Private Pensions: ERISA Permits Offsets of Private Pension Benefits by Amounts Received in Worker\u27s Compensation Awards, Preempting State Laws Prohibiting Such Offsets

Alessi v. Raybestos-Manhattan, Inc., 101 S. Ct. 1895 (1981). In response to a growing national concern over the loss of private pension benefits by employees, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA). Congress\u27 primary concern was correcting the inadequate vesting and funding requirements which frequently resulted in defeating retirees\u27 post employment expectations. Through ERISA Congress sought to improve the equitable character and soundness of such plans by providing (1) nonforfeitable vested rights, (2) minimum funding requirements, and (3) termination insurance to protect retirees from insolvent employers. An additional goal of Congress was to encourage expansion of private pension plans. Congress was aware of the need to. minimize the cost of maintaining a plan in order to achieve this additional goal. Thus, ERISA is an attempt to eliminate the inequities which plagued the private pension system prior to its enactment, while simultaneously avoiding undue expense to employers. In order to fulfill these objectives without intrusive state interference, Congress included in the Act a general preemption provision. Due to the complexity of the Act and the existence of competing interests, i.e., assuring adequate funding to insure benefits upon retirement versus minimizing the cost to employer to encourage expansion, various disputes have arisen over whether certain reductions in pension benefits constitute. a forfeiture of vested rights in violation of section 1053 of ERISA. The United States Supreme Court resolved such a dispute in Alessi v. Raybestos-Manhattan, Inc. The Alessi Court was confronted with the issue whether a collectively bargained pension plan allowing offsets of pension benefits by the amount of workers’ compensation awards constitutes such a forfeiture; and if not, whether the Act preempts a state worker\u27s compensation law which expressly prohibits such offsets. To determine the permissibility of the offsets it was necessary for the Court to concern itself with the competing interest involved in such a dispute. To permit such an offset may appear inconsistent with Congress\u27 desire to assure a nonforfeiture of retiree\u27s vested rights to his pension benefits, but would be consistent with Congress\u27 desire to reduce the cost to the employer, and thus encourage expansion of the private pension system. Allowing this offset would enable the employer to reduce his cost of maintaining the plan by calculating these payments into it