Compensation Definition and Plan Docs at Heart of ConAgra ERISA Lawsuit

A participant in ConAgra Brands’ retirement plan has filed an Employee Retirement Income Security Act (ERISA) lawsuit against the company, alleging the firm is failing to adhere to the definitions of compensation and permissible contribution stated in plan documents.

The proposed class action was filed in the U.S. District Court for the District of Illinois. According to the text of the compliant, defendants have based a denial of certain retirement benefits to which the plaintiff believes he and a similarly situated class of participants are entitled on a “reinterpretation” of the plan documents that violates the plan’s clear language.

The text of the suit also challenges the way defendants “have interpreted and applied the plan for years,” arguing the defendants violated ERISA duties by reinterpreting plan language in a conflicted manner aimed at reducing employer costs.  

“Defendants’ purported reinterpretation of the plan was motivated by their desire to save money,” the complaint states. “However, by wrongfully denying millions of dollars in benefits to a large number of plan participants and their beneficiaries, defendants have violated their fiduciary and other legal duties.”

According to the text of the complaint, the plan in question is a sizable one, with more than $1.4 billion in assets as of December 2015 and almost 13,000 participants. Important to the allegations in the case is the fact that, on or about October 1, 2015, ConAgra announced that it would lay off approximately 30% of its global, office-based workforce as part of what it described as an “efficiency plan,” which was meant to result in at least $300 million in cost savings for ConAgra over the next three years. The lead plaintiff says he was laid off as a part of this restructuring, effective April 1, 2016.

Detail from the text of the complaint shows the retirement plan in question accepts both pre-tax and after-tax contributions, which are to be matched by the employer at different rates depending on the date of hire of a given plan participant. Important to the claims in the lawsuit are the mechanics of how “compensation” is defined in the case of a participant’s termination from employment.

The text of the lawsuit explains the following: “Pursuant to Section 1.11 of the plan document, ‘compensation’ includes payments made by the later of 2.5 months after severance from employment, or the end of the calendar year that includes the date of severance, if the payments are payments that, absent a severance from employment, would have been paid to the participant while the participant continued in employment with ConAgra and are bonuses. Pursuant to Section 1.01 of the plan document, ‘Accounting Year,’ as relevant here, is defined as the period beginning on January 1 of each year and ending the following December 31.”

The text of the complaint then notes that, following his termination effective April 1, 2016, the lead plaintiff “maintained a valid deferral election for a pre-tax contribution under the plan during 2016, with a pre-tax deferral percentage equaling 15% of his compensation.” The plaintiff did not have an after-tax election on file.

Subsequently, on or about July 15, 2016, ConAgra paid the lead plaintiff a bonus pursuant to the Fiscal Year 2016 ConAgra Foods Business Management Incentive Plan, which, pursuant to Section 1.11, is “compensation” he would have received if he had continued his employment with ConAgra, the complaint argues.

“Pursuant to Sections 1.11 and 3.01(a) of the plan document and [plaintiff’s] deferral election, defendants should have deferred 15% of [plaintiff’s] bonus to the plan,” the lawsuit contends. “Pursuant to Section 3.02 of the plan document, ConAgra had the obligation to match that contribution, subject to the limitations set forth in Section 3.02 of the plan document. Defendants failed to follow the plan provisions on participant contributions with respect to the bonus [the lead plaintiff] received on or about July 15, 2016. Thus, it did not defer 15% of [the bonus] to the plan and it did not match that contribution.”

According to the text of the complaint, when the lead plaintiff filed a request with plan administrators to receive the amount he believes he is entitled to, the firm provided the following explanation of its denial: “As communicated in the [preliminary] May claim denial letter, the administrative procedure for post-termination bonus payments was changed in 2016 to only apply elective deferral deductions to bonuses paid within 2.5 months after separation from service. The plan was not amended because the change related to the administrative interpretation of existing plan language. Section 3.01 of the plan states that ‘eligible employees’ may specify a deferral rate for payroll deductions. In 2016, administration changed to interpret ‘employee’ more literally. Former employees were only allowed to defer bonuses if they separated from service after May 1, not if they separated from service earlier in the calendar year (which was the procedure in 2015).”

The complaint argues that defendants’ denial of the lead plaintiff’s claim “had no reasonable basis and contradicted the express terms of the plan. [Defendants’] explanation in the appeals denial letter—that the ‘interpretation’ of the term ‘eligible employee’ was ‘narrowed’—is erroneous and cannot alter [plaintiff’s] post-separation contribution rights under the plan document.”

The full text of the complaint can be downloaded here.