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Plan Administrator Cannot Limit Enhanced Benefits in Retirement Plan Based on Change of Control

    Client Alerts
  • July 25, 2014

In Adams v. Anheuser-Busch Companies, Inc., a retirement plan provided that the benefits payable to a participant “whose employment with the Controlled Group is involuntarily terminated within three years after the Change in Control shall be determined by taking into account an additional five years of Credited Service and … an additional five years of age.” The U.S. Court of Appeals for the Sixth Circuit concluded that this provision was clear and unambiguous, and therefore could not be interpreted in an effort by the plan administrator to reduce its scope.
In this case, Anheuser-Busch was acquired by InBev, in a transaction that the parties to this case agreed constituted a Change in Control for purposes of the retirement plan. Before the expiration of the three-year period mentioned above, InBev spun off certain plants and transferred to the acquiring company certain employees who were offered similar benefits. In that context, the plan administrator concluded, as a matter of interpretation, that the plan language quoted above “was intended to provide an enhanced benefit to participants who suffer an actual termination or loss of employment.” Therefore, the enhanced benefit should not be given to participants who leave the controlled group as a result of a corporate transaction but do not suffer an actual loss of employment, because they are hired by the acquiring company.
The court concluded that the phrase “whose employment with the Controlled Group is involuntarily terminated” was clear when read in its entirety. The plan administrator therefore could not interpret these words to effectively add another requirement that participants would need to meet in order to obtain enhanced benefits under the plan. In other words, the plaintiffs’ employment with the Controlled Group was clearly involuntarily terminated, which entitled them to the enhanced benefits, regardless of whether or not they secured employment with another employer. As a result, the plan administrator’s decision was arbitrary and capricious.
This case can be seen as a simple, yet powerful, reminder that employee benefit plan provisions must be crafted with care, and that clear and unambiguous plan language cannot be modified by a plan administrator, even if the plan gives the administrator the power to interpret the document.