Opinion ID: 202237
Heading Depth: 2
Heading Rank: 1

Heading: Violation of the Terms of the ERISA Welfare Benefit Plan

Text: 29 ERISA draws a distinction between welfare benefit plans and pension benefit plans. Unlike pension benefit plans, which are subject to strict vesting requirements, welfare benefits are not automatically vested under ERISA. ERISA does not create any substantive entitlement to . . . welfare benefits, and [e]mployers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995). As the Supreme Court has noted: 30 The flexibility an employer enjoys to amend or eliminate its welfare plan is not an accident; Congress recognized that requir[ing] the vesting of these ancillary benefits would seriously complicate the administration and increase the cost of plans. Giving employers this flexibility also encourages them to offer more generous benefits at the outset, since they are free to reduce benefits should economic conditions sour. If employers were locked into the plans they initially offered, they would err initially on the side of omission. 31 Inter-Modal Rail Employees Ass'n v. Atchison, Topeka & Santa Fe Ry., 520 U.S. 510, 515, 117 S.Ct. 1513, 137 L.Ed.2d 763 (1997) (alteration in original) (internal citation omitted) (quoting S.Rep. No. 93-383, at 51 (1973); Heath v. Varity Corp., 71 F.3d 256, 258 (7th Cir.1995)). 32 An employer may contractually cede[] its freedom to amend and terminate the plan and may provide retirees with vested retiree welfare benefits that cannot be changed unilaterally. Id. An employer may cede this freedom in bilaterally negotiated contracts, like collectively bargained labor agreements, see Senior, at ___, 2005 WL 1322800, or in the ERISA plan itself, see Am. Fed'n of Grain Millers v. Int'l Multifoods Corp., 116 F.3d 976, 980 (2d Cir.1997). 33 The interpretation of the provisions of an ERISA benefit plan proceeds under federal substantive law, and is guided by common sense principles of contract interpretation, Filiatrault v. Comverse Tech., Inc., 275 F.3d 131, 135 (1st Cir. 2001), although principles from the law of trusts are employed in certain cases, Allen v. Adage, Inc., 967 F.2d 695, 698 (1st Cir. 1992). See also Rodriguez-Abreu v. Chase Manhattan Bank, N.A., 986 F.2d 580, 585 (1st Cir.1993); Burnham v. Guardian Life Ins. Co., 873 F.2d 486, 489-90 (1st Cir. 1989). 34 The rules of interpretation of ERISA welfare benefit plans when dealing with unambiguous terms are uncontroversial. See Grain Millers, 116 F.3d at 980 (citing cases). Under ERISA, unambiguous language in a plan is enforced according to its terms. See Filiatrault, 275 F.3d at 135; Burnham, 873 F.2d at 490-91. The question of whether an ERISA plan term is ambiguous is generally a question of law for the judge. See Allen, 967 F.2d at 698. 35 It is also the rule that ambiguity in a plan term does not necessarily foreclose summary judgment, as when the evidence presented about the parties' intended meaning [is] so one-sided that no reasonable person could decide the contrary. Id. at 698 (quoting Boston Five Cents Sav. Bank v. Sec'y of Dep't of HUD, 768 F.2d 5, 8 (1st Cir.1985)). 36 However, there is substantial disagreement among the courts, and between the parties here, about whether ambiguous plan language may support a finding that a company has promised to vest ERISA welfare plan benefits. See Grain Millers, 116 F.3d at 980. Under ordinary rules of ERISA plan interpretation, if a party demonstrates ambiguity in a plan on a particular question, reference may be made to extrinsic evidence to determine the parties' intended meaning. See Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 178 (1st Cir.1995). If such extrinsic evidence is not one-sided, the issue of the parties' intent might be for the fact-finder. Allen, 967 F.2d at 698. 37 The company argues for a departure from these ordinary rules. It asserts that the intent to vest lifetime welfare benefits that cannot be changed by the company must be found in clear and express language in the ERISA plan documents. In other words, the company argues that if the plan language is ambiguous on the question, there is a presumption that welfare benefits are not vested. The plaintiffs argue that there is no such presumption against the vesting of ERISA welfare benefits. 2 38 The circuits have adopted different rules of construction as to vesting of welfare benefits. Such rules may be helpful in particular factual situations but are certainly not a starting point for analysis. We reject the analysis apparently used by the district court, see Senior, 372 F.Supp.2d at 165, 166-67, that there can never be vesting of retirement welfare benefits unless there is a clear and express statement of such vesting. 39 Congress's decision to give employers, in the absence of an affirmative promise to vest welfare benefits, the flexibility to amend and terminate ERISA welfare benefit plans does not mean that ERISA requires a strict rule of construction against vesting of retirement welfare benefits. The company has pointed to nothing else in ERISA or its legislative history to suggest Congress intended these questions to start with such a presumption. Furthermore, the Supreme Court has analogized ERISA benefit plans to trust agreements and observed that trust agreements are to be construed `without deferring to either party's interpretation.' Allen, 967 F.2d at 701 (quoting Bruch, 489 U.S. at 112, 109 S.Ct. 948). 40 Our case does not involve a special situation. The dental plan documents are express that the company reserves the right to change even promises of lifetime benefits. In that sense, the benefits are not vested. And the 1997 PRP program brochure and the individualized benefits summaries expressly refer to the dental plan documents, which contain those reservations. The 1999 VSP brochure not only refers to those same plan documents, but contains its own express reservation. 41 The plaintiffs argue that the ERPs, nonetheless, unambiguously vest lifetime retirement dental benefits that cannot be changed. Plaintiffs' argument is that to give content to the lifetime benefits language in the ERPs, it is necessary to construe the ERPs as creating a new ERISA plan, independent of the continuing ERISA dental plan. That is why, they say, the ERPs do not themselves refer to any specific dental plan. They ask us to focus on the language in the ERP program brochures and the individualized benefit summaries. 3 They acknowledge that those documents reference the SPDs, which contain an express reservation of the company's right to amend the plan. But they argue that the vague reference . . . to the plan documents would not inform the reasonable employee that he or she should review the entirety of several lengthy policies to determine his or her rights under the dental benefit plans. 42 The argument fails on several grounds. There is no basis for the plaintiffs' assertion that the ERPs themselves constitute their own separate ERISA plan. The plaintiffs admit that the brochure and the plan documents do not meet the requirements of an ERISA plan or SPD. They counter by asserting that the creation of an ERISA plan does not depend on the existence of formal documentation. But the ERPs themselves refer to existing ERISA plans as providing the more specific terms. The references to the plan documents in the ERP brochures and the individualized plan summaries are prominent. For example, the 1997 PRP brochure states in bold letters that the plan documents are The Last Word. 43 Furthermore, under ERISA, we cannot ignore the SPDs which do contain the reservation, because SPDs play a key role in communicat[ing] to beneficiaries the essential information about the plan. Curtiss-Wright, 514 U.S. at 83, 115 S.Ct. 1223. ERISA requires SPDs to be written in a manner calculated to be understood by the average plan participant, and . . . be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan. 29 U.S.C. § 1022(a). Given the important informational role SPDs play under the ERISA scheme, it would be improper to ignore the terms provided by the SPDs. 44 The plaintiffs further argue that, even considering the reservation of rights in the SPDs, a reasonable fact finder could conclude that the dental benefits are vested. They suggest that the best way to reconcile the reservation of rights in the SPDs and the language regarding lifetime benefits in the individualized summaries, is to read the reservation as only permitting the company to terminate the services of a particular dental plan provider, while continuing to be obligated to provide the plaintiffs with dental plan coverage. 4 45 No reasonable reader of the documents could reach that conclusion. The SPDs reserve to the company the right . . . to amend, modify, or terminate the Plan at any time. Given the rule under ERISA that an employer is generally free at any time, absent an undertaking to the contrary, to cancel a welfare benefit plan, see Curtiss-Wright, 514 U.S. at 78, 115 S.Ct. 1223, this language can only be reasonably read to allow the company to terminate dental plan coverage. See Gable, 35 F.3d at 856 (rejecting a similar argument). The only reasonable reading of the ERPs is that the company would provide lifetime benefits to its retirees subject to its reservation of the right to modify, alter, or terminate dental plan coverage should future circumstances require such changes. 46 The past practice of the company in the provision of retirement dental benefits confirms our conclusion. See Allen, 967 F.2d at 698, 702 (relying, in part, on past practice in interpreting an ERISA severance pay plan). The company had provided non-union retirees with dental benefits well before the ERPs were created. The plaintiffs do not claim that the benefits provided during this time were vested. Rather, they argue the ERPs changed the prior practice, and are new ERISA plans that guarantee vested lifetime dental benefits. However, the reservation of the company's right to amend, modify, and terminate the dental plan in the dental plan SPDs does not reflect such a change after the creation of the ERPs. The individualized plan summaries and program brochures that plaintiffs claim created the new ERISA plan clearly state that the plan documents are governing. The oral statements made by the company representatives which omitted the reservation are similarly insufficient to overcome the unambiguous reservation of rights in the plan documents. See Bellino v. Schlumberger Techs., Inc., 944 F.2d 26, 32-33 (1st Cir.1991); see also 29 U.S.C. § 1102(a)(1) (Every employee benefit plan shall be established and maintained pursuant to a written instrument.  (emphasis added)). A number of courts have held that, since ERISA requires that plans be established and maintained pursuant to a written instrument, oral statements cannot amend the terms of an ERISA plan. See, e.g., Perreca v. Gluck, 295 F.3d 215, 225 (2d Cir.2002); In re Unisys Corp. Retiree Med. Benefit ERISA Litigation, 58 F.3d 896, 902 (3d Cir.1995).