Feds Must Face Constitutional Suit Over Teamsters Pension Cuts

United Parcel Service Inc. retirees who sued the federal government over a 2014 pension law that authorized 29% cuts to their benefits advanced their lawsuit alleging an unconstitutional governmental taking of property, according to a U.S. Court of Federal Claims ruling.

The retirees have a valid property interest in their right to receive unreduced payments of their vested pension benefits under the terms of their plan, Judge Richard A. Hertling said in an April 8 opinion.

He denied the government’s request for summary judgment on the retirees’ claim under the Fifth Amendment’s takings clause.

He said the retirees’ property interest under the plan wasn’t significantly diminished based on the plan’s subjection to the “robust regulatory framework” of the Employee Retirement Income Security Act and the Internal Revenue Code.

The retirees’ lawsuit is the first to challenge the 2014 Multiemployer Pension Reform Act. The law allows a critically underfunded multiemployer plan to request approval from the Treasury Department to cut benefits if the plan shows that doing so would avoid insolvency.

The UPS retirees say the government unconstitutionally took their property when it approved the Teamsters’ decision to cut retiree benefits by 29% and active employee benefits by 18%.

The government argued that its decision authorizing the cuts wasn’t a taking under the Fifth Amendment, because it was the New York State Teamsters Conference Pension and Retirement Fund that actually made the reductions.

But Hertling said the retirees could go to trial on this point, explaining that “government authorization to a third party to seize a plaintiff’s property may give rise to a taking.”

However, Hertling rejected the retirees’ claims accusing the government of orchestrating an unlawful taking through coercion or agency control.

Hertling also emphasized that the dispute may be affected by further legislative developments, including the American Rescue Plan Act of 2021.

This law allows pension plans that reduced benefits under the MPRA to apply for economic assistance. Plans that seek funding under this law must commit to reimbursing and restoring benefits cut under the MPRA.

Because of this legal backdrop, Hertling said his opinion was limited to the specific issues raised by the government’s motion for summary judgment.

Messing & Spector LLP represents the retirees. The Department of Justice represents the government.

The case is King v. United States, 2022 BL 122479, Fed. Cl., No. 1:18-cv-01115, 4/8/22.