# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _

No. 1 4- 35 89

__ __ __ __ __ __ __ __ __ __ __ __ __ _

The od or e F. In gr am

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Term inal Rai lro ad Ass oc ia ti on of St

. Lou is Pen si on Pl an fo r Non sc he du le Em pl oyees

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll ee

__ __ __ __ __ __

App eal fro m

Uni te d S ta te s Di st ric t Co ur t

fo r th e Eas te rn Dis tri ct of M is so ur i - St . Lou is

__ __ __ __ __ __

Su bm it te d: Sep te m

be r 21 , 20 15

Fil ed : J an ua ry

29 , 20 16

__ __ __ __ __ __

Befo re LOKEN, BENTO N, and SHEPHERD, Circ ui t J ud ge s.

__ __ __ __ __ __

LOKEN, Ci rcu it Ju dg e.

In 20 06

, The od or e In gr am was em pl oyed by Uni on Paci fic Rai lro ad (“ Uni on

Paci fic ”) an d li vi ng in Los Ang el es

. On Ju ly 1, he was hi red to be th e Su pe rin te nd en t

of Tran sp or ta ti on of th e Term in al Rai lro ad Ass oc ia ti on of St

. Lou is (“ Term in al ”) an d

m ov ed to St

. Lou is

. In gr am el ect ed to rece iv e earl y ret ire m en t be ne fit s fro m Uni on

Paci fic be gi nn in g Ja nu ary 1, 20 10

. W he n he ret ire d fro m Term in al at th e e n d o f

20 10 , he b ecame eli gi bl e fo r ret ire m en t b en efi ts un de r Term in al ’s P en si on Pl an fo rNon sc he du le Em pl oyees (th e “ Pl an ”). In th is act io n un de r § 50 2( a)(1 )(B) of th e

Em pl oyee Ret ire m en t I nc om e Secu rit y Act (“ ERISA”) , 2 9 U.S.C. § 11 32 (a)( 1) (B),

In gr am al le ge s th at th e Pl an erro ne ou sl y de te rm in ed hi s pe ns io n be ne fit s b y (i)

ex clud in g a 20 06 si gn -o n bo nu s fro m pe ns io n- qu al ifyin g earn in gs an d (ii ) im pr op er ly

in fla ti ng th e of

fs et fo r ret ire m en t be ne fit s In gr am rece iv es fro m Uni on Paci fic

.

Rev ie win g fo r ab us e of di sc ret io n, th e d is tri ct co ur t gra nt ed su m m ary jud gm en t in 1

fav or of th e Pl an

, co nc lu di ng th at th e ad m in is tra to r’s de ci si on s wer e r e a s o n ab le

.

In gr am ap pe al s. Re vi ewin g t he gra nt of s um m ary jud gm en t de no vo , we affi rm

.

I. Th e ERI SA Sta nda rd o f Rev ie w

.

W e rev ie w de no vo whe th er th e di st ric t co ur t ap pl ie d th e ap pr op ria te st an da rd

of rev ie w to th e Pl an ad m in is tra to r’s de ci si on

. Jo be v. Med

. Life In s. Co

., 59 8 F.3 d

47 8, 48 0- 81 (8 th Ci r. 20 10 ). App lying tru st la w pr in ci pl es

, th e Su pr em e Co ur t he ld

in Fi res to ne Tire & Ru bb er Co

. v. Bru ch

, 4 8 9 U.S. 10 1, 11 1- 13 (1 98 9)

, th at th e

ad m in is tra to r’s in te rp ret at io n of an ERISA pl an is rev ie wed de no vo un le ss th e pl an

ex pr es sl y gr an ts di sc ret io na ry au th or it y to m ak e be ne fit de te rm in at io ns

. If th e

ad m in is tra to r ha s di sc ret io na ry au th or it y

, th e pl an ’s de ci si on is su bjec t to ab us e-o fdi sc ret io n rev ie w. In th is cas e, § 14 .6 of Te r mi n a l ’s Pl an un qu es ti on ab ly gr an te d

di sc ret io n to in te rp ret th e Pl an

, pr ov id in g th at th e ad mi n i s t r a t or “ sh al l pe rfo rm it s

du ti es as th e Pl an Adm in is tra to r in it s so le di sc ret io n sh al l de te rm in e is ap pr op ria te .”

In gr am arg ue s th at we sh ou ld no ne th el es s a p p l y a le ss de fere nt ia l de

no vo st a n d a r d o f rev ie w be cau se “ a pa lp ab le co nf li ct of in te res t or a se rio us

pr oc ed ur al irr eg ul ari ty ex is te d, whi ch

. . . cau se d a s e r i o us br each of th e pl an

ad m in is tra to r’s fid uc ia ry du ty.” And ers on v. U.S. Ban co rp

, 48 4 F.3 d 10 27

, 10 32 (8 th

Ci r. 20 07 ). The Su pr em e Co ur t la rg el y ov erru le d ou r pr io r cas e s a p p l yin g th is

The Hon or ab le Hen ry E. Aut rey, Uni te d St at es Dis tri ct Ju dg e fo r th e East ern 1

Dis tri ct of M is so ur i.

-2

-pr in ci pl e in Met ro

. Life In s. Co

. v. Glen n, 55 4 U.S. 10 5 (2 00 8)

. Aga in ap pl y in g th e

la w o f tru st s as ad op te d in Fi res to ne an d refl ect ed in th e Res ta te m en t (Sec on d) of

Trus ts § 18 7 c mt

. d ( A m. Law. In st

. 19 59 ), th e Co ur t in Glen n affi rm ed a Si xt h

Ci rcu it de ci si on th at co ns id ered an al le ge d co nf li ct of in t e r e s t an d va rio us al le ge d

pr oc ed ur al reg ul ari ti es as fact or s to be wei g h e d in de te rm in in g whe th er a pl an

ad m in is tra to r wit h di sc ret io na ry au th or it y ha d ab us ed th at di sc ret io n. Id

. at 11 6- 19

.

As th e Co ur t ex pl ai ne d, “ W e do no t be li ev e th at Fi res to n e ’s [ref eren ce to an

ad m in is tra to r’s fin an ci al co nf li ct of in te res t] im

pl ie s a ch an ge in th e st an da rd of

rev ie w, sa y

, fro m de fere nt ia l to de no v o r e v i e w

. Trus t la w co nt in ue s to ap pl y a

de fere nt ia l st an da rd of rev ie w to th e di sc ret io na ry de ci si on mak i n g of a co nf li ct ed

tru st ee, whi le at th e sa m e ti m e req ui rin g th e rev ie win g ju dg e to ta ke acco un t of th e

co nf li ct whe n de te rm in in g whe th e r t h e tru st ee, su bs ta nt iv el y or pr oc ed ur al ly, ha s

ab us ed hi s d is cret io n.” 55 4 U.S. at 11 5.

Here, no ne of th e co nf

li ct s of in te res t an d pr oc ed ur al irr eg ul ari ti es al le ge d by

In gr am “ cau se d a se rio us br each of th e pl an ad m in is tra to r’s fid uc ia r y d u t y ” whi ch

warra nt ed de pa rtu re fro m th e ab us e-o f-d is cret i o n st an da rd of rev ie w un de r Glen n.

Jo hn s on v. Uni te d of Om ah a Life In s. Co ., 7 75 F.3 d 98 3, 98 7 (8 th Ci r. 20 14 ). The

dis tri ct co ur t co rrec tl y rev ie wed th e de ci si on of th e Pl an ad m in is tra to r, Term in al CFO

Kerry Paub el , for ab us e o f di sc ret io n. 2

In gr am co nt en ds th at Pau be l’s in it ia l la ck of kn owl ed ge th at he was Pl an 2

ad m in is tra to r was a m at eri al pr oc ed ur al irr eg ul ari ty th at warra nt s de no vo r e v i e w

. Thi s co nt en ti on is wit ho ut m eri t. Pau be l was aware he ha d be en de le ga te d Term in al ’s

de ci si on m ak in g au th ority an d tim el y ad vis ed In gram he wou ld de ci de In gr am ’s cl ai m

. The re was no t ev en an arg ua bl e br each of fid uc ia ry du ty in ex erci si ng th at au th or it y

,

co ns is te nt wit h th e Pl an

, whe th er Pau be l di d so as Term in al ’s de si gn ee, or as th e Pl an

ad m in is tra to r ap po in te d b y Term in al ’s Boa rd of Di rect or s s om e y ears earl ie r.

-3

-II . The Si gn -On B on us Is su e.

A. The Ru li ng at Is su e. W he n In gr am ret ire d, § 5.1 (a) of th e Pl an pr ov id ed th at

ret ire men t b e n e f

i t s were cal cu la te d ba se d on “ 1.5 %

. . . of th e Ave rag e Mo nt hl y

Earn in gs of th e Part ic ip an t,” de fin ed in § 2.6 as th e av erag e m on th ly earn in gs in th e

fiv e co ns ecu ti ve cal en da r y ears in whi ch In gr am ’s earn in gs were th e hi gh es t. In gr am

wor ke d at Term in al on ly fi fty-fou r m on th s

, t h e 2 0 06 pa rt y ear an d fu ll y ears 20 07

-

20 10 . Sect io n 2 .14 de fin ed earn in gs as:

The to ta l earn in gs pa id du rin g th e ap pl ic ab le pe rio d by an

Em pl oyer su bjec t to in co m e ta x wit hh ol di ng as rep or te d on Treas ur y

Dep art m en t Fo rm W -2

, ex cl ud in g rei m bu rs em en t of m ov in g ex pe ns es

, rei m bu rs em en ts or o th er ex pe ns e al lo wan ces an d fr in ge be ne fit s . . . .

The Pl an ga ve ret iri ng Part ic ip an ts be ne fit pa y m en t op ti on s. In gr am ch os e th e

Si ng le Life Ann ui ty m on th ly pa y m en t op ti on

. Pl an ad m in is tra to r Pau be l de te rm in ed

th at In gr am ’s Ave rag e Mo nt hl y Earn in gs fo r th e fif ty-fou r m on th s were $1 5,3 57 .60

.

Thi s pr od uc ed a Gro ss Pen si on of $9 ,21 4.5 6 pe r m on th

, an Eli gi bl e Pen si on of

$7 ,40 0.7 1 pe r m on th

, an d, aft er th e of fs et di sc us se d in P a rt III of th is op in io n, a

Si ng le Life Ann ui ty be ne fit of $3 ,17 0.7 1 pe r m on th

. Pau be l reject ed I n g r a m’ s

co nt en ti on th at hi s Ave rag e Mo nt hl y Earn in gs sh ou ld in cl ud e a Ju ly 20 06 “ Si gn On

Bo nu s” of $1 4 2

, 7 3 7

. 2 0 (“ th e Ju ly 20 06 pa y m en t” ), co nc lu di ng th at th e Si gn On

Bo nu s was an ex cl ud ab le m ov in g exp en se al lo wan ce. In cl ud in g th at am ou nt in th e

cal cu la ti on wou ld ap pa ren tl y ha ve in crea se d In gr am ’s Ave rag e Mo nt hl y Earn in gs by

17 .2% an d h is Sin gl e Life Ann ui ty m on th ly ben efi t b y ne arl y 50 %.

B. Pro ced ur al Bac kg ro un d. W he n In gr am ad vi se d Pau be l in Ju ly 20 10 th at he

pl an ne d to ret ire at th e en d of th e y ear, Pau be l sa id th at th e Ju ly 20 06 pa y m en t wou ld

n ot be in cl ud ed as earn in gs un de r Pl an § 2.1 4 be cau se it fel l wit hi n th e mo v i n g

-4

-e xp en se s ex cl us io n. In gr am su bm it te d a cl ai m fo r be ne fit s un de r th e Pl an , a rg ui n g

th at th e Si gn On Bo nu s s ho ul d b e in cl ud ed in cal cu la ti ng hi s p en si on an nu it y :

W he n I si gn ed on to wor k fo r [Term in al ] in 20 06 I was pr ov id ed wit h

a Si gn On b on us for th e fo ll owi ng reas on s:

1. I t oo k a cu t i n p ay

to tak e th e job

. 2. [Ter m in al ] ha d n o re lo cat io n o r m ov in g e xp en se po li cy

.

The re were no co nd it io ns at ta ch ed to th e bo nu s an d no req ui rem en ts to

tu rn in rece ip ts or an ex pe ns e rep or t sh owi ng ho w th e bo nu s m on ey was

sp en t.

In gr am at ta c he d as su pp or ti ng do cu m en ts (i) a Ju ly 20 06 pa y st ub sh owi ng a

$1 42 ,73 7.2 0 “ bo nu s,” red uc ed by va rio us ta x de du ct io ns to “ ne t pa y ” of $9 2,2 93 .00 ;

(ii ) a y ear- en d pa y st ub sh owi ng th e Si gn On Bo nu s an d a y ear en d bo nu s (wh ic h was

in cl ud ed in hi s Ave rag e Mo n t h l y Ea r n in gs ) ad de d to ge th er; (ii i) hi s Fo rm W -2 fo r

20 06 sh owi ng th e Si gn On bo nu s in cl ud ed in ta xa bl e in co me; a n d ( i v ) a Ju ly 13

,

20 06 , n ot e fro m Pau be l at ta ch in g “ m y

. . . c al cu la ti on of y ou r s i gn on bo nu s.” The

at ta ch ed sp read sh eet

, da te d Ju ly 1, 20 06

, was ti tl ed “ Si gn in g Bon us - T. F. In gr am ”

an d reco rd ed Gro ss Pay of $1 42 ,73 7.2 0 red uc ed by va rio us ta x de du ct io ns to a “ Net

Bo nu s Am ou nt ” o f $8 5,0 00

.

In a le tt er da te d Ja nu ary 21

, 20 11

, Pau be l de ni ed In gr am ’s cl ai m an d en cl os ed

affi da vi ts su bm it te d to th e Pl an ad m in is tra to r by fo r mer Te rm in al Pres id en t Bi ll y

Bro y le s an d by Dire ct or of Hum an Res ou rces

, Co rp or at e Secr et ary, an d Ass is ta nt to

th e Pres id en t Sh an no n Nou ri. Bro y le s av erre d th at

, in 2 0 0 6

, he of fere d In gr am a

po si ti on wit h Term in al an d “ ne go ti at e d Mr. In gr am ’s co m pe ns at io n wit h hi m

,

in cl ud in g hi s co m

pe ns at io n fo r rel oc at io n ex pe ns es .” Tho ug h Te r mi n al “ ha d no

f o r mal r el oc at io n po li cy ,” it was co m pa ny pr act ic e “ to pr ov id e in di vi du al s who

rel oc at ed to acce pt a se ni or po si ti on wit h th e Co m pa ny co m pe ns at io n fo r rel oc at in g.”

Afte r ag reei ng wit h In gr am on a lu mp s um pa y m en t, Bro y le s in st ru ct ed Nou ri to

-5

-co ns ul t wit h CFO Pau be l an d “ de te rm in e a reas on ab le am ou nt to b e p a i d

. . . to

rei m bu rs e [In gr am ] fo r th e ex pe ns es of m ov in g.” Nou ri av erre d th at sh e an d Pau be l

“ de te rm in ed th at $8 5,0 00 wou ld be an ap pr op ria te am ou nt to co m pe ns at e Mr. In gr am

fo r rel oc at io n.” Pau be l det erm in ed an ad di ti on al am ou nt In gr am wou ld be pa id “ as

a ‘gro ss up ’ fo r ta xe s Mr. In gr am wou ld in cu r on $8 5,0 00 .” Nou ri al so av erre d th at

,

in 20 06

, it was Term in al ’s pr act ic e to refl ect “ m os t ex pe ns e rei mb u r s e m en ts

(in cl ud in g m ov in g e xp en se rei m bu rs em en ts ) . . . as s al ary or bo nu s.” Bot h B ro y le s

an d Nou ri av erre d th at “[n ]o p o rti on of th e $1 42 ,73 7.2 0 was in te nd ed as

co m pe ns at io n fo r ta ki ng a cu t i n p ay .”

Rel y in g on th es e affi da vi ts

, an d on In gr am ’s ack no wled gm en t “ that th e am ou nt

was pa id (at le as t in pa rt) ” be c a u s e Te r mi n al ha d no rel oc at io n or m ov in g ex pe ns e

po li cy

, Pau be l’s le ng th y le tt er de ni ed In gr am ’s cl ai m

. “ I in te rp ret th e pl an la ng ua ge

[in § 2.1 4] ex cl ud in g ‘reim bu rs em en t of m ov in g ex pe ns es

, rei m bu rs em en ts or ot he r

ex pe ns e al lo w an ces ’ as en co m pa ss in g am ou nt s pr ov id ed as an al lo wan ce in

reco gn it io n of ex pe ns es in cu rred in m ov in g an d reloc at ing

, re ga rd le ss of whe th er th ey

were co nd it io ne d o n p ro of an d d oc um en ta ti on of a ct ua l ex pe ns es in cu rred .”

In vo ki ng th e Pl an ’s ap pe al pr oc ed ur e, In gr am ap pe al ed Pau be l’s in it ia l cl ai m

de ni al

, su bm it ti ng an a f

f i d a v i t res po nd in g to th e fact s reci te d in th e affi da vi ts of

Bro y le s an d Nou ri. In gr am av erre d th at

, be cau se th e sa la ry Term in al of fere d in 20 06 3

was $3 4,0 00 le ss th an he was m ak in g in Cal ifo rn ia

, “ I in qu ire d ab ou t a m ov in g

pa c k a g e.” Bro y le s ad vi se d it was no t Term in al ’s po li cy to pa y m ov in g ex pe ns es

.

In gr am sa id he w a s in te res te d in th e po si ti on “ bu t I co ul d no t affo rd to ab so rb th e

sa la ry cu t an d m

y co st s i n l eav in g Lo s An ge le s.” Bro y le s as ke d ho w m uc h In gr am

wou ld ne ed to co m e to wor k fo r Term in al

. “ Afte r r e v i e w i ng th e nu m be rs wit h m

y

wife

, I co nt act e d B i l l a nd to ld hi m th at I wou ld ne ed to cl ear ab ou t $8 3,0 00 aft er

In gr am ’s ap pe al al so rai se d fo r th e fir st ti m e th e of fs et is su e co ns id ered in Part 3

III o f th is op in io n. Term in al co nc ed es th e is su e was ti m el y rai se d.

-6

-ta xe s to m ak e th e m ov e fin an ci al ly feas ib le .” In gr am ’s ap pe al fu rth er rel ie d on a Ju ly

1, 20 06

, le tt er ag reem en t, si gn ed by Bro y le s an d acce pt ed by In gr am

, co nf irming th at

In g r a m w o u ld be em

pl oyed ba se d on a “ co m

pe ns at io n pa ck ag e” th at in cl ud ed an

an nu al sa la ry of $1 15 ,00 0, “ $8 5,0 00 si gn on bo nu s,” an d “ up to an ad di ti on al $1 0,0 00

in tem po rary lod gi ng ex pe ns es bi ll ed di rect ly from th e Ch as e Par k P la za” h ot el

.

On Ju ne 15

, 20 11

, Pau be l d e n i e d In gr am ’s ap pe al in a le ng th y le tt er.

Reg ard in g th e Ju ly 2 00 6 pa y m en t is su e, Pau be l ex pl ai ne d i n d et ai l wh y he reject ed

In gr am ’s fou r rea so ns for no t trea ti ng th e p ay m en t as ex cl ud ab le m ov in g e xp en se s.

Not in g t ha t Br oyles an d No ur i av erre d t ha t t he pa y m en t “ was co m pe ns at io n fo r th e

ex pe ns es as so ci at ed wit h rel oc at io n” fro m Cal ifo rn ia

, an d th at In gr am ’s in it ia l cl ai m

s ta te d “ th at th e am ou nt was pa id at le as t in pa rt be cau se th ere was no C o mp a n y

rel oc at io n or m ov in g ex pe ns e po li cy ,” Pau be l co nc lu de d: “ I fin d th at th e am ou nt at

is su e was co m

pe ns at io n fo r th e ex pe ns es as so ci at ed wit h rel oc at io n.” Thi s la wsu it

fo ll owe d.

C. Pro ceed in gs in th e Dis tri ct Co ur t. The di st ric t co ur t in it ia ll y de ni ed cro ss

m ot io ns fo r su m

m a r y ju d g ment an d in vi te d th e pa rti es to su pp le m en t th e

ad m in is tra ti ve reco rd wit h ev id en ce rel at in g to th e di sc rep an cy be twee n th e “ si gn on

bo nu s” ter m

us ed in th e do cu m en ts an d Ter m in al ’s cha ract eri zat io n o f th e p ay m en t

as m ov in g ex pe ns es

. “ Cu rio us ly,” th e co ur t st at ed

, “ th e cl ai m ed ad m in is tra to r, Kerry

Pau be l, h as no t s ub m it te d a n affi da vi t reg ard in g th e reas on fo r pa y in g [I ng ram ] th e

$8 5,0 00 .” The co ur t de cl in ed to r e s o l v e th e st an da rd of rev ie w is su e be cau se of

ge nu in e is su es of di sp ut ed fact reg ard in g “ irr eg ul ari ti es ” al le ge d by In gr am

. In

re s p on se

, Term in al fil ed an affi da vi t by Pau be l fu rth er jus ti fy in g hi s de ci si on to

cl as si fy th e 20 06 pa y m en t as rei m bu rs em en t of mo v in g ex pe ns es

. In gr am fil ed a

su pp le m en ta l affi da vi t an d ad di ti on al ev id en ce ad dr es si ng th es e is su es

. The di st ric t

co u r t th en gr an te d su m

m ary jud gm en t fo r Term in al

. Co nc lu di ng th at ab us e of

di sc ret io n was th e s t a n d a r d of rev ie w, th e co ur t fo cu se d “ so le ly on th e ev id en ce

av ai la bl e to th e ad m in is tra to r at th e ti m e o f th e d eci si on .”

-7

-On ap pe al

, In gr am arg ue s th at th e di st ric t co ur t’s de ci si on to reo pe n th e reco rd

an d ad m it Pau be l’s affi da vi t req ui res th at we rev ie w th e ad m in is tra to r’s de ci si on de

no vo be cau se

, in rev ie win g cl ai m s de ci si on s by ad m in i s tra to rs wit h di sc ret io na ry

au th or it y

, “ a rev ie win g co ur t mu s t fo cu s on th e ev id en ce av ai la bl e to th e pl an

ad m in is tra to rs at th e ti m e of th ei r de ci si on a n d m ay no t ad m it ne w ev id en ce or

co ns id er po st

ho c rat io na le s.” Ki ng v. Hart fo rd Life & Acci de nt In s. Co., 41 4 F .3d

99 4, 99 9 (8 t h Ci r. 20 05 ) (en ba nc ) (q uo ta ti on om it te d) ; co m pa re Prez io so v.

Pru de nt ia l In s. C o

. o f A m

., 74 8 F.3 d 79 7, 80 3 (8 th Ci r. 20 14 ) (a di st ric t co ur t m ay

ad m it e v i d en ce in ad di ti on to th at in th e ad m in is tra ti ve reco rd if “ ne ces sa ry fo r

ad eq ua te de no vo rev ie w of th e fid uc ia ry ’s de ci si on ”). Thi s pr oc ed ur al co nt en ti on is

wit ho ut m eri t.

Rev ie w of a pl an ad m in is tra to r’s di sc ret io na ry de ci si on m us t be li m it ed to th e

ad m in is tra ti ve reco rd

, bu t ad di ti on al ev id en ce m ay be ad mi t t e d “ fo r th e li m it ed

pu rp os e of de te rm in in g th e pr op er st an da rd of rev ie w.” W al do ch v. Med tro ni c, In c.,

75 7 F.3 d 82 2, 83 0 (8 th Ci r. 20 14 ). If ab us e of di sc ret io n is th en de te rm in ed to be th e

st an da rd of rev ie w, rev ie w of th e m eri ts of th e ad m in is tra to r’s de ci si on is li m it ed to

th e ad m in is tra ti ve reco rd

. Id

. at 8 3 3 ; s e e Kin g, 41 4 F.3 d at 99 9- 10 00

. Here, th e

di st ric t co ur t pr op erl y pr oc eed ed in th at m an ne r, in vi ti ng th e pa rti e s to su bm it

ad di ti on al ev id en ce ad dr es si ng st an da rd -o f-re vi ew is su es an d th en di sr eg ard in g th at

ev id en ce i n r e v i ewin g th e Pl an ad m in is tra to r’s de ci si on fo r ab us e of di sc ret io n.

Lik ewis e, on ap pe al , we con si de r th e m eri ts of th e Pl an ad m in is tra to r’s de ci si on on

th e ad m in is tra ti ve reco rd , gi vi ng no effec t t o fa ct ua l ev id en ce i ni ti al ly sub m it te d t o

th e d is tri ct co ur t, i nc lu di ng Pau be l’s affi da vi t an d In gr am ’s su pp le m en ta l af fid av it

.

D. The Mer it s. Und er th e ab us e of di sc ret io n st an da rd of rev ie w, “ we m us t

up ho ld [a pl an ad m in is tra to r’s] de ci si on so lo ng as it is ba se d on a reas on ab le

in te rp ret at io n of th e Pl an an d is su pp or te d by su bs ta nt ia l ev id en ce.” Ham pt on v.

Rel ia nc e St an da rd Life In s. Co

. , 7 6 9 F

. 3 d 59 7, 60 0 (8 th Ci r. 20 14 ). A de ci si on is

reas on ab le “ if a reas on ab le pe rs on co ul d ha ve reac he d a si m il ar d eci si on , gi ve n t he

-8

-ev id en ce be fo re hi m

, no t th at a reas on ab le pe rs on wo ul d ha ve reac he d th at de ci si on .”

Mi dg et t v. W as h. Grp. In t’l L on g Term Dis ab il it y Pl an

, 56 1 F.3d 88 7, 89 7 (8t h Cir.

20 09 ) (q uo ta ti on om it te d)

. W e rev ie w ad m in is tra to r Pau be l’s fin al cl ai m s de ci si on

,

no t th e in it ia l de ni al le tt er, to en su re de ve lo pm en t of a co m pl et e reco rd

. See Kho ur y

v. Grp

. Heal th Pl an

, In c., 61 5 F.3 d 94 6, 95 2 (8 th Ci r. 20 10 ). W he re a pl an fid uc ia ry

of fere d a reas on ab le in te rp ret at io n of a di sp ut ed pl an pr ov i s i o n, “ co ur ts m ay no t

rep la ce it wit h an in te rp ret at io n of th ei r own -- an d th eref or e can n o t d i s t u r b as an

‘abu se of di sc ret io n’ th e ch al le ng ed be ne fit s de te rm in at io n.” Kin g, 41 4 F.3 d at 99 9

(q uo ta ti on an d a lt erat io n o m it te d)

.

The Ju ly 20 06 pa y m en t by em pl o ye r Te r m in al to em

pl oyee In gr am was

r e p o r t e d to th e IRS on Fo rm W -2 as ta xa bl e in co m e. The is su e is whe th er th e

pa y m en t was ex cl ud ed fro m th e Ave rag e Mo nt hl y Earn i n g s o n whi ch In gr am ’s

ret ire m en t be ne fit was cal cu la te d m an y y ears lat er b y

th e b ro ad ex cl us io n in § 2.1 4

of th e Pl an fo r ta xa bl e “ rei m bu rs em en t s o r o t h e r ex pe ns e al lo wan ces an d fri ng e

be ne fit s.” Obv io us ly, th is ex cl us io n do es no t tu r n o n t h e fed eral ta x la ws -- § 2.1 4

ex cl ud es ta xa bl e fri ng e be ne fit s repo rte d as ta xa bl e in co m e. Nor do es th e qu es ti on

tu rn o n h o w t h e pa y

m en t was cl as si fie d in th e em pl oyer’s b oo ks an d reco rd s at th e

ti m e, ab se nt ev id en c e t h a t t h e cl as si fic at io n was in te nd ed to co nt ro l fu tu re pe ns io n

be ne fit de ci si on s. Thu s, whil e th e te rm “ si gn on bo nu s” or “ bo nu s” of te n den ot es a

pa y m e n t t ha t is pa rt of an em pl oyee’s sa la ry or wag es

, th at co nt em po ran eo us

cl as si fic at io n m ay be ou twei gh ed by ex tri ns ic ev id en ce th at a pa rti cu la r bo nu s sh ou ld

be vi ewed un de r § 2.1 4 as an ex cl ud ed ex pe ns e al lo wan ce or fri ng e be ne fit

, no t as a

qu al ifyin g p or ti on of t he em pl oyee’s tax ab le earn in gs . For t he se reas on s, we reject

In gr am ’s co nt en ti on th at th is is su e m ay be res ol ve d by th e “ pl ai n m e a n i ng ” of th e

wor ds “ m ov in g exp en se s” an d “ rei m bu rs em en t” in § 2.1 4, or by rep eat ed us e of th e

te rm “ si gn on bo nu s” in th e co nt em po ran eo us 20 06 do cu m en ts

.

The ad m in is tra ti ve reco r d in cl ud ed st at em en ts an d affi da vi ts by th e pe rs on s

who ne go ti at ed th e Ju ly 20 06 pa y m en t, In gr am an d Term in al Pres id en t Bi ll y Bro y le s.

-9

-Thi s te st im on ia l ev id en ce pr es en te d Pl an ad m in is tra to r Pau be l with m ore co ns is te nc y

th an di sa gr eem en t. In gr am st at ed th at he in it ia ll y ob jecte d to Term in al ’s of

fer on two

gr ou nd s, a su bs ta nt ia l “ cu t in pa y ” an d th e ab se nc e of rel oc at io n or m ov in g ex pe ns es

.

Bro y le s refu se d to of

fer m or e sa la ry

, sa id Term in al ha d no rel oc at io n ex pe ns e po li cy

,

an d as ke d wha t was ne ed ed to acce pt th e job of fer. I n g r a m r ep li ed th at he ne ed ed

$8 3,0 00 aft er ta xe s “ to m ak e th e m ov e fin an ci al ly feas ib le .” Bro y le s th en in st ru ct ed

Nou ri to co ns ul t wit h Pau b e l a n d de te rm in e a reas on ab le am ou nt “ to co m pe ns at e

[In gr am ] fo r th e co st s o f m ov in g.”

The res ul ti ng pa y m en t of $1 42 ,73 7.2 0 ($ 85 ,00 0 aft er ta xe s) was no do ub t

in te nd ed to ad dr es s bo t h i s s u e s r a i se d by In gr am

, th e cu t in pa y an d th e co st s of

rel oc at in g fro m Cal ifo rn ia

. The pa rti es co ul d ha ve ag reed to cl as si fy th e pa y m en t, fo r

ret ire m en t be ne fit pu rp os es

, as ta xa bl e sa la ry

, a ta xa ble re loc at ion ex pe nse al lo wan ce,

or so m e co m

bi na ti on of th e two

. Abs en t su ch an ag reem en t, Pl an ad m i n i s t r a to r

Pau be l ha d to m ak e th e di sc ret io na ry de ci si on

, so m e y ears la te r, whe th er to cl as si fy

th e pa y m en t as ta xa bl e sa la ry or a ta xa bl e ex pe ns e al lo wan ce un de r § 2.1 4. Lik e th e

di st ric t co ur t, we co nc lu de t h a t ei th er in te rp ret at io n was reas on ab le

. The refo re,

su bs ta nt ia l ev id en ce su pp or ts th e Pl an ad m in is tra to r’s de c i s i o n an d th ere was no

ab us e o f di sc ret io n.

II I. The Offs et I ss ue.

Sect io n 3.6 of th e Pl an de fin ed In gr am ’s y ears of “ Ben efi t Serv ic e” to in cl ud e

bo th th e 4.5 y ears h e w o r k e d a t Term in al an d th e 35 .5 y ears he wor ke d at Uni on

Paci fic

. Thu s

, h i s G ro ss Term in al Pen si on eq ua le d 1.5 % of Ave rag e Mo nt hl y

Earn in gs ti m es 40 y ears of se rv ic e. Howev er, un de r § 5.5 (b ) of th e Pl an

, th e pe ns io n

pa id by T erm in al was re du ced by the “ ret ire m en t i nc om e p ay ab le ” u nd er h is Uni on

P a c i f ic pl an

. In de te rm in in g In gr am ’s m on th ly Si ng le Life Ann ui ty ret ire m en t

be ne fit

, Pau be l i n t e r pr et ed th e Pl an as req ui rin g an of fs et eq ua l to th e no rm al

ret ire m en t be ne fit s In gr am wou ld ha ve rece iv ed un de r th e Uni on Paci fic pl an

, rat he r

-1 0-th an th e lo wer be ne fit s he was in fact rece iv in g be cau se he to ok earl y ret ire m en t. 4

App lying th e ab us e-o f-d is cret io n st an da rd of rev ie w, th e di st ric t co ur t co nc lu de d th at

Pau be l di d no t ab us e hi s di sc ret io n as Pl an ad m in is tra to r be cau se he ad op te d a

reas on ab le in te rp ret at io n of t he rel ev an t Pl an pro vi si on s. Ing ram arg ue s on ap pe al

,

as he di d to th e d i s t r i c t c o u r t, th at th is de ci si on was co nt rary to th e Pl an un de r an y

st an d a r d o f rev ie w be cau se th e pl ai n m ean in g of th e Pl an te rm “ ret ire m en t in co m e

pa y ab le ” is th e b en efi ts act ua ll y pa id by U ni on Paci fic

.

The se nt en ce a t i s su e was pa rt of th e fir st pa rag rap h of § 5.5 (b ): “ The

ret ire m en t in co m e be ne fit pa ya bl e un de r th is Pl an sh al l be of fs et by th e am ou nt of

ret ire m en t in co m e pa

ya bl e un de r an y ot he r de fin ed be ne fit pl an ” (em ph as is ad de d)

.

Ci ti ng di ct io na rie s th at de fin e “ pa y a b l e ” a s “ req ui rin g pa y m en t on a cert ai n da te ,”

Am

. Heri ta ge Dict io na ry (4 th ed

. 20 00 ), In gr am arg ue s th at th e pl ai n m ean in g of

pa y ab le in § 5.5 (b ) “ req ui res res ol ut io n of th e si m pl e qu es ti on : In Ja nu ary 20 11 whe n

In gr am ret ire d fro m [Term in al ], wha t was th e ‘am ou nt of ret ire m en t in co m e pa y ab le ’

fro m th e UP Pen si on Pl an ? The an swe r is : In gr am ’s UP Pen si on Pl an earl y ret ire m en t

pe ns io n o f $3 ,25 2.7 9 p er m on th .”

The pr ob le m wit h th is pl ai n la ng ua ge arg um en t is th at

, in le ga l co nt ex ts

, “pay ab le ” ha s a le ss de fin it e m ean in g, whi ch crea te s am bi gu it y -- a su m of m on e y

“ th at is to be pa id

. An am ou nt m ay be pa y ab le wit ho ut be in g du e.” B l a c k ’s La w

Dict io na ry (9 th ed

. 20 09 ). In hi s le tt er ex pl ai ni ng th e de ni al of In gr am ’s ap pe al

, Pl an

ad m in is tra to r Pau be l ex pr es sl y co ns id ered th is am

bi gu it y :

The of fs et be in g app li ed to Mr. Ing ram ’s m on th ly be ne fit is pa rt of th e

cal cu la ti on of th e Nor m al Ret ire m en t Ben e f i t [ i n Pl an § 5.1 (a)]

-- th e

am ou nt of th e si ng le li fe an nu it y pa y ab le at ag e 65

. . . . Sect io n 5.5

In gr am rece iv es $3 ,25 2.7 9 pe r m on th fro m Uni on Paci fic ’s s i n g l e li fe 4

ret ire m en t be ne fit an nu it y

. Had he wait ed to ret ire fro m Uni on Paci fic un ti l ag e 65

, he wou ld ha ve rece iv ed $4 ,28 0.3 8 p er m on th in no rm al ret ire m en t b en efi ts

.

-1 1-refe rs to th e am ou nt “ pa y ab le ,” no t th e am ou nt pa id

. The am ou nt

act ua ll y pa id

. . . is su bjec t to va ria ti on de pe nd in g on bo th th e ti m in g of

th e co m m en cem en t of be ne fit s an d th e fo rm of be ne fit el ect ed

. I ha ve

in te rp ret ed th e Pl an to pr ov id e th at th e of fs et to th e Nor m al Ret ire m en t

Ben efi t req ui red by Sect io n 5.1 m us t be a no rm al r e t i r e men t be ne fit

,

reg ard le ss of th e ti m e an d fo rm of th e act ua l pa y m e n t

. U n d er th is

in te rp ret at io n, a no rm al re t i r e m en t be ne fit is of fs et by a no rm al

ret ire m en t; th ere i s an ap pl es to ap pl es co rrel at io n.

U n de r th e in te rp ret at io n y ou pr op os e, th e Nor m al Ret ire m en t Ben e f i t

un de r th e Pl an of two id en ti cal ly si tu at ed pa rti ci pa nt s wou ld va ry si m pl y

be cau se on e pa rti ci pa nt ch os e to co mm e n c e hi s be ne fit un de r an ot he r

de fin ed be ne fit pl an earl ie r th an t h e o t h er.

. . . You r in te rp ret at io n

pr od uc es t h i s an om al ou s res ul t be cau se it of fs et s a no rm al ret ire m en t

be ne fit by an earl y ret ire m en t be ne fit

, an ap pl es to or an ge s co rrel at io n.

On app eal

, in ad di ti on to hi s pl ai n m ean in g con te nt io n, Ing ram no te s th at th e

se co nd pa rag rap h o f § 5 .5(b ) pr ov id ed th at , if t he ot he r pl an ’s ben efi t was pa id in a

fo rm ot he r th an a m on th ly Si ng le Life Ann ui ty, su ch as a lu m p su m , t he a mo u n t of

th e of fs et was ex pr es sl y st a t e d t o b e th e m on th ly be ne fit th at wou ld ha ve be en

pa y ab le un de r th e o th er pl an “ co m m en ci ng on th e Par ti ci pa nt ’s Norm al Ret ire m en t

Date .” In gr am arg ue s th at th e ab se nc e of th is sp eci fic la ng ua ge in th e fir st pa rag rap h

of § 5.5 (b ) m ean s th at Pau be l’s in te rp ret at io n im pe rm is si bl y ch an ge d th at of fs et

pr ov is io n by ad di ng th e wor ds

, “ ret ire m en t in co m e th at wo ul d ha ve be en pa y ab le at

no rma l r et ir emen t a ge .”

Term in al res po nd s th at In gr am ’s in te rp ret at io n im pe rm is si bl y ad ds th e wor ds

,

“ whe n th e pa rti ci pa nt be gi ns hi s be ne fi t u n d e r t hi s Pl an ,” to th e te rm “ ret ire m en t

in co m e pa y ab le ” in th e fir st pa rag rap h of § 5.5 (b ). Term in al arg ue s th at th e se co nd

pa rag rap h o f § 5 .5(b ) su pp or ts Pau be l’s d eci si on “ be cau se it ag ai n ti es th e o ffs et to

th e am ou nt pa y ab le at th e Part ic ip an t’s Nor m al Ret i r e men t Date .” Seek in g to gi ve

li ng ui st ic le gi ti m acy to Pau be l’s “ ap pl es to ap pl es ” an al y si s, Term in al fu rth er arg ue s

th at Pau be l reas on ab ly in te rp ret ed th e fir st pa rag rap h of § 5.5 (b ) by gi vi ng th e sa m e

-1 2-m ean in g -- no rm al ret ire m en t da te -- t o t he wor d “ pa y ab le ” whe n it was us ed twi ce

in th e sa m e se nt en ce. On a m or e pr act ic al le ve l, Term in al arg ue s th at In gr am se ek s

an im pr op er su bs id y fro m Term in al by ha vi ng it s Pl an “ m a k e u p t h e di ffer en ce

be twee n” hi s red uc ed earl y ret ire m en t be ne fit an d hi s no rm al ret ire m en t be ne fit un de r

th e Uni on Paci fic pl an

. In gr am ’s rep ly br ie f res po nd s th at Pau be l’s de ci si on so ug ht

to co rrec t an ov ers ig ht in th e dr aft in g of Term in al ’s 20 02 P l a n a mend m en ts “ by

twi st in g a nd ig no rin g P la n l an gu ag e to in crea se th e o ffs et .”

The di st ric t co ur t care fu ll y co ns id ered th es e co m p le x Pl an pr ov is io ns an d

co nc lu de d th at th e Pl an ad m in is tra to r’s in te rp ret at io n was reas on ab le be cau se it was

no t in co ns is te nt wit h Pl an la ng ua ge

, was co ns is te nt wit h Pl an go al s an d ERISA, an d

rat io na ll y co ns tru ed th e of fs et so th at th e Nor m al Ret ire m en t Ben efi t un de r th e Pl an

do es no t va ry be cau se of th e fo rm of pa y m en t ch os en un de r an ot he r pl an

. Afte r

care fu l rev ie w ap pl y in g th e de fere nt ia l ab us e of di sc ret i o n s t a n d ard

, we ag ree.

In gr am ’s te xt ua l arg um en ts ha ve so m e fo rce, bu t th ey do no t pe rs ua de us th at th e te rm

“ ret ire m en t in co m e pa y ab le ” is su sc ep ti bl e of on ly on e reas on ab le in t e rp ret at io n.

Pau be l’s in te rp ret at io n of § 5.5 (b ) was care fu ll y ex pl ai ne d an d was no t un reas on ab le

te xt ua ll y

. It al so reas on ab ly av oi de d be ne fit di sp a r it ie s be twee n si m il arl y si tu at ed

ret iri ng pa rti ci pa nt s by us in g no rm al ret ire m en t ag e of fs et cri te ria in d e t e r m in in g

In gr am ’s no rm al ret ire m en t ag e m on th ly be ne fit fro m Term in al

. Und er th e ab us e-o fdi sc ret io n st an da rd

, it is irr el ev an t th at we m ig ht ha ve co ns tru ed § 5.5 (b ) di ffer en tl y

,

as t h e co ur t di d in Co ck er v. Term in al R.R. Ass ’n of St

. Lou is Pen si on Pl an fo r

Non sc he du le Em

ps ., 2 01 5 U.S. Di st . LEXIS 75 11 6, No . 12 -1 23 9 (S .D. Ill .), ap pe al

do ck et ed

, No. 15 -2 69 0 (7 th Ci r. Aug

. 11

, 20 15 ). W e res pe ct fu ll y di sa gr ee wit h th at

di st ric t co ur t’s d eci si on

.

Fo r th e fo reg oi ng reas on s, t he jud gm en t o f th e d is tri ct co ur t i s af fir m ed

.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

-1 3-