Opinion ID: 576675
Heading Depth: 3
Heading Rank: 3

Heading: Substantial Unanticipated Costs

Text: 29 An additional factor to consider is whether either party's interpretation of the Plan would give rise to 'substantial unanticipated costs to the Plan.'  Batchelor, 877 F.2d at 445 (citing Lowry v. Bankers Life and Casualty Retirement Plan, 865 F.2d 692, reh'g denied 871 F.2d 522, 524 (5th Cir.1989)). An interpretation that would result in substantial unanticipated costs may be less likely to be legally correct. Id. 30 Appellants argue that if Kennedy is allowed to claim past service credits for his time as an apprentice, as many as 440 current participants might claim similar benefits. Appellants claim that this would cripple the Plan. The Fund's actuary testified that apprentice eligibility could cost the Plan between $849,500 and $3,186,900, amounting to a 2.3% increase in actuarial liability for one additional year of past service credit (granted to all 440 participants) to an 8.7% increase for four years of additional past service credit. The result of such an increase, claims the actuary, would be possibly causing a postponement of benefits for a few years. (Deposition of L. Black, p. 20). 31 Kennedy argues that the actuary's estimates represent an unrealistic worst case scenario. He claims that the actuary had no way of determining whether all 440 participants would be entitled to additional past service credit. Even if a credit would be applicable, not all participants served the same time as an apprentice. Thus, a prediction predicated upon an unknown term (the years of apprenticeship) and an unknown quantity in the set (the number of people serving an apprenticeship before Union initiation), results in a calculation steeped in speculation. Kennedy, on the other hand, presents a graph showing that some of the 440 employees were apprentices for only a matter of months. Finally, Kennedy points out that benefit increases have been postponed in the past--suggesting that even the worst case scenario would not undermine the Plan. 32 Although neither party provides us with definitive guidance on the likely financial impact of implementing Kennedy's interpretation of the Plan, 9 it is clear that the granting of apprenticeship credit could have a substantial impact on the Plan. 10 In this regard, we must contrast the possible costs with the Plan's total assets. Batchelor, 877 F.2d at 445. At the end of 1989, the Fund was worth roughly $36.5 million dollars. Assuming that adoption of Kennedy's interpretation will cost the Plan the mean of the actuary's predictions, or roughly $2 million dollars, 11 such an impact on the fund would be substantial. 12 33 Yet, we are unconvinced that Kennedy's interpretation yields unanticipated cost. The district court held that the 1976 amendment to the Plan was specifically intended to extend prior service credit to apprentices. Kennedy, 755 F.Supp. at 707. Although we have not been provided conclusive evidence as to why the qualifications for past service credit were purposely liberalized in 1976, our reading of Section 4.01(b) compels us to agree with the district court. By requiring membership in the Union for eligibility, the original past service credit provision echoes the Trustees current interpretation of the Plan. As previously discussed, this language was amended in 1976 to require only that all employees be dependant for livelihood on his trade as an Electrician within the jurisdiction of the Union (emphasis added). The membership requirement was obviously omitted. Appellants have not persuaded us that Kennedy's interpretation of the amended language in any way conflicts with the 1976 amendment. 34 We therefore confirm the district court's holding that the plain meaning of the Plan, as amended in 1976, would permit past service credit for apprenticeship service for members of the collective bargaining unit between October 1950 and October 1970. In denying Kennedy the credit, the Trustees have read the Plan unfairly. Moreover, because the language of the Plan was obviously liberalized to grant credit for years of apprentice service, we agree that the Fund will not face substantial unanticipated costs if Kennedy is to prevail.