Opinion ID: 2997119
Heading Depth: 4
Heading Rank: 2

Heading: Reservations of rights clauses

Text: The plaintiffs next argue that, as a separate and distinct program, the benefits in the VSRP were not subject to the reservations of rights clauses in the various general retirement plan documents, and that the documents specifically mentioning the VSRP did not contain reservation of rights clauses. However, regardless of how the plaintiffs believe the VSRP was marketed to the early retirees, their initial premise that the VSRP was separate and distinct from the general retirement plan is incorrect. This is evident from a review of the Brief Description Newsletter, which repeatedly refers to the general retirement plan in discussing the VSRP’s enhanced benefits, making clear that the general retirement plan is the baseline program to which the VSRP’s enhancements would be made.7 The plaintiffs 7 We note four references in the three page document. (Brief Description Newsletter, R. 109-2, ex. 12.) On page 1, it states, “the Retirement Plan’s benefit formula for accruing your retirement allowance usually is a percentage of your average final pay over the last five years, multiplied by your years of service, but reduced if you want to retire before age 62. Under the [VSRP], the following enhancements will apply.” On page 2, it states that “[u]nder the Retirement Plan, your allowance is normally reduced . . . . But if you elect to retire through the [VSRP], these reduction factors will not apply.” Later on the same page, it states, “[i]n addition to these changes, we have already announced an expansion of the Retirement Plan’s definition of pay.” And on page 3: “In addition to the enhanced retirement benefits that are described above . . . .” Moreover, the VSRP would fail to qualify as an ERISA retirement program if it were comprised solely of the documents that specifically mentioned the VSRP and did not take (continued...) No. 03-2090 21 themselves admit that the VSRP was a modification of the regular retirement plan. (Appellants’ Br. at 32.) We also note that if the plaintiffs were correct that the VSRP was comprised only of those documents that specifically mentioned the VSRP, it would lack such fundamental prerequisites as administrative procedures and descriptions of the very benefits being offered. Moreover, the Covering Memo specifically incorporated the 1992 Retirement Guide and its reservation of rights clause. The Covering Memo stated that “[r]etirement means a major change in lifestyle for most people, and you’ll need to weigh the pros and cons carefully. The enclosed materials are intended to help you arrive at the right decision for you.” (Covering Memo at 1.) One of the enclosed documents was the 1992 Retirement Guide, which eligible employees were told “provides information about the benefits available to you during retirement and highlights the decisions you need to make regarding those benefits.” Id. Continental thus unambiguously stated in writing that the 1992 Retirement Guide, which included a reservation of rights clause, was part of the VSRP program and contained information about retirement benefits under the VSRP, including Continental’s reserved right to alter or terminate those benefits. The reservation of rights clause appears in a box near the bottom of the last page of the 15-page document: “The coverages described in this Guide may be amended, revoked or suspended at the Company’s discretion at any time, even after your retirement. No management representative has the authority to change, alter or 7 (...continued) as its baseline the general retirement plan’s terms, procedures and benefit descriptions. See 29 U.S.C. §§ 1102(a)(1), 1024(a)(1) (requiring employee benefit plans to be governed by written plan documents filed with the Secretary of Labor). 22 No. 03-2090 amend these coverages.”8 (1992 Retirement Guide at 15.) Although the plaintiffs argue that this reservation of rights clause on its face applies to “the coverages described in this Guide” and that the VSRP was not mentioned in the 1992 Retirement Guide, we noted earlier that the “lifetime” nature of the HCA benefit was set out in the 1992 Retirement Guide and that the HCA benefit’s “lifetime” nature was not one of the VSRP’s enhancements. Although the 1992 Retirement Guide (with its applicable reservation of rights clause) was part of the VSRP, along with, as will be shown, the 1990 Plan and the annual SPDs available at the time the VSRP was offered, it is worth addressing CNA’s argument that the lack of any reservations of rights clauses in the documents that mention the VSRP amounts to silence (with its presumption against vesting). If the benefits were not “lifetime” benefits, CNA would be correct. But, as we noted in Rossetto v. Pabst Brewing Co., “[i]f there is language in the agreement to suggest a grant of lifetime benefits, and the suggestion is not negated by the agreement read as a whole, the plaintiff is entitled to a trial.” Rossetto, 217 F.3d at 547; see also Abbruscato v. Empire Blue Cross & Blue Shield, 274 F.3d 90, 98 (2d Cir. 2001) (vacating district court’s grant of summary judgement in plan’s favor because “lifetime” life insurance benefits in early retirement plans “are ambiguous 8 Even if the general retirement plan documents were inapplicable to the VSRP, the omission of a reservation of rights clause from the documents mentioning the VSRP would not necessarily operate to waive CNA’s right to terminate or modify the HCA, which is an ERISA welfare benefit. See, e.g., Gable v. Sweetheart Cup Co., 35 F.3d 851, 855 (4th Cir. 1994) (citing Wise v. El Paso Natural Gas Co., 986 F.2d 929, 938 (5th Cir. 1993) (holding that “silence” as to an employer’s right to modify the plan does not “impliedly cede the right to later amend or discontinue coverage”)). No. 03-2090 23 and susceptible to interpretation as a promise of vested benefits” where neither of the early retirement plans “contain unambiguous reservation of rights clauses”); Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76, 85 (2d Cir. 2001) (where no reservation of rights clause was present, “[s]uch ‘lifetime’ language, we believe, is sufficient to create a triable issue of fact as to whether Empire promised to vest retiree life insurance benefits at the stated level.”). Thus, if the plaintiffs had been correct that the reservation of rights clauses in the general retirement plan documents did not apply to the VSRP, the grant of “lifetime” benefits would have created an ambiguity allowing them a trial and allowing us to examine extrinsic evidence of the parties’ intent. However, since we determined that this was not the case, there is no ambiguity requiring an examination of extrinsic evidence. See Rockford Powertrain, 350 F.3d at 704 (“The health insurance section of the plan description unambiguously does not provide the plaintiffs with vested lifetime health insurance benefits. Therefore, we need not resort to extrinsic evidence to interpret the contractual obligation between the parties.”). Finally, the plaintiffs argue that language in the 1990 Plan authorized the vesting of their retirement benefits in such a way that the reservation of rights clause in the 1990 Plan, which they concede was “the controlling document in existence at the time that the putative class elected to accept the VSRP plan” (Appellants’ Br. at 23), allowed the benefits to be changed or terminated only prior to their retirement.9 For this proposition, the plaintiffs seize upon 9 The 1990 Plan incorporates by reference the Plan’s annual SPDs and “any changes announced in writing to Employees or to Retired Employees before the beginning of the calendar year, for the year in which the services are rendered.” (1990 Plan § 4.2, at 15.) The 1990 Plan is the umbrella ERISA plan under which the (continued...) 24 No. 03-2090 the following language: “However, no such amendment or termination shall diminish or eliminate any claim for a benefit under the Plan to which a participant shall have become entitled prior to such amendment or termination, as applicable.” (1990 Plan § 8.1, at 30.) But this argument presumes the very things the plaintiffs are trying to prove: that upon their retirement, the early retirees became entitled to their retirement benefits, which could not be diminished or eliminated by later amendments. As we have already explained, welfare benefits, unlike pension benefits, do not vest upon retirement. And the reservation of rights clauses contained in the 1992 Retirement Guide and other general retirement plan documents, which were applicable to the VSRP, allow amendment or modification of retirement benefits even after retirement. Thus, there was no entitlement to the HCA benefit on a going-forward basis. See Hackett v. Xerox Corp., 315 F.3d 771, 774 (7th Cir. 2003) (analyzing language in a benefits plan similar to the language here and holding that “[r]ights to benefits do not accrue prospectively”). The language at issue here prevented CNA from amending its retirement plan to require retirees to pay back HCA allowances already paid out, or retroactively terminating coverage for a claim to medical benefits to avoid paying such a claim. The reservations of rights clauses, on the other hand, allow CNA to prospectively alter or amend its welfare benefits offered to retirees, even after retirement, and that is what it did. 9 (...continued) general retirement plan as well as the VSRP were both created. As the controlling document at the time the plaintiffs elected to accept the VSRP plan, we find that its reservation of rights clause also applies to the VSRP. In addition, since the SPDs are incorporated by reference into the 1990 Plan, any reservation of rights clauses in the SPDs available to the early retirees at the time the VSRP was offered are also applicable to the VSRP. No. 03-2090 25