Carter v. Comm’r of Internal Revenue

In 2006 Finkl, a Chicago steel producer, initiated termination of its defined benefit pension plan under the Employment Retirement Income Security Act, apparently anticipating merger with another company. The Plan was amended in 2008, to include Section 11.6, a special provision for distributions in connection with the contemplated termination, to apply if a participant “ha[d] not begun to receive a benefit under the Plan at the time benefits are to be distributed on account of termination of the Plan.” In May 2008, Finkl decided not to terminate the Plan. Section 11.6 was deleted. Finkl notified the IRS that the Plan was not going to terminate. Seven Finkl employees sued, alleging that they were entitled to an immediate distribution of benefits while they were still working for Finkl and that repeal of Section 11.6 violated the anti-cutback terms of the Plan, I.R.C. 411(d)(6), and ERISA, 29 U.S.C. 1054(g). The IRS sent Finkl a favorable determination letter that the Plan had retained its tax qualified status. In 2011, the Seventh Circuit affirmed the district court’s award of summary judgment to Finkl. The employees then pursued a claim in the Tax Court, which ruled that they were collaterally estopped by the Seventh Circuit decision from challenging the 2009, determination letter, which concluded that the Plan had not been terminated and continued to qualify for favorable tax treatment. The Seventh Circuit affirmed. View "Carter v. Comm'r of Internal Revenue" on Justia Law