Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981)

Alessi v. Raybestos-Manhattan, Inc.

No 79-1943
Argued March 4, 1981
Decided May 18, 1981 *
451 U.S. 504

APPEAL FROM THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

In two suits initiated in New Jersey state court, retired employees who had received workers’ compensation awards subsequent to retirement challenged the validity of provisions in their employers’ pension plans reducing a retiree’s pension benefits by an amount equal to a workers’ compensation award for which the retiree is eligible. These private pension plans are subject to federal regulation under the Employee Retirement Income Security Act of 1974 (ERISA). The employers independently removed the suits to Federal District Court, where the judges in each suit held that the pension offset provisions were invalid under a provision of the New Jersey Workers’ Compensation Act prohibiting such offsets; that Congress had not intended ERISA to preempt such state laws; that the offsets were prohibited by ERISA’s provision, 29 U.S.C. § 1053(a), prohibiting forfeitures of pension rights except under specified conditions inapplicable to these cases; and that a Treasury Regulation authorizing offsets based on workers’ compensation awards was invalid. The Court of Appeals consolidated appeals from the two decisions, and reversed.

Held:

1. Congress contemplated and approved the kind of pension provisions challenged here. Pp. 509-521.

(a) Pension plan provisions for offsets based on workers’ compensation awards do not contravene ERISA’s nonforfeiture provisions. While § 1053(a) prohibits forfeitures of vested rights, with specified exceptions that do not include workers’ compensation offsets, nevertheless other provisions make it clear that ERISA leaves to the private parties creating the pension plan the determination of the content or amount of benefits that, once vested, cannot be forfeited. The statutory definition of "nonforfeitable" pension benefits, 29 U.S.C. § 1002(19), assures that an employee’s claim to the protected benefit is legally enforceable, but it does not guarantee a particular amount or a method for calculating the benefit. Cf. Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359. It is particularly pertinent that Congress did not prohibit "integration," a calculation practice under which benefit levels are determined by combining pension funds with other public income streams available to the retired employee. Rather, Congress accepted the practice by expressly preserving the option of pension fund integration with benefits available under both the Social Security Act and the Railroad Retirement Act. Offsets against pension benefits for workers’ compensation awards work much like the integration of pension benefits with Social Security or Railroad Retirement payments, and thus the nonforfeiture provision of § 1053(a) has no more applicability to the former kind of integration than it does to the latter. Pp. 510-517.

(b) Although neither ERISA nor its legislative history mentions integration with workers’ compensation, ERISA does not forbid the Treasury Regulation permitting reductions of pension benefits based on awards under state workers’ compensation laws, or Internal Revenue Service rulings to the same effect. There is no merit in the argument that integration of pension funds with workers’ compensation awards, which are based on work-related injuries, lacks the rationale behind ERISA’s permission of integration of pension funds with Social Security and Railroad Retirement payments, which supply payments for wages lost due to retirement. Both the Social Security and Railroad Retirement Acts also provide payments for disability, and ERISA permits pension integration with such benefits, as well as with benefits for wages lost due to retirement. Moreover, when it enacted ERISA, Congress knew of the IRS rulings permitting integration with workers’ compensation benefits and left them in effect. Pp. 517-521.

2. The New Jersey statute in question is preempted by federal law insofar as it eliminates a method for calculating pension benefits under plans governed by ERISA. The provision of ERISA, 29 U.S.C. § 1144(a), stating that the Act’s provisions shall supersede any state laws that "relate to any [covered] employee benefit plan," demonstrates that Congress meant to establish pension plan regulation as exclusively a federal concern. Regardless of whether the purpose of the New Jersey statute might have been to protect the employee’s right to workers’ compensation disability benefits, rather than to regulate pension plans, the statute "relate[s] to pension plans" governed by ERISA because it eliminates one method for calculating pension benefits -- integration -- that is permitted by federal law, and the state provision thus is an impermissible intrusion on the federal regulatory scheme. It is of no moment that New Jersey intrudes indirectly, through a workers’ compensation law, rather than directly, through a statute called "pension regulation," since ERISA makes clear that even indirect state action bearing on private pensions may encroach upon the area of exclusive federal concern. Moreover, where, as here, pension plans emerge from collective bargaining, the additional federal interest in precluding state interference in labor-management negotiations calls for preemption of state efforts to regulate pension term. Pp. 521-526.

616 F.2d 1238, affirmed.

MARSHALL, J., delivered the opinion of the Court, in which all other Members joined, except BRENNAN, J., who took no part in the decision of the case.