The 6th Circuit Court of Appeals has upheld a decision to dismiss a participant's claim on the grounds of a venue selection clause in the sponsor's plan documents, and in the process overruled the Secretary of Labor's interpretation of ERISA's compatibility with venue clauses.
On March 1, 2000, Robert Smith, an employee of Commonwealth General Corporation, which merged with Aegon, USA at the end of Smith's career, retired with what he thought would be a lifetime monthly benefit of about $2,200, from two company-sponsored plans, as well as a lump-sum payment of about $155,000.
In 2007, long after Smith had left the company, Aegon amended its retirement plan to add a "venue provision," which said that a participant "shall only bring action in connection with the plan in Federal District Court in Cedar Rapids, Iowa." The U.S. arm of the global investment and insurance company is located in Des Moines, Iowa.
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In August of 2011, Smith was contacted by Aegon officials and informed that he had been receiving $1,122.99 in extra pension a month since his retirement.
The Aegon pension plan eliminated Smith's entire monthly benefit, stating that it would continue to do so until the company had recouped the more than $153,000 in extra benefits paid to Smith over the 11-year period.
After unsuccessfully suing CGC, his former employer, Smith filed a claim against Aegon in U.S. District Court for the Western District of Kentucky.
But the claim was dismissed because of the Aegon's venue clause.
An amicus brief filed by Secretary of Labor Thomas Perez to the 6th Circuit claimed venue selection clauses are incompatible with ERISA law, according to court documents.
The 6th Circuit dismissed the Secretary's argument, because his interpretation was not made "with the force of law."
Aegon's venue selection clause was enforceable, given that the clause was made in writing, and that ERISA's statutory scheme "is built around the reliance on the face of written plan documents," wrote Justice Alice Batchelder.
The appellate court also noted that plan sponsors are "generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans."
One of the 6th Circuit's judges dissented, siding with Smith.
In enacting ERISA, Congress sought to eliminate "jurisdictional and procedural obstacles which in the past appear to have hampered effective enforcement of fiduciary responsibilities," wrote Justice Eric Clay in the dissenting opinion.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
