In Kifafi v. Hilton Hotels Retirement Plan, — F.3d —, No. 11-7113, 2012 WL 6216631 (D.C. Cir. Dec. 14, 2012), the D.C. Circuit affirmed a judgment holding that Hilton violated ERISA’s anti-backloading provisions, despite a subsequent amendment purporting to cure the violation in response to plaintiffs’ claims. Under the terms of the pre-1999 plan, the plan calculated normal retirement benefits as a function of compensation and years of service, less benefits payable to the participant under another pension plan or government-sponsored system, such as Social Security. The pre-1999 plan expressly stated an intent to comply with backloading rules by employing the so-called “133-1/3 rule” when computing a participant’s accrued benefit. Plaintiffs brought a class action, alleging the plan failed to credit all years of service when calculating early retirement benefits, and impermissibly backloaded benefit accruals to later years of service in violation of the 133-1/3 rule. After granting summary judgment to plaintiffs on both claims, the district court ordered Hilton (1) to amend the benefit accrual formula to comply with the 133-1/3% rule and (2) to administer a claim procedure for the purpose of calculating years of union service for vesting purposes. On appeal, Hilton argued that its promise of compliance made the court’s chosen remedy unnecessary, and that the amendment cured the alleged violations. The court rejected Hilton’s argument, noting that defendants could not divest the court of jurisdiction merely by promising to abstain from future ERISA violations. The court also rejected Hilton’s argument that the lower court’s remedial order was improper, in that it required the plan to comply with the 133-1/3 rule, as opposed to other modes of complying with ERISA’s backloading rules. Affirming the ordered remedy of compliance of the 133-1/3% rule, the court reasoned that once the district court “determined the plan violated ERISA, it entered the world of equity,” and held that the remedy need not be “a reflection of the legal violations supporting the remedy.” Finally, the court rejected plaintiffs’ argument that the district court improperly excluded nonunion nonparticipating years of service from the class. The court reasoned that even if plaintiffs’ complaint properly pled a claim for nonparticipating years of service for nonunion employees, Hilton’s alleged failure to count nonunion nonparticipating service affected individuals other than those affected by its failure to count union service, and thus raised separate questions of fact and potential remedies. Accordingly, the court concluded, these claims would not be appropriate for inclusion into the union service class.
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