Opinion ID: 8407616
Heading Depth: 2
Heading Rank: 2

Heading: Calculating Years of Service

Text: Section 204(b)(4)(A) requires plansi for purposes of determining accrued benefits, to' include all years that ERISA § 202(b) counts for participation purposes. And § 202(b) requires that all “years of service” be taken into account. Section 202(a)(3)(A) defines a “year of service” as follows: For purposes of this section, the term “year of service” means a 12-month period during which the employee has not less than 1,000 hours of service. For purposes of this paragraph, computation of any 12-month period shall be made with reference to the date on which the employee’s employment commenced, except that, in accordance with regulations prescribed by the Secretary [of Labor], such computation may be made by reference to the first day of a plan year in the case of an employee who does not complete 1,000 hours of service during the 12-month period beginning on the date his employment commenced. 29 U.S.C. § 1052(a)(3)(A). By contrast, the Plan defines a “year of credited service” as follows: (1) for years prior to October 1, 1978, any year in which a participant had at least 400 hours of employment in the industry provided that such participant had an average of 700 hours employment per year during such years prior to October 1, 1978 and provided further no credit shall be given for any year(s) of employment occurring prior to a break in service which break in service occurred prior to January 1, 1976; and (2) commencing October 1, 1978, any year in which a participant has at least 700 hours of service. Although, as we have discussed above, the Plan’s pre-ERISA break-in-service provision does not apply to accrued benefits, there remains the question of whether ERISA requires the PTF to credit McDonald with any years of service prior to 1973, given that ERISA only requires that benefits accrue for years in which an employee works at least 1,000 hours. The PTF argues on appeal, although it did not do so before the district court, that the district court should have applied ERISA’s stricter 1,000-hour definition of “year of service”-rather than the Plan’s more lenient 400-hour “year of credited service” definition—in analyzing whether McDonald is entitled to additional benefits. Specifically, the PTF contends that only three of McDonald’s 13 years of pre-1973 employment were 1,000-hour years, and each directly preceded a greater number of fewer-than-1,000-hour years. Under ERISA § 202(b)(4)’s “rule of parity,” applicable to McDonald’s pre-ERISA years of service: years of service with the employer or employers maintaining the plan before a break in service shall not be required to be taken into account in computing the period of service ... if the number of consecutive 1-year breaks in service equals or exceeds the aggregate number of such years of service before such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this paragraph by reason of any prior break in service. See Pub.L. No. 93A06, 88 Stat. 829, 854 (1974). Thus, the PTF argues, none of McDonald’s 13 years of pre-1973 employment counted as “years of service” under ERISA’s rule of parity, and, consequently, McDonald is not entitled to relief. 6 The question, then, is whether, when we have invalidated the Plan’s break-in-service provision for accrual purposes, we must (1) enforce all of the remaining Plan provisions or (2) merely ensure that ERISA’s minimum accrued-benefit standards have been met. Athough the PTF’s arguments on this issue were not made to the district court, an appellate court “is not limited to the particular legal theories advanced by the parties but rather retains the independent power to identify and apply the proper construction of governing law.” Kamen v. Kemper Fin. Servs., 500 U.S. 90, 99, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991). In Kamen, the Supreme Court found that while the appellant failed to advert to the governing state law until her reply brief at the circuit-court level, the appellant did not waive her right to have the applicable law applied to her case. Id.; see also Arcadia v. Ohio Power Co., 498 U.S. 73, 77, 111 S.Ct. 415, 112 L.Ed.2d 374 (1990) (addressing a legal question that the parties had not argued); cf. Baker v. Dorfman, 239 F.3d 415, 420-21 (2d Cir.2000). Similarly, the parties here are entitled to a resolution in this case that accommodates all relevant portions of ERISA. Neither party disputes that a plan’s terms may define a “year of service” more generously than ERISA § 202(a)(3)(A) does. We are concerned, however, with the effects of nullifying the Plan’s break-in-service provision with regard to pre-ERISA benefit accrual and leaving the Plan’s 400-hour “year of credited service” definition to stand on its own, when under the terms of ERISA itself the PTF was not required to recognize any of McDonald’s pre-1973 service. The PTF argues that its break-in-service provision was inextricably intertwined with its definition of a “year of credited service.” Because longshoremen’s work is somewhat transient, the PTF contends that its objective under the Plan was to reward those who worked steadily over the course of many years by permitting such workers to qualify for a year of credited service by working only 400 hours. If the Plan had not included a break-in-service provision concerning benefit accrual, the PTF contends that it never would have adopted such a low threshold. Given this argument, the propriety of the enforcement of the 400-hour “year of credited service” definition in the absence of the Plan’s break-in-service provision may involve the consideration of issues— possibly factual ones—regarding the relationship of these two plan provisions. Because such issues cannot be fully explored based upon the record before us, however, we conclude that this question is best addressed in the first instance by the district court. We therefore vacate the district court’s (1) order for the PTF to retroactively amend the Plan and (2) award of additional benefits to McDonald. We remand the issue of the applicability of the 1,000-hour standard for its consideration, in light of ERISA’s nullification of the break-in-service provision with regard to accrued benefits.