DocketNumber: No. 126751
Citation Numbers: 1995 Conn. Super. Ct. 13090
Judges: FLYNN, J.
Filed Date: 11/27/1995
Status: Non-Precedential
Modified Date: 4/18/2021
On June 5, 1995, the plaintiff, Daniel O'Neill, filed a second amended appeal from the decision of the Board. The amended appeal contains the following allegations. During October, 1994, the plaintiff retired from the Waterbury Fire Department under a disability pension after twenty eight years of service. At this time, the Board determined that the plaintiff's pension benefits were $73,820.40 per year, payable CT Page 13091 monthly in the amount of $6,151.70. In February, 1995, the Board recalculated the plaintiff's annual pension at $75,727.20, payable in monthly installments of $6,310.60. On April 26, 1995, the Board voted to reduce the plaintiff's monthly pension from $6,310.60 to 6,015.56, representing a reduction in annual payments from $75,727.20 to $72,186.72. The plaintiff received no prior notice that a reduction of his pension benefit would be considered by the Board at its April 26, 1995 meeting. The plaintiff alleges that the Board's decision to reduce his pension was "illegal, arbitrary and in violation of his right to receive pension benefits, including disability benefits, as provided therein."
In July of 1995, the defendant filed an answer to the plaintiff's second amended appeal which included a special defense. In it, the defendant claims:
Pursuant to the limits imposed by Section 415 of the Internal Revenue Code, the Defendants, City of Waterbury, et al were required to reduce the pension of the Plaintiff, Daniel O'Neill. The Agreement between the City of Waterbury and the Firefighters Association Local 1339 International Association of Firefighters Association was entered into with the presumption that it comply with the law.
It is this special defense that the defendant City has moved to strike.
"The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." Grant v. Bassman,
"[26 U.S.C.] Section 401(a)1 lists various requirements that must be met by a trust forming part of a pension or profit sharing trust in order for that trust to be eligible for favorable tax treatment under various sections of the Internal Revenue Code. [26 U.S.C.] 401(a)(16) provides that `A trust shall not constitute a qualified trust under this section if the plan of which such plan is a part provides for benefits which CT Page 13092 exceed the limitations of [26 U.S.C.] section 4152.'" BuzzettaConstruction Corp. et al v. Commissioner, 92 TC No. 35,
In support of its motion to strike, the plaintiff argues that nothing in Internal Revenue Code § 415 either requires or permits the defendant to reduce his pension benefits in order to retain the qualified status of the plan. In opposition, the defendant contends that it was required to reduce the plaintiff's pension in order to preserve the qualified status of the plan. The defendant argues that sections 401 and 415 of the Internal Revenue Code became a part of the parties' agreement are read into the agreement as if they were express. The defendant relies upon Cislo v. City of Shelton,
Internal Revenue Code Section 415 neither supersedes nor invalidates contract provisions which provide for the payment of pension benefits in excess of section 415 limits. Instead, it provides overall limitations on contributions and benefits allowed under qualified pension plans which receive favorable tax treatment. If a pension plan chooses to comply with the limitations of Section 415, it is entitled to favorable tax treatment. If payments are made in excess of the limitations imposed by the Code, the plan loses its favorable tax status.
Even if the terms of Section 415 have been incorporated into the pension contract between the parties, a plan which fails to comply with these limitations is not unlawful; instead, it simply forfeits its exempt status. Because Section 415 does CT Page 13093 not require the reduction of the plaintiff's pension, despite the special defense allegations to the contrary, the plaintiff's motion to strike the defendant's special defense is granted.
It is worth mentioning that this same conclusion has been reached in a recent decision of the United States District Court for the Eastern District of Missouri. Schierholz v. GoldmanFinancial Group,
As amended, the special defense pled that the reduction in monthly payments was mandated by the Internal Revenue Code. It is not. The second sentence of the special defense suggests, while not explicitly saying, that the contract between the union and the City does not comply with the Internal Revenue Code and that compliance is not possible unless the reduction is made. A plan "complies" with the Code even if excessive contributions or pension payments do not permit favorable tax treatment under Sections
FLYNN, J.