A federal appeals court dismissed a lawsuit against the Girl Scouts of the USA brought by a local council, ruling that member employers in multiple-employer defined benefit plans have little recourse under the Employee Retirement Income Security Act to challenge unilateral actions by plan sponsors.
The lawsuit, brought by the Girl Scouts of Middle Tennessee, Nashville, challenged an increase in pension liabilities and contribution rates following an organizational restructuring.
In 2011, the Girl Scouts of Middle Tennessee tried to withdraw from the national organization, but the request was denied.
Despite “compelling” policy arguments, Judge Eugene Edward Siler in Cincinnati on Oct. 23 upheld a District Court ruling that ERISA pre-empts such actions. Unlike multiemployer plans governed by collective bargaining agreements, the New York-based National Girl Scout Council Retirement Plan “falls within ERISA's catchall category of single employer plans,” which are pre-empted from filing such claims, Mr. Siler wrote. “There is a gap in ERISA concerning multiple-employer plans … ERISA fails to prescribe procedures through which employers … can resolve disputes with sponsors,” he said.
The Girl Scouts of Middle Tennessee, one of 112 independent councils, sued the national office in 2012, arguing a council reconsolidation required by the national organization and completed in 2010 increased pension costs dramatically by adding 1,850 new participants and early retirement incentives to make the reorganization palatable. At the time of the lawsuit filing, the pension fund had an estimated $340 million deficit, which triggered contribution rate increases scheduled to continue through 2023. As of Dec. 31, 2013, the plan had $459 million in assets, but did not report liabilities, according to its most recent Form 5500 filing.
Officials with the Girl Scouts of the USA declined to comment on the lawsuit. “We are exploring next steps,” said James Bristol, a lawyer with Nashville law firm Waller Lansden Dortch & Davis, representing the Tennessee council, which brought the lawsuit “because of the serious financial hardship that our council, like all of the other councils across the country, are suffering because of mismanagement of the pension plan. We are disappointed in the court's ruling because it does nothing to address these problems.”