WASHINGTON - The Supreme Court of the United States ruled last month that a provision in federal pension law now extends the same anti-discrimination provision to welfare plans.
In Inter-Modal Rail Employees Association, vs. Atchison, Topeka & Santa Fe Railway Co., Justice Sandra Day O'Connor said while an employer can amend or eliminate its benefit plan, it can't terminate employees and move their jobs elsewhere for that purpose. The high court reinstated the case and said that Section 510 of the Employee Retirement Income Security Act would apply to an employer's attempt to fire employees at one company and rehire them at another company just to change benefits.
Former employees of Santa Fe Terminal Services filed suit when parent Atchison Topeka canceled its cargo handling contract and moved it to another company. Employees argued that by moving them to the new company, Terminal Services, they lost their Railroad Retirement Act benefits, which were more generous. Employees argued the company transferred them only to avoid making contributions to the Railroad Retirement Fund.
Section 510 says employers can't fire, suspend or discriminate against a participant or beneficiary in order to interfere with the participant's benefits. While the lower court agreed the section covered pension benefits, they said that the provision does not apply to welfare benefits because welfare benefits do not vest. The Supreme Court disagreed, saying the provision doesn't distinguish between vested and unvested benefits.
"Had Congress intended to confine 510's protection to 'vested' rights, it could have easily substituted the term 'pension plan," Ms. O'Connor wrote.
The high court added that employers can amend or even terminate a plan through proper procedures. "Giving employers this flexibility also encourages them to offer more generous benefits at the outset, since they are free to reduce benefits should economic conditions sour," Ms. O'Connor wrote.