Madison - St. Clair Record

Friday, August 23, 2019

Seventh Circuit reverses pension pad for retired railroad worker

By Record News | Mar 28, 2016


CHICAGO – U.S. District Judge David Herndon improperly inflated the pension of a railroad worker, Seventh Circuit appellate judges ruled on March 16.

Justice Richard Posner branded Herndon’s decision in favor of Madison County resident Roger Cocker as senseless.

Posner, Justice Joel Flaum, and Justice Frank Easterbrook granted relief to the Terminal Railroad pension plan only 19 days after hearing arguments.

“The plan administrator was right,” Posner wrote.

Terminal Railroad hired Cocker in 2006, after he left a job with Union Pacific.

In 2009, he elected to receive early retirement benefits from Union Pacific, at $1,022.94 a month.

If he had waited until 2019, he would have received $2,311.73 a month.

In 2010, he retired from Terminal Railroad.

The administrator of the Terminal Railroad pension plan, Kerry Paubel, figured that Cocker should receive $3,725.02 a month for his time with the two railroads.

From that amount Paubel subtracted $2,311.73, the benefit Cocker would have received from Union Pacific if he had waited until 2019.

Paubel set the monthly benefit from the Terminal Railroad plan at $1,413.29.

Cocker retained Terry Brown of Belleville, who filed suit in 2012.

Brown claimed Paubel should have subtracted Union Pacific’s early retirement benefit rather than the full benefit that would have begun in 2019.

Herndon stayed the proceedings in 2013, at the request of both sides, pending the outcome of a similar case before a federal judge in Missouri.

After the judge on that case ruled in favor of the railroad, Herndon lifted the stay.

Herndon increased Cocker’s benefit last September, finding Paubel’s decision conflicted with the plain meaning of terms in the pension plan’s documents.

He wrote that the Missouri decision did not bind him, and he disagreed with it.

He ruled that the Union Pacific early retirement benefit fit the Terminal Railroad plan’s definition of “retirement income payable.”

“Since Crocker retired early from Union Pacific, he will never be eligible for normal retirement benefits,” Herndon wrote.

“Thus, the higher normal retirement benefits from the Union Pacific plan are not payable and will never be payable to Cocker.”

Although he calculated the dispute at $1,288.79 a month, he awarded Cocker $555.53 a month without explaining the difference.

That increased the monthly benefit from the Terminal Railroad plan to $1,968.82.

Herndon awarded $36,109.45 in past due benefits, plus $3,316.99 in interest.

He awarded attorney fees of $53,500 to Brown and St. Louis lawyer James Singer, who had teamed with Brown after losing the Missouri case.

The Terminal Railroad plan appealed.

While the plan awaited a decision, the Eighth Circuit appellate court in St. Louis affirmed its victory in the Missouri case.

Like the Eighth Circuit, the Seventh Circuit sided with the Terminal Railroad plan.

Posner wrote that the early retirement benefit and the greater benefit available in 2019 were actuarially identical.

The present value of the two streams of money is the same, “because the smaller monthly benefit is received for 111 months longer than the larger one,” he wrote.

Deducting $1,022.94 would have made Cocker better off than if he had received his Union Pacific pension in larger payments for a shorter period, he wrote. By example, he imagined two employees, A and B, one choosing normal retirement and the other choosing benefits to begin now.

Posner wrote that they retired from Union Pacific the same day, went to work for Terminal Railroad the same day at the same salary, and retired from Terminal the same day, entitled to a monthly benefit of $4,000.

He wrote that Cocker’s position, echoed by Herndon, was that A would be entitled to $1,688.27 a month from Terminal’s plan, and B would be entitled to $2,977.06.

“That is senseless given the above assumptions about their work history, and is not required by the plan document,” Posner wrote.

He wrote that Paubel permissibly interpreted “payable” to require that benefits be offset by the total value of benefits received under a different plan.

“Otherwise the plan would be conferring a windfall on an employee who could vary the monthly payments that he received under that other plan,” he wrote.

He and his colleagues instructed Herndon to dismiss the suit with prejudice.

Want to get notified whenever we write about Union Pacific HQ ?

Sign-up Next time we write about Union Pacific HQ, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

Union Pacific HQ

More News