Opinion · Court of Appeals for the Fifth Circuit

Flynn v. Aetna Casualty & Surety Co.

Flynn v. Aetna Cas. & Sur. Co., 698 F.2d 758 (5th Cir. 1983)

Type: Opinion
Court: Court of Appeals for the Fifth Circuit
Jurisdiction: Federal
Date: 1983-02-22
Topic: general

TATE, Circuit Judge: The plaintiffs, a former bank employee and his spouse, seek to compel payment under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. (1974), of certain pension benefits allegedly due them by the defendants, the employer’s profit sharing and retirement plans. The central issue of the litigation is presented by the plaintiffs’ claim that ERISA forbids forfeiture of a plan participant’s benefits by application of plan clauses, such as those used here, that permit forfeiture for reasons of the employee’s early retirement or termination for misconduct. ERISA § 203(a), 29 U.S.C. § 1053(a) (1974). We affirm, however, the district court’s rejection of this claim; because the employee was terminated on February 25, 1975, after ERISA was generally enacted (September 1974) but before section 203, the nonforfeiture provision, came into effect (January 1, 1976), the plans properly applied the “bad-boy” clauses preventing recovery.1 We find persuasive, as did the district court, the reasoning of a factually-similar case, Fremont v.

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FLYNN v. AETNA CASUALTY SURETY CO.,698 F.2d 758(5th Cir. 1983)

MR. AND MRS. DONALD P. FLYNN, PLAINTIFFS-APPELLANTS-APPELLEES, v. AETNA

CASUALTY SURETY CO. AND THE UNITED STATES OF AMERICA,

INTERVENORS-APPELLEES-APPELLANTS, v. SAVINGS PROFIT SHARING PLAN FOR THE

EMPLOYEES OF REPUBLIC OF TEXAS CORP. AND ITS PARTICIPATING AFFILIATES, ET

AL., DEFENDANTS-APPELLEES.

No. 82-1180.

United States Court of Appeals, Fifth Circuit.

February 22, 1983.

Kelly D. McGehee, Dallas, Tex., Robert D. Conkel, Richardson, Tex., for Flynn.

Thompson, Knight, Simmons Bullion, David R. McAtee, Dallas, Tex., for Sav. Profit, et al.

James A. Williams, Dallas, Tex., for Aetna Cas., intervenor.

Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, Chief, Appellate Section, Wynette J. Hewett, John A. Dudeck, Jr., Attys., Tax Div., Dept. of Justice, Washington, D.C., for U.S., intervenor.

Appeals from the United States District Court for the Northern District of Texas.

Before WISDOM, RUBIN and TATE, Circuit Judges.Page 759

TATE, Circuit Judge:

[1] The plaintiffs, a former bank employee and his spouse, seek to compel payment under the Employee Retirement Income Security Act of 1974 (ERISA),29 U.S.C. § 1001et seq.(1974), of certain pension benefits allegedly due them by the defendants, the employer's profit sharing and retirement plans. The central issue of the litigation is presented by the plaintiffs' claim that ERISA forbids forfeiture of a plan participant's benefits by application of plan clauses, such as those used here, that permit forfeiture for reasons of the employee's early retirement or termination for misconduct. ERISA § 203(a),29 U.S.C. § 1053(a) (1974). We affirm, however, the district court's rejection of this claim; because the employee was terminated on February 25, 1975,afterERISA was generally enacted (September 1974) but before section 203, the nonforfeiture provision, came into effect (January 1, 1976), the plans properly applied the "bad-boy" clauses preventing recovery.¹

[2] We find persuasive, as did the district court, the reasoning of a factually-similar case,Fremont v. McGraw-Edison Company,606 F.2d 752(7th Cir. 1979). InFremont,the employee was terminatedbeforeERISA section 203 came into effect, benefits were formally denied in accordance with ERISA notice and hearing proceduresaftersection 203 became effective, so that section 203 proscribed forfeiture. TheFremontcourt rejected this argument, emphasizing that section 203, which provides that "anemployee'sright to his normal retirement benefit is nonforfeitable" (emphasis added), "only protects against forfeiture the benefits of those who were in an employee status on January 1, 1976, or thereafter."Fremont,606 F.2d at 755. Since the plaintiff here was properly dismissed in 1975, he is not an "employee" for purposes of the protective statute.²

[3] Accordingly, we affirm the district court's conclusion, in its excellently reasoned opinion, that the plaintiff employee, discharged prior to the 1976 effective date of ERISA's non-forfeiture provision (section 203), is precluded from recovery.

[4] We likewise find no error in the district court's determination that the plaintiff employee's spouse is not, under Texas community property law, entitled to a right in the pension and profit sharing plans greater than that of the employee himself.

[5] Accordingly, we AFFIRM the judgment of the district court.

[6] AFFIRMED.

The plan clauses in effect at the time the plaintiff employee was terminated in 1975 provide that a participant dismissed for dishonesty forfeits all amounts but his own contributions to the plan and that "any employee whose service is terminated prior to the date as of which he has both attained the age of 55 years and completed 15 years of credited service shall not be entitled to any benefit under the plan whatever."

At the time the plaintiff employee was dismissed from the bank for dishonesty, he had served 16 years, but had not reached 55 years of age. ↩
We note that this holding is not inconsistent with the Second Circuit's decision inRiley v. MEBA Pension Trust,570 F.2d 406(2d Cir. 1977). InRiley,the plaintiff's benefits weresuspended,not terminated, in 1975. After section 203 became effective in 1976, the pension plan could not continue to enforce the suspension clause, even against a non-employee. Here, theterminationof benefits was complete when the plaintiff was dismissed. ↩