Employers are free to change the terms and conditions of employment, even going so far as to reduce employees' salaries that, in turn, reduce contributions to pension plans, the 3rd U.S. Circuit Court of Appeals ruled.
In Haberern vs. Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan et al., the appeals court in Philadelphia overturned a lower court decision.
Ruth Haberern, secretary-bookkeeper, received a salary plus a percentage of gross revenue. When Kaupp began a defined benefit plan, the portion of her salary based on revenue was eliminated. A lower salary resulted in a lower plan contribution. Also, her employer termed part of her salary a bonus, reducing her potential pension benefits and slashing the fund's liabilities.
When Ms. Haberern retired a few years later, her employer refused to release her pension benefits unless she signed a release, which she refused to do. She then sued her employer for breach of fiduciary duty and discrimination for withholding her pension benefits, cutting back her salary and terming part of it as a bonus.
The district court found in her favor, but the appeals court reversed the judgment, saying the salary cut did not violate ERISA's anti-discrimination provisions.