We do recognize in this case that Mr. Knauss was separated from employment involuntarily through no fault of his own through the failure of the company for which he worked and where he had accumulated the past years of credit under the pension plan of Local 424. Actually, though, the plan was only in effect 5 years when the company failed.
On the other hand a break in service or break in employment provision in a pension plan is not uncommon. In Foley v. Devaney, supra, our court of appeals upheld a provision of a pension plan providing for a break in service but noticed that the plan provided (page 889) only for breaks in employment in case of "failure of a participant who is medically and physically able to work to make himself available for employment during a full calendar year. This had the effect of cancelling previously accumulated years of credit." In the present case Knauss did make himself available for employment.
We again point out that there is no evidence in the case indicating the number of employees affected by the provision relative to cancellation of previously acquired service credit. Since this situation operates only unfairly as to a single individual such as plaintiff herein as far as we can tell we can scarcely say that there is a structural defect in the entire plan, or that the funds are not being held for the exclusive benefit of the employees. Likewise there is no evidence in this case that any of the funds of the plan have by the provisions thereof or otherwise been diverted to employers or others but it would appear that they are all held for the exclusive benefit of the employees. The only question is whether there is unfairness and arbitrary action with respect to a single individual.
It should further be pointed out that section 203 of ERISA (29 U.S.C. § 1053(b)(3)(B)) provides: "For purposes of paragraph 1 (provisions for nonforfeitable percentages in connection with minimum vesting standards) in the case of any employee who has any one-year break in service, years of service before such break shall not be required to take it into account until he has completed a year of service after his return." Knauss did complete a year of service after return from the break and commencement of work at Northside Packing. While ERISA does not control this case it is some evidence of what Congress regarded as reasonable at a later date.
The defendant further points out that there is no evidence in the case showing that the one or two year break in service provision is capricious, unreasonable or arbitrary which is the basis of plaintiff's claim. Also, there is no evidence in the case showing what the effect of a holding of arbitrariness or unreasonableness with respect to the break in service provision would be on the actuarial soundness of the plan or what effect it would have upon the obligations of the trustees of the national fund under the merger agreement of January 12, 1970 pursuant to which they assumed the obligations and liabilities of the Local 424 Fund. The Local 424 Fund was financed solely by contributions from the employers and participants made no contribution toward the costs of pension. However, the contributions were made in accordance with the Collective Bargaining Agreement and therefore the question of lack of contributions by the employees toward this fund which was secured in such a bargaining agreement is not important.
Lee v. Nesbitt, 453 F.2d 1309 (9th Cir. 1972) also holds that where the trust is solely funded by employers' contributions, denial of benefits can reasonably be rested upon an insufficiency of years of employment regardless of the reason. It was pointed out that under Stasukonis v. Kennedy, 387 Pa. 216, 127 A.2d 678 (1956) where an employee even through no fault of his own is prevented from completing a minimum period of employment he may be denied a pension. The Nesbitt court then, however, went on to state:
" However, that is not this case. As indicated earlier -- in footnote 2 -- by 1955, Lee had earned and was entitled to at least 15 years credits, having worked prior to that time without interruption. He was thus eligible for a pension on that date, save for the fact that he had not reached the age of retirement."