2013 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit

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# C he r y l Ann Gr ub e r v

. PPL R et ir e me n t P l a n
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w . v i l l a no v a . e du/thir dc ir c uit_2013/10081 NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

_____________ No. 12

- 2123

_____________ CHERYL ANN GRUBER,

Appellant

v. PPL RETIREMENT PLAN; PPL CORPORATION EMPLOYEE BENE FITS DEPARTMENT PLAN ADMINISTRATION; PPL BENEFITS SERVICE AND FIDELITY INVESTMENTS

___________ On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 5

- 11

- c v - 0 2188 ) District Judge: Honorable Mitchell S. Goldberg

___________ Argued March 5 , 201 3 Before: RENDELL , AMBRO , and VANASKIE, Circuit Judges

.

(Filed : April 9, 2013 ) David B. Rodes, Esq. (Argued) Goldberg, Persky & White, P.C. 1030 Fifth Avenue Pittsburgh, PA 15219 Counsel for Appellant Harrison Lee, Esq. Frederick G. Sandstrom, Esq. (Argued) Blank Rome LLP One Logan Square 130 North 18th Street Philadelphia, PA 191032

Counsel for Appellees

___________ OPINION

___________ VANASKIE, Circuit Judge. A Qualified Domestic Relations Order (“QDRO”) entitles Appellant Cheryl Ann Gruber to 53% of the actuarial equivalent of her former husband‟s normal retirement benefit plus “53% of the value of any employer subsidy for early retirement” in the event that her ex

- husband “retires prior to the attainment of age 65

. ” (J.A. 58, ¶ 5) (emphasis added). Ms. Gruber‟s ex

- husband, Bryn Lindenmuth, retired at age 57 when his job with PPL Corporation was eliminated as part of a reduction

- in

- force. Appellees PPL Retirement Plan, PPL Corporation Employee Benefits Department Plan Administration, and PPL Benefits Service (collectively, “PPL”) , included in the c alculation of Ms. Gruber‟s share of her ex

- husband‟s pension the value of an employer subsidy that increased Mr. Lindenmuth‟s pension as a reward for his years of service with PPL, but excluded from that ca lculation the increase in her ex

- husband‟s pension that was payable under a PPL policy that entitled an early

- retirement eligible employee to the full amount that would have been payable at age 65 if he or she was terminated as part of a reduction

in

- force and executed a general release. The District Cou rt agreed with PPL‟s position , reasoning that the PPL separation policy did not provide a subsidy for early retirement because it was payable “on account of” contingencies other than early retirement, i.e. , a reduction

- in

- force and the execution of a gener al release. Having reviewed the matter de

novo , we conclude that, because a purpose of the separation benefit is to enhance early3

retirement benefits and is payable only to employees who are eligible for early retirement, the PPL policy does indeed provid e a subsidy for early retirement. Accordingly, we will vacate the District Court‟s judgment, and remand with instructions that judgment be entered in favor of Ms. Gruber.
I.
Ms. Gruber‟s ex

- husband, Bryn Lindenmuth , worked for PPL Corporation from 1976 un til March 3, 2009 , and participated in the PPL Retirement Plan (“Plan”). Mr. Lindenmuth and Ms. Grube r separated in December of 2004 and later divorced in 2005. As part of the divorce settlement, Ms. Gruber and Mr. Lindenmuth stipulated to a QDRO that de signate s Ms. Gruber as an alternate payee, entitling her to a portion of Mr. Lindenmuth‟s pension benefits under t he Plan. The Plan approved the QDRO, which provides: 5. Portion of Participant's Accrued Benefit

Awarded to Alternate Payee

. The Alternate P ayee will receive a benefit from the Plan . . . that is the actuarial equivalent of 53% of the present value of Participant‟s accrued benefit in the Plan determined as of December 20, 2004.

. . . . For purposes of this Paragraph, the P articipant‟ s accrue d benefit shall be determined in accordance with the terms of the Plan, including the applicable assumptions for actuarial equivalence as set forth in the Plan, but without taking into account the value of any subsidy in the Plan for early retirement benef

its, or any increase s or adjustments to Participant‟ s accrued benefit under the Plan following Participant‟s separation from service.4 If payments to the Alternate Payee commence while the Participant is still employed, the payment is to be computed as if the Participant had retired on the date on which payments to the Alternate Payee commence (but taking into account only the value of the benefits actually accrued and not taking into account the present value of any subsidy in the Plan for early retirement benefits). If Participant subsequently retires prior to the attainment of age 65, the amount payable to Alternate Payee shall be recalculated to include 53% of the value of any employer subsidy for early retirement. ( J.A

. 58 , ¶ 5 ) (emphasis added). Aft er Mr. Lindenmuth reached age 55 in August 2006, making him eligible for early retirement, Ms. Gruber elected to commence receipt of her monthly alternate payee benefit of $606.41, representing 53% of the actuarial value of Mr. Lindenmuth‟s benefit accrued as of December 20, 2004. 1 The amount received by Ms. Gruber was the age

based actuarial equivalent of Mr. Lindenmuth‟s accrued retirement benefit payable at age 65 , without any adjustment to reflect the value of any employer subsidy to enhance retirement benefits for a P lan participant who retires early. The PPL P lan included provisions that increased a participant‟s pension payment above the age

- based actuarial equivalent of the participant‟s accrued retirement benefit based upon years of service. Spec ifically, S chedule B to the P lan provided for an increase in pension payments above the actuarial equivalent of accrued retirement

1 Based on the Plan, “Gruber‟s benefit was adjusted to reflect (1) payment prior to Lindenmuth‟s 65th birthday and (2) Gruber‟s longer life expectancy, as she was five years younger than Lindenmuth. Gruber‟s resulting mon thly benefit was $606.41, the actuarial equivalent of a $1,730.12 annuity commencing on Lindenmuth‟s 65th birthday.” ( Appellee s‟ Br. 10.) The monthly amount of $1,730.12 was 53% of Mr. Lindenmuth ‟s age - 65 annuity of $3,26 4.38 accrued as of December 20, 2 004.5

benefits for P lan participants who retired before age 65 with more than twe nty years of service with PPL. That is, PPL provi ded an early retirement subsidy for qualifying participants to receive an enhanced pension in recognition of their years of service to it.
T he QDRO provide s that if Ms. Gruber commenced her benefits while Mr. Lindenmuth was still employed, her payments wou ld be based on the accrued value of the benefits as of December 20, 2004, and would not include “the present value of any subsidy in the Plan for early retirement benefits , ” ( id. ), because Mr. Lindenmuth‟s subsidy for early retirement would be unknown unti l his actual retirement. The QDRO also provide s , however, that if Mr. Linde n muth did retire before age 65 , and the employer provided a subsidy for early retirement, i.e. , an increase in pension benefit greater than the age

- based actuarially equivalent ben efit, Ms. Gruber‟s alternate payee benefit would be recalculated to i nclude 53% of the value of that subsidy. Ms. Gruber continued to receive a monthly benefit of $606.41 from August of 2006 until 2009, when Mr. Lindenmuth was discharged and forced into e arly retirement as part of a company - wide reduction

- in

- force. The early retirement triggered the Schedule B subsidized early retirement benefit. 2 Pursuant to the QDRO, PPL

2 Based on Mr. Lindenmuth ‟s age and length of service, his “subsidized early retirement benefit . . . was equal to 80.7% of his age

- 65 accrued benefit.” ( Appellees‟ Br. 10

- 11.)6

recalculated Ms. Gruber‟s benefit to include 53% of the Schedule B early retiremen t subsidy

. 3
In addition to the Schedule B partially subsidized early retirement benefit , Mr. Lindenmuth also qualified for an additional Plan benefit , under a policy known as “GP 401, ” which provided benefits upon the occurrence of certain organizatio nal c hanges, such as reductions

- in

- force. Under GP 401 , all employees were entitled to some benefits based on their base pay, and employees who signed a release were entitled to additional benefits based on their years of service. I n addition to those benefit s, GP 401 also provided “enhanced pension benefits under the PPL Retirement Plan” for employees, aged fifty

- five and over, who signed a release and were eligible for retirement. ( J.A

. 302.) Among other things, these employees were “eligible to receive 10 0% of their accrued Retirement Plan benefit.” ( Id. ) Having m et all the preconditions under GP 401, Mr. Lindenmuth was therefore entitled to a fully subsidized early retirement benefit as a result of his separation due to PPL‟s reduction

- in

- force. On Marc h 26, 2009, PPL sent Mr. Lindenmuth a letter describing the effect of the QDRO o n his pension payment options along with a “Post

- Retirement Payment Option Election Form” for Mr. Lindenmuth to choose a payment option. After explaining that
Ms. Gruber would receive 53% of his accrued benefit as of December 20, 2004, t he letter stated :

3 “This recalculation increased Gruber‟s monthly benefit to $1,150.88, t he actuarial equivalent of a $1,730.12 age

- 65 annuity commencing on her benefit commencement date, with an 80.7% early retirement subsidy.” ( Appellees‟ Br. 11

- 12.)7 Under Separation (GP 401), your monthly straight

- life annuity benefit amount is $4,481,15. The [QDRO] provides that the Alternate Payee‟s benefit will include 53% of the value of any employer subsidy for early retirement. Your enhancement under GP 401 is also actuarially reduced by 53%. Therefore, under the terms of the [QDRO], the Alternate Payee receives an actuarially equivalent monthly benefit of $2,261.08.
(J.A. 43.) T he Post

- Retirement P ayment Option Election Form reflected the payment
amounts re ferenced in the March 26 letter. On April 2 , 2009, Mr. Lindenmuth selected a payment option and signed that form. According to the date stamp, PPL received the signed form on April 7, 2009.
On May 24 , 200 9 , Ms. Gruber requested that her p ayments be recalculated to include her share of the GP 401 fully subs idized early retirement benefit . T he Administrative Committee of PPL‟s Employee Benefit Board (“Plan Administrator”) , how ever, denied Ms. Gruber ‟s administrative claim and her subsequent appeal , reasoning that the GP 40 1 was payable due to the reduction

- in

- force, not for early retirement

. Ms. Gruber brought this action under the Employee Retirement Income Security Act (“ERI SA”), 29 U.S.C. §§ 1001

- 1461, seeking her share of the GP 401 benefits. 4 The parties filed cross

- motions for summary judgment. Interpreting the phrase in the QDRO, “any employer subsidy for early retirement,” t he District Court concluded that the GP 401 subsidy was “not provided „for‟ early retirement,” interpreting “for” as meaning “because of” or “on account of.” (J.A. 11 & n.1 )

. The District Court determined that

4 Mr. Lindenmuth is not a party to this action , and has filed nothing that opposes the argu ments made by his former spouse

.8

because the GP 401 benefit applied as a result of a reduction

- in

- force and Mr. Lindenmut h‟ s execution of a release, the GP 401 benefit did not constitute an employer subsidy for early retirement. Therefore, it held that Ms. Gruber was not entitled to 53% of the amount by which Mr. Lindenmuth‟s monthly pension was increased under GP 401. 5
II.
A. The District Court had ju risdiction under 2 8 U.S.C. § 1331 and 29 U.S.C. § 1132(f) , and we have appellate jurisdiction under 28 U.S.C. § 1291

. W e exercise plenary review over a district court‟s order granting summary judgment. Miller v. Am. Airlines,
Inc. , 632 F.3d 837, 844 (3d Cir. 2011). Ordinarily, when an ERISA plan grants the plan administrator discretion to determine eligibility and benefi ts, judicial review of the plan administrator‟s determination is under an arbitrary and capricious standard

. Id. 6 At issue here , however, is the interpretation of a judicially

- approved contract

— the QDRO

— which entitles Ms. Gruber to 53% of “any employer subsidy for early retirement.” W e review the plan administrator‟s interpretation of this court order de novo

. See Hullett v.

5 As an alternative basis for her claim, Ms. Gruber also contended that the GP 401 early retirement enhancement was an “accrued benefit” as of December 20, 2004. The District Court rejected this contention, reasoning that, under ERISA, an “accrued benefit” is “expressed in the form of an annual benefit commencing at normal retirement age,” 29 U.S.C. § 1002(23)(A), and the GP 401 benefit did not meet that criterion. Ms. Gruber does not appeal that part of the District Court ‟s holding

.

6 We have also characterized the appropriate standard of review for the decisions of administrators with broad discretion as an abuse of discretion standard; however, “ [i] n the ERISA context, the arbitrary and capricious and abuse of discreti on standards of re view are essentially identical. ” Miller , 632 F.3d at 845 n.2.9

Towers, Perrin, Forster & Crosby, Inc. , 38 F.3d 107, 114 (3d Cir. 1994) (upholding de

novo review of a “plan administrator‟s con struction of [a QDRO], which involved issues of contract interpretation under the [QDRO] and not the Plan ” ); see also Owens v. Auto. Machinists Pension Trust , 551 F.3d 1138, 1142 (9th Cir. 2009) (“We review de novo the district court‟s review of a plan adm inistrator‟s conclusions regarding legal obligations under a QDRO.”).
B. It is undisputed that the GP 401 benefit included a full retirement subsidy

. By definition, the 100% retirement subsidy only applied to qualifying participants who had not yet reach ed the normal retirement age . P articipants who had attained the normal retirement age would need no full retirement subsidy because they already would be eligible for full retirement benefits without actuarial adjustment

. And participants who were not el igible for early retirement d id not qualify for the employer

- provided early retirement subsidy. T hus, the GP 401 enhanced pension only benefit ed a class of participants who were eligible for early retirement , such as Mr. Lindenmuth. Therefore, contrary t o PPL‟s assertion and the District Court‟s conclusion , this benefit was an employer subsidy for early retirement so that eligible participants would not have to receive actuarially reduced retirement benef its when they were effectively forced to retire bef ore age 65. The reason why PPL provided the subsidy, i.e. , a reduction

- in

- force and execution of a general release, does not change the fact that the P lan participant‟s pension payment is increased over his actuarially calculated amount. In this respec t, the benefit is10

indisputably intended for early retirement purposes. If the motivation for the employer

provided benefit was the determinative factor in deciding which benefit qualified as a subsidy “for” early retirement, enhancements in pension benefi ts for years of service would likewise not fall within the QDRO‟s provisions. After all, that subsidy is not “on account of” early retirement, but “ on account of ” years of service that otherwise lack actuarial significance. PPL , however, does not contend that Schedule B fails to provide an employer subsidy for early retirement. The preposition “for” has a plethora of meanings, one of which is the definition that the District Court applied : “because of” or “on account of.” Def. 21, Oxford English Dictionar y, http://www.oed.com/view/Entry/72761#eid0 (last v isited on March 25, 2013). But another meaning is “to indicate purpose,” such as a “grant for studying medicine.” Def. 1, Merriam

- Webster Dictionary, http://www.merriam

webster.com/dictionary/for (last v isited April 9, 2013 )

. The QDRO was intended to assure that Ms. Gruber would receive 53% of her ex

spouse‟s retirement benefit. This is made clear by the fact that it calls for an adjustment in her favor in the event that her ex

- spouse retired early and P PL provided a subsidy to enhance his retirement benefit over that which otherwise would be payable. Interpreting the word “for” as signifying the purpose of the subsidy, i.e. , to increase the retirement benefits, is consistent with the parties‟ intent in the QDRO. In this case, the District Court recognized that GP 401 is indeed “akin to a „retirement

- type subsidy.‟” (J.A. 11

. )
T he District Court , however, th en stopped short by considering the reason for the subsidy, but not its effect. In this case, t h e effect of GP 401 is to enhance early11

retirement benefits, and it was error to interpret the pr e position “for” as meaning “on account of.” Instead, the correct interpretation of “for” is the purpose of the subsidy, which is to provide more substantial e arly retirement payments. Importantly, PPL itself initially treated the GP 401 benefit as a subsidy for early retirement under the QDRO

. PPL ‟s supervisor of retirement and life insurance programs notified Mr. Lindenmuth in the March 26, 2009 letter that h is “enhancement under GP 401 [was] also actuarially reduced by 53%” pursuant to the QDRO

. (J.A. 43.) Furthermore, the record shows that Mr. Lindenmuth ‟s signed Post

- Retirement Payment Option Election Form included payment options with figures based on th e 53% reduction of the GP 401 benefit, as indicated in the March 26 letter. 7 While PPL argues that its later correspondence with Ms. Gruber correctly stated its position that she was not entitled to a share of that benefit and that the March 26 letter mus t have been a mistake,

we are not persuaded. T he supervisor‟s March 26 letter to Mr. Linde n muth and the corresponding figures on Mr. Linde n muth‟s election form indicate, and we conclude, that the GP 401 benefit was a subsidy for early retirement within th e meaning of the QDRO. Our conclusion is supported by our decision in Bellas v. CBS, Inc. , 221 F.3d 517 (3d Cir. 2000). In Bellas , we explained that “ [t] he provision of an early retirement benefit greater than the actuarial equivalent of the normal retire ment benefit is

. . . a subsidized early retirement .” Id. at 525 (emphasis added). O ur re cognition in Bellas as to what constitutes a “subsidized early retirement” is indeed applicable in the present

7 The record does not indicate whether Mr. Lindenmuth ‟s subsequent payments reflected a 53% reduction of the GP 401 benefit.12

context . Here, GP 401 provides for a “benefit greater than the actuarial equivalent of the normal retirement benefit

. ” See id. As a result, the GP 401 meets the definition of a “subsidized early retirement” as described in Bellas and comports with our conclusion that it is a “subsidy for early retirement” within the meaning of the QDRO. PPL‟s reliance on Krusos v. Atlantic Richfield Co. , No. Civ. A. 3 : 00

- CV

- 0 1887

- D, 2003 WL 21383656 (N.D. Tex. June 11, 2003), is unavailing. There, an ERISA plan participant, Pavlas, and his ex - spouse, Krusos, were parties to a QDRO , which provid ed that Krusos was entitled to receive 50% of Pavlas‟s accrued benefit as determined on the date of their divorce. Id. at *1

- 2. The QDRO also provided:

If [Pavlas] elects to retire from the Plan before normal retirement age and by reason of that early retirement the Plan provides an early retirement subsidy , then [Krusos‟ ] benefit shall be recomputed to provide [Krusos] with fifty percent (50%) of that portion of the subsidy attributable to the total accrued benefit on the date of d ivorce. Id. at *1 (emphasis added)

. After Pavlas‟s employer terminated his employment due to a reduction

- in

- force, entitling him to an enhanced benefit, Krusos claimed that the benefit constituted an early retirement subsidy and sought a share of those b enefits. Id. at *2

- 3. The D istrict C ourt assumed that the particular benefit at issue

— adding five years of age and service toward an affected employee ‟ s calculation of benefits

— was a retirement subsidy, but concluded that Krusos was not entitled to a sha re of the benefit because it was not “„by reason of . . . early retir ement,‟ as required by the QDRO , ” because the benefit was due to the loss of employment resulting from the reduction

- in

- force. Id. at *4.13

Krusos is distinguishable in t hree crucial respe cts. First, the QDRO in Krusos required that the early retirement subsidy be “ by reason of . . . early retirement,” as opposed to the QDRO at issue here, which covers “any employer subsidy for early retirement.” As explained above, t he preposition “for” may be used “to indicate purpose,” i.e. , “a grant for studying medicine.” Def. 1, Merriam

- Webster Dictionary, http://www.merriam

- webster.com/dictionary/for (last visited April 9, 2013 ). This is the sense in which we read the QDRO at issue here to use the pr e position “for,” i.e. , it covers
any employer subsidy that has as its purpose an enhancement of early retirement benefits. Had the parties intended that only employer subsidies that are payable by reason of early retirement be included in calculating M s. Gruber‟s share of Mr. Lindenmuth‟s pension, they should have expressed that intention more clearly , as was done in Krusos

. Second, the QDRO in Krusos provided that Krusos was entitled to a share of an early retirement subsidy if Pavlas “ elect [ ed ] to re tire from the plan before normal retirement age . . . .” 2003 WL 21383656, at * 1 (emphasis added)

. Here, however , there is no similar requirement in the QDRO that Mr. Linde n muth‟s retirement must have be en voluntary in order to allow Ms. Gruber to claim her share of the benefits

. And third, the benefit in question in Krusos , which increased a plan participant ‟ s age and length of service by five years for purposes of benefits calculation s , applied regardless of any early retirement and therefore would hav

e applied to Pavlas even if he had been at the normal retirement age. Id. at *4. In contrast, the GP 401 benefit in this case is linked to early retirement because the value of the subsidy was based on a participant‟s eligibility for early retirement and14

did not apply to participants who either were ineligible for early retirement or had reached normal retirement age. In sum, we hold that the GP 401 benefit was an “employer subsidy for early retirement” within the meaning of the QDRO

. Ms. Gruber is theref ore entitled to 53% of that benefit . The District Court erred by concluding otherwise and granting summary judgment in favor of PPL.
III. For the foregoing reasons, we will vacate the judgment of the District Court , and remand with instructions to enter judgment in favor of Ms

. Gruber

.