Advisory Opinion 1977-76a

Dear     Gerber:

This is in response to the letter from you and Mr. James W. Townsend of The Budd Company requesting an advisory opinion regarding certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA) as they relate to several matters collectively bargained between the UAW and The Budd Company.

You represent in your letter and the memorandum enclosed therewith that in 1973 the UAW and The Budd Company agreed upon a 6 year retirement agreement. After bargaining in 1977, the two parties agreed to the following:

1. An increase in the percentage benefit of the surviving spouse of an employee retiring on or after November 1, 1976; and
2. An increase in the Special Age 65 Benefit effective November 1, 1976;
3. Payment of a one-time lump sum from corporate assets to employees retiring before January 15, 1977, who are eligible to receive benefits as of May 1, 1978.

The latter provision of the 1977 agreement was made conditional upon securing a satisfactory ruling from the Department of Labor.

Specifically, you request an advisory opinion that these 1977 requirements do not constitute a termination of the 1973 retirement agreement under sections 211(c) and 306(c) of ERISA.

Section 306(c)(1) provides that the minimum funding standards of Part 3 of Title I of ERISA shall not apply to any play in effect on January 1, 1974, pursuant to a collective bargaining agreement until the earlier of the dates specified in section 211(c)(1)(A) or (B). Section 211(c)(1) provides that such plans will not be treated as not meeting the requirements of sections 204 and 205 solely because of a supplementary or special plan provision for any plan year before the year which begins after the earlier of the date on which the last collective bargaining agreement relating to the plan terminates or December 31, 1980.

The statute does not define what constitutes termination of a collective bargaining agreement relating to a plan for purposes of section 211(c). However, a House Ways and Means Committee Report (House Report 93-807, p. 51-52) states such an agreement “ . . . will not be considered terminated if it can be (or is) reopened with respect to narrow issues only. For example, a collective bargaining agreement would not be considered as being terminated for this purpose if it can be reopened with respect to the benefit payable to a surviving spouse, if it can be reopened because of a change in payments with respect to voluntary coverage under Part B of the Medicare benefits under the Social Security Act or if it can be reopened to increase benefits with respect to a quite limited group of employees.” The Conference Committee Report on ERISA (House Report 93-1280, p. 267) incorporated these statements by reference.

Based on your representations, the supplementary material enclosed with your letter, and the intent of the Congress as shown in the Committee Reports, we conclude that the 1977 agreements on the Special Age 65 Benefit and the increased surviving spouse benefit do not constitute termination of the 1973 retirement agreement. Lastly, the agreement for The Budd Company to pay a lump sum to certain retirees will not constitute a termination of the 1973 retirement agreement because it in any event deals with a narrow issue within the meaning of the legislative history cited above.

Notwithstanding the above, this letter should not be deemed to be an opinion of the Department as to whether section 211(c) applies to the plan. In this regard, we are issuing no opinion herein as to whether the agreements mentioned in your letter constitute “collective bargaining agreements” for purposes of section 211(c)(1) of ERISA or whether the plan’s participation and vesting rules in effect on the date of enactment of ERISA were not less favorable to participants, in the aggregate, than the rules provided under sections 202, 203, and 204 of ERISA or whether the plan contains a “supplementary or special plan provision” within the meaning of section 211(c)(2).

Because sections 211(c) and 306(c) have parallel provisions in ERISA section 1017(c) which is under the jurisdiction of the Internal Revenue Service, we have conferred with representatives of the Service and they have indicated their concurrence in the views set forth above as the apply to that section.