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Seventh Circuit Finds Release in Severance Agreement Bars ERISA Claim for Benefits

    Client Alerts
  • June 14, 2013

Last month, the Seventh Circuit Court of Appeals issued an opinion holding that a former participant in an ERISA-covered pension plan waived his claim to challenge contested benefits under the pension plan by signing a general release upon his termination of employment. 

In Hakim v. Accenture United States Pension Plan, the participant sought to recover additional benefits under the pension plan because he claimed that the employer violated ERISA when it failed to provide notice that a plan amendment disqualified participants from future benefit accruals after a change in employment status. The participant, however, had knowingly and voluntarily previously signed a release waiving "any and all claims of any nature whatsoever, known or unknown, which you now have, or at any time may have had" against Accenture in exchange for a severance package upon his termination from employment.

The Seventh Circuit found that ERISA' s anti-alienation provision did not trump the general release signed by the participant. While pension entitlements cannot be alienated under ERISA, contested pension claims are outside of the realm of the anti-alienation provision and can be waived. Pension entitlements are vested benefits arising under the terms of the plan. Pension claims, however, are claims for benefits above and beyond those to which a participant is entitled and had actual or constructive knowledge of at the time of signing a release. The court found that the participant's claim for benefits was a pension claim because it sought benefits beyond the benefits provided under unambiguous terms of the plan. Based on a previous benefit statement advising the participant that he no longer was eligible to accrue benefits under the pension plan, the participant had constructive notice of his claim before he signed the release.

This case sheds light on when a participant's claim accrues, as this rational may be helpful in defending against both individual and class action suits brought by former employees under ERISA. In addition, employers should review any standard severance agreements to ensure that they contain a general and broad release.