## Administrative Tribunal of the International Monetary Fund — JUDGMENT No. 2021-4

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### Case overview and procedural history
- Tribunal: Administrative Tribunal of the International Monetary Fund, JUDGMENT No. 2021-4.
- Session dates: September 22, October 25 and 27, 2021.
- Judges: Judge Catherine M. O’Regan, President; Judges Edith Brown Weiss and Deborah Thomas-Felix.
- Applicants: Mr. Thomas Elkjaer; Mr. Gamal El-Masry; Ms. Martine Rossignol; Mr. Tobias Roy (staff members and principals of the Staff Association Committee (SAC)).
- Counsel for Applicants: Mr. Ryan Griffin, James & Hoffman, P.C.
- Respondent representation:
  - Written pleadings: Ms. Melissa Su Thomas, Deputy Unit Chief, and Mr. Cassandro Joseney, Counsel, Administrative Law Unit, IMF Legal Department.
  - Oral proceedings: Mr. Brian Patterson, IMF Assistant General Counsel, and Ms. Melissa Su Thomas.
- Filing and transmission dates:
  - Applications filed: July 29, 2020.
  - Applications transmitted to Respondent: July 31, 2020.
  - Registrar notice circulated: August 3, 2020 (pursuant to Rule IV, para. (f) of the Tribunal’s Rules of Procedure).
  - Respondent’s consolidated Answer filed: September 14, 2020.
  - Applicants’ Reply: November 23, 2020.
  - Respondent’s Rejoinder: December 23, 2020.
  - Amicus additional submission filed: February 8, 2021.
- Forum modality: Session held “by electronic means” (videoconference) under amended Statute, Article XI, due to the COVID-19 pandemic and the Fund’s work-from-home directive.

### Subject of the dispute
- Contested decision: Executive Board decision effective May 1, 2020, authorizing the Managing Director to raise the FY2021 Medical Benefits Plan (MBP) contribution rate by 3.6 percent.
- Comparative figure: Increase in the structural salary scale for the same period was 2.7 percent.
- Applicants’ core legal claims:
  - Alleged breach of a formal commitment or consistent and established practice by setting the MBP contribution increase above the structural salary increase, amounting to a breach of a “fundamental and essential” condition of employment.
  - Alleged failure to maintain a “rules-based” compensation and benefits system.
  - Alternatively, alleged abuse of discretionary authority by Management and the Executive Board for failing to consider relevant facts, explore alternatives, or engage in meaningful consultation with key stakeholders (including SAC).
- Relief sought:
  - Annulment of the FY2021 MBP contribution rate increase decision.
  - Order that the Fund notify all MBP participants of such annulment.
  - Legal fees and costs under Article XIV, Section 4 of the Statute, if Applications are well-founded in whole or in part.

### Respondent’s primary contentions
- Legal authority: MBP Plan Document and applicable rules authorize unilateral amendment of MBP contribution rates based on the Fund’s assessment of the Plan’s funding needs.
- No constraint: The Fund did not, by formal commitment or consistent practice, constrain its discretionary authority to revise contribution rates.
- Rationale for increase: The 3.6 percent increase (percentage of the aggregate salary increase calculated under the Fund’s revised compensation framework) was a proper exercise of discretion to ensure the MBP remained “financially robust,” meet projected liabilities, and smooth contribution rates to avoid unexpected budgetary pressures on MBP participants and the Fund.

### Amicus Curiae participation (IMF Retirees Association - IMFRA)
- IMFRA granted leave to communicate views as Amicus Curiae (Rule XV).
- IMFRA contentions:
  - Fund retirees and their dependents comprise a little more than half of all MBP participants.
  - Historically, IMFRA had formal representation on committees and working groups relating to medical benefits issues.
  - The contested decision wrongfully violated an established Fund rule that the structural salary increase serves as a ceiling on MBP contribution increases.
  - The Fund failed to engage in substantive consultation with IMFRA before the decision.
- Procedural notes:
  - Tribunal decision granting leave: October 5, 2020.
  - IMFRA filed an additional submission on February 8, 2021.

### Applicants’ request for production of documents (Rule XVII) and Tribunal ruling
- Applicants’ request: “All documents, including email threads, notes of meetings or telephone conferences, memoranda, and correspondence,” relating to management’s decision to propose in EBAP/20/32 that the Executive Board approve an increase in Medical Benefits Plan contribution rates for FY2021 at the level of the aggregate staff salary increase instead of the salary scale increase.
- Respondent objections included:
  - Procedural deficiency for lack of statement of reasons under Rule XVII, para. 1.
  - Sufficiency of the record: EBAP/20/32 reflected the final proposal.
  - Relevance limitation: internal deliberations not relevant to whether the Board reached a legitimate decision based on information before it.
  - Deliberative-process privilege and burdensomeness.
- Tribunal finding:
  - Applicants failed to provide the reasons required by Rule XVII, para. 1.
  - The Tribunal denied Applicants’ request for production of documents on the ground of non-compliance with Rule XVII.

### Motions to supplement the factual record (Rule XI) and Tribunal stance
- Motions filed after close of regular pleadings:
  - Motion 1 (filed March 22, 2021): Actuarial report “April 30, 2020 Medical Benefits Plan (MBP) Liabilities,” issued February 19, 2021.
    - Key figures:
      - MBP cash reserves at end of FY2020: $95.5 million.
      - This projection is $5.7 million more than the projection made in March 2020, which informed the impugned decision.
      - On that basis, MBP reserves were not projected to be depleted fully until FY2026.
  - Motion 2 (filed April 7, 2021): Excerpt from Annex VIII to Board Paper EBAP/21/11 stating: “During the period beginning with the MBP reforms in 2008 and FY 20, contributions to the MBP were indexed to the structural change in the pay scale. In FY 21, MBP contributions were aligned to the new single salary increase ... For FY 22, the proposal envisages that premium contribution rates will again be adjusted with the single salary increase.”
- Respondent opposed admission of both documents; Tribunal proceeded “on the basis that these documents have been admitted to the record, without deciding whether they should be so admitted,” and noted they “would not materially support Applicants’ case.”

### Oral proceedings: access, conduct, and disclosure
- Tribunal authority: Article XII of the Statute and Rule XIII, para. 1.
- Tribunal invited all Fund staff and retirees as “interested persons” to view virtual oral proceedings in real time via videoconference; viewers could not speak or intervene and undertook not to make personal audio/video recordings.
- The Tribunal retained an official audio-video recording; staff and retirees could request access under the same restrictions.
- Disclosure of written pleadings:
  - Tribunal’s standard practice is confidentiality of written pleadings.
  - Exceptionally, in view of open oral proceedings challenging a “regulatory decision,” the Tribunal granted Applicants’ request (to which Respondent did not object) to provide staff and retirees access to the written pleadings of Applicants and Respondent and the Amicus Curiae’s written submissions.
- Oral hearing held: October 25, 2021 (by videoconference).
  - Attendance: Approximately 250 Fund staff and retirees viewed some or all of the proceedings; others accessed the recording by request to the Registrar.

### Factual background — MBP structure, governance, and financing
- MBP fundamentals:
  - The MBP is a self-funded (and self-insured) insurance plan providing medical benefits to eligible staff, retirees, and dependents; administration is outsourced.
  - Financing: contributions from the Fund (and the Retired Staff Benefits Investment Account (RSBIA) for retirees) and from Plan participants in a three-to-one ratio. (MBP Plan Document, January 1, 2011, Section 6.1 (Contributions).)
  - MBP liabilities represent the legal and contractual liability of the Fund; the Fund provides for obligations through the Plan.
- Governance and review practice:
  - Section 6.1 (Contributions): “The Employer is responsible annually for determining contribution rates on the basis of Claims experience and negotiating administrative expenses with the Claims Administrator, Case Management Reviewer, and other service providers.”
  - Since 1994 the Executive Board has required Management to review the finances of the MBP annually to determine appropriate contribution scales and adjust target reserve levels.
  - Purpose of reserves: settle claims upon termination, provide “a liquidity cushion” against variations in inflows/outflows, and enable smoother transitions if outflows exceed inflows.
  - The Fund engages a consultant and actuary annually and conducts a more detailed MBP examination typically every four or five years, ordinarily convening a task force including SAC and IMFRA representatives to advise Management.
- MBP plan text on Employer rights:
  - Section 6.1 (Contributions): “The Employer reserves the right to change the cost-sharing ratio between the Employer and Participants; to set monthly Participant contributions at a level that will, taken together with the Employer’s contribution, cover the costs of financing the Plan; and to make other changes to the contribution schedule that are deemed necessary.”
  - Section 9.3 (Plan Amendment, Suspension, or Termination): “The Employer intends to continue the Plan indefinitely, but it assumes no contractual obligation to do so. The Employer may amend, suspend, or terminate the Plan in whole or in part at any time.”

### Historical reforms and contested practice
- 2008 MBP funding framework:
  - Management’s stated aim: “[s]moothing rate increases and prefunding by pre-announcing annual adjustments in line with the structural increases in staff salaries at a minimum.” (EBAP/08/73, July 11, 2008.)
  - Executive Board Decision No. 14149 – (08/69), adopted July 25, 2008: authorized the Managing Director to increase Plan contribution rates, effective May 1 each year, “by the percentage structural increase to staff compensation that is incorporated into the administrative budget for that financial year.” (Referred to as “2008 Board Decision.”)
  - Staff Bulletin 09/3 (April 10, 2009): automatic annual contribution increases intended to pre-fund the Plan and smooth MBP contribution rate increases through pre-announced annual adjustments in line with the average structural increase in staff salaries, “at a minimum.”
- 2017 review and FY2018 contribution reduction:
  - December 2016 reserves: $115.6 million, constituting 140 percent of the annualized projected costs.
  - Consulting actuary proposed a target reserve of $13.6 million.
  - Task force recommendations:
    - One-time 7 percent reduction in contribution rates for FY2018.
    - Medium-term target reserves equal to 40 percent of the following year’s projected expenses.
    - A “trigger mechanism” if reserves fall below 50 percent of the following year’s projected expenses (the Board did not expressly accept the early review proposal).
  - Executive Board accepted the one-time 7 percent reduction for FY2018 and the 40 percent target reserve basis.
- FY2019 and FY2020: MBP contribution rates were increased in line with the structural salary increases; although the 2008 Board decision authorized the Managing Director to decide contribution rates, in FY2019 and FY2020 the Executive Board itself made the decision.
- CCBR and changes effective May 1, 2020:
  - Revised staff compensation rules (adopted December 2019) de-linked the annual adjustment to the salary structure from the annual salary increase paid to staff.
  - Introduced a single, aggregate annual salary increase based on an indexation formula. (2020 Review of Staff Compensation, EBAP/20/28 (March 17, 2020), p. 21.)

### Executive Board decision on FY2021 MBP contribution rate: facts, consultation, and timing
- Rules-based compensation and salary adjustments:
  - The Fund reaffirmed that its staff compensation scheme is rules-based while allowing “some scope for management and the Executive Board to exercise judgment, within defined parameters, in setting salary levels.”
  - In March 2020, the Fund approved an aggregate 2.7 percent upwards adjustment to the salary structure.
  - The Fund approved a salary increase of 3.6 percent based on the indexation formula; the Board-approved single salary increase was described as an average 3.6 percent for staff at grades A1 through B3 and 2.7 percent for grades B4 and B5.
- MBP finances, proposal, and Management recommendation:
  - MBP reserves decreased from $102.9 million at end-April 2019 to $96.3 million at end-November 2019. (EBAP/20/32, Executive Summary)
  - EBAP/20/32 projected reserves expected to reach the target reserve level by FY 2022 and warned that plan reserves "could be depleted by end FY 2024 absent actions to increase premium contributions and/or reduce plan costs." (EBAP/20/32, p. 4.)
  - Management proposed increasing contributions to the MBP for FY2021 by 3.6 percent, based on the aggregate salary increase approved by the Fund, and not on the 2.7 percent adjustment to the salary structure.
  - EBAP/20/32: "MBP premiums will be based on FY 2020 MBP premiums adjusted by the 3.6 percent increase in Fund’s salaries for FY 2021." The Paper warned: "It is likely that premium contribution adjustments of greater than the salary increase will be required starting in FY 2022." (EBAP/20/32, pp. 5-6.)
- Consultation, timing, and decision:
  - HRD circulated the Medical Benefits Plan and Group Life Insurance Plan—Staff Report 2020 to SAC and IMFRA on March 3, 2020, requesting comments by March 5, 2020.
  - SAC Chair responded March 5, 2020 asserting the “agreed funding formula only allows for an increase of the MBP schedule in line with the proposed structural increase (component), not the combined structure plus merit increase.”
  - HRD replied March 9, 2020 that reserves were projected to be depleted by FY24 unless greater premium increases and cost-containment measures were implemented, and that "Implementing a slightly higher than salary structure increase in FY 21 will help reduce the premium increases that will be required in FY 22 and subsequent years."
  - Management transmitted EBAP/20/32 to Executive Directors on March 27, 2020, for consideration on a lapse-of-time basis to expire April 2, 2020.
  - The Managing Director was authorized, and the Executive Board approved on a lapse-of-time basis on April 2, 2020, an Executive Board Decision authorizing an increase in MBP contribution rates for FY 2021 by 3.6 percent; the decision took effect May 1, 2020. (Executive Board Decision No. A/14240-(20/35), adopted April 2, 2020.)
  - FUNDALL announced on April 15, 2020: "Effective May 1, 2020, the Executive Board has approved an increase in the contribution rates for the Medical Benefits Plan (MBP) of 3.6 percent, in line with the average increase in Fund staff salaries."
  - Intranet posting dated June 18, 2020 advised salary increases would be reflected in paychecks beginning July 10 and retroactive to May 1, 2020.

### Legal issues for adjudication
- Principal questions:
  1. Did the Executive Board’s decision to increase the FY2021 MBP contribution rate by a percentage exceeding the annual adjustment upwards to the Fund’s structural salary scale violate a "fundamental and essential" condition of Applicants’ employment?
  2. If not a violation of a "fundamental and essential" condition, did that decision constitute an abuse of the Fund’s discretionary authority to amend terms and conditions of employment?
- Applicants’ position: The decision abandoned a rules-based decision-making process and constituted an unlawful amendment to a fundamental and essential element of Fund employment.
- Respondent’s position: The Fund retained discretionary authority and acted within its rights under internal law and past decisions.

### Tribunal findings on alleged rule capping MBP increases
- Applicants relied on the 2008 Board decision delegating authority to increase MBP contributions “by the percentage structural increase to staff compensation.”
- Tribunal conclusions:
  - The 2008 Board decision delegated limited authority to the Managing Director but did not evidence Executive Board intent to constrain the Board’s own authority thereafter.
  - The 2008 Board Paper’s phrase “at a minimum” indicates the structural salary adjustment was not intended as a ceiling.
  - The MBP Plan’s text (Section 6.1 and Section 9.3) expressly affords the Fund discretion to determine contribution rates and to amend the Plan.
  - Conclusion: The Fund did not establish a rule, by “formal commitment” or “long-standing practice,” that annual increases to the MBP contribution rate may not exceed the percentage annual adjustment to the structural salary scale.

### Tribunal findings on rules-based compensation and whether discretion undermines it
- Tribunal observations:
  - The rules-based system governs salary-scale adjustments and salary increases; the MBP Plan sets detailed rules for eligibility and benefits while expressly granting the Fund discretion on contribution rates.
  - Provision for discretion within a system does not invalidate a rules-based system.
- Conclusion: The Plan’s discretionary authority to determine MBP contribution rates does not render the Fund’s staff compensation scheme non-rules-based, nor did the FY2021 decision violate the Fund’s principle that its staff compensation scheme be rules-based.

### Abuse-of-discretion inquiry: legal test and application
- Legal test adopted (from de Merode, para. 47):
  - Changes must be based on a proper consideration of relevant facts.
  - Changes must be reasonably related to the objective intended.
  - Changes must be made in good faith and not prompted by improper motives.
  - Changes must not discriminate in an unjustifiable manner.
  - Changes must be made in a reasonable manner seeking to avoid excessive and unnecessary harm.
  - The care with which a reform has been studied and the conditions attached to a change are to be taken into account.
- Consideration of relevant facts:
  - Board Paper rationale: raising the premium by the amount of the single salary increase would be prudent to maintain the targeted path for reserve depletion and avoid higher abrupt increases in subsequent years. (EBAP/20/32, pp. 5-6.)
  - Actuarial evidence (December 6, 2019): projected reserves would be entirely depleted by FY2024 and an additional contribution of $34.9 million would be required at that stage.
  - Supplementary actuarial report (April 30, 2020) not available to the Board projected cash reserves at end of FY2020: $95.5 million, $5.7 million more than the March 2020 projection, with depletion projected by FY2026.
  - Common actuarial finding: annual outflows exceeded inflows starting in FY2018, leading to declining reserves and a future need for remediation.
  - Impact on individual staff: a staff member earning $50,000 per annum saw a contribution increase of only approximately $2 per month as a result of the FY2021 increase.
  - Tribunal conclusion: the Executive Board’s decision was based on the relevant facts available at the time and was reasonable.
- Consultation with SAC and IMFRA:
  - Timeline of exchanges: HRD circulated report March 3, 2020; SAC Chair responded March 5, 2020; HRD replied March 9, 2020; SAC Chair reiterated March 11, 2020. IMFRA asked questions but did not address the specific proposal to set FY2021 contributions above the structural salary increase.
  - Tribunal’s standard for meaningful consultation: notice and information related to nature, scope and effect of proposed amendments should be provided; the extent of engagement depends on nature, scope and effects.
  - Tribunal findings:
    - Given the limited scope and effect of the FY2021 increase, the Fund engaged stakeholders through correspondence; stakeholders responded and did not request continued dialogue.
    - Turnaround time for comments was minimal and occurred amid COVID-19 disruptions.
    - Although it would have been good practice for Management to inform the Executive Board of SAC and IMFRA concerns, Management’s failure to do so did not preclude SAC and IMFRA from approaching the Executive Board themselves.
    - Conclusion: consultation was adequate in the circumstances; no abuse of discretion for failure to consult meaningfully.

### Tribunal conclusions and remedy
- The Tribunal concludes:
  - The FY2021 MBP contribution-rate increase of 3.6 percent, above the 2.7 percent structural salary increase, did not violate a “fundamental and essential” condition of Applicants’ employment.
  - The Executive Board did not abuse its discretion in setting the FY2021 MBP contribution rate at 3.6 percent.
  - Applicants failed to establish that the Fund had constrained its discretionary authority such that structural salary increases served as a ceiling on MBP contribution-rate increases.
  - Applicants failed to substantiate that the contested decision was not based on appropriate consideration of relevant facts or was not taken in accordance with fair and reasonable procedures, including meaningful consultation.
- Decision:
  - The Applications of Mr. T. Elkjaer, Mr. G. El-Masry, Ms. M. Rossignol, and Mr. T. Roy are denied.

*Administrative Tribunal of the International Monetary Fund — JUDGMENT No. 2021-4 (Washington, D.C., December 28, 2021).*

### INTRODUCTION ...........................................................................................................

### INTRODUCTION

### Case overview and procedural history
- Tribunal: Administrative Tribunal of the International Monetary Fund, JUDGMENT No. 2021-4.
- Session dates: September 22, October 25 and 27, 2021.
- Judges: Judge Catherine M. O’Regan, President; Judges Edith Brown Weiss and Deborah Thomas-Felix.
- Applicants: Mr. Thomas Elkjaer; Mr. Gamal El-Masry; Ms. Martine Rossignol; Mr. Tobias Roy (staff members and principals of the Staff Association Committee (SAC)).
- Counsel for Applicants: Mr. Ryan Griffin, James & Hoffman, P.C.
- Respondent representation:
  - Written pleadings: Ms. Melissa Su Thomas, Deputy Unit Chief, and Mr. Cassandro Joseney, Counsel, Administrative Law Unit, IMF Legal Department.
  - Oral proceedings: Mr. Brian Patterson, IMF Assistant General Counsel, and Ms. Melissa Su Thomas.
- Filing and transmission dates:
  - Applications filed: July 29, 2020.
  - Applications transmitted to Respondent: July 31, 2020.
  - Registrar notice circulated: August 3, 2020 (pursuant to Rule IV, para. (f) of the Tribunal’s Rules of Procedure).
  - Respondent’s consolidated Answer filed: September 14, 2020.
- Other procedural filings and dates:
  - Applicants’ Reply: November 23, 2020.
  - Respondent’s Rejoinder: December 23, 2020.
  - Amicus additional submission filed: February 8, 2021.
- Forum modality: Session held “by electronic means” (videoconference) in accordance with amended Statute, Article XI, due to the COVID-19 pandemic and the Fund’s work-from-home directive.

### Subject of the dispute
- Contested decision: Executive Board decision effective May 1, 2020, authorizing the Managing Director to raise the FY2021 Medical Benefits Plan (MBP) contribution rate by 3.6 percent.
- Comparative figure: Increase in the structural salary scale for the same period was 2.7 percent.
- Core legal claims by Applicants:
  - The Fund violated a formal commitment or consistent and established practice by setting the MBP contribution increase above the structural salary increase, thereby breaching a “fundamental and essential” condition of employment.
  - The Fund failed to maintain a “rules-based” compensation and benefits system.
  - Alternatively, Management and the Executive Board abused their discretionary authority by failing to consider relevant facts, explore alternatives, or engage in meaningful consultation with key stakeholders (including SAC), rendering the decision procedurally flawed and poorly reasoned.
- Relief sought by Applicants:
  - Annulment of the FY2021 MBP contribution rate increase decision.
  - Order that the Fund notify all MBP participants of such annulment.
  - Legal fees and costs under Article XIV, Section 4 of the Statute, if Applications are well-founded in whole or in part.

### Respondent’s primary contentions
- Legal authority: MBP Plan Document and applicable rules authorize unilateral amendment of MBP contribution rates based on the Fund’s assessment of the Plan’s funding needs.
- No constraint: The Fund did not, by formal commitment or consistent practice, constrain its discretionary authority to revise contribution rates.
- Rationale for increase: The 3.6 percent increase (percentage of the aggregate salary increase calculated under the Fund’s revised compensation framework) was a proper exercise of discretion to ensure the MBP remained “financially robust,” meet projected liabilities, and smooth contribution rates to avoid unexpected budgetary pressures on MBP participants and the Fund.

### Amicus Curiae participation (IMF Retirees Association - IMFRA)
- IMFRA representatives requested and were granted leave to communicate views as Amicus Curiae (Rule XV).
- IMFRA’s asserted interests and contentions:
  - Fund retirees and their dependents comprise a little more than half of all MBP participants.
  - Historically, IMFRA has had formal representation on committees and working groups relating to medical benefits issues.
  - The contested decision wrongfully violated an established Fund rule that the structural salary increase serves as a ceiling on MBP contribution increases.
  - The Fund failed to engage in substantive consultation with IMFRA before the decision, contrary to usual processes affecting the MBP.
- Procedural notes:
  - Both Applicants and Respondent supported IMFRA’s request for leave as Amicus Curiae and did not object to its access to the parties’ pleadings.
  - Tribunal decision granting leave: October 5, 2020.
  - IMFRA declined the Tribunal’s invitation to supplement its Amicus Memorandum after access to pleadings, but later filed an additional submission on February 8, 2021.
  - The Tribunal provided the Amicus Curiae with Applicants’ Reply and Respondent’s Rejoinder and enabled parties to submit observations on the amicus brief.

### Applicants’ request for production of documents (Rule XVII)
- Applicants’ request scope: All documents, “including email threads, notes of meetings or telephone conferences, memoranda, and correspondence,” relating to “management’s decision to propose in EBAP/20/32 that the Executive Board approve an increase in Medical Benefits Plan contribution rates for FY2021 at the level of the aggregate staff salary increase instead of the salary scale increase.”
- Respondent’s objections and positions:
  - Procedural deficiency: Applicants failed to state reasons for the request as required by Rule XVII, para. 1, denying meaningful opportunity to respond.
  - Sufficiency of record: The Fund provided “all documents relevant to the Board’s consideration of the proposed contribution increase,” and EBAP/20/32 reflected the final proposal and was the basis of the Board’s consideration and decision.
  - Relevance limitation: Internal deliberations among Management, HRD, and related departments in formulating the proposal are not relevant to whether the Board reached a legitimate decision based on information before it.
  - Deliberative-process privilege: Production would intrude on the deliberative process, chilling candid internal deliberations.
  - SAC conflict: It would be improper for SAC representatives to use Tribunal litigation to obtain information they did not seek at the time.
  - Burdensomeness: The request potentially encompasses numerous communications and is unduly broad and burdensome under Rule XVII, para. 2.
- Applicants’ response: Applicants did not respond to Respondent’s objections and did not clarify reasons or specify particular documents sought.
- Tribunal’s procedural finding:
  - Rule XVII requires an Applicant to provide a “statement of the Applicant’s reasons supporting production.”
  - Because Applicants provided no reasons or specification, the Tribunal’s ability to assess relevance, burden, or privacy impact was impaired.
  - Precedent: Tribunal jurisprudence shows that, where relevant, records of the consultative process to formulate Management recommendations have been part of the record (citing IMFAT Judgment No. 2007-1 and IMFAT Judgment No. 2011-2).

### Legal and statutory references cited in the Introduction
- Statute citations:
  - Statute, Article XI (session location and electronic means).
  - Article XIV, Section 4 (legal fees and costs reference for relief).
- Tribunal Rules cited:
  - Rule IV, para. (f) (Registrar notice circulation).
  - Rule V (implicitly by composition provision in Article VII, Section 4—composition language cited).
  - Rule XV (Amicus Curiae).
  - Rule XVII (Production of Documents).
- Related Tribunal precedent referenced:
  - Ms. “J”, Applicant v. IMF, IMFAT Judgment No. 2003-1 (granting SAC’s amicus participation under earlier Rule XV).
  - Daseking-Frank et al. v. IMF, IMFAT Judgment No. 2007-1 (consultative process as part of record).
  - Ms. D. Pyne v. IMF, IMFAT Judgment No. 2011-2 (consultative process relevance).

*Administrative Tribunal of the International Monetary Fund — JUDGMENT No. 2021-4*

### 19. In this case, as will become evident below, the documents relevant to the process of

### 19. In this case, as will become evident below, the documents relevant to the process of

### Document production and Rule XVII compliance
- Applicants sought “All documents relating to management’s decision to propose in EBAP/20/32 that the Executive Board approve an increase in Medical Benefits Plan contribution rates for FY2021 at the level of the aggregate staff salary increase instead of the salary scale increase.”
- The Tribunal found the request:
  - Potentially unduly burdensome, as argued by the Fund.
  - Non-compliant with Rule XVII, para. 1, because Applicants “failed to provide the reasons for their request,” despite the Fund drawing attention to Rule XVII.
- Conclusion: The Tribunal denied Applicants’ request for production of documents on the ground of non-compliance with Rule XVII.

### Motions to supplement the factual record (Rule XI)
- Procedural timeline:
  - Regular pleadings closed before March 22, 2021.
  - Applicants filed two Motions on March 22, 2021 and April 7, 2021 invoking Rule XI (Additional Pleadings).
  - Respondent filed Views on April 19, 2021.
  - Applicants filed a Response on April 30, 2021.
- First Motion — Actuarial report:
  - Document: “April 30, 2020 Medical Benefits Plan (MBP) Liabilities,” issued February 19, 2021.
  - Key figures and projections:
    - MBP cash reserves at end of FY2020: $95.5 million.
    - This projection is $5.7 million more than the projection made in March 2020, which informed the impugned decision.
    - On the basis of reserves as at the end of FY2020, MBP reserves are not projected to be depleted fully until FY2026.
  - Applicants’ position: The report was unavailable when pleadings were filed and would enable the Tribunal to “more fully evaluate the parties’ respective positions.”
- Second Motion — Board paper excerpt:
  - Source excerpt: Annex VIII (Assumptions Underlying the FY22 Budget) to Board Paper EBAP/21/11, FY2022-FY2024 Medium-Term Budget, submitted March 26, 2021.
  - Relevant excerpt: “During the period beginning with the MBP reforms in 2008 and FY 20, contributions to the MBP were indexed to the structural change in the pay scale. In FY 21, MBP contributions were aligned to the new single salary increase implemented as a result of the CCBR [Comprehensive Compensation and Benefits Review] reforms. For FY 22, the proposal envisages that premium contribution rates will again be adjusted with the single salary increase.”
  - Applicants’ argument: The excerpt bears on whether the Fund engaged in a consistent practice between FY2008 and FY2020 of capping annual MBP contribution rate increases at the level of annual adjustments to the Fund’s salary structure.
- Fund’s opposition to both Motions:
  - The information in both documents was not and could not have been available to the Board when it decided to increase MBP contribution rates in April 2020.
  - Applicants failed to make out an exceptional case under Rule XI to warrant admission.
  - Both documents were already in the possession of both parties.
- Tribunal’s procedural stance:
  - The Tribunal proceeded “on the basis that these documents have been admitted to the record, without deciding whether they should be so admitted.”
  - The Tribunal noted that even if admitted, the two documents “would not materially support Applicants’ case.”

### Oral proceedings: access, conduct, and disclosure
- Legal basis: Article XII of the Tribunal’s Statute and Rule XIII, para. 1 (oral proceedings held “if . . . the Tribunal deems such proceedings useful”).
- Parties did not request oral proceedings; the Tribunal nonetheless found limited oral proceedings useful and notified parties on September 23, 2021.
- Accessibility and format:
  - The Tribunal had to interpret “open to all interested persons” in light of Article XI allowing sessions “by electronic means.”
  - Decision on Conduct of the Oral Proceedings issued October 18, 2021.
  - All Fund staff and retirees were invited as “interested persons” to view the virtual proceedings in real time via videoconference; they were not permitted to speak or intervene and undertook not to make personal audio/video recordings.
  - The Tribunal retained an official audio-video recording; staff and retirees could access the recording upon request under the same restrictions.
- Participants present (but not permitted to address the Tribunal directly):
  - Applicants and the SAC legal counsellor on Applicants’ side.
  - Two officials of the Fund’s Human Resources Department for Respondent.
  - Four IMFRA Board members who had submitted as Amicus Curiae.
- Disclosure of written pleadings:
  - Tribunal’s consistent practice: maintain confidentiality of all written pleadings.
  - Exceptionally, in view of open oral proceedings challenging a “regulatory decision,” the Tribunal granted Applicants’ request (to which Respondent did not object) to provide staff and retirees with access to the written pleadings of Applicants and Respondent and the written submissions of the Amicus Curiae (the Amicus had consented).
- Oral hearing held:
  - Date: October 25, 2021 (by videoconference).
  - Attendance: Approximately 250 Fund staff and retirees viewed some or all of the proceedings; others accessed the recording by request to the Registrar.

### Factual background — structure and key MBP features
- MBP fundamentals:
  - The MBP is a self-funded (and self-insured) insurance plan providing medical benefits to eligible staff, retirees, and dependents; administration is outsourced.
  - Financing: contributions from the Fund (and the Retired Staff Benefits Investment Account (RSBIA) for retirees) and from Plan participants in a three-to-one ratio. (MBP Plan Document, January 1, 2011, Section 6.1 (Contributions).)
  - MBP liabilities represent the legal and contractual liability of the Fund; the Fund provides for obligations through the Plan.
- Governance and review practice:
  - Section 6.1 (Contributions): “The Employer is responsible annually for determining contribution rates on the basis of Claims experience and negotiating administrative expenses with the Claims Administrator, Case Management Reviewer, and other service providers.”
  - Since 1994 the Executive Board has required Management to review the finances of the MBP annually to determine appropriate contribution scales; on that basis the Board has adjusted target reserve levels.
  - Purpose of reserves: settle claims upon termination, provide “a liquidity cushion” against variations in inflows/outflows, and enable smoother transitions if outflows exceed inflows.
  - The Fund engages a consultant and actuary annually and conducts a more detailed MBP examination typically every four or five years, ordinarily convening a task force including SAC and IMFRA representatives to advise Management.
- MBP plan text on Employer rights:
  - Section 6.1 (Contributions): “The Employer reserves the right to change the cost-sharing ratio between the Employer and Participants; to set monthly Participant contributions at a level that will, taken together with the Employer’s contribution, cover the costs of financing the Plan; and to make other changes to the contribution schedule that are deemed necessary.”
  - Section 9.3 (Plan Amendment, Suspension, or Termination): “The Employer intends to continue the Plan indefinitely, but it assumes no contractual obligation to do so. The Employer may amend, suspend, or terminate the Plan in whole or in part at any time.”

### Historical reforms and contested practice
- 2008 MBP funding framework:
  - Context: Prior pay-as-you-go funding produced volatility in contribution rates.
  - Management’s proposal (EBAP/08/73, July 11, 2008): aim to “[s]moothing rate increases and prefunding by pre-announcing annual adjustments in line with the structural increases in staff salaries at a minimum.”
  - SAC and IMFRA (Note to Executive Directors, July 18, 2008): urged delaying the proposed September 1, 2008 increase until May 1, 2009 due to large surplus; supported future increases “in line with structural adjustments.”
  - Executive Board Decision No. 14149 – (08/69), adopted July 25, 2008: authorized the Managing Director to increase Plan contribution rates, effective May 1 each year, “by the percentage structural increase to staff compensation that is incorporated into the administrative budget for that financial year.” (Referred to as “2008 Board Decision.”)
  - Staff Bulletin 09/3 (April 10, 2009) summarized: automatic annual contribution increases intended to pre-fund the Plan and smooth MBP contribution rate increases through pre-announced annual adjustments in line with the average structural increase in staff salaries, “at a minimum.”
- 2017 review and FY2018 contribution reduction:
  - Task force and report: “Medical Benefits Plan – Review of Finances and Coverage,” April 19, 2017 (EBAP/17/32).
  - December 2016 reserves: $115.6 million, constituting 140 percent of the annualized projected costs.
  - Consulting actuary proposed a target reserve of $13.6 million.
  - Task force recommendations:
    - One-time 7 percent reduction in contribution rates for FY2018.
    - Medium-term target reserves equal to 40 percent of the following year’s projected expenses.
    - A “trigger mechanism”: if reserves fall below 50 percent of the following year’s projected expenses, launch an early review (the Board did not expressly accept the early review proposal).
  - Executive Board accepted the one-time 7 percent reduction for FY2018 and the 40 percent target reserve basis.
- FY2019 and FY2020:
  - MBP contribution rates were increased in line with the structural salary increases.
  - Although the 2008 Board decision authorized the Managing Director to decide contribution rates, in FY2019 and FY2020 the Executive Board itself made the decision on increases.
- Comprehensive Compensation and Benefits Review (CCBR) and change effective May 1, 2020:
  - Effective May 1, 2020, revised staff compensation rules (adopted December 2019) de-linked the annual adjustment to the salary structure from the annual salary increase paid to staff.
  - Introduced a single, aggregate annual salary increase based on an indexation formula comprising both public and private sector indices. (2020 Review of Staff Compensation, EBAP/20/28 (March 17, 2020), p. 21.)
  - Rationale: the Fund’s compensation system is comparator-based to ensure competitiveness in recruiting/retaining diverse, multinational staff. (Id., p. 24.)

*Excerpt from the Tribunal’s Judgment.*

### 48. The Fund also reaffirmed the principle that its staf f  compensation scheme is rules-based.

### Executive Board decision on FY2021 MBP contribution rate

### Rules-based compensation and salary adjustments
- The Fund reaffirmed that its staff compensation scheme is rules-based, providing for annual salary structure adjustments (to the payline) and salary increases paid to staff based on reviews conducted within an agreed framework, while allowing "some scope for management and the Executive Board to exercise judgment, within defined parameters, in setting salary levels." (Id., p. 4.)
- In March 2020, the Fund approved an aggregate 2.7 percent upwards adjustment to the salary structure which adjusted the salary structure midpoints, but which did not impact individual staff salaries save in the unlikely circumstances that the adjustment placed a staff member’s salary below the minimum or above the maximum of the salary range for their grade. (Id., p. 24.)
- The Fund approved a salary increase of 3.6 percent based on the indexation formula. (Id., p. 21.)
- Individual salary increases for Grades A1 – B3 were determined using "a two-dimensional matrix comprised of performance on one dimension and position in the salary range on the other." (Id., pp. 24-25.)
- The Fund combined its former two-part salary increase mechanism (structure plus merit) into a single salary increase effective May 1, 2020; the Board-approved single salary increase was described as an average 3.6 percent for staff at grades A1 through B3 and 2.7 percent for grades B4 and B5. (Intranet notice cited; retroactive to May 1, 2020.)

### MBP finances, proposal, and Management recommendation
- MBP reserves decreased from $102.9 million at end-April 2019 to $96.3 million at end-November 2019. (EBAP/20/32, Executive Summary)
- EBAP/20/32 projected that reserves were expected to reach the target reserve level by FY 2022 and that plan reserves "could be depleted by end FY 2024 absent actions to increase premium contributions and/or reduce plan costs." (EBAP/20/32, p. 4.)
- The Board Paper noted that plan contributions had been increasing at the same rate as annual salary structure increases but "have not kept up with annual MBP cost increases," and that "higher premium increases will be required in future to slow down the rate of reserve depletion." (EBAP/20/32, p. 4.)
- Management proposed increasing contributions to the MBP for FY2021 by 3.6 percent, based on the aggregate salary increase approved by the Fund, and not on the 2.7 percent adjustment to the salary structure. That proposal formed the core dispute in the case.
- EBAP/20/32 recommended that "premium contributions for FY 2021 be adjusted in line with the new single salary increase" and explicitly stated: "MBP premiums will be based on FY 2020 MBP premiums adjusted by the 3.6 percent increase in Fund’s salaries for FY 2021." The Paper warned that "It is likely that premium contribution adjustments of greater than the salary increase will be required starting in FY 2022." (EBAP/20/32, pp. 5-6.)

### Consultation, timing, and decision
- HRD circulated the Medical Benefits Plan and Group Life Insurance Plan—Staff Report 2020 to SAC and IMFRA on March 3, 2020, requesting comments by March 5, 2020. (Memorandum to SAC/IMFRA)
- SAC Chair responded on March 5, 2020, asserting that the "agreed funding formula only allows for an increase of the MBP schedule in line with the proposed structural increase (component), not the combined structure plus merit increase."
- HRD replied that reserves were projected to be depleted by FY 24 unless greater premium increases and cost-containment measures were implemented, and that "Implementing a slightly higher than salary structure increase in FY 21 will help reduce the premium increases that will be required in FY 22 and subsequent years." (March 9, 2020 exchange)
- SAC Chair reiterated on March 11, 2020, that he did not see conditions met to invoke the trigger mechanism and that premium increases should align with the change to the salary structure (the structural increase and not salary increase).
- IMFRA raised questions and comments to HRD but did not address the proposal to set the MBP contribution increase for FY2021 above the structural salary increase.
- The Fund began work-from-home measures in response to the COVID-19 pandemic on March 13, 2020.
- Management transmitted EBAP/20/32 to Executive Directors on March 27, 2020, for consideration on a lapse-of-time basis to expire April 2, 2020.
- The Managing Director was authorized, and the Executive Board approved on a lapse-of-time basis on April 2, 2020, an Executive Board Decision authorizing an increase in MBP contribution rates for FY 2021 by 3.6 percent, based on the existing contribution schedule; the decision took effect May 1, 2020. (Executive Board Decision No. A/14240-(20/35), adopted April 2, 2020.)
- FUNDALL announced on April 15, 2020: "Effective May 1, 2020, the Executive Board has approved an increase in the contribution rates for the Medical Benefits Plan (MBP) of 3.6 percent, in line with the average increase in Fund staff salaries."
- Intranet posting dated June 18, 2020 advised that salary increases would be reflected in paychecks beginning July 10 and retroactive to May 1, 2020.

### Channels of administrative review and litigation timeline
- Under Article VI, Section 2, of the Statute of the Administrative Tribunal, an application challenging the legality of a "regulatory decision" may be filed within three months of its announcement or effective date; there are no channels of administrative review to exhaust for a regulatory decision challenged directly.
- The contested Executive Board decision setting the FY2021 MBP contribution rate became effective May 1, 2020.
- Applicants timely filed their Applications with the Administrative Tribunal on July 29, 2020.

### Parties’ principal contentions
- Applicants (summary):
  - The FY2021 MBP contribution rate decision violates the Fund’s obligation to maintain a "rules-based" compensation and benefits system as a "fundamental and essential" condition of employment.
  - The decision violates a "formal commitment" and "longstanding practice" that the structural salary increase serves as a ceiling on any increase in MBP contribution rates.
  - The decision constituted an abuse of discretion because it was adopted without sufficient consideration of relevant facts or alternatives and without meaningful consultation with stakeholders, notably SAC and IMFRA.
  - Relief sought: (a) annulment of the May 1, 2020 MBP contribution rate increase decision pursuant to Article XIV, Section 3; (b) an order that the Fund notify all MBP participants of such annulment; and (c) legal fees and costs under Article XIV, Section 4 if Applications are well-founded in whole or in part. (Paras. 64, 76)
- Respondent (summary):
  - The rate of increase of MBP contributions is not a fundamental term of staff employment and therefore may be unilaterally amended by the Fund.
  - The MBP Plan Document authorizes the Fund to unilaterally amend MBP contribution rates based on assessment of the Plan’s funding needs.
  - The Fund did not constrain its discretionary authority to revise contribution rates through formal commitment or consistent practice.
  - The FY2021 decision was a proper exercise of discretion to ensure MBP financial robustness and to smooth contribution rates over time. (Paras. 65, 77-78)
- Amicus Curiae (summary):
  - The decision to increase the FY2021 MBP contribution rate by a greater percentage than the structural salary increase violated an established Fund rule.
  - The Fund failed to engage in prior substantive consultation with IMFRA, contrary to usual MBP policy decision processes. (Para. 66)

### Relevant provisions of the Fund’s internal law cited
- MBP Plan Document (January 1, 2011):
  - Section 6.1 (Contributions): "The Employer is responsible annually for determining contribution rates on the basis of Claims experience and negotiating administrative expenses with the Claims Administrator, Case Management Reviewer, and other service providers." "The Employer reserves the right to change the cost-sharing ratio between the Employer and Participants; to set monthly Participant contributions at a level that will, taken together with the Employer’s contribution, cover the costs of financing the Plan; and to make other changes to the contribution schedule that are deemed necessary." (Section 6.1 excerpts)
  - Section 9.3 (Plan Amendment, Suspension, or Termination): "The Employer intends to continue the Plan indefinitely, but it assumes no contractual obligation to do so. The Employer may amend, suspend, or terminate the Plan in whole or in part at any time." (Section 9.3 excerpt)
- 2008 Board Decision:
  - Decision No. 14149-(08/69), adopted July 25, 2008, authorized the Managing Director "to implement funding reforms to the Plan" and specifically authorized the Managing Director "to increase the Plan contribution rates, effective May 1 each year, by the percentage structural increase to staff compensation that is incorporated into the administrative budget for that financial year." (Para. 70)

### Issues for the Tribunal’s adjudication
- Principal questions presented:
  1. Did the Executive Board’s decision to increase the FY2021 MBP contribution rate by a percentage exceeding the annual adjustment upwards to the Fund’s structural salary scale violate a "fundamental and essential" condition of Applicants’ employment? (Para. 71(a))
  2. If the FY2021 MBP contribution rate decision did not violate a "fundamental and essential" condition of Applicants’ employment, did that decision constitute an abuse of the Fund’s discretionary authority to amend terms and conditions of employment? (Para. 71(b))
- Applicants assert the decision "abandons altogether a rules-based decision-making process" for MBP contribution rates and thus constitutes an unlawful amendment to a fundamental and essential element of Fund employment. (Paras. 75–76)
- Respondent asserts the Fund retained discretionary authority and acted within its rights under internal law and past decisions. (Paras. 77–78)

*Source: Administrative Tribunal materials and EBAP/20/32 excerpts as summarized in the source content.*

### 79. In departing from the alleged “formal commitment” or “longstanding practice,”

### In departing from the alleged “formal commitment” or “longstanding practice,”

### Whether the Fund established a rule capping annual MBP contribution increases at the percentage structural salary adjustment
- Applicants argue the Fund adopted a “formal commitment” and a “consistent and established practice” that MBP contribution rate increases could not exceed the percentage structural increase to staff compensation.
- Applicants point to the 2008 Board decision delegating to the Managing Director discretion to increase MBP contribution rates annually “. . . by the percentage structural increase to staff compensation that is incorporated into the administrative budget for that financial year.”
- Applicants cite years in which annual MBP contribution rate increases matched the percentage adjustment to the structural salary scale: 2009: 4.2 percent; 2010: 3.3 percent; 2011: 2.6 percent; 2012: 1.5 percent; 2013: 0 percent; 2014: 1.5 percent; 2015: 2.1 percent.
- Applicants acknowledge departures from matching beginning in 2016 when MBP reserves had grown to 140 percent of projected annual expenditures and the Executive Board decided there would be no MBP contribution rate increases in FY2016 (salary structure adjusted by 2.4 percent) and FY2017 (salary structure adjusted by 2.3 percent).
- The 2017 five-yearly task force review recommended a one-time 7 percent reduction in contribution rates in FY2018 (adopted by the Executive Board) and a 3 percent adjustment to the salary scale for that year; the task force forecast gradual reserve declines and recommended MBP reserves be stabilized at approximately 40 percent of projected annual expenditures.
- In FY2019 and FY2020, MBP contribution rate increases again matched salary-scale adjustments: 2.2 percent and 2.7 percent respectively.
- Applicants rely on an excerpt from Annex VIII (Assumptions Underlying the FY22 Budget) to Board Paper EBAP/21/11 noting: “During the period beginning with the MBP reforms in 2008 and FY 20, contributions to the MBP were indexed to the structural change in the pay scale.”
- The Fund relies on MBP Section 6.1 (Contributions): “The Employer reserves the right to change the cost-sharing ratio between the Employer and Participants; to set monthly Participant contributions at a level that will, taken together with the Employer’s contribution, cover the costs of financing the Plan; and to make other changes to the contribution schedule that are deemed necessary.”
- The Fund also cites the 2008 Board Paper statement that the new framework aimed at “smoothing rate increases and prefunding by pre-announcing annual adjustments in line with the structural increase of salaries at a minimum.” (Emphasis in source.)
- The Tribunal’s analysis and conclusions:
  - The 2008 Board decision delegated limited authority to the Managing Director to increase MBP contribution rates only by the percentage structural adjustment incorporated into the administrative budget for the relevant year; it did not evidence an Executive Board intent to constrain the Board’s own authority thereafter.
  - The Tribunal found no record evidence that the Fund considered itself legally obliged to cap MBP contribution increases at the percentage salary adjustment.
  - The Board Paper’s “at a minimum” language indicates the structural salary adjustment was not intended as a ceiling.
  - Given healthcare cost and risk volatility (illustrated by COVID-19), the Fund needs discretion to adjust MBP contributions to ensure MBP viability; the Plan’s terms afford that authority.
  - Conclusion: The Fund did not establish a rule, by “formal commitment” or “long-standing practice,” that annual increases to the MBP contribution rate may not exceed the percentage annual adjustment to the structural salary scale in the relevant year.

### Whether the Fund’s compensation system remains rules-based despite MBP discretion
- Applicants contend that departing from a purported rule in FY2021 violated a “fundamental and essential” condition that the staff compensation scheme be rules-based.
- The Fund asserts its adjustment was authorized by the Plan and did not violate an essential term of employment.
- The Fund has stated, at least since 1979 and reiterated in the 2020 Review of Staff Compensation (EBAP/20/28 (March 17, 2020), pp. 4-5), that:
  - “The Fund’s compensation system is rules-based. The system relies on clearly defined comparator markets, formulae for aggregating market data, and governance procedures that provide the basis for decisions on salary adjustments. ... the rules-based system continues to provide some scope for management and the Executive Board to exercise judgment, within defined parameters, in setting salary levels.”
- Tribunal observations:
  - The rules-based system primarily focuses on determination of salary scale adjustments and salary increases, but other employment benefits (e.g., MBP participation) fall within the compensation scheme.
  - The MBP Plan sets detailed rules for eligibility and benefits yet expressly affords the Fund discretion to determine contribution rates.
  - Precedent accepts that provision for discretion within a system does not invalidate a rules-based system (citing Daseking-Frank et al., para. 88).
  - The exercise of discretion is subject to governing legal principles and constrained by the Fund’s law.
- Conclusion: The Plan’s discretionary authority to determine MBP contribution rates does not render the Fund’s staff compensation scheme non-rules-based, nor did the FY2021 contribution-rate decision violate the Fund’s established principle that its staff compensation scheme be rules-based.

### Allegation of violating a “fundamental and essential” condition by failing to consult
- Applicants argue the Fund violated a “fundamental and essential” condition by not meaningfully consulting key stakeholders (including SAC and IMFRA) about the FY2021 MBP contribution-rate increase.
- The Tribunal distinguishes between:
  - Prohibition on unilateral amendment of “fundamental and essential” employment conditions; and
  - Obligation to take discretionary decisions in accordance with fair procedures (including meaningful consultation).
- The Tribunal indicates it will assess separately whether the Fund abused its discretion by failing to consult meaningfully with key stakeholders.
- Interim conclusion: The Executive Board’s decision to increase the FY2021 MBP contribution rate above the annual structural salary adjustment did not violate a “fundamental and essential” condition of Applicants’ employment.

### Introduction to abuse-of-discretion inquiry
- Having concluded no breach of a “fundamental and essential” condition, the Tribunal frames the next question: did the FY2021 decision constitute an abuse of the Fund’s discretionary authority to amend terms and conditions of employment?
- The Tribunal references precedent that addresses whether organizational decisions on staff compensation transgress the organization’s “broad, although not unlimited, power ... to amend the terms and conditions of employment.” (Daseking-Frank et al., para. 44, citing Commentary on the Statute, p. 17.)
- The Tribunal will apply governing legal principles to assess whether the Fund abused its discretion in the FY2021 MBP contribution-rate decision.

*Source: IMF Administrative Tribunal judgment excerpt (paras. 79–108).*

### 109. What constraints apply to the amendment of non-fundamental and essential terms and

### 109. What constraints apply to the amendment of non-fundamental and essential terms and conditions of employment?

### Legal test for amendments to non-fundamental terms
- The Tribunal adopted the test articulated by the WBAT in de Merode, para. 47, for abuse of discretion when adopting changes to non-fundamental terms and conditions of employment. Changes:
  - must be based on a proper consideration of relevant facts;
  - must be reasonably related to the objective which they are intended to achieve;
  - must be made in good faith and must not be prompted by improper motives;
  - must not discriminate in an unjustifiable manner between individuals or groups within the staff;
  - must be made in a reasonable manner seeking to avoid excessive and unnecessary harm to the staff;
  - the care with which a reform has been studied and the conditions attached to a change are to be taken into account by the Tribunal.
- Example citation: Ms. “GG” (No. 2), Applicant v. International Monetary Fund, IMFAT No. Judgment 2015-3 (December 29, 2015), para. 362.

### Applicants’ pleaded grounds regarding the FY2021 MBP contribution-rate increase
- Applicants advanced two main arguments asserting abuse of discretion:
  - (a) Management failed to base its decision on an appropriate consideration of the relevant facts, including exploring alternative options;
  - (b) Management failed to engage in meaningful consultation with the SAC and IMFRA before determining the annual increase in MBP contribution rates.

### Tribunal analysis—consideration of relevant facts (FY2021 MBP contribution-rate decision)
- Board Paper supporting the FY2020 proposal stated:
  - “raising the premium by the amount of the single salary increase this year would be prudent to help maintain the targeted path for reserve depletion, as set out in 2017, and avoid having to impose potentially higher and abrupt increases next year to keep pace with rising healthcare costs.”
  - “As the MBP reserve approaches the targeted reserve level set in the 2017 MBP review, premium contribution rates and medical claim costs will continue to be monitored closely. It is likely that premium contribution adjustments of greater than the salary increase will be required starting in FY2022.” (EBAP/20/32, pp. 5-6.)
  - Proposed method: “MBP premiums will be based on FY2020 MBP premiums adjusted by the 3.6 percent increase in Fund’s salaries for FY2021.”
- Actuarial evidence cited by the Fund:
  - MBP Liabilities report of the Actuary, dated December 6, 2019, projected reserves would be entirely depleted by FY2024 and an additional contribution of $34.9 million would be required at that stage with increasing amounts in successive years.
- Applicants attempted to supplement the record with an actuarial report dated April 30, 2020:
  - The April 30, 2020 report shows the Plan ended FY2020 with cash reserves of $95.5 million, $5.7 million more than projected in March 2020.
  - That report projected MBP reserves would be fully depleted by FY2026.
  - The Tribunal noted the April 30, 2020 report was not available to the Executive Board when it decided the FY2021 increase; the Executive Board therefore could not be faulted for failing to consider it.
- Additional actuarial finding common to both reports:
  - Annual outflows from the MBP exceeded inflows starting in FY2018, leading to a decline in MBP reserves and a future need for steps to address inadequacy.
- Tribunal observations:
  - The Fund’s 2008 MBP funding framework aimed to “smooth contribution rates” to avoid abrupt and sudden increases; this is a legitimate goal.
  - Alternatives (e.g., altering benefits coverage or adjusting the tiered contribution scheme) may have been more far-reaching and intrusive to the MBP’s integrity than the chosen increase.
  - Impact on individual staff: the MBP contribution rate of a staff member earning $50,000 per annum increased by only approximately $2 per month as a result of the FY2021 increase.
  - Substantive MBP reviews occur on a five-yearly basis; the 2022 review would be an opportunity to revisit funding in light of developments since 2017.
- Tribunal conclusion on facts:
  - The Executive Board’s decision to increase MBP contributions by 3.6 percent for FY2021 was made on the basis of the relevant facts available at the time and was reasonable in light of those facts.
  - Although other courses of action existed, the Fund’s policy-making discretion permits choosing among more than one reasonable alternative.

### Tribunal analysis—consultation with SAC and IMFRA
- Procedural facts:
  - On March 3, 2020, HRD circulated the “Medical Benefit Plan and Group Life Insurance Plan—Staff Report 2020” to SAC and IMFRA requesting comments by close of business on March 5, 2020. The report included the proposal to increase MBP contributions for FY2021 by 3.6 percent based on the aggregate salary increase.
  - On March 5, 2020, the SAC Chair emailed HRD noting the “agreed funding formula only allows for an increase of the MBP schedule in line with the proposed structural increase (component), not the combined structure plus merit increase.”
  - On March 9, 2020, HRD replied explaining that consideration had been given to premium increases in excess of the structural salary increase if reserve levels continued to reduce more rapidly than projected, and that a slightly higher than structural increase in FY2021 would help reduce future premium increases.
  - The SAC Chair thanked HRD for the comprehensive response but noted continued “reservations”; no further correspondence followed.
  - IMFRA responded to consultation but did not raise pertinently the question of the MBP contribution-rate increase.
- Tribunal’s standard for meaningful consultation:
  - All required notice and information related to the nature, scope and effect of proposed amendments should be provided to key stakeholders, who ought to provide feedback and commence discussions if necessary.
  - The extent of engagement required depends on the nature, scope and effects of the proposed amendments.
- Tribunal findings on consultation adequacy:
  - Given the limited scope and limited effect of the FY2021 increase, the Fund engaged key stakeholders through correspondence; stakeholders responded and did not request continued dialogue.
  - The turnaround time for comments was minimal, particularly considering disruptions from the onset of the COVID-19 pandemic.
  - It would have been good practice for Management to inform the Executive Board that the SAC and IMFRA had raised concerns, but Management’s failure to do so did not bar SAC and IMFRA from approaching the Executive Board themselves.
  - The SAC and IMFRA could have approached the Executive Board directly but did not explain why they chose not to do so.
- Tribunal conclusion on consultation:
  - The Fund’s consultation with the SAC and IMFRA was adequate in the circumstances.
  - The Fund did not abuse its discretion by failing to engage in meaningful consultation with key stakeholders.

### Conclusions of the Tribunal
- The Tribunal concludes that the Fund’s Executive Board did not abuse its discretion when it decided, effective May 1, 2020, to set the increase in the annual MBP contribution rate at 3.6 percent, above the 2.7 percent increase in the Fund’s structural salary scale.
- The MBP contribution increase rate was not insulated from unilateral amendment as a “fundamental and essential” condition of employment.
- The Fund’s discretion to determine annual increases in MBP contributions does not constitute a violation of the Fund’s principle that its staff compensation system should be rules-based; the Fund was authorized to vary the MBP contribution rate subject to ordinary restrictions on discretionary authority.
- Applicants failed to establish that the Fund had constrained its discretionary authority such that increases in the structural salary scale served as a ceiling on MBP contribution-rate increases.
- The Tribunal examined Applicants’ arguments and evidence and concluded that Applicants have not substantiated that the contested decision was not based on an appropriate consideration of relevant facts or was not taken in accordance with fair and reasonable procedures, including meaningful consultation.
- Accordingly, the Applications were denied.

### Decision
- The Administrative Tribunal of the International Monetary Fund unanimously decides:
  - The Applications of Mr. T. Elkjaer, Mr. G. El-Masry, Ms. M. Rossignol, and Mr. T. Roy are denied.

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_Source: https://www.imf.org/-/media/files/imfat/j2021-4.pdf_