## Facts

- Edward Shaw, a retired employee of the International Association of Machinists and Aerospace Workers (IAM), received benefits from the IAM Pension Plan.
- The plan included a “living pension” feature that adjusted retirees’ pension payments to track the current salary of the position from which the retiree had retired.
- After receiving actuarial advice warning the living pension would impose increasing financial strain and threaten fiscal soundness, the plan sponsor amended the plan to phase out and reduce the salary-linked increases over several years.
- The amendment decreased benefits for existing retirees, including Shaw (e.g., providing only a fraction of the prior salary-linked adjustment in certain years).
- Shaw brought a class action under ERISA challenging the amendment as an unlawful reduction of accrued benefits under 29 U.S.C. § 1054(g).
- On cross-motions for summary judgment, the district court granted summary judgment for Shaw and the class and denied the plan’s motion.

## Issues

1. Whether the plan’s salary-linked “living pension” feature constituted part of a participant’s “accrued benefit” protected by ERISA’s anti-cutback rule.
2. Whether ERISA § 204(g), 29 U.S.C. § 1054(g), was effective and applicable to the plan when the amendment was adopted, such that the amendment was prohibited.

## Decision

- The court granted summary judgment for Shaw and the class and denied defendants’ summary judgment motion.
- The court held the living pension feature was part of the accrued benefit for participants who had earned it.
- The court held the amendment’s phase-out and reduction of salary-linked increases decreased accrued benefits in violation of ERISA § 204(g).
- The court concluded § 204(g) applied to the plan at the time of the amendment and no statutory exception justified the reduction.
- As relief, the amendment was invalid to the extent it reduced protected accrued benefits.

## Legal Principles

- ERISA § 204(g), 29 U.S.C. § 1054(g), prohibits any plan amendment that decreases a participant’s accrued benefit, unless a specified statutory exception applies.
- In a defined-benefit plan, “accrued benefit” includes the plan’s benefit formula and features that determine the annual retirement benefit amount under the plan’s terms once earned.
- A post-retirement adjustment mechanism embedded in the plan’s benefit formula (such as salary-linked increases) can be a protected component of the accrued benefit, not merely an ancillary benefit.
- Financial or actuarial concerns about plan cost do not permit reducing accrued benefits absent compliance with an applicable statutory exception.
- The anti-cutback rule applies according to ERISA’s effective-date scheme; if effective as to the plan on the amendment date, a benefit-reducing amendment is unlawful.

## Conclusion

The district court held that the IAM Pension Plan’s “living pension” feature was part of retirees’ accrued benefits and that a plan amendment phasing out and reducing those salary-linked increases violated ERISA’s anti-cutback rule because § 204(g) applied and no statutory exception authorized the reduction.


Shaw v. Int’l Ass’n of Machinists & Aerospace Workers Pension Plan, 563 F. Supp. 653 (C.D. Cal. 1983)