ERISA ANTICUTBACK PROVISIONS PROHIBIT EXPANSION OF POSTRETIREMENT EMPLOYMENT LIMITS.

[1] SOUTER, J., delivered the opinion for a unanimous Court. BREYER, J., filed a concurring opinion, in which REHNQUIST, C.J., and O'CONNOR and GINSBURG, JJ., joined.

[2] With few exceptions, the "anti-cutback" rule of the Employee Retirement Income Security Act of 1974 (ERISA) prohibits any amendment of a pension plan that would reduce a participant's "accrued benefit." 88 Stat. 858, 29 U.S.C. §1054(g). The question is whether the rule prohibits an amendment expanding the categories of postretirement employment that triggers suspension of payment of early retirement benefits already accrued. We hold such an amendment prohibited.

[4] Heinz's entitlement is subject to a condition on which this case focuses: the Plan prohibits beneficiaries of service only pensions from certain "disqualifying employment" after they retire. The Plan provides that if beneficiaries accept such employment their monthly payments will be suspended until they stop the forbidden work.¹ When Heinz retired in 1996, the Plan defined "disqualifying employment" as any job as "a union or non-union construction worker." This condition did not cover employment in a supervisory capacity, however, and when Heinz took a job in central Illinois as a construction supervisor after retiring, the Plan continued to pay out his monthly benefit.

[5] In 1998, the Plan's definition of disqualifying employment was expanded by amendment to include any job "in any capacity in the construction industry (either as a union or non-union construction worker)." The Plan took the amended definition to cover supervisory work and warned Heinz that if he continued on as a supervisor, his monthly pension payments would be suspended. Heinz kept working, and the Plan stopped paying.

[6] Heinz sued to recover the suspended benefits on the ground that applying the amended definition of disqualifying employment so as to suspend payment of his accrued benefits violated ERISA's anti- cutback rule. On cross-motions for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), the District Court granted judgment for the Plan, only to be reversed by a divided panel of the Seventh Circuit, which held that imposing new conditions on rights to benefits already accrued was a violation of the anti-cutback rule. 303 F. 3d 802 (CA7 2002). We granted certiorari in order to resolve the resulting Circuit split, see Spacek v. Maritime Assn., 134 F. 3d 283 (CA5 1998), and now affirm.

[8] ERISA's anti-cutback rule is crucial to this object, and (with two exceptions of no concern here²) provides that "[t]he accrued benefit of a participant under a plan may not be decreased by an amendment of the plan . . . ." 29 U.S.C. §1054(g)(1). After some initial question about whether the provision addressed early retirement benefits, see Langbein & Wolk 164, a 1984 amendment made it clear that it does. Retirement Equity Act of 1984, §301(a), (2), 98 Stat. 1451. Now §204(g) provides that "a plan amendment which has the effect of . . . eliminating or reducing an early retirement benefit . . . with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits." 29 U.S.C. §1054(g)(2).

[9] Hence the question here: did the 1998 amendment to the Plan have the effect of "eliminating or reducing an early retirement benefit" that was earned by service before the amendment was passed? The statute, admittedly, is not as helpful as it might be in answering this question; it does not explicitly define "early retirement benefit," and it rather circularly defines "accrued benefit" as "the individual's accrued benefit determined under the plan . . . ." §1002(23)(A). Still, it certainly looks as though a benefit has suffered under the amendment here, for we agree with the Seventh Circuit that, as a matter of common sense, "[a] participant's benefits cannot be understood without reference to the conditions imposed on receiving those benefits, and an amendment placing materially greater restrictions on the receipt of the benefit 'reduces' the benefit just as surely as a decrease in the size of the monthly benefit payment." 303 F. 3d, at 805. Heinz worked and accrued retirement benefits under a plan with terms allowing him to supplement retirement income by certain employment, and he was being reasonable if he relied on those terms in planning his retirement. The 1998 amendment undercut any such reliance, paying retirement income only if he accepted a substantial curtailment of his opportunity to do the kind of work he knew. We simply do not see how, in any practical sense, this change of terms could not be viewed as shrinking the value of Heinz's pension rights and reducing his promised benefits.

[11] The Plan also contends that, because §204(g) only prohibits amendments that "eliminat[e] or reduc[e] an early retirement benefit," the anti-cutback rule must not apply to mere suspensions of an early retirement benefit. This argument seems to rest on a distinction between "eliminat[e] or reduc[e]" on the one hand, and "suspend" on the other, but it just misses the point. No one denies that some conditions enforceable by suspending benefit payments are permissible under ERISA: conditions set before a benefit accrues can survive the anti-cutback rule, even though their sanction is a suspension of benefits. Because such conditions are elements of the benefit itself and are considered in valuing it at the moment it accrues, a later suspension of benefit payments according to the Plan's terms does not eliminate the benefit or reduce its value. The real question is whether a new condition may be imposed after a benefit has accrued; may the right to receive certain money on a certain date be limited by a new condition narrowing that right? In a given case, the new condition may or may not be invoked to justify an actual suspension of benefits, but at the moment the new condition is imposed, the accrued benefit becomes less valuable, irrespective of any actual suspension.

[13] The IRS has formally taken the position that the anti- cutback rule does not keep employers from specifying in advance of accrual that "[t]he availability of a section 411(d)(6) protected benefit [is] limited to employees who satisfy certain objective conditions . . . ." 26 CFR §§1.411(d)-4, A-6(a)(1) (2003). Without running afoul of the rule, for example, plans may say from the outset that a single sum distribution of benefits is conditioned on the execution of a covenant not to compete. §1.411(d)-4, A-6(a)(2). And employers are perfectly free to modify the deal they are offering their employees, as long as the change goes to the terms of compensation for continued, future employment: a plan "may be amended to eliminate or reduce section 411(d)(6) protected benefits with respect to benefits not yet accrued . . . ." §1.411(d)-4, at A-2(a)(1). The IRS regulations treat such conditions very differently, however, when they turn up as part of an amendment adding new conditions to the receipt of benefits already accrued. The rule in that case is categorical: "[t]he addition of . . . objective conditions with respect to a section 411(d)(6) protected benefit that has already accrued violates section 411(d)(6). Also, the addition of conditions (whether or not objective) or any change to existing conditions with respect to section 411(d)(6) protected benefits that results in any further restriction violates section 411(d)(6)." §1.41(d)-4, A-7. So far as the IRS regulations are concerned, then, the anti-cutback provision flatly prohibits plans from attaching new conditions to benefits that an employee has already earned.

[14] The IRS has, however, told two stories. The Plan points to a provision of the Internal Revenue Manual that supports its position: "[a]n amendment that reduces IRC 411(d)(6) protected benefits on account of [a plan's disqualifying employment provision] does not violate IRC 411(d)(6)." Internal Revenue Manual 4.72.14.3.5.3(7) (May 4, 2001), available at http//www.irs.ustreas.gov/ irm/part4/ch49s18.html. And the United States as amicus curiae says that the IRS has routinely approved amendments to plan definitions of disqualifying employment, even when they apply retroactively to accrued benefits. But neither an unreasoned statement in the manual nor allegedly longstanding agency practice can trump a formal regulation with the procedural history necessary to take on the force of law. See generally Note, Taxpayers' Bill of Rights Act: Taxpayers' Remedy or Political Placebo?, 86 Mich. L. Rev. 1787, 1799-1801 (1988) (discussing legal status of the Internal Revenue Manual). Speaking in its most authoritative voice, the IRS has long since approved the interpretation of §204(g) that we adopt today.⁴

[16] First, as a technical matter, §203(a) addresses the entirely different question of benefit forfeitures. This is a distinct concept: §204(g) belongs to the section of ERISA that sets forth requirements for benefit accrual (the rate at which an employee earns benefits to put in his pension account), see 29 U.S.C. §1054, whereas §203(a)(3)(b) is in the section that regulates vesting (the process by which an employee's already-accrued pension account becomes irrevocably his property), see 29 U.S.C. §1053. See generally Nachman Corp., 446 U.S., at 366, n. 10 ("Section 203(a) is a central provision in ERISA. It requires generally that a plan treat an employee's benefits, to the extent that they have vested by virtue of his having fulfilled age and length of service requirements no greater than those specified in §203(a)(2), as not subject to forfeiture"). To be sure, the concepts overlap in practical effect, and a single act by a plan might raise both vesting and accrual concerns. But it would be a non sequitur to conclude that, because an amendment does not constitute a prohibited forfeiture under §203, it must not be a prohibited reduction under §204. Just because §203(a)(3)(B) failed to forbid it would not mean that §204(g) allowed it.

[17] Second, read most simply and in context, §203(a)(3)(B) is a statement about the terms that can be offered to plan participants up front and enforced without amounting to forfeiture, not as an authorization to adopt retroactive amendments. Section 203(a), 29 U.S.C. §1053(a), reads that "[e]ach pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age." This is a global directive that regulates the substantive content of pension plans; it adds a mandatory term to all retirement packages that a company might offer. Section 203(a)(3)(B), in turn, is nothing more than an explanation of this substantive requirement. Congress wanted to allow employers to condition future benefits on a plan participant's agreement not to accept certain kinds of postretirement employment, see n. 1, supra, and it recognized that a plan provision to this effect might be seen as rendering vested benefits improperly forfeitable. Accordingly, adding §203(a)(3)(B) made it clear that such suspension provisions were permissible in narrow circumstances. But critically for present purposes, §203(a)(3)(B) speaks only to the permissible substantive scope of existing ERISA plans, not to the procedural permissibility of plan amendments. The fact that ERISA allows plans to include a suspension provision going to benefits not yet accrued has no logical bearing on the analysis of how ERISA treats the imposition of such a condition on (implicitly) bargained-for benefits that have accrued already.⁵ Section 203(a)(3)(B) is no help to the Plan.⁶

[20] I join the opinion of the Court on the assumption that it does not foreclose a reading of the Employee Retirement Income Security Act of 1974 that allows the Secretary of Labor, or the Secretary of the Treasury, to issue regulations explicitly allowing plan amendments to enlarge the scope of disqualifying employment with respect to benefits attributable to already-performed services. Cf. Christensen v. Harris County, 529 U.S. 576, 589 (2000) (SOUTER, J., concurring).

²ERISA §204(g) allows the reduction of accrued benefits by amendment in cases where a plan faces "substantial business hardship," 29 U.S.C. §1082(c)(8), and in cases involving terminated multiemployer plans, §1441.

³"A plan shall be treated as not satisfying the requirements of this section if the accrued benefit of a participant is decreased by an amendment of the plan, other than an amendment described in section 412(c)(8) [of this Code], or [29 U.S.C. §1441]." 26 U.S.C. §411(d)(6)(A); see also §411(d)(6)(B) (clarifying that the anti-cutback rule applies to early retirement benefits). Cf. n. 2, supra, and accompanying text (detailing ERISA §204(g)).

⁴Nothing we hold today requires the IRS to revisit the tax-exempt status in past years of plans that were amended in reliance on the agency's representations in its manual by expanding the categories of work that would trigger suspension of benefit payments as to already-accrued benefits. The Internal Revenue Code gives the Commissioner discretion to decline to apply decisions of this Court retroactively. 26 U.S.C. §7805(b)(8) ("The Secretary may prescribe the extent, if any, to which any ruling (including any judicial decision or any administrative determination other than by regulation) relating to the internal revenue laws shall be applied without retroactive effect"). This would doubtless be an appropriate occasion for exercise of that discretion.

⁵This is not to say that §203(a)(3)(B) does not authorize some amendments. Plans are free to add new suspension provisions under §203(a)(3)(B), so long as the new provisions apply only to the benefits that will be associated with future employment. The point is that this section regulates the contents of the bargain that can be struck between employer and employees as part of the complete benefits package for future employment.

⁶For analogous reasons, the Plan's reliance on 26 CFR §1.411(c)-1(f) (2003) is unavailing. That section provides that, for the purpose of allocating accrued benefits between employer and employee contributions, "[n]o adjustment to an accrued benefit is required on account of any suspension of benefits if such suspension is permitted under section 203(a)(3)(B)." We read this provision as simply establishing that the actual suspension of benefit payments pursuant to an existing suspension provision does not affect the actuarial value of a beneficiary's total benefits package for the purpose of allocation calculations, since the suspension provision has already been accounted for in the initial valuation. Cf. n. 3, supra. Far from helping the Plan, this regulation tends to support our larger proposition that it is the addition of a suspension condition, not the actual suspension of a benefit, that reduces an employee's accrued benefit.