only if

trade, or craft in the more than 40

they work

-- a month, and a variety of other restrictions. was cabining the authority

And those showed that Congress of plans so that they

didn't unduly restrict the ability

of plan participants to go back to work. But it return to is, I think, absolutely critical, to

the point, that function as

1053(a)(3)(B), the Congress intended

suspension is

rule, cannot what

and that

the IRS concluded

if it

does not apply

to already discourage

accrued benefits.

We could

not encourage or

the plan participants to go back to work or not to go back to work and thus calibrate the into the plan if pension payments that are -if our suspension

coming

it did

provision did not apply to their benefits. If I could reserve the remainder of the time. QUESTION: Very well, Mr. Goldstein.

Mr. Elwood, we'll hear from you. ORAL ARGUMENT OF JOHN P. ELWOOD ON BEHALF OF THE UNITED STATES AS AMICUS CURIAE, SUPPORTING THE PETITIONER

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MR.

ELWOOD:

Mr. Chief

Justice,

and

may it

please the Court: For at least 20 years, the Internal Revenue

Service has consistently approved the amendment of pension plans to add or expand disqualifying employment provisions within the scope permitted of ERISA's suspension to be rule, and it to has

those amendments

applied

existing

benefit accruals.

Over the years, literally

hundreds of

plans have relied on the

flexibility that policy afforded

in determining whether a plan -­ QUESTION: The fact Could you address one -- one question -- or the does not

that the -- the plan doesn't lose their tax deduction

contributors don't

necessarily mean that those -with ERISA. MR. ELWOOD: think that

that they otherwise comply

That is -because the

I think that -- the

-- well,

qualification

provisions are coextensive with the ERISA provisions, that I think that they rise or fall together. QUESTION: Have we ever said that? I think that the -- the -- thing is -- the provisions is substantially exactly the

MR. ELWOOD: the language identical. same. of the

The wording

is --

is basically

And so I don't know that there has been a -- a case says they could be construed differently,

on point that

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but I think there would be an uphill road. QUESTION: is interpreting The Treasury Department, interpreting the of course, the

-- is

statute for

purpose of deciding whether -- the income tax consequences of contributions basically. MR. ELWOOD: vested under to That is correct, but they have been plan number same four with the the

reorganization construe

authority

the exact

provisions,

corresponding provisions of talking about here. And

title I in --

of ERISA that they issue

we're those We

when

regulations, they typically say we're construing both. use the code verbiage, but we're construing both. QUESTION: The thing that runs through

my mind

is I'm not sure they have the same expertise, for example, as if the Department of Labor had to give them the same -­ same answer to this question. MR. interpreting title I of ELWOOD: these They have the 203 been charged with of the

provisions, the 204,

same provisions here as in

ERISA,

corresponding provisions of the code. position that they're just as

And it would be our because they're

expert

exactly the same the language -­ QUESTION: But the concern at issue in this case the -- out Department

is the ability of people to move in and out of of the trade, which is specifically a Labor

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interest.

The

Labor Department would be

more interested than the

in ensuring

that -- that

interest is preserved

Treasury Department would. MR. ELWOOD: of the Treasury and because it's In any event, the -- the Department the responsibility argue that

has been charged with

identical language, we would just as much deference

they're entitled to

under that as

under title I of ERISA -QUESTION: And the -- the Labor Department has

not adopted a position on this question -­ MR. this position. executive ELWOOD: The Labor Department agrees with

The Labor Department, again under internal orders, is bound by the IRS

branch

determinations in this regard. Now, if I could get back to -­ QUESTION: Because the Now, may I ask you about section 203? says it governs only normal

respondent

retirement benefits and not early retirement benefits that are at issue here. MR. benefits and ELWOOD: their It governs normal retirement So to the

actuarial equivalents. benefits are

extent that

early retirement

the actuarial

equivalent of normal retirement account for they'll be the fact

benefits, just reduced to earlier and that

they're received

received over a

longer period, it

applies of

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its own force. But again, the -- the Department of the Treasury has taken the purposes of 203 into account when it

construes all of the remaining provisions. Justice Souter -­ QUESTION: argument that Mr. May I ask you to -- to comment on Goldstein at least just made? certainly so His far -as an his the

argument was

that,

construction industry retroactive

is concerned,

unless this -- the

kind of -- the least

effect could be

given, there

various plans could they --

not protect

themselves, or at

they could not take account of -- of labor market It would be useless to them. ERISA is made made for the believe

conditions.

My question is assume that is so. for all sorts of plans. It Is isn't just

construction industry. that Congress was

there any with

reason to the

concerned

construction --

industry's labor market the statue in the

problems in --

in fixing the

way Mr. Goldstein

and you

say it has

been arranged? MR. ELWOOD: that Congress was I think there is reason to believe of

concerned with

the cyclical nature

industries for which market -- which are covered typically by multiemployer plans. QUESTION: How do we -- how do we know that? In

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other words,

how do we know that this argument is not the

tail wagging the dog? MR. ELWOOD: Congress -spoke to several I think two things. Members of Congress, First of all, everyone who

the subject during the debates leading up to the ERISA, indicated that the idea to here was plans to the

passage of promote

industrial

stability

and

give

flexibility, when

market conditions

warranted, to

adopt

suspension provisions. QUESTION: to adopt Well, but you don't -we don't have

your provision to -- to accord that flexibility. needed is that the plan state, when it is

All that's

established,

that these provisions dealing with where you Once it says that, then there's the

can work are amendable.

no reduction in the value of employee receives. from the outset All I mean, that we're

-- of the benefits that it's -- it's just very things are is a

clear to

these

subject plan

defeasance.

talking about at the

that then

doesn't contain

that provision

outset, and

later decides it wants to change its mind. MR. ELWOOD: Actually, Justice Scalia, it I If

think explicitly indicates that it you look at pages J.A.

contemplates that.

46 and 64, there are

places there

saying that basically if there are material changes in the suspension provisions, that the plan will notify

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participants of that the

them.

And so

between that and

the fact

plan itself specifically states on page 50, J.A.

50, that the plan is amendable -­ QUESTION: QUESTION: Yes, but that -­ Okay. You're referring to J.A. 50.

Give us a minute, if you're -­ MR. ELWOOD: QUESTION: comprehending what Oh, sure. -if you're interested in our to

you're saying.

Give

us a minute

turn to that page, will you? Where on page 50 is it? MR. ELWOOD: The -page 50 is just the

explanation that the plan is amendable. that --

Page 46 indicates

that there can be change in the suspension rules.

It says if benefits have -­ QUESTION: Whereabouts are you reading? It's under (d)(1), page 46.

MR. ELWOOD: QUESTION:

Okay. (d)(1). That's the -basically

MR. ELWOOD:

the last sentence in the bottom three lines. I'll benefits begin earlier than that. and It says, if new the

have been shall, if

suspended upon

payment resumed, given to

notification participant

resumption, be any

there

has been

material

change in

suspension rules, which

we take to be

an indication that

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the plan contemplated that such amendments could be made. Justice Souter, if I could -­ QUESTION: amendments. It doesn't say anything about

It just says if you had a suspension, you got I don't -- I don't see that. that -that's a

-- you got to give notice. QUESTION:

Presumably

suspension provided for in the plan but the plan -­ MR. ELWOOD: No. It says if there has been any

material change in the suspension rules, which we think to apply to changes in when a suspension can be enacted, not

that a suspension will be given in a particular case. In addition, I just -- Mr. Goldstein has already explained a bit why we think the text of ERISA supports

this, but I think that its purposes -- the purposes of the anti-cutback rule are consistent to protect with this because what rule

Congress was trying

in the anti-cutback

was reduction of retirement income. is broadly satisfied in this

And I think that that what this

case because

guarantee, as we've explained, is an annuity and a certain face amount that can never be reduced in face amount. the only time it is not paid to them is under they are, And very by

narrowly

cabined

circumstances essentially

when

definition, income from the same

receiving

receiving replacement

the same industry, the same trade or craft in that has funded their pension

geographic area

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plan.

And

I

think the

under -- the

those

sort of

of

narrow

circumstances,

that

purposes

the anti­

cutback rule are satisfied. In addition, I would like to get back to a point that Justice Souter raised. QUESTION: were a -- a industry? What -- what would happen if working in any there other

suspension if you were

Suppose the plan adopted that? MR. ELWOOD: I think that a plan could adopt a

suspension rule with

respect to future plan

accruals for

any reemployment, but it is the Government's position that because what Congress is trying to control here was -- was basically to give plans the flexibility so that not have to compete their -­

their participants would

or, rather,

have to subsidize their competitors -QUESTION: But what is -- what is the provision to

of the statute which is -make that distinction -­ MR. ELWOOD: QUESTION: for the

which -- on which you rest

That -­ whether it's very important Suppose some plan said

-- as to

construction industry?

it's for any industry. MR. ELWOOD: 1053(a)(3)(B), which It's for section is set forth at the 203(a)(3)(B), or yellow brief on

page -- I think it's 1a to 2a.

And there it is just -- it

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just identifies the circumstances under which Congress has authorized the suspension rule, which we read to be able

to be applied to existing benefit accruals. it to application in the case of

And it limits plan,

a multiemployer

which we've swings, to

said tend to cases where

be industries of it's employment craft, and

more cyclical in the same same

industry, in

the same

trade or

in the

geographic area covered by the plan. QUESTION: how come I mean -­ MR. ELWOOD: No. It's cited from the outset. But If this is so central to your case, -- in the reply brief?

it only shows up in your

It's just -- it's only reproduced in the reply brief. the -- but the very same provision is very central

to the the

argument set forth in both the petitioner's brief and Government's. QUESTION: You -- you've been dying Let me give you the

to respond

to something I raised. it. (Laughter.) MR. ELWOOD: But I

chance to do

Okay.

I appreciate that. to clarify one thing about

just wanted

what the notice of required modifications says because the notice of required modifications basically plan language, and the model sets out model this case

plan language in

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that

existed

began

--

first

appeared

in

1984

said

explicitly plan

it may be

added to

existing plans. contain any

And the

language

itself doesn't

language that by definition

would carve our

existing accruals, so that

it would apply to existing accruals. the Treasury had intended it

And I think that if only to future And

to apply

benefit accruals, it

would have contained language.

in fact, there are other out that kind

provisions that specifically set language so it can only be

of limiting

applied to future accruals. I -- I think it's a

So I'd say that.

It's not -­

-- a reasonable

negative inference

that can be drawn from that. too much. QUESTION: QUESTION:

It's not going out on a limb

Mr. Elwood, you -Thank you, Mr. Elwood. Thank you.

MR. ELWOOD: QUESTION:

Mr. Gossett, it's your turn.

ORAL ARGUMENT OF DAVID M. GOSSETT ON BEHALF OF THE RESPONDENTS MR. GOSSETT: Mr. Chief Justice, and may it

please the Court: The Central Laborers' Heinz and Rick retirement Pension Fund promised Tom accepted an early work in It

Schmitt that after they they would be

package,

entitled to

specific jobs without sacrificing their pension plans.

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is a foundational principle of ERISA that participants are entitled to rely on plan promises such as this one. By

reneging on this promise and changing fact, the plan violated of section

the rules after the ERISA as and

204(g) of

decreased Scalia -­

the value

participants' plan,

Justice

QUESTION: that.

Let's assume I -- I agree with you on reliance problem

The -- there's -- there's another

here and -- and that, I take it, is the -- is the reliance upon your a contrary view taken by the IRS. -- your colleagues on the And the -- the -­

other side say that if we out

see it your way, there's there who are

an enormous number of plans going to find

suddenly

themselves Is -­

unqualified or disqualified, whatever the is there a way to avoid that if --

term is.

if you are correct on

the law, but they are correct about the -- the practice? MR. GOSSETT: QUESTION: MR. section Yes, Justice Souter.

What part are we -- how does that -­ Under has the of Internal Revenue Code

GOSSETT:

7805(b), the IRS before

right to say of

that any

amendment

the date

this --

this Court's

decision in this case wouldn't of -- of the plan. QUESTION:

lead to a disqualification

Oh, I don't

think they could because that if

you have an answer there to question 6 which says

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you put in your original

plan a provision that would

say

the employer can change the definition of who's working in his same company for it, that can't do over time, as labor circumstances call

that gives the employer discretion, giving them that

and you

it because

discretion would

itself count as a reduction. Now, that's well established. of this -- so do what you tell me how they could they should be able The whole point

write a plan to to do. And of

you think

course, they of 203.

should.

That's the whole point of this part

MR. GOSSETT: part --

No, Justice Breyer.

The --

the

the -- the point of 203

is not to allow plans to

change the rules over time -­ QUESTION: understand it, the you The whole point of 203, as I

is that it was

something put in

there by

Teamsters or possibly the crafts get your -- your

unions so that when

early retirement benefit and you're Why not my plant?

out there, don't come back to my plant.

Because when you do, you will work for a low wage and that will depress the wages of other workers. Now, I'm not going to say absolutely never. not going to say always. and that's It's going to I'm

depend on labor not what

conditions, that part

why if that

purpose is

of 203 is there for, you

can explain why it is

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there.

But if

I'm

right about

why

it's there,

your

interpretation

not only

disrupts 20

years of --

of how

this has been administered, but also makes it unworkable. MR. GOSSETT: Breyer. QUESTION: Why is it there? Section -section 203(a)(3)(B), That's not why it's there, Justice

MR. GOSSETT:

for starters, only applies Under section 203(a) of

to normal retirement benefits.

ERISA, normal retirement benefits But for section 203(a)(3)(B),

are -- cannot be forfeited. there would benefit

be no situation in which a plan could suspend So 203(a)(3)(B) specifies -it

payments.

delimits the limited circumstances in which -­ QUESTION: Put a little footnote here that I may

not agree with your statement, but go ahead. MR. GOSSETT: Okay. I -- footnote noted.

But the point of 203(a)(3)(B) is to say that you can only limit plans The -suspensions you look in two certain

circumstances.

-- if

at the

legislative -- how

history of 203(a)(3)(B),

though, it discusses how

employers shouldn't be required They shouldn't be required to

to subsidize competitors. -- union employers should non­

not have former union workers union competitors a at lower

going in for work for wages because That's

they're also what's rife

receiving

pension

benefit.

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throughout the legislative of ERISA. But which requires there's nothing a plan to be in that -- that purpose rules,

able to

change the

which is what they want. QUESTION: Now, have That -- that would be an odd purpose. that the purpose of this -- I

wait, you're saying a -- a

plant where I

make trousers and

some of my

workers have retired early. of this provision is early

And you're saying the purpose sure that my worker who's Ginsburg's

to make go

retired

doesn't

work for

Justice

plant, the trousers, some other plant.

All right?

Now, that would be very odd to have that purpose served by the language which I think says by -that -­ who

that in the case of a maintains the plan

plan other than by an employer it's talking about Am I wrong?

-- that is,

going

back to the same plant, isn't it? MR. GOSSETT: QUESTION:

Well, in -- there -- there are -­ They're -they're talking about

going back to my plant, isn't it? MR. GOSSETT: In the context of a single

employer plan, which is -­ QUESTION: It's talking That's -am I right about that? not Justice

about going

back to

my plant,

Ginsburg's plant. MR. GOSSETT: Sure. In the single employer

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plan, it only limit -- it's only to prevent double -- true double dipping. What double dipping also receiving is, is where you the

accrued benefits while same plan.

benefits from

It's -- it's -QUESTION: I thought that -That's all you can -­ if I've retired early and I'm an

MR. GOSSETT: QUESTION: expert trouser Ginsburg's --

maker, I could go back to work for Justice nobody would Right? If your pension fund was a care as far as this

plant and

provision is concerned. MR. single -­ QUESTION: GOSSETT:

Yes.

It's my -- my -­ pension fund. It was

MR. GOSSETT: not a multiemployer. QUESTION:

-- employer

All right. But in the multiemployer context, But the no

MR. GOSSETT: it's -it's only

about

cross-subsidization.

bottom line is that in reason

either of those cases, there's

why the pension fund -- why the -- the fund should The -- those -­

be allowed to change the rules. QUESTION: say is the reason we

The reason is supposedly -- what they want to change the rules is because

labor conditions change and whereas in this year where the plant -- where the economy is booming, I don't really have

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a problem, at least my workers don't, with retirees coming back and depressing their wages. QUESTION: rules, would Well, it wouldn't be changing the

it, if you said at the beginning these rules Isn't that all do it so your saying, that -- that when the plan is can be

can be changed? the employer

can it

long as that

established, changed?

is made

clear

the rules

MR. GOSSETT: QUESTION:

Not exactly. you're not changing the

Then -- then

rules when you change the rules, so to speak. QUESTION: candid, could Mr. Gossett, I -- I thought your brief was -- was and you said you couldn't -- you You

not do

what Justice

Scalia just

suggested.

couldn't say up front in the plan, we can amend it anytime back and forth the way we like. I thought you said quite

clearly in your brief that that wouldn't work. MR. GOSSETT: agree completely. The -- the between a point is that there's that says we no difference change the a Yes, Justice Ginsburg. I -I

plan provision at any

can

suspension rules

point and reduce

them versus

plan provision that $1,600 a month choose.

says we can reduce

your benefit from point if we so

to $1,400 a

month at any

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QUESTION:

And the only -Both of those would -- sorry. to get the answer to Justice

MR. GOSSETT: QUESTION:

I want

Scalia's before you lose that. MR. GOSSETT: QUESTION: suggesting was not This is -­ Now, I thought that what he was

possible because of the Am I right or wrong?

reason of the

answer to question 6. MR. GOSSETT:

The answer to question 6 in the -­ subsidiary answer. I think it's

in the regulations is a

by far the less important answer. QUESTION: right or wrong. MR. GOSSETT: cannot be -­ QUESTION: I am right. -- discretionary on the -to do something to the plan Yes. That is an answer is that it No, but I want to know first if I'm

MR. GOSSETT: cut back --

because of

funding. But the more fundamental answer were the case, every said plan could include a is that if that provision that

in just these words, any benefit that we've promised plan can be reduced And if a ERISA, at a future date say that and rule at our

you in this discretion. valid

plan could the

still be would be

under

anti-cutback

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meaningless. So

Every plan would -- could say that. ERISA was passed specifically because

historically plans were pulling back the common law rule that And the

benefits, relying on gratuity.

a pension is simply a is to the primary say, no,

anti-cutback rule was designed

provision in a -a

ERISA

that

when

participant is promised something, that kept. QUESTION: Yes,

promise has to be

but if -- if your hypothesis is nothing, in other retroactively -­

that even when it says they're promised words, that they -- it can be changed

you're -kept?

you're saying that that is a promise that's not

MR. GOSSETT: the most

That is a promise that is kept on of course. If I'm promised

technical level,

nothing and I'm given nothing, I -- I -­ QUESTION: You can't complain. -- one simply can't complain. But

MR. GOSSETT:

the -- the whole goal of ERISA is say we're going

to require employers to

to -- to say we're going to give you this

and -- and keep their -- their word to that. QUESTION: provided that I thought I it was 203 thought that -203 that that

guarantee.

it was

prevents you change.

from going too far

in what you say

you can

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MR.

GOSSETT:

It

is both 203

and 204, Justice

QUESTION: MR.

I don't see how 204 does it. The -- the -- Mr. Goldstein tries and 204 and argue one that they're the

GOSSETT: 203

differentiate

completely other. in its

distinct

beasts, the

not affecting

That's simply not the case.

As the IRS has said decreases a

regulations, anything that indirectly

benefit is equally violative of 204(g). And it's provisions that, decrease easy to come up with -with plan than the

quote,

forfeit a

benefit

rather reduced

the benefit, I mean,

but

which obviously

value you get. a

the most obvious example would be each month we're going to

-- an amendment

that says,

flip a coin and decide whether or not you get a check this month. That benefit would be -­ QUESTION: My -- my true question -- it isn't -­ easy answer to this case.

isn't -- I think there's no

All right?

And I agree with you that in ordinary English, But there is in 203(g) -- or, talking about -- there is an is not consistent

we'd call this a reduction. you know, the 203 part we're obvious purpose to do

something that

with the normal ERISA purposes. done for labor reasons. way.

It's right there and it's either

And you can interpret it

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So given

the either-way possibility, in

my own I'd

mind this is where I am. say -­ MR. GOSSETT: QUESTION: they've had this for consistent with it.

I'm telling you truthfully.

Thank you. either-way possibility. Well, are

--

20 years.

They have regs that with it.

People have lived I mean, that's

Go with So

the administration. that's

-- all

right?

-- that's where I

-- that's what

I -- that's how

I'm thinking to that.

about it, and I'd like to hear your response

MR. GOSSETT:

Okay.

I have several responses to

that because it's obviously a critical point. The -- the first response is that have told us that although the this is a

Mr. Goldstein

longstanding Government position, the actually point to that states

only thing they can position is the of

that

Internal Revenue Manual that dates Required Modifications, the

to 2001.

The List

LRM, not the IRM,

which does

go back quite some time earlier, specifically says that it is designed to aid people in and that the drafting or redrafting plans be useful So

provisions included therein could

in some plans, it could

be violative in other plans.

that's not authority by which someone can actually look at an IRS publication and say, this is what we have -- the

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IRS allows. They say that they've issued letters --

determinations that they but those are not

have allowed these in

the past, not

due deference under not even

-- certainly

under Chevron, probably are sort of

under Skidmore.

Those

individual case determinations and

they have

put none of these in the record. And in any event, under section -- code section

7805, the IRS says that those can be wrong, and if they're wrong, all having done it means is the plan can't be disqualified for something wrong. The plan There's -- there are no tax to someone

implications.

can still owe damages

who in fact was hurt by

the amendment, but that is itself

a small cost in this case. Mr. Goldstein is engaged -and more to the

point, his amici

is engaging in hyperbole

by saying this

is going to bankrupt plans. 80, the plan -- the seven people's

In the joint appendix at page exactly

plan's actuary tells us that were cut off as a

benefits

result -­ out of

suspended as

a result of this

amendment.

That's

5,300 active pensioners, according to at the moment. We're talking

the plan's web site of 1

less than two-tenths

percent of people were, in of -­ QUESTION:

fact, cut -- suspended because

But it's not --

if your --

if your

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position prevails, then I take it the only way an employer can protect himself against hard times is to say for this retirees, no employment. Any employment

class of early will result ones --

in suspension of benefits, and to say for the the ones who are restricted

normal retirees are

only with respect restrictive as

to the same trade, to I think

make the rule as -your

possible.

that your

interpretation forces

the employer

who wants

to protect

against hard times to take that view. MR. GOSSETT: The -from the --

Is that not so?

I -- I disagree, Justice Ginsburg. up a plan, the

the employer setting

settlers of

a plan, all they care about is how much money And it's a -- it's a design rather have a benefit of,

a plan is going to cost them. decision whether or not you'd

say, $2,000 a month with a narrow -- a narrower suspension rule or $1,990 a month with a wider suspension rule. Both

of those plans cost the employer the same amount of money. There's no -- the -- the details of the number, of course, are -- are questions for actuaries. But the -- the design

question is one that can be made completely independent of this. Is it's how important is it to the employer whether important is it

people go back to work in other jobs, how

to the employees that they can work in specific jobs. The -- while a change in the plan might save the -- the plan money, the initial design decision about how

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restrictive the rules should be isn't a financial question in the -the change in the slightest. in the plan -- the here saved And in fact, the fact that

-- in the suspension rule, money, is in fact I

the amendment

the plan

think the best evidence of all that the amendment violates the anti-cutback rule. The anti-cutback rule prevents,

quote, a decrease -­ QUESTION: reduction thought where You're -with you're back you. But to the I would word have

I agree

that this --

this provision union.

here in

203 really to

reflects a tension within the get benefits for its going back. protect the But the wages of

The union wants

early retirees, and that union also the people

argues for -- or

wants to reflect who are

already there.

And that means

that if there is a recession, what we want

to do is stop too many people from going back because that might there. Now, I put that again how I began to understand because that -- that going on in was this have a depressing effect on the workers who are

what was

provision and wrong.

I want you

to be

able to say,

no, you're

That isn't what's going on. MR. GOSSETT: What's going on is that -and But

Justice Breyer, is that plans the employers want to

-- that -- that unions

prevent cross-subsidization.

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there's -- while it is

certainly the case that, at

least

according to this plan and its amici, they have started to rely on this purported right to deal with changing market The only by in

conditions, they have no authority for doing so. thing they can point to is one floor

statement of ERISA,

Representative fact, had change

Dent

after that

provision

been enacted, saying

that there might would affect

be some things.

in market

conditions which

Employers can deal with changing traditional ways. And in

market conditions in the

They can pay more or less money. any event, the thing missing in that

approach to 203

is the foundational principle

that ERISA

is designed to protect participants. protect plans. in the plans. accrual rules It's designed

It's not designed to

to protect the participants

That's why it -- that's why the vesting and are very explicit. And in fact, turning

very briefly to the vesting rules, Mr. -­ QUESTION: plans thing. MR. largely GOSSETT: Yes, that's true, but that's -- the in some It's certainly designed to that protect sort of

respects, the

preemption,

an indirect

way of

protecting

the plan

plans and more indirectly the -- the participants and more indirectly the participants and more indirectly the

Federal fisc because, of course,

plans are -- are insured

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by the Pension Benefit Guaranty Board. QUESTION: Am I right about this, that -that

the -- that there is a specific provision in there for the -- for the protection of the plans? but isn't there a provision I forget what the it is, in

that if

plan gets

financial straits,

then in fact there -- there can -- can otherwise might be allowed, an the plan money? money so he Is can

be an amendment that might amendment that that would -Or save

would save

correct?

the employer

continue to contribute to the plan. MR. GOSSETT: With the

Is that correct? Justice Souter. of Labor,

With the -- yes,

-- with the consent

of the Secretary

with the disclosure -­ QUESTION: Okay. -- to the Secretary of Labor and

MR. GOSSETT:

consent, you can pass an amendment in a plan that -­ QUESTION: And that would -- that would -­ -- reduces benefits. that would be a redundancy

MR. GOSSETT: QUESTION: on

-- be --

-- on the argument that your -- your colleagues on the then I take it. On their position, that

other side make

wouldn't be necessary. MR. GOSSETT: QUESTION: QUESTION: Yes.

Yes. Mr. Gossett, would you just make sure

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I understand

one thing correctly?

It's been asked two or

three times, but I want to be sure I'm right on it. The amendment that -- the plan provision that

Justice Scalia hypothesized which authorized this

sort of

change -- you agree that if you prevail, that kind of plan provision would be impermissible. MR. GOSSETT: I don't think this Court needs to case doesn't,

reach the question because the plan in this in fact, include that provision. QUESTION: MR. No, I understand that. But I think

GOSSETT:

that

that

plan

provision would not be permissible. QUESTION: Yes, I think that's right. It's

still is the same -- it doesn't affect your argument, so I just wanted to be sure about that. MR. GOSSETT: Yes, yes, I agree with that.

I -- I want to -­ QUESTION: Because of what? Just tell me the

provision that you think precludes it. MR. GOSSETT: -- on the narrow end I think -- it's that it is on the a technical level narrow -- it's

precluded under the IRS's own that you way that can't have -- you

regulations which point out in a more

can't change conditions But -but on the

violates missions.

fundamental level, it violates -­

45 Alderson Reporting Company 1111 14th Street NW, Suite 400 Washington, DC 20005

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 203(c), statute before and want the

QUESTION:

I

want the

statutory provision. makes that

I

statutory provision

that

no good.

204(g). MR. GOSSETT: QUESTION: 204(g).

Yes. 204(g)(1) which says you come said it can't a

MR. GOSSETT: decrease benefits. technical provision reason would -not

And while reading

one can of that

up with that would

your read

violate 204(g)(1),

204(g)(1) -- 204(g) out of ERISA because -­ QUESTION: And this is what we were discussing

you spell this out in your brief, and you were saying Justice Scalia's solution wouldn't

very candid in work.

MR. GOSSETT:

Yes, Justice Ginsburg.

I -- I want -- I wanted to turn quickly to -- to the -- the amendment provision in about. the vesting There are a

that Mr.

Goldstein talked

couple of things to note about that. The first and foremost is probably that it shows that 203(a)(1)(B), the -- the suspension rule that we're

talking about, talks about a plan providing for something. In 203(c), they had they talk about a plan amending the rules. wanted to talk about an amendment If in

203(a)(1)(B), they could have.

They -- they talked about

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terms amending things elsewhere in the same provision. But more fundamentally, Mr. Goldstein is wrong that a plan can of benefits that simply

retroactively de-vest a participant had previously vested. Under

203(c)(1)(A), which

is on page 4a of the yellow brief, it

-- it explains that a plan amendment shall not -- shall be treated amount as not satisfying is less than such 203 if the -- if the amended percentage

a non-forfeitable

commuted -- computed under the plan without regard to such amendment. So, earned 20 for example, of if a plan participant a had

percent

their

-- had

non-forfeitable benefit and the

interest

in 20 percent

of their accrued

plan switched

from a progression to a -- a cliff vesting, 5 years, they could do that,

where you got everything in but they you

couldn't remove your 20 percent.

They could say

don't vest in anything more

until the 5-year period,

but they

couldn't say you lose the 20 percent vested that

you already have. QUESTION: being there I think that they -- that the -- (c) more than, that the words, shall

shows no

provide, which provide provide in in

is the beginning of 203, do not mean shall plan. plan They must or through mean shall

the original the original

permissible plan only,

amendments because if

they meant the original

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there would be no safety. MR. GOSSETT: The term provide is not in

203(a)(1)(A) and (B), which are the -­ QUESTION: It says at the very that. beginning, (A), -- reading think those

each plan shall provide some of words

And as some of as if you

what you've written, it's

mean in the original plan, and

-- and I think they

point to (c) to say it can't mean that. MR. GOSSETT: plan is authorized is the Justice Breyer, the amendment of a under ERISA section 402(b)(3). any plan The

402(b)(3) must

provision of that

ERISA that says

include

a provision

allows amendments.

amendments

that are

authorized under 402(b)(3)

are then

limited by the anti-cutback rule,

by the provisions of -­

of 203, by everything else in ERISA. The -- these specific limitations on amendments, though, are fully -each -- are all read in on amendments para materia. applies to Each every

limitation

amendment and there's no provision in 203 amendments are allowed. QUESTION: We're back to the

that says these

circle.

I

mean,

the -- you're quite right.

Every time it

talks about the

amendments or otherwise, it uses reduce, and

some word like you can't

the ordinary -- it would have been simpler if that word reduced, wherever it appears,

they had amended

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with the same exception they have here in 203. lose definitely and you'd admit it. On the

Then you'd other hand,

they didn't put those words in and that gives the strength to your argument. But on the other hand, they say, well, yes, that if in fact they didn't mean to read it in, they're going to reduce the effectiveness of that same really kind of

thing over in 203, you see, because they the forfeitability.

just have it for

They don't have it for the reduction. much sense. firm answer So that's the

Really, please, that doesn't make why, you know, I can't get a

out of

language. MR. GOSSETT: I think that the text of the

statute is pretty clearly on my side. Mr. Goldstein can point to is

The only thing that purpose and allowed to

this created of plans to be light of

supposed longstanding practice change rules retroactively in

changing market that,

conditions.

But

though the plans

have been doing

it's the text of the statute that controls and -­ QUESTION: have been making them But you do acknowledge that and the IRS has plans been tax

these changes purposes

accepting

for

of

the

employer's

deductions. MR. GOSSETT: QUESTION: I know, Justice -­

Is that right?

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MR. they did so statements

GOSSETT:

I know,

Justice O'Connor,

that

in this case. in the IRS's

Beyond that, all we brief brief, and in the

have are National not

Coordinating actually -­

Committee's

but

they're

QUESTION: retirement plans.

Now, section

203

refers to

normal

You take the position

that it doesn't

cover early retirement. MR. GOSSETT: to the subsidized Section 203(a)(3)(B) doesn't apply early retirement benefits.

portion of

The -- the -- that's obvious because it is an exception to 203(a) which says that your normal retirement is non­

forfeitable. And the This Government has taken this position we created. 2530.203. as

is not this

something that is in 29

In the The early for the

regulation

--

C.F.R.

Government explains

that a

plan can

provide that

retirement benefits are any reemployment of

suspended for

any reason -defining for

because

203(a)(3)(B) is rules

universe

possible

suspension

normal

retirement benefits, but universe benefits. And in fact, of suspension

it doesn't -- doesn't rules for early

limit the retirement

in

September

--

on

the

same

amendment that applied to Messrs.

Heinz and Schmitt, that

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-- in

that

same amendment,

the plan

provided that

for

benefits accrued after September 30th, 1998, but only sort of prospective benefits, not retroactive benefits, any

post-retirement reemployment would being suspended. They -- and the -again, from -- and

lead to those benefits

this actually follows own position. you

from

the IRS's the

In the a

Internal

Revenue Manual,

IRS says

can have

provision saying that

any work is

-- is suspensive,

but

you can only do that prospectively because applying the -­ such a changed rule retroactively would decrease their

benefits. But to the extent that you can have a rule that that means that 203(a)(3)(B) here. It's not what

says any work is suspensive, isn't -- just isn't

applicable

determines whether or not someone -- the rules that a plan can have for early retirement benefits. a -­ QUESTION: Was that distinction made in the A plan can have

Seventh Circuit between the early retirement benefits with regard to the application of 203(a)? MR. GOSSETT: QUESTION: you presented to Sorry.

Was that -- was that an argument that Circuit distinguishing the

the Seventh

early retirements benefits from normal retirement benefits

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for 203(a)

purposes?

I thought

it was --

that it

was

acknowledged in the Seventh Circuit that 203(a) applied to the early retirement benefits as well as the normal --

normal retirement benefits. MR. GOSSETT: benefits to the 203(a) applies to early retirement that they are the actuarial

extent

equivalent, the net present -- the financial equivalent of normal retirement benefits, -- of them. but not to the subsidized answer is

portion of

So -- so

I think the

yes, we did say that in -- in the lower court, but I'm not 100 percent sure, Justice Ginsburg. The -over. one other point I wanted to -- to go

Though the plan argues that 204(g) doesn't apply to to a

this change -- they say that the change only applies

reduction in the value of a life annuity -- that's not the statutory term. accrued benefit, The -- the statutory definition ERISA section of an the

which is in

323, is

individual's accrued

benefit determined

under the

plan.

It's whatever the plan promises to the participant that is protected by the plan. QUESTION: the plan at It's --- you say that 204(g) prevents amendable, prevent

You

the outset

from rendering itself

but if you agreed with the later amendment,

them that 204(g) does not it would also be true

that 204(g) at saying

does not

prevent the employer

from the outset

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that the retirement right?

benefits are

amendable.

Isn't

that

MR. GOSSETT:

Justice Scalia,

it allows an

--

you can make an amendment -QUESTION: I was making the point earlier that have

even if we find for you, the employer would -- would

a way of -- of solving the problem, which is simply at the outset to set forth. respond to that Now, it's very difficult for them to say that 204(g) does

argument when they

not stop -- does -- does not prevent a later change in the plan. How could it possibly prevent a later change but -­ a later change, but prevent a change at the

not prevent

outset and announce that you're going to make a change? MR. GOSSETT: Well, it clearly prevents the I think it

later change, which is what is at

issue here.

also prevents the earlier change because I think any other reading of the anti-cutback rule reads it out of the

statute, but I don't think the Court needs to address that question in this case. QUESTION: Scalia's point is they But another way of putting Justice surprising that

if they're right, it's

didn't make the point clearer in their plans because

it would have been legal to do so. MR. GOSSETT: this argument I don't think -- they didn't of my knowledge. make They

below, to the best

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made this argument that -­ QUESTION: the 204(g) But I mean if their basic theory all the plans of

is correct,

then

could have

solved this problem by saying so expressly so nobody would have been fooled as your clients were. They could have

said in the They say

plan itself, we retain the just there by statute,

right to do this. but the plan is

it's

somewhat ambiguous, and they could if they're right and you're wrong. MR. GOSSETT: QUESTION: Yes.

have said so expressly

They couldn't have

done it if you're

right and they're wrong. MR. Stevens. GOSSETT: That's exactly right, Justice

But of course, they didn't. The -- the main provision on amendments at page 50 of the in the joint

plan, which

is

the provision

appendix, says that no amendment value. They elsewhere in the changes to

can decrease the accrued notifying that

plan talk about

participants of

the plan

and discussed

there could be a change, say that there can be have been a There could

but that change -- that

doesn't could rules.

a retroactive change.

There

prospective change also have been a

that loosened the prospective

change that of

applied to newly accrued benefits because by the terms that provision, the -­

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Gossett.

QUESTION:

Thank you,

Mr.

-- thank

you, Mr.

Mr. Goldstein, you have 2 minutes remaining. REBUTTAL ARGUMENT OF THOMAS C. GOLDSTEIN ON BEHALF OF THE PETITIONER MR. GOLDSTEIN: Thank you, Mr. Chief Justice,

and may it please the Court: I have four points. The first deals with what

kind of promises we can make to participants that they can enforce. The promise can only go in one direction. That

is, if we promise them

we will not change the

suspension the --

rules, if they -- trustees

put that provision in and on it, we -- that

employees and the participants rely

to -- to change that would violate the plan and they would have a right under 502 to enforce it. But, Justice Scalia, there is no way that

there's a middle ground under which the plans flag for the participants, hey, this is open to a change because 204(g) -- if they win, they'll win under 204(g). 204(g) is

categorical. you're going

You can't reduce to. It's

benefits even if

you say And

just no way you

can do it.

therefore, the only middle ground If participants and making it the trustees

is under our provision. want a plan provision,

a concrete promise, we won't

change the rules.

If that's in the plan, it would be enforceable against us.

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But it isn't. Second -­ QUESTION: No, but your plan could have made

clear what you say the law otherwise authorizes. MR. GOLDSTEIN: say that the provisions It could cited have, although I would Assistant to the

by the

Solicitor General talks retirement rules, about a

about telling a person in the

who is in suspension But

material change

and that's -- that's pretty clear to my mind. It could have gone -- we could have

it's true.

been even that

more clear, but this is we have.

a right, a statutory right,

Justice O'Connor, 203 cover? usually what that is, It covers a

Justice

Ginsburg, what

does

normal retirement

benefit, and

we think of as an

early retirement benefit, an -of a early

the unsubsidized

portion of

retirement benefit. The third is it is -Justice Breyer is We

absolutely right about the purpose of this want to be able to adjust to current

provision.

labor conditions. 203(a)

And Justice Souter, has a special rule like

the statute recognizes that. for multiemployer plans. and labor where

They cover the markets in

things

construction

change a lot, and they

have a much narrower provision

203 for single employer plans.

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13
14
15
16
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18
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20
21
22
23
24
25

But characterized

ultimately, I as ambiguous.

think The

that

this is

fairly
has an

agency here

enormous amount of experience in balancing the purposes of
these different statutes and knowing what's different

between a decrease and a suspension.
CHIEF Goldstein.
The case is submitted.
(Whereupon, at 11:07 a.m., the case in the
JUSTICE REHNQUIST: Thank you, Mr.

above-entitled matter was submitted.)

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Alderson Reporting Company
1111 14th Street NW, Suite 400 Washington, DC 20005