Retirement Plan Has Authority to Arbitrate
Thursday, August, 11, 2016
According to a federal judge’s recent ruling, Educational Testing Service, a standardized-test making company, can force an employee’s widow to arbitrate claims concerning the company’s retirement plan. The ruling upheld a provision in Education Testing Service’s retirement plan that required claims over benefits in the plan be resolved in binding arbitration. Furthermore, the cost of arbitration must be “equally shared” by the claimant and the plan.
The employee’s widow proposed a class action suit against the company challenging the spousal benefit calculation made by the company and its service provider, Teachers Insurance and Annuity Association of America – College Retirement Equities Fund. The widow claimed both entities placed restrictions on qualified pre-retirement spousal annuities available to surviving spouses.
The mandatory arbitration clause was upheld by the court. The entities argued the widow’s claims should be dismissed under the mandatory arbitration provision in the retirement plan. She disagreed, stating the provision violated ERISA Section 503, claiming she was not given a reasonable opportunity for full and fair review of her claim.
Judge Michael A. Shipp of the US District Court for the District of New Jersey sided with the company, citing a previous ruling by a panel of judges for the US Court of Appeals for the Eight Circuit in the case Bond v. Twin Cities Carpenters Pension Fund. The judge adopted the reasoning in that case and ordered the widow to submit her claims in mandatory arbitration. He did, however, state in a footnote in his ruling that the widow wouldn’t be precluded from arguing in the future that mandatory arbitration provisions would deny her a forum to vindicate her rights.