Alessi v. Buczynski v. General Motors Corporation

• Decision Date: 18 May 1981
• Docket Number: RAYBESTOS-MANHATTA,80-193,INC,Nos. 79-1943,s. 79-1943
• Parties: Joseph ALESSI et al., Appellants, v. , et al. Henry BUCZYNSKI et al., Petitioners, v. The GENERAL MOTORS CORPORATION et al
• Court: U.S. Supreme Court

451 U.S. 504

101 S.Ct. 1895

68 L.Ed.2d 402

Joseph ALESSI et al., Appellants,

v RAYBESTOS-MANHATTAN, INC., et al.

Henry BUCZYNSKI et al., Petitioners,

v. The GENERAL MOTORS CORPORATION et al.

Nos. 79-1943, 80-193.

Argued March 4, 1981.

Decided May 18, 1981.

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 pre-empt 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, 100 S.Ct. 1723, 64 L.Ed.2d 354. 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 pre-empted 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 pre-emption of state efforts to regulate pension terms. Pp. 521-526.

616 F.2d 1238, affirmed.

Theodore Sachs, Detroit, Mich., for appellants in No. 79-1943.

Marc C. Gettis, Roselle Park, N. J., for petitioners in No. 80-193.

Laurence Reich, Newark, N. J., for respondent in No. 80-193.

Warren J. Casey, Morristown, N. J., for appellees in No. 79-1943.

Justice MARSHALL delivered the opinion of the Court.

Some private pension plans reduce a retiree's pension benefits by the amount of workers' compensation awards received subsequent to retirement. In these cases we consider whether two such offset provisions are lawful under the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. (1976 ed. and Supp. III), and whether they may be prohibited by state law.

I

Raybestos-Manhattan, Inc., and General Motors Corp. maintain employee pension plans that are subject to federal regulation under ERISA. Both plans provide that an employee's retirement benefits shall be reduced, or offset, by an amount equal to workers' compensation awards for which the individual is eligible.¹ In 1977, the New Jersey Legislature amended its Workers' Compensation Act to expressly prohibit such offsets. The amendment states that "[t]he right of compensation granted by this chapter may be set off against disability pension benefits or payments but shall not be set off against employees' retirement pension benefits or payments." N.J.Stat.Ann. § 34:15-29 (West Supp. 1980-1981) (as amended by 1977 N.J.Laws, ch. 156).

Alleging violations of this provision of state law, two suits were initiated in New Jersey state court. The plaintiffs in both suits were retired employees who had obtained workers' compensation awards subject to offsets against their retirement benefits under their pension plans.² The defendant companies independently removed the suits to the United States District Court for the District of New Jersey. There, both District Court Judges ruled that the pension offset provisions were invalid under New Jersey law, and concluded that Congress had not intended ERISA to pre-empt state laws of this sort. The District Court Judges also held that the offsets were prohibited by § 203(a) of ERISA, 29 U.S.C. § 1053(a). This section prohibits forfeitures of vested pension rights except under four specific conditions inapplicable to these cases.³ The judges concluded that offsets based on workers' compensation awards would be forbidden forfeitures and struck down a contrary federal Treasury Regulation authorizing such offsets.⁴

The United States Court of Appeals for the Third Circuit consolidated the appeals from these two decisions and reversed. 616 F.2d 1238 (1980). It rejected the District Court Judges' view that the offset provisions caused a forfeiture of vested pension rights forbidden by § 1053. Instead, the Court of Appeals reasoned, such offsets merely reduce pension benefits in a fashion expressly approved by ERISA for employees receiving Social Security benefits. Accordingly, the Court of Appeals found no conflict between ERISA and the Treasury Regulation approving reductions based on workers' compensation awards and ERISA. Finally, the court concluded that the New Jersey statute forbidding offsets of pension benefits by the amount of workers' compensation awards could not withstand ERISA's general pre-emption provision, 29 U.S.C. § 1144(a). We noted probable jurisdiction of the appeal taken by the former employees of Raybestos-Manhattan, Inc., and granted certiorari on the petition of former employees of General Motors Corp. 449 U.S. 949 and 950, 101 S.Ct. 351 and 352, 66 L.Ed.2d 213 (1980). For convenience, we refer to the former employees in both cases as retirees. We affirm the judgment of the Court of Appeals.

II

Retirees claim that the workers' compensation offset provisions of their pension plans contravene ERISA's nonforfeiture provisions and that the Treasury Regulation to the contrary is inconsistent with the Act. Both claims require examination of the relevant sections of ERISA.

A

As we recently observed, ERISA is a "comprehensive and reticulated statute," which Congress adopted after careful study of private retirement pension plans. Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361, 100 S.Ct. 1723, 1726, 64 L.Ed.2d 354 (1980). In Nachman, we observed that Congress through ERISA wanted to ensure that "if a worker has been promised a defined pension benefit upon...