Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
DIGIACOMO V. TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY:
WHY AND HOW THE SUPREME COURT SHOULD RESOLVE THE CIRCUIT SPLIT OVER
PRE-ERISA BREAKS IN SERVICE
There is a split in the circuits on whether the benefit accrual requirements of the Employee Retirement Income Security Act of 19741 (ERISA) allow pension plans to disregard an employee’s service before a pre-ERISA break in service.2 The split is the result of disagreement over how to interpret the interrelated provisions of ERISA’s participation, vesting, and benefit accrual requirements.3 The minimum vesting requirements expressly do not apply to years of service disregarded under a plan’s pre-ERISA break in service provisions.4 The benefit accrual requirements, however, lack an explicit exception for such service.5 In DiGiacomo v. Teamsters Pension Trust Fund of Philadelphia and Vicinity,6 the Third Circuit held that a pension plan violated ERISA’s benefit accrual requirements because it did not credit an employee’s years of service before a pre- ERISA break in service. The court’s decision aligns the Third and Second Circuits7 in opposition to the Seventh Circuit8 on this issue. The Supreme Court has denied certiorari.9 Thus, the requirements of ERISA vary from one circuit to the next, undermining the statue’s goal of national uniformity.10 To arrive at the decision in DiGiacomo, the Third Circuit relied primarily on two canons of statutory construction: plain meaning11 and negative pregnant.12 It misapplied both. The court’s plain meaning analysis misinterpreted the statute and ignored the legislative history, while its negative pregnant analysis misconstrued the purpose of the benefit accrual requirements. Moreover, the court did not adequately consider the relevant administrative agency interpretations, treatises, and policy implications. This Note critiques the DiGiacomo decision and suggests that the Supreme Court should have granted certiorari and resolved the circuit split in favor of the Seventh Circuit’s result. Part I discusses the relevant statutory framework. Part II describes DiGiacomo. Part III critiques the court’s plain meaning and negative pregnant analyses and suggests that these canons of statutory construction, as well as relevant administrative agency interpretations, treatises, and policy implications all lead to a conclusion contrary to that of DiGiacomo. Part IV concludes by discussing the current legal uncertainties that result from the split in the circuits, providing practical advice for employee benefits practitioners and plan sponsors, and explaining why and how the Supreme Court should have resolved the circuit split.