Employers can't change pension benefits retroactively: Supreme Court

Court rules in favour of employees who took early retirement and then went on to start new jobs

Employers in the U.S. can’t cut back pensions for employees who retire early and then work elsewhere, according to a U.S. Supreme Court decision.

In Central Laborers’ Pension Fund v. Heinz, a case involving two Illinois construction workers, the court said federal law protects against slashing benefits after a worker has retired.

The two workers, Thomas Heinz and Richard Schmitt Jr., retired in 1996 at the age of 39. Both were eligible for full retirement benefits. They were told they could take the benefits as long as they did not take on certain jobs in the construction industry.

According to a report in the Associated Press, both took new jobs as construction supervisors, jobs that at the time still allowed them to collect pension benefits along with their new paycheques. But in 1998 the Central Laborer’s Pension Fund changed its rules and said the two could not draw a pension while working in any construction job.

Writing for the court, Justice David H. Souter said Heinz worked and accrued retirement benefits under a plan with terms allowing him to supplement retirement income by certain employment, and he was being reasonable if he relied on those terms in planning his retirement.

“We simply do not see how, in any practical sense, this change of terms could not be viewed as shrinking the value of Heinz’s pension rights and reducing his promised benefits,” said Justice Souter.

By changing the rules retroactively, the Central Laborer’s Pension Fund would force Heinz to forego work opportunities he had banked on, the court said.

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