A 6^th U.S. Circuit Court of Appeals panel recently ruled on a case involving a disbursement of lump sum pension benefits for US Airways pilots. In 1994, the airline and the union agreed that US Airways would have 45 days from the date a pilot retired to calculate the pilot’s benefit without paying interest during those days. In 1996, a US Airways retiree elected to take a $488,500 lump sum benefit from his pension plan. The retiree claimed that the airlines owed him $14,700 in interest that he said accumulated in the 45 days between his retirement and the day that US Airways paid his benefit.

An arbitrator, who referenced the oral agreement and a history of around 780 lump sum payments the airline had made since 1989 without paying interest, ruled in favor of US Airways. Yet, several US retirees complained and sought class action status, saying that the oral agreement violated provisions of ERISA because it was not in writing, and it restricted how the plan would operate, making the lump sum benefit unequal to an annuity benefit.

A federal court ruled that the retirement board had exclusive jurisdiction over each of the cases, and that it could not be brought to a federal hearing. The court used the Railway Labor Act to guide its decision by classifying the complaint as a “minor dispute.”

The case highlights the fact that any issue that is not clearly defined in writing can become an open issue for litigation. Participants in all kinds of ERISA plans need to pay more attention to participant’s rights. Disability claims are also coming into question because many of these payments are made some time after the disability occurs, raising the question of interest owed.