The TaxGuru has posted a cartoon here which illustrates in humorous fashion how an ERISA section 510 claim* might arise. The caption of the cartoon reads: “I know you’re three weeks away from retirement, but it’s either fire you now or I have to fork out for another gold watch.” Sadly enough, similar sorts of scenarios involving pension and health benefits have been the subject of much litigation as you can read about in this previous post here. I suppose one would argue that in the cartoon, the watch is not really a “benefit” protected by ERISA. However, that issue–when are in-kind benefits covered by ERISA?–reminds me of the well-known “grocery voucher” case decided last year–Musmeci et al. v. Schwegmann Giant Super Markets, Inc. et al.–in which the employer provided regular grocery vouchers to retirees when they retired from the employer with certain age, service, and position. When a qualifying employee retired, the employer would send the retiree a set of four grocery vouchers worth a total of $216 each month. These vouchers were valid for a period of thirty days, redeemable only at stores owned by the employer.
When the employer terminated the grocery voucher program due to financial difficulties and a sale of the business, the retirees sued claiming they were vested in a pension benefit plan under ERISA. The district court held that the voucher program did indeed qualify as a pension benefit plan under ERISA. On appeal, the Fifth Circuit agreed and upheld the district court’s opinion that the CEO and others were liable as fiduciaries of the plan and that the plaintiffs were entitled to monetary relief for benefits denied.
In reaching its decision, this is what the court had to say about in-kind benefits:
To determine whether ERISA applies to the Voucher Plan, we begin our analysis with an examination of the language of the statute itself. ERISA defines an “employee pension benefit” plan as:
any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program . . . provides retirement income to employees. . . 29 U.S.C. § 1002 (2) (A) (i).The parties agree that [the employer] established a “program.” Thus, the primary issue this court must resolve is whether the vouchers issued pursuant to [the employer’s] Voucher Plan provided the Plaintiffs with “retirement income.”
Neither ERISA’s statutory provisions nor the federal regulations define the term “income.” However, they do not affirmatively require that the pension benefit be paid in cash. Moreover, the Department of Labor (DOL) refused to declare as a general policy whether in-kind benefits are regulated by ERISA. See ERISA Advisory Op. (March 26, 1999), 1999 ERISA LEXIS 11. We have likewise found no controlling case law directly addressing the issue. . .
Even if we were to adopt the plain or ordinary meaning of “income,” our conclusion would be the same. As noted by the Supreme Court in Lukhard v. Reed, the term “income” is commonly understood to mean a “gain or recurrent benefit usually measured in money.” Lukhard v. Reed, 481 U.S. 368, 374 (citing Webster’s Third International Dictionary 1143(1976)). Because the vouchers provided a gain or benefit to . . . employees and could readily be measured in money, they would constitute income as the term is generally understood.
In addition to holding that the voucher program constituted a benefit plan subject to ERISA, the Fifth Circuit affirmed the lower court’s decision that the CEO and other defendants were fiduciaries of the “plan” or voucher program, stating that the term “fiduciary” was to be “liberally construed in keeping with the remedial purposes of ERISA” and that “the term should be defined not only by reference to particular titles, but also by considering the authority which a particular person has or exercises over an employee benefit plan.