Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-03589/USCOURTS-ca8-14-03589-0/pdf.json

Parties Involved:
Theodore F. Ingram
Appellant
Terminal Railroad Association
Appellee

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-3589

___________________________

Theodore F. Ingram

lllllllllllllllllllll Plaintiff - Appellant

v.

Terminal Railroad Association of St. Louis Pension Plan for Nonschedule Employees

lllllllllllllllllllll Defendant - Appellee

____________

Appeal from United States District Court 

for the Eastern District of Missouri - St. Louis

____________

 Submitted: September 21, 2015

 Filed: January 29, 2016

____________

Before LOKEN, BENTON, and SHEPHERD, Circuit Judges.

____________

LOKEN, Circuit Judge.

In 2006, Theodore Ingram was employed by Union Pacific Railroad (“Union

Pacific”) and living in Los Angeles. On July 1, he was hired to be the Superintendent

of Transportation of the Terminal Railroad Association of St. Louis(“Terminal”) and

moved to St. Louis. Ingram elected to receive early retirement benefits from Union

Pacific beginning January 1, 2010. When he retired from Terminal at the end of

2010, he became eligible for retirement benefits under Terminal’s Pension Plan for

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Nonschedule Employees (the “Plan”). In this action under § 502(a)(1)(B) of the

Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a)(1)(B),

Ingram alleges that the Plan erroneously determined his pension benefits by (i)

excluding a 2006 sign-on bonus frompension-qualifying earnings and (ii) improperly

inflating the offset for retirement benefits Ingram receives from Union Pacific. 

Reviewing for abuse of discretion, the district court granted summary judgment in 1

favor of the Plan, concluding that the administrator’s decisions were reasonable. 

Ingram appeals. Reviewing the grant of summary judgment de novo, we affirm.

I. The ERISA Standard of Review.

We review de novo whether the district court applied the appropriate standard

of review to the Plan administrator’s decision. Jobe v. Med. Life Ins. Co., 598 F.3d

478, 480-81 (8th Cir. 2010). Applying trust law principles, the Supreme Court held

in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111-13 (1989), that the

administrator’s interpretation of an ERISA plan is reviewed de novo unless the plan

expressly grants discretionary authority to make benefit determinations. If the

administrator has discretionary authority, the plan’s decision is subject to abuse-ofdiscretion review. In this case, § 14.6 of Terminal’s Plan unquestionably granted

discretion to interpret the Plan, providing that the administrator “shall perform its

duties asthe Plan Administrator in its sole discretion shall determine is appropriate.” 

Ingram argues that we should nonetheless apply a less deferential de

novo standard of review because “a palpable conflict of interest or a serious

procedural irregularity existed, which . . . caused a serious breach of the plan

administrator’s fiduciary duty.” Anderson v. U.S. Bancorp, 484 F.3d 1027, 1032 (8th

Cir. 2007). The Supreme Court largely overruled our prior cases applying this

The Honorable Henry E. Autrey, United States District Judge for the Eastern 1

District of Missouri.

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principle in Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008). Again applying the

law of trusts as adopted in Firestone and reflected in the Restatement (Second) of

Trusts § 187 cmt. d (Am. Law. Inst. 1959), the Court in Glenn affirmed a Sixth

Circuit decision that considered an alleged conflict of interest and various alleged

procedural regularities as factors to be weighed in determining whether a plan

administrator with discretionary authority had abused that discretion. Id. at 116-19. 

As the Court explained, “We do not believe that Firestone’s [reference to an

administrator’s financial conflict of interest] implies a change in the standard of

review, say, from deferential to de novo review. Trust law continues to apply a

deferential standard of review to the discretionary decisionmaking of a conflicted

trustee, while at the same time requiring the reviewing judge to take account of the

conflict when determining whether the trustee, substantively or procedurally, has

abused his discretion.” 554 U.S. at 115. 

Here, none of the conflicts of interest and procedural irregularities alleged by

Ingram “caused a serious breach of the plan administrator’s fiduciary duty” which

warranted departure from the abuse-of-discretion standard of review under Glenn. 

Johnson v. United of Omaha Life Ins. Co., 775 F.3d 983, 987 (8th Cir. 2014). The

district court correctly reviewed the decision ofthe Plan administrator, TerminalCFO

Kerry Paubel, for abuse of discretion.2

Ingram contends that Paubel’s initial lack of knowledge that he was Plan 2

administrator was a material procedural irregularity that warrants de novo review. 

This contention is withoutmerit. Paubel was aware he had been delegated Terminal’s

decisionmaking authorityand timely advised Ingramhe would decide Ingram’s claim.

There was not even an arguable breach of fiduciary duty in exercising that authority,

consistent with the Plan, whether Paubel did so as Terminal’s designee, or asthe Plan

administrator appointed by Terminal’s Board of Directors some years earlier.

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II. The Sign-On Bonus Issue.

A. The Ruling at Issue. When Ingramretired, § 5.1(a) of the Plan provided that

retirement benefits were calculated based on “1.5% . . . of the Average Monthly

Earnings of the Participant,” defined in § 2.6 as the average monthly earnings in the

five consecutive calendar yearsin which Ingram’s earnings were the highest. Ingram

worked at Terminal only fifty-four months, the 2006 part year and full years 2007-

2010. Section 2.14 defined earnings as:

The total earnings paid during the applicable period by an

Employer subject to income tax withholding as reported on Treasury

Department Form W-2, excluding reimbursement of moving expenses,

reimbursements or other expense allowances and fringe benefits . . . .

The Plan gave retiring Participants benefit payment options. Ingram chose the

Single Life Annuity monthly payment option. Plan administrator Paubel determined

that Ingram’s Average Monthly Earnings for the fifty-four months were $15,357.60. 

This produced a Gross Pension of $9,214.56 per month, an Eligible Pension of

$7,400.71 per month, and, after the offset discussed in Part III of this opinion, a

Single Life Annuity benefit of $3,170.71 per month. Paubel rejected Ingram’s

contention that his Average Monthly Earnings should include a July 2006 “Sign On

Bonus” of $142,737.20 (“the July 2006 payment”), concluding that the Sign On

Bonus was an excludable moving expense allowance. Including that amount in the

calculation would apparently have increased Ingram’s Average MonthlyEarnings by

17.2% and his Single Life Annuity monthly benefit by nearly 50%.

B. Procedural Background. When Ingram advised Paubel in July 2010 that he

planned to retire at the end of the year, Paubel said that the July 2006 payment would

not be included as earnings under Plan § 2.14 because it fell within the moving

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expenses exclusion. Ingram submitted a claim for benefits under the Plan, arguing

that the Sign On Bonus should be included in calculating his pension annuity:

When I signed on to work for [Terminal] in 2006 I was provided with

a Sign On bonus for the following reasons:

1. I took a cut in pay to take the job.

2. [Terminal] had no relocation or moving expense policy.

There were no conditions attached to the bonus and no requirements to

turn in receipts or an expense report showing how the bonus money was

spent.

Ingram attached as supporting documents (i) a July 2006 pay stub showing a

$142,737.20 “bonus,” reduced by various tax deductions to “net pay” of $92,293.00;

(ii) a year-end pay stub showing the Sign On Bonus and a year end bonus (which was

included in his Average Monthly Earnings) added together; (iii) his Form W-2 for

2006 showing the Sign On bonus included in taxable income; and (iv) a July 13,

2006, note from Paubel attaching “my . . . calculation of your sign on bonus.” The

attached spreadsheet, dated July 1, 2006, was titled “Signing Bonus - T. F. Ingram”

and recorded Gross Pay of $142,737.20 reduced by various tax deductions to a “Net

Bonus Amount” of $85,000.

In a letter dated January 21, 2011, Paubel denied Ingram’s claim and enclosed

affidavits submitted to the Plan administrator by former Terminal President Billy

Broyles and by Director of Human Resources, Corporate Secretary, and Assistant to

the President Shannon Nouri. Broyles averred that, in 2006, he offered Ingram a

position with Terminal and “negotiated Mr. Ingram’s compensation with him,

including his compensation for relocation expenses.” Though Terminal “had no

formal relocation policy,” it was company practice “to provide individuals who

relocated to accept a senior position with the Company compensation for relocating.”

After agreeing with Ingram on a lump sum payment, Broyles instructed Nouri to

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consult with CFO Paubel and “determine a reasonable amount to be paid . . . to

reimburse [Ingram] for the expenses of moving.” Nouri averred that she and Paubel

“determined that $85,000 would be an appropriate amount to compensate Mr. Ingram

for relocation.” Paubel determined an additional amount Ingram would be paid “as

a ‘gross up’ for taxes Mr. Ingram would incur on $85,000.” Nouri also averred that,

in 2006, it was Terminal’s practice to reflect “most expense reimbursements

(including moving expense reimbursements) . . . as salary or bonus.” Both Broyles

and Nouri averred that “[n]o portion of the $142,737.20 was intended as

compensation for taking a cut in pay.” 

Relying on these affidavits, and on Ingram’s acknowledgment “that the amount

was paid (at least in part)” because Terminal had no relocation or moving expense

policy, Paubel’s lengthy letter denied Ingram’s claim. “I interpret the plan language

[in § 2.14] excluding ‘reimbursement of moving expenses, reimbursements or other

expense allowances’ as encompassing amounts provided as an allowance in

recognition of expensesincurred in moving and relocating,regardless of whether they

were conditioned on proof and documentation of actual expenses incurred.”

Invoking the Plan’s appeal procedure, Ingram appealed Paubel’s initial claim

denial, submitting an affidavit responding to the facts recited in the affidavits of

Broyles and Nouri. Ingramaverred that, because the salary Terminal offered in 2006 3

was $34,000 less than he was making in California, “I inquired about a moving

package.” Broyles advised it was not Terminal’s policy to pay moving expenses. 

Ingram said he was interested in the position “but I could not afford to absorb the

salary cut and my costs in leaving Los Angeles.” Broyles asked how much Ingram

would need to come to work for Terminal. “After reviewing the numbers with my

wife, I contacted Bill and told him that I would need to clear about $83,000 after

Ingram’s appeal also raised for the first time the offset issue considered in Part 3

III of this opinion. Terminal concedes the issue was timely raised.

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taxes to make the move financially feasible.” Ingram’s appeal further relied on a July

1, 2006, letter agreement, signed by Broyles and accepted by Ingram, confirming that

Ingram would be employed based on a “compensation package” that included an

annualsalary of $115,000, “$85,000 sign on bonus,” and “up to an additional $10,000

in temporary lodging expenses billed directly from the Chase Park Plaza” hotel. 

On June 15, 2011, Paubel denied Ingram’s appeal in a lengthy letter. 

Regarding the July 2006 payment issue, Paubel explained in detail why he rejected

Ingram’s four reasons for not treating the payment as excludable moving expenses. 

Noting that Broyles and Nouri averred that the payment “was compensation for the

expenses associated with relocation” from California, and that Ingram’s initial claim

stated “that the amount was paid at least in part because there was no Company

relocation or moving expense policy,” Paubel concluded: “I find that the amount at

issue was compensation for the expenses associated with relocation.” This lawsuit

followed.

C. Proceedings in the District Court. The district court initially denied crossmotions for summary judgment and invited the parties to supplement the

administrative record with evidence relating to the discrepancy between the “sign on

bonus” term used in the documents and Terminal’s characterization of the payment

as moving expenses. “Curiously,” the court stated, “the claimed administrator, Kerry

Paubel, has not submitted an affidavit regarding the reason for paying [Ingram] the

$85,000.” The court declined to resolve the standard of review issue because of

genuine issues of disputed fact regarding “irregularities” alleged by Ingram. In

response, Terminal filed an affidavit by Paubel further justifying his decision to

classify the 2006 payment as reimbursement of moving expenses. Ingram filed a

supplemental affidavit and additional evidence addressing these issues. The district

court then granted summary judgment for Terminal. Concluding that abuse of

discretion was the standard of review, the court focused “solely on the evidence

available to the administrator at the time of the decision.”

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On appeal, Ingram argues that the district court’s decision to reopen the record

and admit Paubel’s affidavit requires that we review the administrator’s decision de

novo because, in reviewing claims decisions by administrators with discretionary

authority, “a reviewing court must focus on the evidence available to the plan

administrators at the time of their decision and may not admit new evidence or

consider post hoc rationales.” King v. Hartford Life & Accident Ins. Co., 414 F.3d

994, 999 (8th Cir. 2005) (en banc) (quotation omitted); compare Prezioso v.

Prudential Ins. Co. of Am., 748 F.3d 797, 803 (8th Cir. 2014) (a district court may

admit evidence in addition to that in the administrative record if “necessary for

adequate de novo review of the fiduciary’s decision”). This procedural contention is

without merit. 

Review of a plan administrator’s discretionary decision must be limited to the

administrative record, but additional evidence may be admitted “for the limited

purpose of determining the proper standard of review.” Waldoch v. Medtronic, Inc.,

757 F.3d 822, 830 (8th Cir. 2014). If abuse of discretion is then determined to be the

standard of review, review of the merits of the administrator’s decision is limited to

the administrative record. Id. at 833; see King, 414 F.3d at 999-1000. Here, the

district court properly proceeded in that manner, inviting the parties to submit

additional evidence addressing standard-of-review issues and then disregarding that

evidence in reviewing the Plan administrator’s decision for abuse of discretion. 

Likewise, on appeal, we consider the merits of the Plan administrator’s decision on

the administrative record, giving no effect to factual evidence initially submitted to

the district court, including Paubel’s affidavit and Ingram’s supplemental affidavit. 

D. The Merits. Under the abuse of discretion standard of review, “we must

uphold [a plan administrator’s] decision so long as it is based on a reasonable

interpretation of the Plan and is supported by substantial evidence.” Hampton v.

Reliance Standard Life Ins. Co., 769 F.3d 597, 600 (8th Cir. 2014). A decision is

reasonable “if a reasonable person could have reached a similar decision, given the

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evidence before him, not that a reasonable person would have reached that decision.” 

Midgett v. Wash. Grp. Int’l Long Term Disability Plan, 561 F.3d 887, 897 (8th Cir.

2009) (quotation omitted). We review administrator Paubel’s final claims decision,

not the initial denial letter, to ensure development of a complete record. See Khoury

v. Grp. Health Plan, Inc., 615 F.3d 946, 952 (8th Cir. 2010). Where a plan fiduciary

offered a reasonable interpretation of a disputed plan provision, “courts may not

replace it with an interpretation of their own -- and therefore cannot disturb as an

‘abuse of discretion’ the challenged benefits determination.” King, 414 F.3d at 999

(quotation and alteration omitted).

The July 2006 payment by employer Terminal to employee Ingram was

reported to the IRS on Form W-2 as taxable income. The issue is whether the

payment was excluded from the Average Monthly Earnings on which Ingram’s

retirement benefit was calculated many years later by the broad exclusion in § 2.14

of the Plan for taxable “reimbursements or other expense allowances and fringe

benefits.” Obviously, this exclusion does not turn on the federal tax laws -- § 2.14

excludes taxable fringe benefits reported as taxable income. Nor does the question

turn on how the payment was classified in the employer’s books and records at the

time, absent evidence that the classification was intended to control future pension

benefit decisions. Thus, while the term “sign on bonus” or “bonus” often denotes a

payment that is part of an employee’s salary or wages, that contemporaneous

classification may be outweighed by extrinsic evidence that a particular bonus should

be viewed under § 2.14 as an excluded expense allowance or fringe benefit, not as a

qualifying portion of the employee’s taxable earnings. For these reasons, we reject

Ingram’s contention that this issue may be resolved by the “plain meaning” of the

words “moving expenses” and “reimbursement” in § 2.14, or by repeated use of the

term “sign on bonus” in the contemporaneous 2006 documents.

The administrative record included statements and affidavits by the persons

who negotiated the July 2006 payment, Ingramand Terminal President BillyBroyles. 

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This testimonial evidence presented Plan administrator Paubel with more consistency

than disagreement. Ingramstated that he initially objected to Terminal’s offer on two

grounds, a substantial “cut in pay” and the absence of relocation or moving expenses. 

Broyles refused to offer more salary, said Terminal had no relocation expense policy,

and asked what was needed to accept the job offer. Ingram replied that he needed

$83,000 after taxes “to make the move financially feasible.” Broyles then instructed

Nouri to consult with Paubel and determine a reasonable amount “to compensate

[Ingram] for the costs of moving.” 

The resulting payment of $142,737.20 ($85,000 after taxes) was no doubt

intended to address both issues raised by Ingram, the cut in pay and the costs of

relocating fromCalifornia. The parties could have agreed to classify the payment, for

retirement benefit purposes, astaxable salary, a taxable relocation expense allowance,

or some combination of the two. Absent such an agreement, Plan administrator

Paubel had to make the discretionary decision, some years later, whether to classify

the payment as taxable salary or a taxable expense allowance under § 2.14. Like the

district court, we conclude that either interpretation was reasonable. Therefore,

substantial evidence supports the Plan administrator’s decision and there was no

abuse of discretion. 

III. The Offset Issue.

Section 3.6 of the Plan defined Ingram’s years of “Benefit Service” to include

both the 4.5 years he worked at Terminal and the 35.5 years he worked at Union

Pacific. Thus, his Gross Terminal Pension equaled 1.5% of Average Monthly

Earnings times 40 years of service. However, under § 5.5(b) of the Plan, the pension

paid by Terminal was reduced by the “retirement income payable” under his Union

Pacific plan. In determining Ingram’s monthly Single Life Annuity retirement

benefit, Paubel interpreted the Plan as requiring an offset equal to the normal

retirement benefits Ingram would have received under the Union Pacific plan, rather

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than the lower benefits he was in fact receiving because he took early retirement.4

Applying the abuse-of-discretion standard ofreview, the district court concluded that

Paubel did not abuse his discretion as Plan administrator because he adopted a

reasonable interpretation of the relevant Plan provisions. Ingram argues on appeal,

as he did to the district court, that this decision was contrary to the Plan under any

standard of review because the plain meaning of the Plan term “retirement income

payable” is the benefits actually paid by Union Pacific. 

The sentence at issue was part of the first paragraph of § 5.5(b): “The

retirement income benefit payable under this Plan shall be offset by the amount of

retirement income payable under any other defined benefit plan” (emphasis added). 

Citing dictionaries that define “payable” as “requiring payment on a certain date,”

Am. Heritage Dictionary (4th ed. 2000), Ingram argues that the plain meaning of

payable in § 5.5(b) “requiresresolution ofthe simple question: In January 2011 when

Ingram retired from [Terminal], what wasthe ‘amount of retirement income payable’

fromthe UP Pension Plan? The answer is: Ingram’s UP Pension Plan early retirement

pension of $3,252.79 per month.” 

The problem with this plain language argument is that, in legal contexts,

“payable” has a less definite meaning, which creates ambiguity -- a sum of money

“that is to be paid. An amount may be payable without being due.” Black’s Law

Dictionary (9th ed. 2009). In his letter explaining the denial of Ingram’s appeal, Plan

administrator Paubel expressly considered this ambiguity:

The offset being applied to Mr. Ingram’s monthly benefit is part of the

calculation of the Normal Retirement Benefit [in Plan § 5.1(a)] -- the

amount of the single life annuity payable at age 65. . . . Section 5.5

Ingram receives $3,252.79 per month from Union Pacific’s single life 4

retirement benefit annuity. Had he waited to retire from Union Pacific until age 65,

he would have received $4,280.38 per month in normal retirement benefits. 

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refers to the amount “payable,” not the amount paid. The amount

actually paid . . . is subject to variation depending on both the timing of

the commencement of benefits and the form of benefit elected. I have

interpreted the Plan to provide that the offset to the Normal Retirement

Benefit required by Section 5.1 must be a normal retirement benefit,

regardless of the time and form of the actual payment. Under this

interpretation, a normal retirement benefit is offset by a normal

retirement; there is an apples to apples correlation. 

Under the interpretation you propose, the Normal Retirement Benefit

under the Plan oftwo identically situated participants would vary simply

because one participant chose to commence his benefit under another

defined benefit plan earlier than the other. . . . Your interpretation

produces this anomalous result because it offsets a normal retirement

benefit by an early retirement benefit, an apples to oranges correlation.

On appeal, in addition to his plain meaning contention, Ingram notes that the

second paragraph of § 5.5(b) provided that, if the other plan’s benefit was paid in a

form other than a monthly Single Life Annuity, such as a lump sum, the amount of

the offset was expressly stated to be the monthly benefit that would have been

payable under the other plan “commencing on the Participant’s Normal Retirement

Date.” Ingram argues that the absence of this specific language in the first paragraph

of § 5.5(b) means that Paubel’s interpretation impermissibly changed that offset

provision by adding the words, “retirement income that would have been payable at

normal retirement age.” 

Terminal responds that Ingram’s interpretation impermissibly adds the words,

“when the participant begins his benefit under this Plan,” to the term “retirement

income payable” in the first paragraph of § 5.5(b). Terminal argues that the second

paragraph of § 5.5(b) supports Paubel’s decision “because it again ties the offset to

the amount payable at the Participant’s Normal Retirement Date.” Seeking to give

linguistic legitimacy to Paubel’s “applesto apples” analysis, Terminal further argues

that Paubel reasonably interpreted the first paragraph of § 5.5(b) by giving the same

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meaning -- normal retirement date -- to the word “payable” when it was used twice

in the same sentence. On a more practical level, Terminal argues that Ingram seeks

an improper subsidy from Terminal by having its Plan “make up the difference

between” his reduced early retirement benefit and his normalretirement benefit under

the Union Pacific plan. Ingram’s reply brief responds that Paubel’s decision sought

to correct an oversight in the drafting of Terminal’s 2002 Plan amendments “by

twisting and ignoring Plan language to increase the offset.”

The district court carefully considered these complex Plan provisions and

concluded that the Plan administrator’s interpretation was reasonable because it was

not inconsistent with Plan language, was consistent with Plan goals and ERISA, and

rationally construed the offset so that the Normal Retirement Benefit under the Plan

does not vary because of the form of payment chosen under another plan. After

careful review applying the deferential abuse of discretion standard, we agree. 

Ingram’s textual arguments have some force, but they do not persuade usthat the term

“retirement income payable” is susceptible of only one reasonable interpretation. 

Paubel’s interpretation of § 5.5(b) was carefully explained and was not unreasonable

textually. It also reasonably avoided benefit disparities between similarly situated

retiring participants by using normal retirement age offset criteria in determining

Ingram’s normal retirement age monthly benefit from Terminal. Under the abuse-ofdiscretion standard, it is irrelevant that we might have construed § 5.5(b) differently,

as the court did in Cocker v. Terminal R.R. Ass’n of St. Louis Pension Plan for

Nonschedule Emps., 2015 U.S. Dist. LEXIS 75116, No. 12-1239 (S.D. Ill.), appeal

docketed, No. 15-2690 (7th Cir. Aug. 11, 2015). We respectfully disagree with that

district court’s decision.

For the foregoing reasons, the judgment of the district court is affirmed. 

______________________________

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