In Knowlton v. Anheuser-Busch Companies Pension Plan (Knowlton), the US Court of Appeals for the Eighth Circuit held that the plaintiffs, a class of former salaried employees of Busch Entertainment Corporation (BEC) (a subsidiary of Anheuser–Busch Companies LLC), were entitled to enhanced benefits under the terms of the Anheuser–Busch Companies Pension Plan (plan).

The plaintiffs were former salaried employees of BEC, which was a member of the Anheuser-Busch family of companies who participated in the plan. In 2008, a change in control (as defined under the plan) occurred when Anheuser-Busch InBev, N.V. (InBev) combined the Anheuser-Busch Companies. In 2009, BEC was sold to a company outside the controlled group (for more information on controlled groups, see Practice Note, Controlled Group and Affiliated Service Group Rules).

The plan provided an enhanced pension benefit equal to five years of the participant's credited service (enhanced benefits) if the employee was involuntarily terminated from employment with a member of the company's controlled group within three years of a change in control.

In 2012, the plaintiffs filed a claim to receive the enhanced benefits under the plan. The plan administrator denied the claims because the plaintiffs did not experience an actual break in employment, reasoning that enhanced benefits could not be provided when there is simply a change in the owner of the entity employing the individual during a period of continuous employment. The plaintiffs appealed the denials to the plan's Appeals Committee, which affirmed the administrator's decision.

The plaintiffs commenced a class action lawsuit under ERISA Section 502(a)(1)(B) (29 U.S.C. § 1132(a)(1)(B)) to obtain enhanced benefits under the plan (see Practice Note, ERISA Litigation: Causes of Action Under ERISA Section 502). The district court applied the same reasoning as the Sixth Circuit in Adams v. Anheuser-Busch Companies, Inc., 758 F.3d 743 (6th Cir. 2014) (Adams). Adams dealt with the same issue as Knowlton: the plaintiffs were participants in the Anheuser-Busch Companies Pension Plan and former employees of an Anheuser–Busch Company until InBev sold it to an entity outside of the company's controlled group. The plaintiffs in Adams also sought enhanced benefits under the same plan provision. The Sixth Circuit held that the plan requires only that the plan participant's employment with the controlled group be involuntarily terminated after a change in control, "not that the individual experience a job loss or some otherwise undefined period of unemployment" (Adams, 758 F.3d at 749).

Accordingly, the district court found that the enhanced benefits provision applied because:

(No. 15-3538, No. 15-3851, (8th Cir. Feb. 22, 2017).)

Several months after it entered judgment on the pleadings in favor of the plaintiffs, the district court:

Anheuser-Busch filed notice of appeal to the Eighth Circuit.

As required by Firestone Tire & Rubber Co. v. Bruch (Firestone), the Eighth Circuit reviewed the Anheuser-Busch plan administrator's decision for an abuse of discretion (489 U.S. 101, 115 (1989)) (for more information on Firestone, see Practice Note, ERISA Litigation: Standard of Review, and Standard Clauses, SPD Language, Firestone Plan Interpretation and Plan Language, Firestone Plan Interpretation). Under Firestone, the administrator's interpretation of the plan will be given deference and upheld by the court if the interpretation is reasonable.

On appeal, Anheuser-Busch argued that "termination" in the plan's enhanced benefit provision should be analyzed in conjunction with other plan provisions that use the phrase "termination of employment" to mean a break in employment, such as:

The Eighth Circuit found that neither section demonstrates that "termination" should mean "loss of a job." Furthermore, these sections are irrelevant because the plaintiffs were not transferred from their former positions.

The Eighth Circuit explained that the language of the enhanced benefits provision must be understood by applying the words' plain meaning. Because the plaintiffs' employment with the controlled group was terminated within three years after a change in control, it was irrelevant that the plaintiffs' did not experience a break in employment and continued working in the same capacity once they were no longer employed by a member of the controlled group.

The Eighth Circuit concluded that the plan is unambiguous and the plan administrator cannot reasonably interpret the enhanced benefits provision to require plan participants to experience an actual break in employment. Even under Firestone's deferential abuse-of-discretion standard, "a plan administrator cannot contradict the plain language of an ERISA plan to deny benefits." In holding that the plaintiffs were entitled to an enhanced pension benefit under the plan, the Eighth Circuit concurred with the district court in this case and the Sixth Circuit in Adams.

Employers sponsoring retirement plans that provide for additional benefits relating to transactions that result in involuntary terminations of employment must think carefully about the circumstances under which they intend the provision to apply and should draft that provision with the utmost care and specificity. As Knowlton shows, courts will not defer to a plan administrator's interpretation of the plan's intent under Firestone if the administrator's interpretation contradicts the plain language of the plan.