Alessi v. Raybestos-Manhattan, Inc.

Background

Several retired workers sued after their company pension payments were reduced by the amount of workers’ compensation awards they received. The retirees worked for two large employers with pension plans that expressly allowed such offsets. New Jersey amended its workers’ compensation law to forbid reducing retirement pensions by those awards, and the retirees sued under that state law. District courts sided with the retirees and struck down a federal regulation; the Court of Appeals reversed, and the Supreme Court agreed to resolve the dispute.

Reasoning

The central question was whether the federal pension law (ERISA) and a Treasury/IRS regulation allow pension plans to “integrate” other public benefits like workers’ compensation when calculating payouts. The Court explained that ERISA protects an employee’s right to a pension claim but does not guarantee a specific dollar amount set by Congress; plan designers generally control benefit formulas. Congress preserved integration with Social Security and related benefits, and the IRS had long approved similar reductions. The Court held the regulation reasonable and concluded that offsets for workers’ compensation do not violate ERISA’s prohibition on forfeiting vested rights.

Real world impact

Because ERISA governs these pension plans, New Jersey’s statute banning offsets cannot control ERISA-covered plans. Employers and pension plan designers may lawfully include or rely on offset clauses that subtract workers’ compensation from pension payments. As a result, retirees whose plans include such clauses can see lower monthly pensions when they receive workers’ compensation, and collective bargaining and federal rules will largely determine these outcomes.