The Third Circuit Court of Appeals, in a case of first impression, held that the minimum participation standards set out by the Employee Retirement Income Security Act 1974 (ERISA) did not forbid an employer from limiting participation in a pension plan to salaried employees. The court agreed that an employer could not impose age or length of service requirements beyond those permitted by ERISA, but it found no contrary directive in ERISA that overrode the express terms of the plans. Even if the court could not find a precedent addressing the salaried versus hourly job classification as a permitted requirement imposed in the governing plan documents by the plan sponsor, it noted that several other Circuit Courts had upheld an exclusion of leased employees against challenges based on the same provision of ERISA. The court also noted that under the parallel provision of the Internal Revenue Code, long-standing regulations allowed an hourly versus salaried distinction. The existence of the Internal Revenue Service (IRS) regulations perhaps explained why the case was of first impression, but the IRS regulations did not govern the plaintiff’s ERISA claim. Even if the opinion was not explicit, the court presumably recognised that a finding for the plaintiff would have effectively nullified the IRS regulations and upset a historic practice that pre-dated ERISA.

Source: Bauer v. Summit Bancorp, (3rd Cir. 2003) . Howard Pianko, Epstein Becker & Green email: [email protected]