Opinion ID: 790201
Heading Depth: 3
Heading Rank: 2

Heading: McKain Suit.

Text: 9 William D. McKain (McKain) retired from Wheeling National Bank on March 31, 1989. 4 At the time of his retirement, McKain had acquired over 23 years of service for American Bancorporation. Id. at 798. In April of 1992, McKain applied for the distribution of his pension benefits and received a check in the amount of $138,904.90. American Bancorporation used the 20% benefit calculation to arrive at this figure. Upon receipt of this check, McKain filed a claim for additional benefits under the Plan, maintaining that he was entitled to a 32% benefit or a 20 + benefit with interest. The Plan Administrator rejected this challenge. McKain's subsequent appeal of that decision was also denied. When McKain then expressed his intent to file suit on the matter, 5 American Bancorporation filed a declaratory judgment action to resolve the proper earnings formula to determine McKain's pension benefits. 10 In that declaratory judgment action McKain moved for summary judgment contending that the resolutions adopted in March of 1986 by the Board of Directors of Wheeling National Bank constituted an amendment to the retirement plan. McKain argued that this amendment established a benefit equal to 32% of compensation. American Bancorporation countered that the 32% benefit plan was never implemented as clarified during the earlier referenced meeting of an executive committee of the Board of Directors of Wheeling National Bank, and that McKain was estopped from relying upon the 32% benefit because the SPD stated that the benefit was 20%. The district court granted McKain's motion for summary judgment, finding that the AETNA plan was properly amended in March of 1986 to provide benefits of 32%, and again in December of 1986 to provide 20% benefits. 6 Id. at 803-04. Ultimately, the district court ruled that McKain had a vested benefit equal to 32% of his compensation. Id. at 805. 11 Thereafter, the parties settled upon a calculation method and the exact amount of McKain's benefits. In its order approving of the settlement between the parties, the district court described the Plan as calling for the benefit to be a percentage of W-2 earnings averaged over five consecutive years of plan participation, which will give the participant the highest benefit possible. Id. at 881. Brent Richmond (Richmond), the Plan Administrator, employing the calculation approved by the district court, determined McKain's benefit under the settlement by calculating the benefit under two separate formulae: one of which was based on 32 percent of compensation; and a second formula, which was based on a 20 percent of compensation. 7 Id. at 513. Applying these formulae to McKain's earnings, Richmond determined that the first calculation (32%) produced a higher benefit. Therefore, McKain received a 32% benefit. 12 To reach the actual amount of McKain's benefit, the analysis becomes more complex. 8 The Plan's basic retirement benefit is generally stated as an amount payable if the participant remains in covered employment until his normal retirement date (NRD), generally age 65. Those who terminated employment before age 65 received less than full benefits. The Plan calculated this benefit reduction through a mathematical factor known as an Accrued Benefit Adjustment (ABA factor). The ABA factor is a ratio in which the numerator represents the participant's actual years of service, and the denominator represents projected service through the NRD. The ratio is balanced where the same start date is used to calculate both the numerator and denominator, unbalanced where it is not. Under a balanced ratio, any time a person retires before their NRD the ABA factor would be less than 1.0, resulting in less than full benefits after the participant's benefit is multiplied by that factor. 13 Appellants contend that McKain's benefit was calculated incorrectly, using an ABA factor of 1 (the equivalent of having a fully accrued benefit), despite the fact that McKain's benefit was calculated using a date that was a full five years before his NRD. Specifically, in calculating McKain's benefit, American Bancorporation employed an unbalanced ratio, using his actual start date (as opposed to the date he began participation in the pension program) for the numerator, and the date he began participating in the pension program for the denominator. The end date used to calculate the numerator (McKain's actual years of service) was 11/1/1986. 9 Given that McKain began working at American Bancorporation on 5/1/59, his numerator was 28. 10 Mc-Kain's projected NRD was 11/1/91. Therefore, because McKain began participating in the program on 11/1/65, his denominator (McKain's projected service through his NRD) was 26. This unbalanced ratio produced an ABA factor of 1.0, entitling McKain to full benefits. 11 14 According to Appellants, this calculation granted McKain a larger benefit than that to which he was entitled. In fact, American Bancorporation's own expert, Michael Pisula, testified that given McKain's raw data, and the parameters of the Plan, the only way to achieve an ABA factor of 1 for McKain was to simply make it up or to use an unbalanced ABA. Id. at 578-79. Importantly, he further testified that the language of the Plan in no way supports the use of an unbalanced ABA. Id. 15