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. e du/thir dc ir c uit_2000/49Filed March 9, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-5293

STANLEY SMITH,

Appellant

v.

ROBERT CONTINI; JOHN BARNES; JOHN KROMMENHOEK; RICHARD MULLER; JERRY MCCORMICK; LAWRENCE MCDERMOTT; JOHN DOE (name being fictitious); TEAMSTERS LOCAL 641 PENSIO N FUND; PETER VAN LENTEN; ROBERT CIRONE, as Trustee of the Teamsters Local 641 Pension Fund; THOMAS FLANNERY, Trustee of the Teamsters Local 641

Pension Fund

On Appeal from the United States District Court for the District of New Jersey (D.C. Civ. No. 97-2692) District Judge: Hon. William H. Walls

Argued January 25, 2000

BEFORE: GREENBERG, ROTH, and ROSENN, Circuit Judges

(Filed: March 9, 2000)

David Tykulsker (argued) David Tykulsker & Associates

161 Walnut Street Montclair, NJ 07042

Attorneys for Appellant

Gary A. Carlson (argued) Lynch Martin Kroll 300 Executive Drive, Suite 010 West Orange, NJ 07052

Attorneys for Appellees

OPINION OF THE COURT

GREENBERG, Circuit Judge.I. INTRODUCTION

This matter is before the court on an appeal by Sta nley Smith in this Employee Retirement Income Security A ct ("ERISA"), 29 U.S.C. SS 1001 et seq., benefits case .1 Smith filed a complaint in the district court on May 23, 1997,

after the defendants denied him retirement benefits . Smith asserted that defendants' construction of the pensi on plan they managed violated ERISA, and thus he brought th is action seeking an injunction and other appropriate equitable relief to bring their construction of the plan into compliance with the statute. Of course, his ultimat e goal is to obtain a pension.

The Teamsters Local 641 Pension Fund (the "Local 64 1 Fund") plan is a multiemployer, defined benefits pe nsion plan within the meaning of 29 U.S.C. S 1002(2)(A)(3 7). The

individual defendants are trustees and officers of the Local

___________________________________________________ ______________

1. The district court exercised jurisdiction pursua nt to 28 U.S.C. S 1331 and 29 U.S.C. S 1132(e)(1) and (f). We have jurisdi ction pursuant to 28

U.S.C. S 1291. The defendants assert that the case is not ripe for appellate review because the district court granted summary judgment "dismissing the complaint" and not dismissing the a ction. See Appellee Br. at 12 (citing Newark Branch, N.A.A.C.P. v. Harr ison, 907 F.2d 1408, 1416 (3d Cir. 1990)). While it is true that the dis missal of a complaint without prejudice in some circumstances may not be afinal and appealable order because a court can grant leave to amend a complaint even after dismissal, see id. at 1416, in this case the district court did not dismiss the complaint without prejudice and it did not grant leave to amend. Moreover, Smith has stood on his complaint. See Shapiro v. UJB Fin. Corp., 964 F.2d 272, 278 (3d Cir. 1992). Thus, we have jurisdiction.

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641 Fund who, by virtue of their positions, owe afi duciary duty to Smith and the other beneficiaries of the Lo cal 641 Fund plan.

The Local 641 Fund plan provides an array of retire ment benefits to employees covered by the plan. As is re levant herein, the Local 641 Fund pension plan provides fo r two types of benefits to covered employees upon their r eaching their normal retirement age. The first, a "Deferred Pension," is available to employees who accumulate at least t en years of vesting service under the Local 641 Fund. See L ocal 641 Fund plan S 3.15, app. at 27. The second, a"Pro-rat a Pension," is available to certain employees who hav e been members of other Teamsters locals, but did not atta in a minimum of ten years of employment with employers w ithin the jurisdiction of the Local 641 Fund so as to qua lify fora Deferred Pension. The Local 641 Fund entered into

reciprocal agreements with the pension funds of oth er locals to provide for Pro-rata Pensions to certain employees

who then could accumulate service credits in more t han one fund so as to qualify for a pension.

With respect to its Pro-rata Pension provisions, th e Local 641 Fund plan provides:

The Fund has a number of reciprocal agreemen ts with other pension funds under which service in t he jurisdiction of any of the reciprocating fun ds is

considered as service under this Fund for th e purpose of determining eligibility for benefits unde r the Fund.

* * * *

If an employee would meet the eligibility ru les under

this Plan if his Related Credit was consider ed, but does not meet the eligibility rules of the last F und in whose jurisdiction he worked, a Pro-rata pension b ased on the time worked under this Plan only will be payable even if the Employee has less than 10 Pensio n Credits

under this Plan.

Local 641 Fund plan S 3.21, app. at 28.

Generally, the Local 641 Fund plan calculates a Pro -rata Pension based on the amount of the pension to which an employee would have been entitled under the Local 6 41

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Fund plan if he had earned all of his combined pens ion credits under the jurisdiction of the Fund. See Lo cal 641 Fund plan, Addendum A, app. at 37. The Local 641 Fu nd then pays a pro-rata share, or percentage, of the p ension to the employee that equals the percentage of the comb ined pension credits earned by the employee within the jurisdiction of the Local 641 Fund. See id.2 Under this plan, however, a Pro-rata Pension generally is paid only to those employees who had earned a minimum of 15 years of

combined service credits. See id. at 28.

As is relevant here, the Local 641 Fund maintains reciprocal agreements with the Teamsters Local 202 Fund

and the Teamsters Local 816 Fund. Under these agreements, the Local 641 Fund agreed to apply serv ice credits earned by employees with the Local 202 and 816

Funds toward service credits earned in the Local 64 1 Fund plan.

Smith, who was employed as a truck driver, earned t woquarters of service credits with the Local 202 Fund between

May and December 1966. From February of 1967 throug h December of 1973, Smith was employed by Eastern Express, Inc. ("Eastern Express") in New York City, earning 26 quarters of service credits with the Local 816 F und. Then Eastern Express moved to Elizabeth, New Jersey , and its employees came under the jurisdiction of the Lo cal 641 Fund. Smith, whom Eastern Express continued to empl oy after the move, earned 16 quarters of service credi ts with the Local 641 Fund between January 1974 and May 197 7.

Pursuant to its reciprocal agreements with the Loca l 202 and 816 Funds, the Local 641 Fund accepted the serv ice credits Smith had earned within the jurisdiction of those funds. Thus, when Smith terminated his covered employment in 1977, he had earned a total of 44 ser vice credits (the equivalent of 11 years) -- 42 service credits (ten and one-half years) as an Eastern Express employee.

On November 11, 1993, Smith, having turned 65, appl ied for a pension from the Local 641 Fund. By letter da ted

___________________________________________________ ______________

2. Apparently the employee obtains the full pension from all of the funds, but we are not certain as to the mechanics of the p rogram.

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June 21, 1994, the Local 641 Fund acknowledged that Smith had earned 11 years of service credits, but i nformed him that he needed 15 years of service credits befo re he could receive pension benefits. See id. at 85. Smit h appealed this decision on the ground that the Fund could require only ten, not 15, years of service before a n employee was guaranteed pension benefits. The Fund denied Sm ith's appeal by a letter dated September 22, 1994. See id . at 86.

Smith then brought this suit in the district court under 29 U.S.C. S 1132(a)(3), alleging that the defendant s' adherence to the 15-year service credit requirement was contrary to ERISA and constituted a breach of their fiduciary duty. In particular, Smith sought a decla ration that the defendants had breached their fiduciary du ties and an order enjoining them to conform the rules and regulations of the Local 641 Fund plan to ERISA's maximum ten-year vesting requirement. See app. at 7 . He also sought restitution by the award of a pension.

Ultimately, after proceedings that we need not desc ribe, the parties filed cross-motions for summary judgmen t. By an opinion and order dated April 8, 1999, the distr ict court denied Smith's motion but granted the defendants' m otion. See Smith v. Contini, No. 97-2692 (D.N.J. Apr. 8, 1 999). Inits opinion, the district court examined the Local 641

Fund's pension plan and determined it complied with ERISA guidelines. The court noted that the ERISA pr ovision Smith thought applicable to this case, 29 U.S.C. S 1053(a)(2)(A), required plans to provide that an employee's right to his normal retirement benefit be nonforfei table upon the attainment of his normal retirement age, p rovided that the employee have at least ten years of qualif ying

service. See id. at 9-10. But the court determined that the Deferred Pension offered by the Local 641 Fund plan complied with ERISA's vesting provisions. See id. a t 10 -11.

The district court also noted that the Local 641 Fu nd plan provided a pension for those employees who had performed less than ten years of vesting service wi thin the jurisdiction of the Local 641 Fund, but who had accumulated service credits with a reciprocating fu nd. See id. But under the reciprocal pension, an employee w ould not receive any benefits unless he had a minimum of 15

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years of combined service within the jurisdiction o f the various reciprocating funds. See id. It is undisput ed that

Smith did not meet that threshold.

The district court concluded that the Pro-rata Pens ion offered by the Local 641 Fund pursuant to its recip rocity agreements with other funds was not governed by ERI SA's ten-year vesting requirements. See id. at 11. The c ourt

stated:

Defendants are correct in their argument tha t ERISA does not require them to provide pro-rata pe nsions or reciprocal agreements with other funds. Unde r 29 U.S.C. S 1053(b)(1), defendants may disregar d years of service performed for an employer during a p eriod in which that employer did not maintain a pensi on plan with the Local 641 Fund or a predecessor pla n. The pro-rata provisions in the Local 641 Fund's pension plan do not violate the vesting requirements of ERISA, 29 U.S.C. S 1053(a)(2). Because neither the pro-rata provisions nor the vesting schedule of the L ocal 641 Fund's pension plan violate ERISA, defendant s' motion for summary judgment to dismiss the complain t is granted.

Id. at 11.

In addition to contending that the Pro-rata Pension was subject to a ten-year maximum vesting requirement, Smith argued that the Local 641 Fund should recognize his ten and one-half years of service with Eastern Express asvesting service under its plan, thereby entitling h im to a

Deferred Pension. The district court found that"[a] lthough plaintiff 's argument may have merit, the Court may not consider it at this point because it deals with the application of the terms of the pension plan to pla intiff, not whether the terms of the pension violate ERISA. The Court may not consider this argument unless and until pla intiff brings an action under 29 U.S.C. S 1132(a)(1)(B) to challenge his denial of benefits under the Local 64 1 Fund's pension plan." See id. at 12. Smith appeals.

II. DISCUSSION

We exercise plenary review with respect to the dist rict court's decision on the cross-motions for summary

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judgment. See Seibert v. Nusbaum, Stein, Goldstein, Bronstein & Compeau, 167 F.3d 166, 170 (3d Cir. 199 9); Petruzzi's IGA Supermarkets, Inc. v. Darling-Delawa re Co., 998 F.2d 1224, 1230 (3d Cir. 1993). We will affirm only if we conclude that the pleadings, depositions, answer to interrogatories and admissions on file, together wi th the affidavits, show that the defendants were entitled to judgment as a matter of law on the basis of the und isputed facts. See Fed. R. Civ. P. 56(c).

We start our discussion of the issues by recognizin g that ERISA neither mandates the creation of pension plan s nor in general dictates the benefits to be afforded onc e a plan is created. See Dade v. North American Philips Corp ., 68 F.3d 1558, 1561 (3d Cir. 1995) (citing Hlinka v. Be thlehem Steel Corp., 863 F.2d 279, 283 (3d Cir. 1988); H.R. Rep. No. 93-807, 93d Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 4670, 4677). Thus, ordinarily only the plan can create an entitlement to benefits. Consequently , "we are required to enforce the Plan as written unless we c an find a provision of ERISA that contains a contrary direc tive." Dade, 68 F.3d at 1562.

One of the areas in which ERISA requires express provisions in benefit plans concerns the nonforfeit ability, often referred to as "vesting," of normal retiremen t benefits3 payable to an employee who reaches the normal retir ement age.4 In this regard, ERISA section 203(a), 29 U.S. C. S 1053(a), provides in relevant part:

Each pension plan shall provide that an empl oyee's right to his normal retirement benefit is no nforfeitable upon the attainment of normal retirement age and in

___________________________________________________ ______________3. ERISA defines normal retirement benefits as "the greater of the early

retirement benefit under the plan, or the benefit u nder the plan commencing at normal retirement age." 29 U.S.C.S 10 02(22).

4. ERISA allows the normal retirement age to be def ined by the plan or sets the age as the later of the time a plan partic ipant reaches the age of 65 or reaches his or her fifth anniversary of pa rticipation in the plan.

See 29 U.S.C. S 1002(24). The parties do not disput e that Smith had attained the normal retirement age at the time he r equested benefits

under the Local 641 Fund.

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addition shall satisfy the requirements of p aragraphs (1) and (2) of this subsection.

(1) A plan satisfies the requirements of thi s pa ragraph if an employee's rights in his accrued benef it derived

from his own contributions are nonforfeitabl e.

(2) A plan satisfies the requirements of thi s pa ragraph if it satisfies the requirements of subparag raph (A), (B), or (C).

(A) A plan satisfies the requirements of thi s subparagraph if an employee who has complete d at least 10 years of service has a nonforfeitab le right to 100 percent of the employee's accrued benefi t derived from employer contributions.5

The minimum vesting standards to which an employee benefit plan is obligated to adhere are based upon" years of service" as defined in ERISA section 203(b)(1). Tha t section provides:

In computing the period of service under the plan for purposes of determining the nonforfeitable p ercentage under subsection (a)(2) of this section, all of an employee's years of service with the employe r or employers maintaining the plan shall be take n into account, except that the following may be di sregarded:

* * * *

(C) years of service with an employer durin g any period for which the employer did not mainta in the plan or a predecessor plan, defined by the S ecretary of the Treasury

29 U.S.C. S 1053(b)(1).Defendants successfully argued in the district cour t that

the Pro-rata Pension provided by the Local 641 Fund plan to an employee who had not earned the requisite ten years of service credit under its plan was not subject to the

___________________________________________________ ______________

5. The ten-year vesting requirement we set forth re flects the version of

ERISA section 203 in effect at all times relevant t o the instant appeal. Because the Local 641 Fund plan was ratified before March 1, 1986, the parties agree that the current vesting limits do no t apply.

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ERISA ten-year vesting requirement even though the employee overall had more than ten years of service credits. Thus, they assert on this appeal that "ERISA's mini mum vesting standards [i.e., 29 U.S.C. S 1053] do not a pply to pro-rata pension benefits." See Appellees Br. at 24 . In support of this argument, defendants cite ERISA sec tion 203(b)(1)(C), 29 U.S.C. S 1053(b)(1)(C), quoted abo ve, for the proposition that years of service earned under othe r plans may be disregarded for the purposes of vesting. See id. at

19-20.

While we seem not to have had the opportunity to address the specific question presented on this app eal, in Hoover v. Cumberland, Maryland Area Teamsters Pensi on Fund, 756 F.2d 977 (3d Cir. 1984), in an analysis instructive here, we did consider whether pro-rata pensions were subject to other limitations imposed by ERISA. In Hoover, the plaintiffs, as members of Teamsters Loc al 453, participated in the Cumberland Fund, a multiemploye r pension plan established by the local union and emp loyers engaged in collective bargaining with the local. Se e id. at 979. The Cumberland Fund was a qualified plan subje ct to the vesting, funding, and participation requirement s of the

Internal Revenue Code of 1954 and ERISA. See id. S tarting in 1967, the trucking companies employing the plain tiffs began moving their terminals to Pittsburgh, Pennsyl vania, because of changes in interstate highway routes. Se e id. The drivers affected by these relocations, includin g the plaintiffs, moved with their employers to Pittsburg h and

transferred to Teamsters Local 249 whose members participated in the Western Pennsylvania Teamsters and Employers Pension Fund (the "Western Fund"). As a r esult of the move, these drivers terminated their partici pation in the Cumberland Fund and joined the Western Fund, although the same company continued to employ them and they remained members of the same international uni on. See id.

Responding to the disruption in local union jurisdi ction and pension fund affiliation, a number of teamster pensionfunds prepared a reciprocal agreement which the tru stees

of the Cumberland Fund signed in 1968. See id. The purpose of the reciprocal agreement was to provide full

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pensions for workers with continuous membership in the international union, but who, because of transfers to different locals, might not accrue sufficient work credit under any one plan to entitle them to full pension benefits. See id. at 979-80. Under the reciprocal agreement, a union

member who transferred from the Cumberland Fund to the

Western Fund could cumulate his service credit from each fund, and if his total combined service credit was sufficient on retirement, he would receive proportional pensio n benefits from each fund. See id. at 980. The recipr ocal agreement did not specify a particular benefit rate , but rather required each fund to include in its plan do cuments a method for calculating the partial pensions. See id. The trustees of the Cumberland Fund triggered the dispu te in Hoover by amending the plan in a way that reduced t he pensions payable from the level in effect prior to the

amendment.

In response to the amendment, the Hoover plaintiffs brought their suit alleging violations of ERISA sec tion 204(g), 29 U.S.C. S 1054(g). See Hoover , 756 F.2d at 981. Section 204(g) states that the "accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section [302(c)(8)]." 29 U.S.C. S 1054 (g)(1) (emphasis added). Thus, we indicated in Hoover tha t "the focus of our inquiry is whether the partial pension benefits [under the reciprocal agreement involved in that ca se] qualif[ied] as accrued benefits within the meaning of that term under ERISA" so that section 204(g) precluded their reduction. See Hoover, 756 F.2d at 981.

A reading of both the Cumberland Fund plan and the legislative history of ERISA led us to conclude tha t the plaintiffs' partial pension benefits earned pursuan t to reciprocity clauses satisfied ERISA's definition of an accrued benefit. See id. at 982. Accordingly, we de termined that pension benefits provided pursuant to the reci procity agreements were subject to the section 204(g) amend ment
limitations. See id. It was inherent in our determi nation that the benefits provided pursuant to the reciproc ity agreements were provided under a covered plan for purposes of ERISA because the restriction in ERISA section

10204(g), 29 U.S.C. S 1054(g), is only on amendments of a

plan as ERISA defines that term.

ERISA section 203(a) is similar to the ERISA provis ion at

issue in Hoover because it sets forth nonforfeitabi lity requirements for pension plans. See 29 U.S.C. S 105 3(a). As in Hoover, we hold that the benefits provided to em ployees pursuant to the Pro-rata Pension provisions of the Local 641 Fund plan are provided in a pension plan within the meaning of ERISA. See 29 U.S.C. S 1002(2)(A) (defin ing pension plan as any plan, fund or program that prov ides retirement income to employees regardless of the me thod of calculating contributions, benefits or method of di stributing benefits). Accordingly, the Pro-rata Pension is sub ject to the vesting requirements set forth in ERISA section 203 and thus an employee must be provided with a nonforfeit able right to his normal retirement benefit if the emplo yee has completed ten years of service. See ERISA section 203(a)(2)(A), 29 U.S.C. S 1053(a)(2)(A).

Defendants' argument that the vesting requirements of ERISA are not applicable here because the Local 641 Fund was not required to provide its employees with a Pr o-rata Pension is misplaced. As we mentioned, a plan is no t required to provide any particular benefits to its employees and thus the ERISA provisions become applicable onl y after benefits are provided. See Dade, 68 F.3d at 1562. T he Prorata Pension provision here seeks to provide normal retirement benefits to plan participants who reach normal retirement age. ERISA sets forth clear vesting requ irements for the provision of such benefits. See ERISA secti on 203(a), 29 U.S.C. S 1053(a).

Defendants argue, however, that even if ERISA secti on 203(a) is found to be applicable, section 203(b)(1) (C) allows the Local 641 Fund to disregard service with an emp loyer for any period in which the employer did not mainta in the Local 641 Fund plan. We reject this argument. The underlying policy goal of ERISA is the protection o f retirement benefits. Congress's chief purpose in en acting the statute was to ensure that workers receive prom ised pension benefits upon retirement. See Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 1733 (1980). In constructing ERISA, Con gress

11

perceived the statute's accrual and vesting provisi ons as being at the heart of that protection. See Hoover, 756 F.2d

at 985.

Unless an employee's rights to his accrued p ension benefits are nonforfeitable, he has no assur ance thathe will ultimately receive a pension. Thus, pension

rights which have slowly been stockpiled ove r many years may suddenly be lost if the employee l eaves or loses his job prior to retirement. Quite apa rt from the resulting hardships, ... such losses of pens ion rights are inequitable, since the pension contribut ions previously made on behalf of the employee ma y have been made in lieu of additional compensation or some other benefit which he would have received.

S. Rep. No. 93-383, 93d Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 4890, 4930.

Although the concepts of accrued benefits and veste d benefits are distinct, the concerns expressed by th is court in Hoover have force here. In fact, a district cour t, relying on the reasoning of Hoover, recently determined tha t the vesting requirements set forth in ERISA section 203 applied to service credits earned pursuant to reciprocity c lauses.

See Helms v. Local 705 Int'l Bhd. of Teamsters Pens ion Plan, 1999 WL 965230, at *10-12 (N.D. Ill. Sept. 30, 1999 ) (finding that plan that offered both a standard def erred pension and a pension based upon reciprocity agreem ents was required to adhere to ERISA's vesting provision s for both pensions). This conclusion is consistent with our reasoning in Hoover and with the concerns expressed by Congress regarding the protection of accrued benefi ts and vested rights.

The establishment of reciprocal pension agreements promotes transfers of employees between employers w ithin funds that are parties to reciprocity agreements an d provides the employees with the apparent security t hat they will receive a pension based upon their combined ye ars of service. See Helms, 1999 WL 965230, at *12. It woul d be inconsistent with the purpose of ERISA to allow fun ds to promote movement by employees in these circumstance s while at the same time subjecting such employees to "penalties" for having so moved.

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Further, by opting to provide pension benefits base d upon years or service earned under other funds, the Local 641 Fund chose not to avail itself of the provision s of ERISA section 203(b) for the purposes of the Pro-ra ta Pension. Section 203(b) is permissive in that it st ates that a plan may disregard service with an employer durin g any period in which the employer did not maintain the p lan. See 29 U.S.C. S1053(b)(1)(C). Thus, ERISA does not require a plan to disregard such service. Having chosen to provide a pension plan expressly based upon years of servic e earned with certain employers not within the Local 641Fund jurisdiction, the Local 641 Fund is barred fro m

disregarding those years of service for the purpose s of vesting under ERISA Section 203(a).

We reiterate that we agree with the defendants and the

district court that the defendants were under no ob ligation under ERISA to provide for reciprocal agreements an d Prorata Pensions. Nevertheless, once having made the determination to provide for such pensions, the def endants were obliged to formulate a plan providing for vest ing in accordance with ERISA section 203(a)(2)(A), 29 U.S. C. S 1053(a)(2)(A). Thus, this case represents a situa tion, not unusual in the law, that an actor`s discretion in h ow it engages in certain conduct is circumscribed, even t hough it was not obliged to engage in the conduct in thefirs t
instance.

Finally, the defendants argue that they cannot be required to grant Smith a Pro-rata Pension because he brought this action under ERISA section 502(a)(3), 29 U.S.C. S 1132(a)(3), rather than ERISA section 502( a)(1)(B), 29 U.S.C. S 1132(a)(1)(B). See Ream v. Frey, 107 F. 3d 147, 151-53 (3d Cir. 1997). Smith contends, however, tha t he appropriately did not bring this action under 29 U. S.C. S 1132(a)(1)(B) because that section applies to act ions brought "under the terms of the plan" and he acknow ledges that the defendants acted consistently with the ter ms of the plan. Yet in his view they nevertheless breached th eir fiduciary duties because the plan as written does n ot comply with ERISA.

Our recent opinion in Harte v. Bethlehem Steel Corp ., No. 98-2052, 2000 WL 225896, at *1 (3d Cir. Feb. 29, 20 00),

13

supports Smith's position that a fiduciary acting consistently with a plan nevertheless may breach it s fiduciary duty. Smith thus proceeded properly in th is case under ERISA section 502(a)(3). But we will not ling er on the question of whether Smith sued under the wrong subsection of ERISA section 502, as we expect that the defendants now will apply the plan in accordance wi th the ERISA ten-year vesting requirements. Moreover, we w ould be reluctant to order benefits granted, a remedy th at might be appropriate relief under ERISA section 502(a)(1) (B), as we do not know whether there is any impediment asid e from the ten-year vesting requirement to Smith's re covering Pro-rata Pension benefits. For example, Smith may b e entitled to a Deferred Pension, and we doubt that h e will be entitled to obtain both pensions. Of course, in lig ht of our disposition, we are acting without prejudice to Smi th's taking such other steps as may be necessary to reco verPro-rata Pension benefits.

In view of our foregoing conclusions, we will rever se the summary judgment of the district court to the exten t that it held the Local 641 plan did not violate ERISA wi th respect to the statute's ten-year vesting requireme nt. The Pro-rata Pension requirements violate the vesting requirements by making benefits contingent on obtai ning service credits beyond ERISA's permitted forfeiture periods and defendants have a fiduciary obligation to compl y with

the law.

In addition to arguing that the Local 641 Fund's Pr o-rata Pension violated ERISA's vesting provisions, Smith also contends that by reason of his ten and one-half yea rs of service with Eastern Express, he was entitled to a Deferred Pension from the Local 641 Fund plan. The district court found that while this argument may have merit, it c oncerns the application of the terms of the plan to Smith a nd not

whether the terms violate ERISA. The district court concluded that such a challenge must be brought pur suant to ERISA section 502(a)(1)(B), 29 U.S.C. S 1132(a)( 1)(B), dealing with the denial of benefits, and not in an action seeking equitable relief to remedy a breach of fidu ciary duty under ERISA section 502(a)(3), 29 U.S.C. S 1132(a)( 3). We agree with the district court on this point and con sequently

14

we will affirm the order for summary judgment to th at extent without further discussion and without preju dice to a later action under section 502(a)(1)(B), if that should be appropriate.

III. CONCLUSION

For the reasons set forth above, the order for summ ary judgment of April 8, 1999, will be reversed in part and affirmed in part. The district court erred when it concluded that the Local 641 Fund plan's 15-year service cred it requirement for a Pro-rata Pension did not violate ERISA. Accordingly, to the extent Smith sought to challeng e the propriety of the 15-year requirement, this matter w ill be remanded to the district court for the entry of jud gment in favor of Smith and the fashioning of appropriate re lief pursuant to ERISA section 502(a)(3), 29 U.S.C. S 11 32(a)(3).

The decision of the district court will be affirmed , however, to the extent it held that Smith cannot proceed pur suant to ERISA section 502(a)(3), 29 U.S.C. S 1132(a)(3), to assert his rights to a Deferred Pension under the Local 64 1 Fund plan.

A True Copy:Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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