By Cyril Tuohy
A federal appeals court in Cincinnati has upheld a lower court ruling in favor of Girl Scouts of the U.S.A. after its Middle Tennessee council sued the national organization over the restructuring of its pension plan.
U.S. Circuit Judge Judge Eugene Siler, writing for the three-judge panel of the U.S. Court of Appeals for the Sixth Circuit, found that the federal Employee Retirement Income Security Act (ERISA) contained enforcement mechanisms that applied to the case and that the court was not in a position to create new federal laws, as requested by the local council.
The Nashville-based Girl Scouts of Middle Tennessee (GSMT) sued the national organization in 2012 after Girl Scouts of the U.S.A. (GSUSA) restructured its pension plan from 312 local and regional Girl Scout councils into 112 councils.
In Girl Scouts of Middle Tennessee v. Girl Scouts of the U.S.A., GSMT argued that GSUSA had violated ERISA rules and federal and state common law. A lower court dismissed the claims.
In court documents, GSMT argued that it was not obligated to continue to participate in the pension plan, that GSUSA should be required to spin off GSMT pension plan assets, and that GSUSA’s changes to the retirement plan were not binding and GSUSA should indemnify GSMT for any liability.
As part of the restructuring, GSUSA added about 1,850 employees who had not previously contributed to the benefits plan but were scheduled to become eligible to receive lifetime pension annuity benefits through the plan.
In addition, GSUSA amended the retirement plan to include a Voluntary Early Retirement Incentive Plan, which allowed participants to subsidize and accelerate their pension eligibility.
GSMT argued that the changes caused GSMT, which was operating at a surplus, to incur new liabilities, as the National Girls Scout Councils Retirement Plan administered by GSUSA posted a deficit of $340 million in 2011, from a surplus of over $150 million in 2007.
GSUSA blamed the recession for the shortfall, and implemented increases in the contribution rates of the local councils. For GSMT, the contribution rate went from 3 percent in 2008 to 3.8 percent in 2009 to 9 percent in 2012 and 2011, and 10 percent in 2012.
The rate is scheduled to continue to increase through 2023, when it will reach between 10 percent and 16 percent, according to court documents.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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