The Employee Retirement Income Security Act (ERISA) requires all plan fiduciaries to discharge their duties with respect to a plan solely in the interest of the participants and beneficiaries. A problem arises when what’s best for all participants is not best for a select few beneficiaries.
This situation will generally arise when the fund for a plan is in financial danger. In response, the plan fiduciaries decide to check the eligibility requirements of all those receiving pensions and cancel the benefits of those beneficiaries who were never entitled to a pension in the first place. This is a mechanism applied to help the fund stay financially afloat. It is needed so participants who are not yet entitled to a pension will one day be able to apply for one. However, the plan fiduciaries also have a duty to those already receiving pensions, and by canceling those pensions, they would not be acting in the interest of those beneficiaries.
Courts in general will be more lenient regarding plan fiduciary decisions when they are made to maintain the fund’s actuarial soundness. However, those decisions cannot be arbitrary or capricious, meaning that plan policies cannot be amended for the sole purpose of canceling beneficiary pensions. As a side note, all amended policies must be published so all participants and beneficiaries have the opportunity to protect themselves.
If you are a plan administrator and have a dilemma involving conflicted participant/beneficiary interests please contact an employment law attorney.