The U.S. Supreme Court has held that that an amendment to a pension plan that expands the definition of disqualifying employment and results in a suspension of early retirement benefits violates ERISA's anti-cutback rule. See Central Laborers' Pension Fund v. Heinz (June 7, 2004). ERISA's anti-cutback rule substantially limits a pension plan's ability to reduce or “cut back” accrued pension benefits by amending the plan.
In Heinz, the plaintiffs retired before age 60. According to the terms of their retirement plan, the monthly benefit payments for those who retired before age 60 were subject to suspension during periods of disqualifying employment. At the time the plaintiffs retired, working as a supervisor was not included in the definition of disqualifying employment and they took jobs as supervisors in the construction industry while still collecting their retirement benefits. Two years after they retired, the plan was amended and the definition of disqualifying employment was expanded to include working in the construction industry in any capacity. The retirement plan construed this amendment to cover the plaintiffs' employment as supervisors and suspended their monthly benefit payments. The plaintiffs sued, claiming this change violated ERISA's anti-cutback provision. The trial court dismissed the case and the Seventh Circuit overturned the trial court's decision. The U.S. Supreme Court has now affirmed the Seventh Circuit's decision.
The Supreme Court rejected the plan's argument that the anti-cutback provision only applies to amendments directly altering the dollar amount of a retiree's monthly pension payment and held that altering the conditions imposed on receiving benefits reduces the benefit just as surely as a decrease in the size of the monthly benefit payment. The Court also found that while ERISA expressly allows suspension of payments to retirees who engage in disqualifying employment, it does not permit those conditions to be imposed or expanded retroactively, after benefits have already accrued.