Opinion ID: 2977052
Heading Depth: 4
Heading Rank: 1

Heading: provides retirement income to employees, or

Text: (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan. 29 U.S.C. § 1002(2). In order to determine whether a plan qualifies as an ERISA employee benefits plan, this Court applies the four-part test first set forth by the Eleventh Circuit Court of Appeals in Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982). See Int'l Resources, Inc. v. New York Life Ins. Co., 950 F.2d 294, 297 (6th Cir.1991) (adopting the Dillingham test). The Dillingham court held that a “‘plan, fund, or program’ under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.” Dillingham, 688 F.2d at 1372. Both parties agree that the intended beneficiaries of this compensation plan (Hughes) and the source of funding (general funds) are clear. See Williams v. Wright, 927 F.2d 1540, 1544-45 (11th Cir. 1991) (holding that plan covering single employee funded by employer’s general assets was an employee benefits plan). 11 Nos. 07-3102, 07-3211 However, Defendants contend and the district court agreed that the intended benefits and procedures for receiving benefits are not reasonably ascertainable.
The district court found that the intended benefits of the deferred compensation aspect of the plan were not reasonably ascertainable based on its evaluation of the actions of the UTCU board of directors in 1987, 1989, and 1999 and its evaluation of UTCU’s financial statements for the relevant time period. Because the 1987 motion only stated the board’s intention to pay Hughes a salary at an undefined “current pay level” and made no mention of the salary being deferred, the district court found that the 1987 motion was insufficient to establish a deferred compensation plan. The court found that the 1989 motion did not cure these defects because it simply memorialized the board’s intention to “set aside earnings to pay salary and benefits” without specifying the amount to be set aside or the nature of benefits to be provided to Hughes. The district court also noted that the 1999 motion, although acknowledging that the board had authorized Hughes to receive a salary beginning in 1987, did not explicitly state that salary had been deferred. In holding that the intended benefits of the deferred compensation plan were not reasonably ascertainable, the district court also relied upon the accrued benefits liability that Plaintiff claims was recorded to account for Hughes’ deferred compensation. The court noted that the accrued benefits liability did not correspond to a deferred compensation plan because the liability did not increase between 1996 and January 2002, a period during which Plaintiff claims a salary of over $80,000 was deferred annually. 12 Nos. 07-3102, 07-3211 Plaintiff faults the district court for discounting deposition testimony and for examining discrete pieces of evidence instead of viewing the evidence as a whole. Instead, Plaintiff argues, the district court should have applied the factors considered in Henglein v. Informal Plan for Plant Shutdown Benefits for Salaried Employees, 974 F.2d 391 (3d Cir. 1992). In determining whether an informal employee benefit plan existed, the Henglein court considered “internal or distributed documents, oral representations, existence of a fund or account to pay benefits, actual payment of benefits, a deliberate failure to correct known perceptions of a plan’s existence, the reasonable understanding of employees, and the intentions of the putative sponsor.” Henglein, 974 F.2d at 395. Plaintiff correctly argues that the district court focused too narrowly on individual pieces of evidence and failed to consider deposition testimony. Although it is unnecessary to adopt the Heinglein factors as part of the Dillingham test, in considering “the surrounding circumstances” regarding Hughes’ compensation, the individual board motions must be viewed in relationship to each other and in light of the deposition testimony of Carl Hughes and Robert Sorin. Carl Hughes, who was a member of UTCU’s board in 1987, testified that the 1987 motion established a salary for Hughes that was equal to the amount Hughes had been receiving as Vice President of CWA. Carl Hughes also testified that Hughes deferred this salary. Sorin testified that a deferred compensation plan was created for Hughes in the mid-80s. Viewed in the light most favorable to Plaintiff, the 1999 board resolution is a clarification of the 1987 and 1989 motions establishing compensation for Hughes. The board resolution explicitly recognizes the 1987 motion’s authorization of Hughes’ salary and that the authorized salary had not been paid. The 1999 resolution also states that an accrued benefits account had been set aside for Hughes. Thus, the 1999 resolution, viewed in the 13 Nos. 07-3102, 07-3211 light most favorable to Hughes, establishes that Hughes’ salary had been deferred and was reflected in an accrued benefits liability in UTCU’s financial records. Although viewing the evidence as a whole leads to the conclusion that UTCU had the intention to allow Hughes to defer compensation and to reflect this compensation in an accrued benefits liability, this evidence does not establish the reasonably ascertainable benefits necessary for the existence of a plan. As the Plaintiff would have this Court read the 1999 resolution, the resolution states that UTCU owes Hughes the salary of a CWA Vice-President but also provides that Hughes’ accrued benefits would be contained in a specific account, the accrued benefits account. Yet, at no time did the amount of the accrued benefits liability correspond to the accrued CWA salary. Although Plaintiff claims that Hughes was owed a salary for each year between 1987 and 2002, DFI’s 1996 report remarks that UTCU had no intention of increasing the accrued benefits liability in the near future. This intention was borne out by the fact that the amount of the accrued benefits liability did not change between 1996 and January 2002. The 1999 resolution states that Hughes is entitled to compensation but provides two contradictory indications of the amount to which Hughes is entitled, the salary of a CWA Vice President6 and the amount of the accrued benefits liability. Thus, even upon the Plaintiff’s reading of the facts, a reasonable person would not 6 In itself, this indicator of the amount owed to Hughes is ambiguous. Plaintiff asserts that Hughes was entitled to the amount that CWA vice-president would have been paid for each of the years between 1987-1999. The only evidence presented regarding Hughes’ pay level is the 1987 resolution authorizing him to be compensated at his “current pay level” and Carl Hughes’ testimony that this language referred to Hughes’ salary as a CWA Vice President. However, Plaintiff has pointed to no evidence to indicate whether Hughes’ salary was to rise at the same rate as that of a CWA Vice President or whether he was to be awarded a fixed salary equal to the 1987 CWA salary level. 14 Nos. 07-3102, 07-3211 be able to ascertain the amount of deferred compensation owed Hughes. See Williams v. WCI Steel Co., Inc., 170 F.3d 598, 603 (6th Cir. 1999) (“Assuming that plaintiffs were to prevail on their ERISA claim, the district court would have to fashion essentially all of the details of the purported plan and determine exactly what benefits would go to which employees or retirees, since no one can ascertain what WCI intended to provide for its workers.”).
The parties dispute whether there exists a reasonably ascertainable procedure for obtaining benefits. Defendants claim that this prong of the Dillingham test has not been met because UTCU had no “ongoing administrative scheme.” Plaintiff counters that the ongoing scheme requirement applies only to severance cases and that Hughes’ assertion of a claim for benefits is sufficient proof that a reasonably ascertainable procedure existed to survive summary judgment. In Fort Halifax Packing Company, Inc. v. Coyne, 482 U.S. 1 (1987), the Supreme Court held that a Maine statute that required certain employers to make a one-time severance payment to employees in the event of a plant closing was not pre-empted by ERISA. The Fort Halifax majority found an ongoing administrative scheme necessary for a “plan” within the definition of ERISA to exist: The Maine statute neither establishes, nor requires an employer to maintain, an employee benefit plan. The requirement of a one-time, lump-sum payment triggered by a single event requires no administrative scheme whatsoever to meet the employer’s obligation. . . . To do little more than write a check hardly constitutes the operation of a benefit plan. 15 Nos. 07-3102, 07-3211 Fort Halifax, 482 U.S. at 12. This language can be read very broadly to exclude all arrangements that call for lump-sum payments from the ambit of ERISA. However, the Fort Halifax court addressed this concern by explaining that death benefits would still fit within this definition of a plan. Id. at 15 n.9. The Court noted that even though death benefits are generally paid in a lump sum, since it is predictable that former employees will die at various points in the future, the employer has to provide a mechanism for making “payments to survivors on an ongoing basis. The ongoing, predictable nature of this obligation therefore creates the need for an administrative scheme to process claims and pay out benefits, whether those benefits are received by beneficiaries in a lump sum or on a periodic basis.” Id. Thus, a benefits arrangement that provides for a lump-sum payment to an employee may qualify as an ERISA benefits plan if the employer is potentially required to pay out benefits on a regular basis. This Court has recognized that the ongoing administrative scheme requirement is a lesser hurdle than the reasonably ascertainable claims procedure requirement. WCI, 170 F.3d at 604 (“In our view, Dillingham requires more than just the existence of an administrative scheme. If a reasonable person cannot ascertain the claims procedures in a purported plan, then the plan is not an ‘employee benefit plan’ under ERISA.”). Even when benefits are due in a lump-sum payment in a non-severance benefits scheme, there remains the possibility that benefits will need to be calculated and paid through the claims procedure at any time. See Fort Halifax, 482 U.S. at 15 n.9. See also Kolkowski, 448 F.3d at 849 (noting that an ongoing administrative scheme existed in part because the severance package “covered every involuntary termination over a two-year period”). Thus, the 16 Nos. 07-3102, 07-3211 claims procedure, a requirement for all ERISA benefits plans, in itself constitutes an ongoing administrative scheme. In Hughes’ case, the district court agreed with Defendants that no reasonably ascertainable claims procedure existed. Hughes argues that a genuine dispute of material fact remains regarding the existence of a claims procedure because Hughes made multiple attempts to claim benefits. Hughes asserts that since he presented a claim for benefits, a jury could infer that a claims procedure existed. A specific claims procedure need not be set out in writing in order for the third Dillingham factor to be satisfied. See Dillingham, 688 F.2d at 1372 (“ERISA does not, however, require a formal, written plan.”). As evidence of the existence of a procedure for receiving benefits, courts have been willing to accept past practices of plaintiffs in pursuing claims. In particular, when prior requests for benefits have been awarded as the result of a plaintiff taking action to present his claim to a plan administrator, courts have found that a reasonably ascertainable claims procedure exists. See, e.g., Deibler v. UFCW, 973 F.2d 206, 210 (3d Cir. 1992); Whitfield v. Torch Oper. Co., 935 F. Supp. 822, 828 (E.D. La. 1996). However, there is little guidance in the case law regarding the inference to be drawn when no claims have been processed or have resulted in the award of benefits. In discussing whether a claims procedure exists, the parties focus on the question of whether there is a specific person an applicant for benefits should contact to make a claim. This emphasis seems to be misguided because in situations where benefits are awarded automatically upon the occurrence of a stated contingency, this Court has not required the identity of the person to whom the claim is presented to be clear. Kolkowski, 448 F.3d at 850. As the Dillingham court specified, 17 Nos. 07-3102, 07-3211 this Court must look to all the surrounding circumstances to determine whether the claims procedure is reasonably ascertainable. In the instant case, there is little doubt that no claims procedure existed for deferred compensation benefits since there was no clear indication of the amount of compensation deferred, no specification of when the deferral was to end, and no indication of how the benefits would be received. On the other hand, the death benefits were more clearly set forth, specifying the amount of the benefit and the person to whom the benefit should be disbursed (Natalie Hughes). Even though there is more precision regarding this benefit, Plaintiff has given no evidence of how the death benefit is to be claimed. In fact, Hughes attempted to claim the benefit as a disability benefit before his death, exhibiting some uncertainty regarding the nature and claims procedure for this benefit. Even if this Court takes Hughes’ actions in attempting to claim benefits into account, the evidence shows that no reasonably ascertainable claims procedure existed. Plaintiff claims that even if no reasonably ascertainable claims procedure exists, a plan may by governed by ERISA. For this contention, Plaintiff cites 29 C.F.R. § 2560.503-1(l): Failure to establish and follow reasonable claims procedures. In the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. Plaintiff argues that this Department of Labor regulation implies that a benefits scheme may be governed by ERISA despite its failure to establish a claims procedure. However, we believe that it would be more reasonable to interpret 29 C.F.R. § 2560.503-1(l) as explaining that exhaustion of remedies will not be required when claim procedures are deficient instead of interpreting the 18 Nos. 07-3102, 07-3211 regulation as doing away with the reasonably ascertainable claims procedure requirement. This interpretation is consistent with the regulation as a whole since 29 C.F.R. § 2560.503-1 explains in detail the claims procedures employers are required to put in place to comply with ERISA. See e.g. 29 C.F.R. § 2560.503-1(b)(3) (prohibiting employers for charging a fee for claims procedures and noting that such a procedure would not be deemed reasonable). Viewed in this light, 29 C.F.R. § 2560.503-1(l) would free claimants from having to comply with unduly onerous, but still reasonably ascertainable claim procedures. Thus, the lack of a reasonably ascertainable claims procedure is fatal to Hughes’ ERISA claims.