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December 20, 1978

Henry BUCZYNSKI et al., Plaintiffs,

The opinion of the court was delivered by: LACEY

The defendant moves for reconsideration of this court's decision embodied in an opinion and order filed August 24, 1978. 456 F. Supp. 867. That decision invalidated deductions by the defendant in the pension payments made to the plaintiffs in an amount equal to the value of payments received under the New Jersey Worker's Compensation Act, N.J.S.A. 34:15-1 Et seq. Struck down was the pension plan's provision allowing this offset, Article IV, Section 2, on two separate grounds: first, that the offsets were unlawful under 29 U.S.C. § 1053; second, even if Congress did not forbid these pension deductions, New Jersey was not barred by the preemption doctrine from passing a law which effectively outlawed this offset under the "unless prohibited by law" clause of the plan. DP The defendant, in its motion to reconsider, challenges both rationales upon which the earlier decision was grounded.

29 U.S.C. § 1053

 The defendant's action, I previously had held, violated the minimum vesting section of ERISA, 29 U.S.C. § 1053, by failing to make nonforfeitable the plaintiffs' rights to their retirement benefits. The defendant, arguing that the offsets do not constitute a forfeiture within the meaning of ERISA, relies on Treas. Reg. § 1.411(a)-4(a), which provides:

Furthermore, nonforfeitable rights are not to be considered to be forfeitable by reason of the fact that they may be reduced to take into account benefits which are provided under the Social Security Act or under any other Federal or State law and which are taken into account in determining plan benefits.

 Two courts have applied this regulation to hold that deducting worker's compensation payments from pension payments does not offend ERISA's nonforfeitability requirement. Bordine v. Evans Products Co., 453 F. Supp. 19 (E.D.Mich.1978); Pavlovic v. Chrysler Corp., Civ. No. 7-70438 (E.D.Mich. January 10, 1978). *fn1"

  Plaintiffs have placed in issue the validity of the aforesaid regulation. Although Treasury Regulations are accorded great respect and are not lightly overruled, See Bingler v. Johnson, 394 U.S. 741, 749-51, 89 S. Ct. 1439, 22 L. Ed. 2d 695 (1969), a Treasury Regulation that is inconsistent with Congressional enactments cannot stand. United States v. Cartwright, 411 U.S. 546, 557, 93 S. Ct. 1713, 36 L. Ed. 2d 528 (1973). A regulation will be struck down if it is inconsistent with the plain wording of a federal statute, Busse v. Commissioner of Internal Revenue, 479 F.2d 1147, 1152-53 (7th Cir. 1973), or if the regulation "conflict(s) with the philosophy and avowed purpose of legislation." New York Shipbuilding Corp. v. United States, 237 F. Supp. 995, 999 (D.N.J.1965), Aff'd, 362 F.2d 550 (3d Cir. 1966) (per curiam). Thus, the existence of a regulation does not end the inquiry.

 First, the plaintiffs claim the Secretary of the Treasury is powerless to prescribe regulations affecting pension rights under 29 U.S.C. § 1053. This contention is without merit, for 29 U.S.C. § 1202(c) provides:

Regulations prescribed by the Secretary of the Treasury under sections 410(a), 411, and 412 of Title 26 . . . shall also apply to the minimum participation, vesting, and funding standards set forth in parts 2 and 3 of subtitle B of subchapter I of this chapter.

 Treas.Reg. § 1.411(a)-4(a) was issued under 26 U.S.C. § 411, and 29 U.S.C. § 1053, entitled "minimum vesting standards," is located in part 2 of subtitle B of subchapter I. Accordingly, the Secretary of the Treasury had the authority to promulgate a binding regulation regarding § 1053.

 Next to be considered is whether the aforesaid regulation is consistent with ERISA. The defendant's argument that it is requires careful analysis. First, the defendant points to 26 U.S.C. § 401, which states the requirements for qualifying a pension plan. One requirement is that the plan be nondiscriminatory. A plan is not considered discriminatory "merely because the contributions or benefits . . . differ because of any retirement benefits created under State or Federal law." § 401(a)(5). In interpreting this statute, the Internal Revenue Service has ruled that a plan could provide that worker's compensation benefits could be offset against pension benefits without the plan being discriminatory.Rev.Rul. 68-243. Next, the defendant notes that Congress, in enacting ERISA, did not modify 26 U.S.C. § 401(a)(5). Also, Congress explicitly stated that it "intend(ed) that the antidiscrimination rules of present law in areas other than the vesting schedule are not to be changed." H.R.Rep. No. 93-1280, 93d Cong., 1st Sess., Reprinted in (1974) U.S.Code Cong. & Admin.News 4639, 5038, 5058. Thus, defendant argues, because the pre-ERISA rules permitted deductions for worker's compensation benefits and this policy regarding nondiscrimination was continued by Congress, it therefore follows that Treas.Reg. § 1.411(a)-4(a) is consistent with ERISA generally and with § 1053 in particular.

 This convoluted skein of reasoning is unconvincing. First, it is questionable that Congressional intent concerning 26 U.S.C. § 401 indicates anything at all about Congressional intent as to nonforfeitability under § 1053. See Riley v. MEBA Pension Trust, 570 F.2d 406, 409 n. 3 (2d Cir. 1977). The legislative history of ERISA underscores this. Under the heading of "permitted forfeitures of vested rights," Congress declared that "an employee's rights, once vested, are (with certain exceptions) not to be forfeitable for any reason. An employee's rights to benefits attributable to his own contributions may never be forfeited." H.R.Rep. No. 93-1280, 93d Cong., 1st Sess., Reprinted in (1974) U.S.Code Cong. & Admin.News, 5038, 5052. The report then lists a series of exceptions to the principle that an employee's vested rights are not forfeitable. None of these exceptions mention worker's compensation.

 Another difficulty with the defendant's interpretation results from ERISA's handling of the term "nonforfeitable". 29 U.S.C. § 1002(19) provides the definition. *fn2" Under this section, only the exceptions specifically included in § 1053 are consistent with nonforfeitability. Worker's compensation does not appear. Only deductions included in § 1053(a)(3) are exceptions to § 1002's definition of nonforfeitability. See Riley v. MEBA Pension Trust, supra, 570 F.2d at 409; Utility Workers Union v. Consumer Powers Co., supra, 453 F. Supp. at 456; Keller v. Graphic Systems of Akron, Inc., 422 F. Supp. 1005, 1008 (N.D.Ohio 1976).

 Based on these cases, I must conclude it is clear that Congress expected that pension benefits would generally be nonforfeitable, and that employees would forfeit benefits only under narrowly defined circumstances. Regulations promulgated must assist in achieving this goal. See United States v. Bacto-Undisk, 394 U.S. 784, 89 S. Ct. 1410, 22 L. Ed. 2d 726 (1969); New York Shipbuilding Corp., supra. Treas.Reg. § 1.411(a)-4(a), by impeding the attainment of this goal, is inconsistent with the statute. Accordingly, the defendant's reliance on it as a source of expanding the scope of permissible deductions from ...

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