By: Amanda Sonneborn and John Duke
In Shaver v. Siemens Corporation, Nos. 10-4147, 10-4279, 10-4791, 10-4792 (February 29, 2012), the Third Circuit overruled a lower court decision and held that former Westinghouse Electric Corp. employees were not entitled to permanent job separation pension benefits from Siemens Corporation. The Court based its decision on two factors: (1) Siemens did not adopt Westinghouse’s pension plan as an ERISA “transition” plan; and (2) the former employees had not satisfied, and could not satisfy, the conditions for permanent job separation benefits prior to Westinghouse’s transfer of liabilities.
In this case, the plaintiffs, former Westinghouse employees who were transferred to Siemens as part of a corporate transaction, sued Siemens and its pension plans, alleging that an asset purchase agreement (A.P.A.) between Siemens and Westinghouse required Siemens to provide them permanent job separation benefits under the pension plans. The plaintiffs’ primary argument was that Siemens violated the A.P.A. and ERISA’s anti-cutback rule by amending the Westinghouse plan to eliminate the permanent job separation benefits.
The Third Circuit reversed a lower court’s decision in favor of the plaintiffs. In doing so, the court first held that while Siemens agreed to reimburse the Westinghouse plans for benefits accrued during the transition period, Siemens assumed no obligation to establish and maintain a separate and ongoing administrative scheme during that time. Because the only plan in effect during the transition period was the Westinghouse plan, Siemens’ later adoption of its own plans, which lacked permanent job separation benefits, was not an “amendment” of a “transition” plan. Thus, it was not a violation of ERISA to change the benefits
Second, the Court held that the failure of the Siemens plans to provide the permanent job separation benefits did not violate ERISA. The Westinghouse employees who transferred to Siemens plans were never eligible for the job separation benefits under the Westinghouse plan, pursuant to the plan’s specific terms. Therefore, the separation benefits were not “accrued benefits” and ERISA did not require the Siemens plans to protect them.
The Third Circuit’s decision reaffirms the basic ERISA principle that while the statute protects accrued benefits, nothing in the statute requires employers to offer additional benefits not provided for in the written plan documents. Moreover, ERISA protects benefits for which participants fulfill all conditions of eligibility and the statute does not preclude an employer from enforcing those conditions. As demonstrated by the careful planning of the corporate transaction at issue here, this case does show the importance of involving employee benefits attorneys and other professionals in all corporate transactions to ensure the proper treatment of employee benefit obligations both before and after the transaction.