ERISA’s Anti-Cutback Rule

ERISA section 1054(g)(1), provides in relevant part: “The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan ….” The anti-cutback rule is a “crucial” aspect of ERISA’s protection of pension benefits. In light of the importance of the anti-cutback rule and in order to avoid work-arounds that curtail accrued benefits by means other than formal plan amendments, courts have deemed actions to be violative of the anti-cutback rule even when there had not been a formal amendment of a pension plan.

Treasury regulations implementing the anti-cutback rule make the point explicitly: a pension plan may not deny a protected benefit “directly or indirectly, through the exercise of discretion ….” Moreover, plan participants are entitled to notice whenever a plan amendment is seriously considered or enacted.

Sometimes a violation of the anti-cutback provision will give rise to a breach of fiduciary duty claim. According to the Second Circuit, amendments to multi-employer plans which “affect the allocation of a finite asset pool to which each participating employer has contributed” could properly be treated as fiduciary functions. However, the Third Circuit does not agree and does not make a distinction between single-employer or multi-employer pension plans.

Thus, the Third Circuit has adopted the view that ERISA’s fiduciary duty provision does not apply to amendment of multiemployer plans. Therefore, absent some other culpable conduct, a violation of ERISA’s anti-cutback provision will not, by itself, support a breach of fiduciary claim in New Jersey.