Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-06056/USCOURTS-ca10-95-06056-0/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 

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' I. 

Patrick J. Fisher, Jr. 

Clerk 

UNITED STATES COURT OF APPEALS 

Tenth Circuit 

Byron White United States Courthouse 

1823 Stout Street 

Denver, Colorado 80294 

(303) 844-3157 

September 19, 1996 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RE: 95-6056, Chiles v. Ceridian Corporation 

September 18, 1996 by The Honorable Carlos F. Lucero 

Elisabeth A. Shumaker 

Chief Deputy Clerk 

Please be advised of the following correction to the captioned decision: 

On page 26, in the seventh line, the word defendents' is misspelled and should 

read defendants'. 

Please make the appropriate corrections to your copy. 

Very truly yours, 

Trish Lane 

Deputy Clerk 

Appellate Case: 95-6056 Document: 01019279760 Date Filed: 09/18/1996 Page: 1 
PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

LEO W. CHILES, GLORIA HERREN, 

HELEN L. BYRD, JOY L. OLEO, 

PHYLLIS McMILLAN, ROBERT D. 

HUNTER, BARBARA JEFFRIES, 

GLORICE BIGLOW, JACQUELINE 

STEELE, 

FILED 

United States Court of Appeals Tenth Circuit 

SEP 1·8 1996 

PATRICK FISHER 

Clerk 

Plaintiffs - Appellants, No. 95-6056 

V. 

CERIDIAN CORPORATION; 

SEAGA TE TECHNOLOGIES, foreign 

corporations, 

Defendants - Appellees. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

(D.C. No. CIV-93-1715-D) 

Mark Hammons of Hammons & Associates, Oklahoma City, Oklahoma, for PlaintiffsAppellants. 

Charles W. Ellis (G. Neal Rogers with him on the brief) ofLawrence & Ellis, P.A., 

Oklahoma City, Oklahoma, for Defendants- Appellees. 

Before BALDOCK, HENRY and LUCERO, Circuit Judges. 

LUCERO, Circuit Judge. 

Appellate Case: 95-6056 Document: 01019279760 Date Filed: 09/18/1996 Page: 2 
Plaintiffs, a certified class of employees who receive benefits under a long term 

disability plan, appeal from summary judgment denying them health care benefits under 

the Employee Retirement Income Security Act of 1974,29 U.S.C. § 1001 et seq. 

("ERISA"). The issues presented are whether the plaintiffs have vested rights to 

company-paid health insurance as long as they remain disabled and, if not, whether the 

plan administrator had sufficient reason to change the plan and require the covered 

employees to pay their own premiums for coverage. 'The district court found that these 

benefits were not vested and that the employer properly exercised its right to discontinue 

paying the premiums. 

On appeal, both parties point to the plan documents setting out the plaintiffs' 

benefits and, particularly, the summary plan descriptions ("SPDs") describing those plans; 

each finds language supporting its interpretation. Our inquiry is guided by these 

documents and federal ERISA law. Our jurisdiction is founded on 28 U.S.C. § 1291. 

BACKGROUND 

The plaintiffs are former employees of Imprimis, a division of Control Data. 

Control Data provided its nonunionized employees, including those working for 

Imprimis, benefits under a number of ERISA plans. The plans gave employees the option 

of enrolling in health and dental coverage, life insurance and disability benefit insurance. 

Enrolled employees made periodic payments for their coverage. Control Data maintained 

plan documents for each of the four benefit programs (plan "master documents"), and 

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provided covered employees with SPDs, which we are told describe in language 

comprehensible to the average participant the terms and conditions of the plan. 

In September 1989 Control Data sold Imprimis to Seagate Technology. Prior to 

the sale, plaintiffs had all been deemed disabled and were receiving long term disability 

benefits under the Control Data Long Term Disability Plan ("LTD Plan"). The summary 

plan description at the time of sale provided: 

While on Long-Term Disability Status the company will pay the premiums 

for all the company-sponsored benefits (medical, life, and dental) for which 

you and your dependents were enrolled before your disability began. The 

company will continue paying all premiums until you and your dependents 

are no longer eligible for the plans. 

As part of the sale Seagate agreed to administer the plaintiffs' rights "according to the 

terms of the Control Data Plan," and Control Data transferred to Sea gate assets to cover 

projected liabilities from the LTD Plan. Sea gate thereafter created a new LTD plan 

("Seagate LTD Plan") to cover the employees that had participated in the Control Data 

plan, but did not provide coverage for new participants. The Seagate LTD Plan thus 

covered a closed set of participants. 

In a letter to employees regarding the impending sale oflmprimis to Seagate, 

Control Data notified plaintiffs that it would continue the health, dental and life insurance 

plans after the sale, and that "[a]s provided under the current program, Control Data will 

continue to pay the premiums on your behalf for these plans. Under the program, Control 

Data has reserved the right to change or cancel it at any time." Aplt. App. 217. While all 

aspects of the administration of the LTD Plan transferred to Sea gate, Control Data 

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. " 

continued to administer the health, dental, and life insurance plans. Sometime after the 

sale of Imprimis, Control Data changed its name to Ceridian Corporation. In September 

1992 Control Data/Ceridian informed the former Imprimis employees receiving LTD 

benefits and enrolled in health care coverage that, beginning in January 1993, the health 

care plan would be amended to require that plaintiffs pay the same portion of the health 

care premiums as Control Data/Ceridian's active employees. 

The company-paid health care premiums claimed by the plaintiffs are referenced in 

both the documents of Control Data's Health Care Plan and its LTD Plan. Although 

plaintiffs also claim that they have vested rights to company-paid dental and life 

insurance coverage as long as they qualify for long term disability, we focus on the health 

care coverage because it is the only plan for which plaintiffs are now required to pay 

under the disputed amendment. The Health Care Plan master document specifically 

provides that the employer will bear the entire cost of health care coverage during any 

period an employee is on approved disability. This provision is reflected in the SPD 

summarizing the Control Data Health Care Plan. 

Under the LTD Plan, employees who qualify for long term disability are entitled to 

a benefit of up to 60% of their previous salary. Unlike the master plan document for the 

Health Care Plan, the LTD Plan master document does not refer to health care coverage 

during disability. Although the master document is silent, in addition to the SPD 

provision quoted above, the LTD Plan SPD also states that the company promises to 

continue to pay premiums on company sponsored benefits while the employee is on 

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"Rehabilitation Status." A chart in the SPD reiterates the company's promise to pay the 

employee's premium while on disability and rehabilitation. The plan documents for the 

dental and life insurance plans also note that the cost of coverage for those enrolled would 

be paid by Control Data during the employee's disability. 

All of Control Data's plans contain amendment and termination provisions. The 

SPD to each of the four plans states: "Control Data expects to continue the [Long-Term 

Disability/Health/Dental/Life] Plan indefinitely, but must reserve the right to change or 

discontinue it if it becomes necessary. This would be done only after careful 

consideration." This summary is not a verbatim recitation of the rights to amend or 

terminate found in the master plan documents. Those documents allowed plan 

amendment "if deemed advisable" by Control Data, and retained the employer's right to 

terminate "at any time." The LTD Plan's reserved rights provision includes an additional 

feature not found in the documents for the medical, dental, or life insurance benefit plans. 

The LTD Plan master document notes that, notwithstanding the termination of the LTD 

Plan, a participant who was totally disabled on the effective date of termination "shall 

continue to receive benefits in accordance with the terms of the Plan." This promise is 

reflected in the SPD, which states: "Ifthe group Long-Term Disability Plan terminates, 

and if on the date of such termination you are totally disabled, your Long-Term Disability 

benefits and your claim for such benefits will continue as long as you remain totally 

disabled as defined by the plan." 

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' 

Plaintiffs brought this action under 29 U.S.C. § 1132(a)(l)(B) on behalf of"former 

employees oflmprimis Technology, Inc. who were, as of January 1, 1993, receiving longterm disability (LTD) benefits pursuant to the LTD plan administered by Seagate and 

who were covered by the health care plan administered by Ceridian." They sought relief 

against defendants for breach of contract and fiduciary duties. By agreement of the 

parties, the district court certified the class. 1 Both parties moved for summary judgment. 

The district court granted defendants' motion and entered judgment against plaintiffs. 

Plaintiffs timely appealed. 

DISCUSSION 

We review the grant of summary judgment de novo, applying the same legal 

standard used by the district court under Fed. R. Civ. P. 56( c). James v. Sears. Roebuck 

& Co., 21 F.3d 989,997-98 (lOth Cir. 1994). Summary judgment is appropriate if"there 

is no genuine issue as to any material fact and ... the moving party is entitled to 

judgment as a matter oflaw." Fed. R. Civ. P. 56( c). In applying the standard, we 

construe the factual record and all reasonable inferences from the record in the light most 

favorable to the party opposing summary judgment. Blue Circle Cement. Inc. v. Board of 

County Comm'rs, 27 F.3d 1499, 1503 (lOth Cir. 1994). 

1 A separate class of Control Data/Ceridian employees has been certified in a separate 

action. Barker v. Ceridian Com., 918 F. Supp. 1298 (D. Minn. 1996). This class specifically 

excludes the instant plaintiffs, and involves disabled participants in the LTD plan who were not 

employees of Control Data's Imprimis division. 

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We tum to plaintiffs' claimed errors. First, they argue that by its terms, the LTD 

Plan vests in an employee the right to have health insurance premiums paid by the 

company when she qualifies for long-term disability status. Stated in a different fashion, 

once the LTD benefits vest, an employee is guaranteed a premium waiver for as long as 

qualification for disability or rehabilitation status continues -- the plan sponsor may not 

unilaterally alter vested benefits. Second, plaintiffs contend that even if the right to health 

care premiums did not vest when an employee qualified for long-term disability, the LTD 

Plan guaranteed that benefits would vest for all those on long-term disability at the time 

the LTD Plan was terminated. Plaintiffs assert the LTD Plan terminated at the time 

Control Data!Ceridian sold Imprimis to Seagate. Finally, even assuming the right to have 

health care premiums paid did not vest, plaintiffs submit that a question of material fact 

exists over whether it became "necessary" for Ceridian to eliminate the benefit. 

A. Did the health benefit premium payments vest once plaintiffs 

qualified for long-term disability? 

In regulating plans, ERISA distinguishes between two types of employment 

benefits, welfare benefits and pension benefits. 29 U.S.C. § 1002(1),(2). The LTD Plan 

is an employee welfare benefit plan because disability insurance plans are considered 

welfare, not pension, benefits. See Williams v. Plumbers & Steamfitters Local 60, 48 

F.3d 923, 925 (5th Cir. 1995). Vested benefits are those which are nonforfeitable. 

Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 376 (1980). Benefits 

provided under a welfare benefit plan need never vest. Curtiss-Wright Corp. v. 

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. ' 

Schoonejongen, 115 S. Ct. 1223, 1228 (1995); Pitman v. Blue Cross and Blue Shield, 24 

F.3d 118, 121 (lOth Cir. 1994). Congress intentionally exempted welfare benefit plans 

from ERISA vesting requirements, determining that "[t]o require the vesting ofthose 

ancillary benefits would seriously complicate the administration and increase the cost of 

plans whose primary function is to provide retirement income." Hozier v. Midwest 

Fasteners, Inc., 908 F.2d 1155, 1160 (3d Cir. 1990) (citing H.R. Rep. No. 807, 93rd 

Cong., 2d Sess. 60). 

An employer or plan sponsor may unilaterally modifY or terminate welfare 

benefits, unless it contractually agrees to grant vested benefits. Howe v. Varity Corp., 

896 F.2d 1107, 1109 (8th Cir. 1992); Alday v. Container Corp. of America, 906 F.2d 660, 

665 (11th Cir. 1990), cert. denied, 498 U.S. 1026 (1991). A plan sponsor who changes 

the vested benefits granted in a welfare plan may be liable to a beneficiary under the plan. 

29 U.S.C. § 1132(a)(1),(3); see also,~' Wheeler v. Dynamic Eng'g Inc., 62 F.3d 634, 

639-40 (4th Cir. 1995). Plaintiffs argue that the LTD Plan SPD constitutes an enforceable 

promise to pay the disabled employees' health care premiums as long as they remain in a 

disabled condition. The employees, as beneficiaries of the plan, are entitled to enforce 

and clarifY their present and future rights under the plan. 29 U.S.C. § 1132(a)(l)(B). 

Because an employee benefit plan must be established by a "written instrument," 

29 U.S.C. § 1102(a)(l), a promise to provide vested benefits "must be incorporated, in 

some fashion, into the formal written ERISA plan." Jensen v. SIPCO, 38 F.3d 945, 949 

(8th Cir. 1994) (quotation omitted), cert. denied, 115 S. Ct. 1428 (1995). SPDs are 

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considered part of the ERISA plan documents. 29 U.S.C. § 1022(a)(l); Alday, 906 F.2d 

at 665. In interpreting the terms of an ERISA plan we examine the plan documents as a 

whole and, if unambiguous, we construe them as a matter oflaw. Kemmerrer v. ICI 

Americas. Inc., 70 F .3d 281, 288-89 (3d Cir. 1995), cert. denied, 116 S. Ct. 1826 ( 1996). 

In this case we apply the de novo standard of review to interpret the terms of a plan, 

Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), "giving the language 

its common and ordinary meaning as a reasonable person in the position of the [plan] 

participant, not the actual participant, would have understood the words to mean," Blair 

v. Metropolitan Life Ins. Co., 974 F.2d 1219, 1221 (lOth Cir. 1992) (quoting McGee v. 

Eguicor-Eguitable HCA Corp., 953 F.2d 1192, 1202 (lOth Cir. 1992)) (emphasis 

omitted). Defendants assert, and the district court below found, that because the LTD 

Plan and the SPD explicitly reserve the right to change or discontinue the plan, any 

promise to continue benefits was subject to the rights reserved. Plaintiffs contend that the 

SPD's explicit promise that the company would pay the premiums on company-sponsored 

benefits as long as the employee is disabled is inconsistent with the reservation of rights, 

creating an ambiguity for which summary judgment is inappropriate. 

As a threshold matter, we address plaintiffs' argument that all four of the benefit 

plan documents really constitute one ERISA plan, and that we must look to promises 

made in the Control Data Health Care Plan to interpret the rights of participants in the 

LTD Plan. Plaintiffs provide no circuit authority for the proposition that these four 

separate plans should be treated as one, arguing only that we should adopt the interpretive 

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practice that when several contracts refer to the same matter they should be construed 

together. See FDIC v. Hennessee, 966 F.2d 534, 537 (lOth Cir. 1992) (applying 

Oklahoma law). We conclude that Control Data intended to create separate plans. Each 

has a different ERISA identification number; the plans do not all share the same 

administrator or trust; and, most importantly, it is clear from the language of the plan 

documents that the company intended to establish four different plans. We decline 

plaintiffs' invitation to read the documents of the four separate plans as one for the 

purposes of determining plaintiffs' benefits in the LTD Plan. Nevertheless, where 

appropriate, we do refer to each of the relevant plans to detem1ine Control Data's intent. 

Because welfare benefits do not statutorily vest under the terms of ERISA, 

plaintiffs carry the burden of showing an agreement or other demonstration of employer 

intent to have company-paid premiums vest under the plan. Houghton v. SIPCO. Inc., 38 

F.3d 953, 957 (8th Cir. 1994). The conflict between a plan sponsor's reservation of the 

right to change or discontinue a plan, appearing in the same document as a promise of 

interminable benefits to qualifying participants, presents difficult issues of interpretation. 

This case presents the question of whether health benefits vest in the face of a reserved 

modification clause once the employee qualifies for disability status. A number of courts 

have addressed similar cases, where a reservation clause appeared within the same 

document as a promise of lifetime welfare benefits continuing after employees reach 

retirement. See,~' In re Unisys Corp. ERISA Litig., 58 F.3d 896 (3d Cir. 1995); 

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Jensen, 38 F.3d 945; Gable v. Sweetheart Cup Co., 35 F.3d 851 (4th Cir. 1994), cert. 

denied, 115 S. Ct. 1442 (1995); Howe, 896 F.2d 1107. 

Boiled down to its essence, the question is not whether an ERISA plan document 

containing apparently conflicting provisions is ambiguous in toto. Rather, it is whether 

the reservation of rights clause itself, read in tandem with the promise of continuing 

benefits to participants who maintain a particular status, is ambiguous with respect to the 

rights of the participants who have attained the status if the reservation does not 

specifically address alteration or termination oftheir benefits. In most cases, the issue 

involves retirees who are promised continued health care coverage for life; here, the plan 

allegedly promises continued health insurance to participants on disability. In either 

situation, plaintiffs have voluntarily or involuntarily reached the status for which the plan 

promises continued benefits. Recent cases from other circuits are not uniform in 

determining whether a general reservation of rights clause unambiguously controls a 

separate promise of benefits upon retirement. In Unisys, the Third Circuit concluded that 

a general reservation of rights clause unambiguously controls a promise of continued 

health care benefits to retirees: "[a ]n employer who promises lifetime medical benefits, 

while at the same time reserving the right to amend the plan under which those benefits 

were provided, has informed the plan participants of the time period during which they 

will be eligible to receive benefits provided the plan continues to exist." 58 F .3d at 904. 

In Jensen, the Eighth Circuit found two general reservation of rights clauses to be "not 

facially unambiguous--they leave at least some doubt as to whether [the employer] 

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intended to reserve the right to change or terminate benefits to already retired pensioners, 

or only the right to make prospective changes for those covered by the Plan but not yet 

retired." 38 F.3d at 950.2 

Whether an employer intends to commit contractually to an open-ended obligation 

where the ERISA document is silent presents a difficult question, susceptible to a number 

of interpretive approaches. See Bidlack v. Wheelabrator Corp., 993 F.2d 603 (7th Cir.) 

(en bane) (thoroughly discussing possible approaches to this interpretive conundrum), 

cert. denied, 114 S. Ct. 291 (1993). In this case, however, we need not choose between a 

hard-and-fast rule finding a general reservation of rights clause unambiguously 

controlling any promise located in another part of an ERISA document, and an approach 

finding ambiguity unless the plan document spells out exactly whose benefits may be 

unilaterally altered. In this case, it is clear that Control Data retained the right to change 

the benefits of all LTD plan participants--including those who had already qualified for 

long-term disability. 

As noted above, the LTD plan's reservation of rights clause contains a proviso. 

Described in the plan's SPD, it states: "Ifthe group Long-Term Disability Plan 

2 We recognize that the weight of case authority supports the Unisys approach, 

that a reservation of rights clause allows the employer to retroactively change the medical 

benefits of retired participants, even in the face of clear language promising companypaid lifetime benefits. See,~' Gable, 35 F.3d 85; Alday 906 F.2d 660; Howe, 896 F.2d 

1107. But see Wise v. El Paso Natural Gas Co., 986 F.2d 929, 937-38 (5th Cir.) 

(limiting its holding to allow employer to change retirement benefits with respect to not 

yet retired workers; emphasizing that retroactive changes to the rights of already retired 

workers was not an issue before the court), cert. denied, 114 S. Ct. 196 (1993). 

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terminates, and if on the date of such termination you are totally disabled, your LongTerm Disability benefits and your claim for such benefits will continue as long as you 

remain totally disabled as defined by the plan." Here, the LTD plan specifically 

contemplates a situation in which Control Data's discretion to change the plan is 

circumscribed. We find that the interpretive maxim of expressio unius est exclusio 

alterius -- the expression of one thing is the exclusion of another -- properly applies to 

this case. See Smart v. Gillette Co. Long-Term Disability Plan, 70 F .3d 173, 179 (1st Cir. 

1995) (using expressio unius maxim as an ERISA interpretive device to determine 

parties' intent in a severance agreement). By explicitly listing a qualification to Control 

Data's ability to change the LTD plan, it is proper to infer that the right to make other 

changes to disabled participants' benefits was reserved. While the maxim of expressio 

unius is not dispositive, it does carry weight. Id. Supporting this interpretation is 

language in the LTD master plan stating that all "participants" are bound by amendments; 

under the same section, disabled employees are considered "participants." Aplt. App. 

495-96. Our conclusion makes particular sense in this case, where plaintiffs' reading of 

the plan would render the termination exception superfluous; under plaintiffs' 

interpretation, Control Data may not alter the benefits of disabled participants under any 

condition, regardless of whether the plan terminates. 

Plaintiffs suggest that the termination proviso itself vests the benefits of the plan in 

an employee once he becomes disabled, because the right to benefits cannot be withdrawn 

by terminating the plan. Contractual vesting of a welfare benefit is an extra-ERISA 

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commitment that "must be stated in clear and express language." Wise, 986 F .2d at 93 7. 

The plain reading of this provision clearly pinpoints plan termination, not employee 

disability, as the vesting trigger. Contractual vesting is a narrow doctrine. ld. at 938. We 

are unwilling to hold that the vesting of benefits upon the occurrence of a specific 

expressed condition (termination) can be read broadly to include vesting generally upon 

an unexpressed condition (attaining disability). See Restatement (Second) of Contracts§ 

203( c) ("specific and exact terms are given greater weight than general language"). A 

reasonable person in the position of an LTD Plan participant could read the termination 

provision in the SPD only as allowing Control Data to modify or terminate the plan when 

it deems necessary, but if the plan terminates certain benefits may not be withdrawn. 3 

Plaintiffs attempt to distinguish the reservation of rights clause in the case at bar 

from those in which amendment and termination controlled the promise of vested rights. 

We agree with the district court that the termination clause retained almost unlimited 

discretion in Control Data to change the plan. See Musto v. American Gen. Corp., 861 

3 Similarly, we cannot find that the Control Data Health Care Plan creates an 

unforfeitable, vested right. While the Health Care Plan does state that a plan participant 

on approved disability will have continued coverage at no cost, this benefit appears 

contingent on the continued existence of the disability plan. See Aplt. App. 189. 

Moreover, the Health Care Plan contains a conflicting provision suggesting that disability 

coverage does not extend indefinitely: "When coverage would otherwise end, benefits 

may continue if you are or a covered dependent is totally disabled. The plan will pay 

benefits for expenses related to that disability alone and only for 12 months following the 

month in which your coverage ended." Aplt. App. 191 (Health Care Plan SPD). Given 

the contingent and ambiguous nature of the Health Care Plan promise of disability 

benefits and the reservation of the right to change or discontinue the plan, we see no 

intent to vest an open-ended benefit. 

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F.2d 897,904 (6th Cir. 1988) (finding that termination clause controlled a promise of 

continued benefits, stating that "the company fully intends to continue the plan 

indefinitely and to meet any foreseeable situations that may occur. However, the 

company does, as it always has, reserve the right to change the plan and, if necessary, 

discontinue it."), cert. denied, 490 U.S. 1020 (1989). The term "if necessary," found in 

the SPDs of all four Control Data plans, is not conditioned on any event or circumstance. 

Thus its meaning cannot fairly imply, as plaintiffs suggest, that the plans can only be 

amended if necessary to their fiscal survival. See id. at 906 n.S. In this manner, the 

reservation of the right to amend in Control Data's plans differs from that in Alexander v. 

Primerica Holdings. Inc., 967 F .2d 90 (3d Cir. 1992), a case relied on by plaintiffs. 

There, the right to amend was ambiguous in its scope because the company only 

"necessarily reserve[ d] the right to amend, modify, or discontinue the Plan in conformity 

with applicable legislation and also subject to any applicable collective bargaining 

agreement." Id. at 93. This clause could reasonably be read to limit plan modifications to 

those necessary to comply with changes in the law. Id. at 92-93.4 The term, "if 

4 Alexander itself distinguished the SPD language in Musto containing· "if it 

becomes necessary" as a predicate to changing the plan, finding that such a term was 

unambiguous with reference to the actual plan itself and later SPDs allowing the company 

to "reserve the right to change the Plan and, if necessary, discontinue it." 967 F .2d at 95 

(quoting Musto, 861 F .2d at 904 ). By contrast, the SPD in Alexander constituted the 

entire plan description. 

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necessary," in the Control Data plan SPDs cannot be read to limit the reserved right in 

any significant manner.5 

The interpretive principles suggested by the plaintiffs do not fit circumstances such 

as these, where the employer has expressly reserved the right to amend the plan. The 

"Yard-Man inference" that "retiree benefits are in a sense 'status benefits' which ... carry 

with them an inference that they will continue so long as the prerequisite status is 

maintained," International Union UA W of America v. Yard-Man. Inc., 716 F.2d 1476, 

1482 (6th Cir. 1983), cert. denied, 465 U.S. 1007 (1984), is an interpretive aid that applies 

once the provisions of the plan are determined ambiguous. See id. at 1480. Moreover, 

Yard-Man emphasized that the context in which benefits are written is important in 

making the inference; such an inference is more appropriate in the collective bargaining 

context where parties bargained over the language of retirement benefits. See id. at 1482; 

see also Armistead v. Vernitron Corp., 944 F.2d 1287, 1295-96 (6th Cir. 1991). In any 

event, the plan in Yard-Man contained no reservation of rights clause. Likewise, Hansen 

v. Continental Ins. Co. 940 F.2d 971, 982 (5th Cir. 1991), cited by plaintiffs for the 

proposition that language in a contract is resolved against the drafter, only applies once 

the court determines the plan or SPD contains ambiguities. Id. In fact, of the cases cited 

by plaintiffs in which the court found the language of benefits in the plan to be 

5 The district court found, alternatively, that even if Control Data/Ceridian could 

not change its plans without a showing of necessity, it satisfied this requirement in its 

letter explaining the change in benefits. We agree. 

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ambiguous, none contained language in which the employer unequivocally reserved the 

right to modify the plan. 

We conclude that the Control Data/Ceridian plans are not ambiguous with respect 

to the employer's right to modify LTD benefits so long as the LTD Plan remained in 

operation. Company-paid health benefit premium payments did not vest upon plaintiffs' 

qualification for long-term disability.6 

B. Did Rights to benefits vest because of LTD Plan Termination? 

Plaintiffs contend that even if their right to employer-paid health benefits did not 

contractually vest at the time they qualified for disability, the LTD Plan terminated upon 

the sale of the Imprimis division to Seagate, and their "benefits" unambiguously vested at 

that point. Under plaintiffs' interpretation of the LTD Plan's SPD, these benefits include a 

health care premium waiver. Defendants challenged the plaintiffs' interpretation of the 

term "benefits." They argued that the term only includes salary replacement benefits, 

and also alleged that the LTD Plan never terminated. The district court did not decide 

6 In Barker, the case filed by Control Data/Ceridian employees in the District of 

Minnesota, the district court granted Ceridian summary judgment on plaintiffs' claim that 

the right to free health insurance vested upon qualifying for long term disability benefits, 

finding alternatively that the reservation of rights language unambiguously defeats any 

suggestion that the benefits are vested and, even if the intent to vest such benefits was 

ambiguous, extrinsic evidence favored Ceridian's right to change all aspects of its welfare 

plans. 918 F. Supp. at 1304-05. Although we reach the same conclusion on this issue as 

the Minnesota district court, we do not share in its implication that the reserved 

termination and amendment clauses themselves automatically defeat an intent to vest 

welfare benefits. 

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whether the plan terminated, because it found that the vested "benefits" provided upon 

termination of the LTD Plan include only the 60% salary replacement benefit.7 

As discussed above, Control Data reserved the right to terminate the LTD Plan 

subject to the termination exception. The district court below found that the "termination 

clause constitutes an unambiguous promise on the part of the defendant companies to 

·continue long-term disability benefits to employees who have achieved long-term 

disability status in the event of termination ofthe plan ... " Dt. Ct. Order at 16. We 

agree. The termination proviso exhibits the "clear and express language" necessary to 

vest an extra-ERISA commitment. Gable, 35 F.3d at 855 (quoting Wise, 986 F.2d at 

937). The parties disagree both on whether the Control Data LTD Plan terminated with 

respect to the Imprimis division employees, and what is intended by the term "long-term 

disability benefits." 

Questions involving the scope of benefits provided by a plan to its participants 

must be answered initially by the plan documents, applying the principles of contract 

interpretation. See Howe, 896 F.2d at 1109. The law of trusts is also a valuable guide in 

interpreting ERISA documents. Jensen, 38 F.3d at 950; Blair, 974 F.2d at 1222. "The 

terms of trusts created by written instruments are determined by the provisions of the 

7 In a footnote, the district court suggested that "it would appear that the Disability 

Income Protection Plan at issue in the case at bar did not terminate as urged by the 

Plaintiffs." Dt. Ct. Order, at 18-19, n. 10. Instead, "[a]ny changes to the Ceridian plan 

should properly be considered a 'modification' under ERISA law, 29 U.S.C. § 1022(a)(l), 

rather than a termination as urged by the Plaintiffs." I d. 

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instrument as interpreted in light of all the circumstances and such other evidence of the 

intention of the settlor with respect to the trust as is not inadmissible." Jensen, at 950 

(quoting Bruch, 489 U.S. at 112 (1989)) (internal quotation omitted). An SPD is 

considered part of the plan documents required by ERJSA. Jensen, 38 F.3d at 949. If the 

clause to be construed does not itself determine the plan sponsor's intent, we read the 

language of the SPD as a whole. ld. at 950. Because the SPD best reflects the 

expectations of the parties to the plan, the terms of the SPD control the terms of the plan 

itself. Hansen at 982. When conflicting extrinsic evidence must be evaluated in order to 

illuminate a plan's terms, summary judgment is not appropriate. Bower v. Bunker Hill 

Co., 725 F.2d 1221, 1225 (9th Cir. 1984). 

1. Did the LTD Plan "Terminate"? 

The LTD Plan summary is not ambiguous in requiring that the LTD Plan 

terminate before any benefits vest in plaintiffs. Even assuming health premium payment 

benefits could vest for disabled employees in the LTD Plan, if the plan did not 

"terminate," defendants are free to modify its terms. Plaintiffs argue that the LTD Plan 

terminated with respect to them when the Imprimis division was sold to Seagate and the 

latter assumed identical obligations to the plan participants. 8 Defendants characterize the 

change as a "modification" under 29 U.S.C § 1022(a)(2), (b), which sets out an SPD's 

notification requirements in cases of"material modification." We conclude that the 

8 The parties have stipulated that Control Data/Ceridian's LTD Plan continued in 

effect after the sale oflmprimis with respect to employees in its other divisions. 

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Control Data/Ceridian LTD Plan terminated with respect to plaintiffs upon the sale of the 

Imprimis division. 

As part of the sale of the Imprimis division, the parties agreed that Sea gate would 

become responsible for the payment of long-term disability benefits under the Control 

Data LTD Plan, and that Control Data's liability would terminate, except for payments of 

premiums on behalf of LTD participants on disability. Pursuant to this agreement, 

Control Data transferred funds to Seagate "in an amount equal to the present value of the 

projected disability benefits determined as of the closing date payable with respect to 

Imprimis Employees listed on Attachment." Thereafter, Seagate established the "Seagate 

Technology, Inc. Long Term Disability Plan" for Imprimis employees "previously 

covered by the Control Data Corporation Long Term Disability Plan." The Control Data 

LTD Plan specifically states that "the Plan shall terminate as to a particular Employer 

upon the giving of notice by such Employer to the Trustee, executed in the manner of an 

amendment." The plan also provides: "Upon termination of the Plan, the Trustee shall 

continue to hold the Trust Assets and make distribution thereof at the times and in the 

manner heretofore provided, until the Trust Assets are depleted thereby." 

ERISA provides strict obligations and procedures regarding termination of pension 

plans, 29 U.S.C. §§ 1103(d)(1), 1341, 1342, but provides no guidelines to determine 

when a plan terminates. See In re Syntex Fabrics. Inc. Pension Plan, 698 F.2d 199,203 

(3d Cir. 1983) (suggesting that a plan terminates "when the employer's obligation to fund 

the plan ceases, [and] employees can no longer accrue benefits"). The Syntex factors are 

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grounded in the essential purposes of ERISA: to prevent an employee from losing 

accrued, vested benefits in the event the employer terminated the pension plan. 

Nachman, 446 U.S. at 374-75. With respect to termination of a welfare plan, ERISA only 

requires that " [ t ]he assets of a welfare plan which terminates shall be distributed in 

accordance with the terms of the plan, except as otherwise provided in the regulations of 

the Secretary." 29 U.S.C. § 1103(d)(2). Because ERISA welfare plans do not need to 

vest or be funded, the rules underlying terminating a pension benefit plan have little 

application. Unfortunately, there is a scarcity of guidance on questions of welfare plan 

termination. The two cases cited by plaintiffs for partial plan terminations both involve 

pension plan obligations, where in order to maintain a tax qualified plan, termination 

triggers specific ERISA obligations regarding accrued benefits. See Gluck v. Unisys 

~' 960 F.2d 1168 (3d Cir. 1992); Kreis v. Charles 0. Townley. M.D. & Assoc .. P.C., 

833 F.2d 74 (6th Cir. 1987).9 Partial terminations, determined for the tax aspects of 

ERISA plans, do not automatically determine partial terminations for ERISA purposes. 

Chait v. Bernstein, 835 F.2d 1017, 1020 (3d Cir. 1987). 

9 The Internal Revenue Code requires, in the case of qualified pension plan trusts 

created pursuant to §401(a), that employees become vested to the extent the plan is 

funded in the event of a partial termination. 26 U.S.C. §§ 401, 411(d)(3). Whether a plan 

is partially terminated is determined with regard to all the facts and circumstances of the 

particular case. 26 C.F.R. § 1.411(d)-2(b)(1); Borst v. Chevron Corp., 36 F.3d 1308, 

1313 & n.9 (5th Cir. 1994), cert. denied, 115 S. Ct. 1699 (1995). The trust for the LTD 

Plan was established under section 501(c)(9) ofthe Code. 26 U.S.C. § 501(c)(9). 

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. . 

Although it is unclear whether the trustee of the Control Data LTD Plan was 

properly notified that the plan was terminating, the facts that new trustees were appointed 

to a replacement plan instituted by Sea gate, that Sea gate became the administrator of the 

new plan, that Control Data transferred money to fund the new plan, and that after the 

transfer Seagate assumed all of Control Data's obligations with respect to disability plan 

participants, together suggest that the Control DataL TD Plan terminated. 10 See In re 

Syntex Fabrics, 698 F.2d at 203; see also Myron v. Trust Co. Bank Long Term Disability 

Benefit Plan, 522 F. Supp. 511, 516 (N.D. Ga. 1981) (disability plan terminated when 

plan funding was changed from one insurance company to another), affd, 691 F.2d 510 

(11th Cir. 1982), cert. denied, 462 U.S. 1119 (1983). Essential features of an ERISA plan 

include a procedure for establishing and carrying out a funding policy for the plan and 

procedures for the operation and administration of the plan. 29 U.S.C. § 1102(b). After 

the sale of Imprimis none of these provisions remained of the Control Data LTD Plan as 

far as plaintiffs were concerned; the responsibilities for funding and administering 

plaintiffs' disability benefits shifted to the Seagate LTD Plan. Given the facts of this case, 

the Control DataL TD Plan terminated with respect to Imprimis division employees when 

10 Defendants, without citing case authority, contend that the sale oflmprimis and 

change in administrators merely constituted a "material modification" of the plan as 

defined by 29 U.S.C. § 1022(a)(1), which includes as modifications fundamental changes 

in the plan. Aplee. Br. at 39-40. While the changes described in§ 1022(a) could be 

treated as modifications, that does not preclude the very real possibility that they could 

also constitute a termination. Cf. Curtiss-Wright, 18 F .3d at 1041 (requiring a proposed 

termination to comply with the notice of modification requirements in § 1 024(b )( 1) and § 

1022(a)(l)). 

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• 

Control Data was released from its obligation to fund the plan with respect to those 

employees and the employees could look to the Seagate LTD Plan for benefits. 11 

2. Do "benefits" include company-paid health premiums? 

Defendants contend that the ERISA documents cannot support a reading of the 

term "benefits" to include payment of health care premiums. We begin our inquiry with 

the LTD Plan's SPD itself. It is impossible solely from the language of the SPD's 

termination provision to determine what benefits the phrase "Long Term Benefits and 

your claim for such benefits" includes. Elsewhere tlie SPD uses the term "Long-Term 

Disability benefit" and "Long-Term Disability Plan benefits" to describe what eligible 

employees are entitled to. The document does not expressly define either term, or 

distinguish between the two. See Aplt. App. 505-06. Plaintiffs point to several parts of 

the SPD to suggest that "Long Term Benefits" includes payment of the health insurance 

premiums. First, they note that the termination clause refers to "benefits" in the plural, 

while the definition section of the SPD refers to the compensation replacement 

component of the L m Plan in the singular. ("Basic monthly compensation: If you 

become disabled, the benefit you receive from the plan is calculated using your basic 

monthly compensation ... " Aplt. App. 506 (emphasis added). In other parts of the SPD, 

11 The Control Data LTD Plan master document declares that the plan terminates 

with respect to a participant on the date he or she ceases to be an employee of Control 

Data or one of its wholly-owned subsidiaries. (LTD Plan at§§ 2.01, 2.02, 3.03(A)) This 

language also suggests to us that once the Imprimis division was sold its employees' 

participation in the Control Data Plan was terminated. 

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Appellate Case: 95-6056 Document: 01019279760 Date Filed: 09/18/1996 Page: 24 
.. 

' . 

the term "benefit" and "benefits" are both used to describe what the LTD Plan provides. 

Second, the SPD refers to the premium payments several times as benefits that are part of 

long term disability status. Page 7 of the SPD states: "Status: While on Long-Term 

Disability Status the company will pay the premiums for all the company-sponsored 

benefits ... for which you and your dependents were enrolled before your disability 

began." Aplt. App. 510. Again on page 11: 

Rehabilitation benefits are calculated as follows: ... 2) If you are receiving 

Long-Term Disability benefits when you return to work on Rehabilitation 

Status, your rehabilitation benefit will be equal to 60 percent of you wage 

loss . . . . This benefit is not taxed. The company will continue to pay 

premiums on company sponsored benefits .... 

Aplt. App. 514. On page 14, the SPD provides a chart entitled "Continuation of other 

Benefits and Programs During Disability." In this chart, it is clear that the company pays 

the health care premium for employees who are "Disabled and on Short-Term or LongTerm Status." 

Plaintiffs have made a prima facie case that a reasonable person in the position of 

an LTD Plan participant could find the language in the SPD to include payment ofhealth 

insurance premiums as a benefit to which persons on "Long-Term Disability Status" are 

entitled. "Long-Term Disability Status" is achieved after an employee's "fifth consecutive 

month of disability." Aplt. App. 509. The promise of continuing benefits in the 

termination clause applies to persons who are "totally disabled," a term that likewise is 

not defined. The term "Long-Term Disability benefits," as used in the termination clause, 

is susceptible to the reading given it by plaintiffs, that the termination clause can be read 

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to vest health benefits. See Carland v. Metropolitan Life Ins. Co., 935 F.2d 1114, 1120 

(lOth Cir.), cert. denied, 502 U.S. 1020 (1991). 

Defendants argue that when looking at the plan documents as a whole, the 

language regarding the extent of benefits at termination is unambiguous. Beginning with 

the SPD they note that the purpose of the LTD Plan is to "protect disabled employees 

from loss of income and to help them return to productive work whenever possible." 

Aplt. App. 504. From this the defendants conclude that the LTD Plan's SPD must be read 

to insure only against income loss created by disability. Defendants fail to recognize that 

requiring disabled employees to pay their health care premiums out ofthe 60% salary 

replacement benefit exacerbates their income loss. This language does not resolve the 

apparent ambiguity. 

Next, defendants explain the apparent ambiguity of using both "benefit" and 

"benefits" to describe the income replacement provision of the LTD Plan by suggesting 

that when used in the singular, the SPD is referring to a single periodic payment of the 

income replacement, while when used in the plural it refers to multiple payments. The 

language of the SPD section on payment of the salary replacement benefit could be read 

consistently with defendants' interpretation. Nevertheless, we cannot say that this 

explanation removes the ambiguity. An SPD is intended to be a document easily 

interpreted by a layman; an employee should not be required to adopt the skills of a 

lawyer and parse specific undefined words throughout the entire document to determine 

whether they are consistently used in the same context. See McKnight v. Southern Life 

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Appellate Case: 95-6056 Document: 01019279760 Date Filed: 09/18/1996 Page: 26 
& Health Ins. Co., 758 F.2d 1566, 1570 (5th Cir. 1985) (the purpose of an SPD is to 

simplify and explain the complex document that makes up the plan). An employee 

reading the SPD and believing that upon the termination of the LTD Plan she would be 

entitled to continued company-paid premiums for health insurance, is not engaging in an 

"unrealistically narrow" interpretation ofthe document. Wise, 986 F.2d at 939 (quoting 

Sharron v. Amalgamated Ins. Agency Serv .. Inc., 704 F.2d 562, 566 (11th Cir. 1983)). 

Plaintiffs' reading of the promised benefits in the SPD' s is not rebutted by defendents' 

reference to the SPD as a whole. 

Defendants next shift to the LTD master plan document itself Noting that it does 

not include health premium payments as benefits within the plan, they argue that only the 

Control Data/Ceridian Health Care Plan provides these benefits to disabled employees. 

Because the LTD Plan's termination clause has no vesting effect on benefits granted 

under the health care plan, defendants maintain the LTD Plan benefits are unambiguously 

limited to income replacement. Defendants submit that by reviewing the LTD Plan's 

language, any ambiguity in the SPD is resolved. The issue then narrows to whether the 

ambiguity of plan benefits in the plan SPD can be resolved against participants by 

looking to the plan master documents. 

While Control Data/Ceridian may have intended to coordinate the benefits in its 

various plans in such a manner that LTD Plan participants were entitled only to income 

replacement benefits upon the termination of the plan, it was obligated by the SPD to 

inform its employees of such intent. 29 U.S.C. § 1022(a)(l); see also 29 C.F.R. § 

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Appellate Case: 95-6056 Document: 01019279760 Date Filed: 09/18/1996 Page: 27 
2520.102-30)(2), (l) (a welfare benefit plan's SPD shall include a description or summary 

of benefits and a statement "clearly identifying circumstances which may result in 

disqualification, ineligibility, or denial, loss, forfeiture or suspension of any benefits that a 

participant or beneficiary might otherwise reasonably expect the plan to provide on the 

basis ofthe description ofbenefits required"). The LTD Plan SPD nowhere states that 

health care benefits provided to those on disability come from the health care plan, not 

from the LTD Plan. In fact, the LTD Plan SPD purports to summarize the LTD program, 

not the Health Care program. 

Because the SPD is such an important vehicle in ERISA's attempt to fairly regulate 

employment benefits, courts have held that the terms of the master plan cannot control an 

SPD's provision that is ambiguous or in conflict with the master plan document. Pierce v. 

Security Trust Life Ins. Co., 979 F.2d 23,27 (4th Cir. 1992); Hansen, 940 F.2d at 981-82; 

Heidgerd v. Olin Corp., 906 F.2d 903,907 (2d Cir. 1990); Edwards v. State Farm Mut. 

Auto Ins. Co., 851 F.2d 134, 136 (6th Cir. 1988); McKnight, 758 F.2d at 1570-71. The 

duty of clarity falls upon the plan sponsor. As the Fifth Circuit cogently reasoned in 

Hansen: 

Any burden of uncertainty created by careless or inaccurate drafting of the 

summary must be placed on those who do the drafting, and who are most 

able to bear that burden, and not on the individual employee, who is 

powerless to affect the drafting of the summary or the policy and ill 

equipped to bear the financial hardship that might result from a misleading 

or confusing document. Accuracy is not a lot to ask. And it is especially 

not a lot to ask in return for the protection afforded by ERISA's preemption 

of state law causes of action--causes of action which threaten considerably 

greater liability than that allowed by ERISA. 

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Appellate Case: 95-6056 Document: 01019279760 Date Filed: 09/18/1996 Page: 28 
Hansen, 940 F .2d at 982. Allowing the plan's master documents to trump the SPD would 

both undermine Congress's intent for the SPD to convey accurately plan information to 

employees upon which they could rely, see 29 U.S.C. § 1022(a)(l), and would tempt plan 

sponsors to engage in drafting legerdemain in order to conceal or omit the less attractive 

aspects of their plan, thereby creating for ERISA a Daliesque world of legal surrealism. 

See James F. Stratman, Contract Disclaimers in ERISA Summary Plan Documents: A 

Deceptive Practice?, 10 Indus. Rei. L.J. 350 (1988) (documenting how employees reading 

SPDs can be misled as to their contractual rights). Based on the evidence in the record it 

is unclear what benefits plaintiffs were entitled upon plan termination. Whether we 

conclude that the ambiguous SPD renders the LTD Plan documents faulty, or that it is 

unclear from the plan documents what benefits the plan confers, summary judgment is 

inappropriate. 

The mere demonstration that the SPD is inconsistent with the terms outlined in the 

LTD Plan itself does not entitle plaintiffs to the benefits they believe vested upon 

termination. Where the SPD incorrectly described benefits in the plan, "'to secure relief, 

[the claimant] must show some significant reliance upon, or possible prejudice flowing 

from, the faulty plan description."' Aiken v. Policy Management Sys. Com., 13 F.3d 

138, 140 (4th Cir. 1993) (quoting Govoni v. Bricklayers Int'l Union Local No.5 Pension 

Fund, 732 F.2d 250, 252 (1st Cir. 1984)); accord Gable, 35 F.3d at 859; Gridley v. 

Cleveland Pneumatic Co., 924 F.2d 1310, 1319 n.8 (3d Cir.) cert. denied, 501 U.S. 1232 

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' -

(1991); Bachelder v. Communications Satellite Corp., 837 F.2d 519, 522-23 (1st Cir. 

1988). This requirement makes sense because the purpose of the SPD is to give 

employees an understanding of the plan upon which they are entitled to rely; the master 

plan document, however, is also relevant to determine what the terms of the plan actually 

are. Only where employees rely on an ambiguous or faulty SPD, or otherwise show 

prejudice from the inconsistency between the SPD and the master plan document, is relief 

appropriate. Any other rule would allow a windfall for some employees and unfairly 

increase costs for employers and their insurers, who rely on the terms of the plan in 

providing benefits and coverage. This in tum could jeopardize the solvency of the plan 

with respect to the remaining employees. Because we conclude that summary judgment 

is inappropriate regarding the scope of"benefits" vested upon plan termination, we leave 

it to the district court to determine the issue of reliance. 

On remand, plaintiffs may attempt to demonstrate that the LTD Plan did in fact 

include health benefit premiums as part of disability benefits. 12 Alternatively, if 

plaintiffs' evidence only shows that the LTD Plan SPD could lead an employee to 

reasonably believe that the Plan intended health benefits to vest, each individual plaintiff 

must demonstrate some reasonable reliance on the SPD provision or prejudice flowing 

from the inconsistency between the SPD and the Plan master document. The issue of 

12 In interpreting this ambiguous provision in the plan the district court may 

consider interpretive statements made by Control Data, past practices, customary usage in 

the trade, and other competent evidence bearing on the understanding of the parties. 

Taylor v. Continental Group, 933 F.2d 1227, 1233 (3d Cir. 1991). 

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Appellate Case: 95-6056 Document: 01019279760 Date Filed: 09/18/1996 Page: 30 
detrimental reliance on the plan document is not appropriate for class action 

determination. See Jensen, 3 8 F .3d at 953. 13 Of course, if plaintiffs prove that the LTD 

Plan in fact intended to vest a continuing health care premium waiver, no reliance need be 

shown. 

CONCLUSION 

For the foregoing reasons, we AFFIRM the district court's judgment that health 

care premium benefits did not vest when plaintiffs became disabled. We REVERSE the 

remainder of the judgment, and REMAND to the district court for proceedings consistent 

with this opinion. 

13 We stress that this case does not involve principles of federal common law 

estoppel to modify unambiguous written plan documents. See Miller v. Coastal Cor.p., 

978 F .2d 622 (1Oth Cir. 1992) (informal communications to employees do not modify 

unambiguous contradictory terms in written plan documents), cert. denied, 507 U.S. 987 

(1993); Straub v. Western Union Tel. Co., 851 F.2d 1262, 1265 (lOth Cir. 1988) (terms of 

benefit plan cannot be modified through promissory estoppel by oral representations). 

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