Opinion ID: 726590
Heading Depth: 2
Heading Rank: 1

Heading: Did the health benefit premium payments vest once plaintiffs qualified for long-term disability?

Text: 15 In regulating plans, ERISA distinguishes between two types of employment benefits, welfare benefits and pension benefits. 29 U.S.C. § 1002(1),(2). The LTD Plan is an employee welfare benefit plan because disability insurance plans are considered welfare, not pension, benefits. See Williams v. Plumbers & Steamfitters Local 60, 48 F.3d 923, 925 (5th Cir.1995). Vested benefits are those which are nonforfeitable. Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 376, 100 S.Ct. 1723, 1733-34, 64 L.Ed.2d 354 (1980). Benefits provided under a welfare benefit plan need never vest. Curtiss-Wright Corp. v. Schoonejongen, --- U.S. ----, ----, 115 S.Ct. 1223, 1228, 131 L.Ed.2d 94 (1995); Pitman v. Blue Cross and Blue Shield, 24 F.3d 118, 121 (10th Cir.1994). Congress intentionally exempted welfare benefit plans from ERISA vesting requirements, determining that [t]o require the vesting of those ancillary benefits would seriously complicate the administration and increase the cost of plans whose primary function is to provide retirement income. Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1160 (3d Cir.1990) (citing H.R.Rep. No. 807, 93rd Cong., 2d Sess. 60). 16 An employer or plan sponsor may unilaterally modify or terminate welfare benefits, unless it contractually agrees to grant vested benefits. Howe v. Varity Corp., 896 F.2d 1107, 1109 (8th Cir.1990); Alday v. Container Corp. of America, 906 F.2d 660, 665 (11th Cir.1990), cert. denied, 498 U.S. 1026, 111 S.Ct. 675, 112 L.Ed.2d 668 (1991). A plan sponsor who changes the vested benefits granted in a welfare plan may be liable to a beneficiary under the plan. 29 U.S.C. § 1132(a)(1),(3); see also, e.g., Wheeler v. Dynamic Eng'g Inc., 62 F.3d 634, 639-40 (4th Cir.1995). Plaintiffs argue that the LTD Plan SPD constitutes an enforceable promise to pay the disabled employees' health care premiums as long as they remain in a disabled condition. The employees, as beneficiaries of the plan, are entitled to enforce and clarify their present and future rights under the plan. 29 U.S.C. § 1132(a)(1)(B). 17 Because an employee benefit plan must be established by a written instrument, 29 U.S.C. § 1102(a)(1), a promise to provide vested benefits must be incorporated, in some fashion, into the formal written ERISA plan. Jensen v. SIPCO, 38 F.3d 945, 949 (8th Cir.1994) (quotation omitted), cert. denied, 514 U.S. 1050, 115 S.Ct. 1428, 131 L.Ed.2d 310 (1995). SPDs are considered part of the ERISA plan documents. 29 U.S.C. § 1022(a)(1); Alday, 906 F.2d at 665. In interpreting the terms of an ERISA plan we examine the plan documents as a whole and, if unambiguous, we construe them as a matter of law. Kemmerer v. ICI Americas Inc., 70 F.3d 281, 288-89 (3d Cir.1995), cert. denied, 517 U.S. 1209, 116 S.Ct. 1826, 134 L.Ed.2d 931 (1996). In this case we apply the de novo standard of review to interpret the terms of a plan, Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989), giving the language its common and ordinary meaning as a reasonable person in the position of the [plan] participant, not the actual participant, would have understood the words to mean, Blair v. Metropolitan Life Ins. Co., 974 F.2d 1219, 1221 (10th Cir.1992) (quoting McGee v. Equicor-Equitable HCA Corp., 953 F.2d 1192, 1202 (10th Cir.1992)) (emphasis omitted). Defendants assert, and the district court below found, that because the LTD Plan and the SPD explicitly reserve the right to change or discontinue the plan, any promise to continue benefits was subject to the rights reserved. Plaintiffs contend that the SPD's explicit promise that the company would pay the premiums on company-sponsored benefits as long as the employee is disabled is inconsistent with the reservation of rights, creating an ambiguity for which summary judgment is inappropriate. 18 As a threshold matter, we address plaintiffs' argument that all four of the benefit plan documents really constitute one ERISA plan, and that we must look to promises made in the Control Data Health Care Plan to interpret the rights of participants in the LTD Plan. Plaintiffs provide no circuit authority for the proposition that these four separate plans should be treated as one, arguing only that we should adopt the interpretive practice that when several contracts refer to the same matter they should be construed together. See FDIC v. Hennessee, 966 F.2d 534, 537 (10th Cir.1992) (applying Oklahoma law). We conclude that Control Data intended to create separate plans. Each has a different ERISA identification number; the plans do not all share the same administrator or trust; and, most importantly, it is clear from the language of the plan documents that the company intended to establish four different plans. We decline plaintiffs' invitation to read the documents of the four separate plans as one for the purposes of determining plaintiffs' benefits in the LTD Plan. Nevertheless, where appropriate, we do refer to each of the relevant plans to determine Control Data's intent. 19 Because welfare benefits do not statutorily vest under the terms of ERISA, plaintiffs carry the burden of showing an agreement or other demonstration of employer intent to have company-paid premiums vest under the plan. Houghton v. SIPCO, Inc., 38 F.3d 953, 957 (8th Cir.1994). The conflict between a plan sponsor's reservation of the right to change or discontinue a plan, appearing in the same document as a promise of interminable benefits to qualifying participants, presents difficult issues of interpretation. This case presents the question of whether health benefits vest in the face of a reserved modification clause once the employee qualifies for disability status. A number of courts have addressed similar cases, where a reservation clause appeared within the same document as a promise of lifetime welfare benefits continuing after employees reach retirement. See, e.g., In re Unisys Corp. Retiree Medical Benefit ERISA Litig., 58 F.3d 896 (3d Cir.1995); Jensen, 38 F.3d 945; Gable v. Sweetheart Cup Co., 35 F.3d 851 (4th Cir.1994), cert. denied, 514 U.S. 1057, 115 S.Ct. 1442, 131 L.Ed.2d 321 (1995); Howe, 896 F.2d 1107. 20 Boiled down to its essence, the question is not whether an ERISA plan document containing apparently conflicting provisions is ambiguous in toto. Rather, it is whether the reservation of rights clause itself, read in tandem with the promise of continuing benefits to participants who maintain a particular status, is ambiguous with respect to the rights of the participants who have attained the status if the reservation does not specifically address alteration or termination of their benefits. In most cases, the issue involves retirees who are promised continued health care coverage for life; here, the plan allegedly promises continued health insurance to participants on disability. In either situation, plaintiffs have voluntarily or involuntarily reached the status for which the plan promises continued benefits. Recent cases from other circuits are not uniform in determining whether a general reservation of rights clause unambiguously controls a separate promise of benefits upon retirement. In Unisys, the Third Circuit concluded that a general reservation of rights clause unambiguously controls a promise of continued health care benefits to retirees: [a]n employer who promises lifetime medical benefits, while at the same time reserving the right to amend the plan under which those benefits were provided, has informed the plan participants of the time period during which they will be eligible to receive benefits provided the plan continues to exist. 58 F.3d at 904. In Jensen, the Eighth Circuit found two general reservation of rights clauses to be not facially unambiguous--they leave at least some doubt as to whether [the employer] intended to reserve the right to change or terminate benefits to already retired pensioners, or only the right to make prospective changes for those covered by the Plan but not yet retired. 38 F.3d at 950. 2 21 Whether an employer intends to commit contractually to an open-ended obligation where the ERISA document is silent presents a difficult question, susceptible to a number of interpretive approaches. See Bidlack v. Wheelabrator Corp., 993 F.2d 603 (7th Cir.) (en banc) (thoroughly discussing possible approaches to this interpretive conundrum), cert. denied, 510 U.S. 909, 114 S.Ct. 291, 126 L.Ed.2d 240 (1993). In this case, however, we need not choose between a hard-and-fast rule finding a general reservation of rights clause unambiguously controlling any promise located in another part of an ERISA document, and an approach finding ambiguity unless the plan document spells out exactly whose benefits may be unilaterally altered. In this case, it is clear that Control Data retained the right to change the benefits of all LTD plan participants--including those who had already qualified for long-term disability. 22 As noted above, the LTD plan's reservation of rights clause contains a proviso. Described in the plan's SPD, it states: If the group Long-Term Disability Plan terminates, and if on the date of such termination you are totally disabled, your Long-Term Disability benefits and your claim for such benefits will continue as long as you remain totally disabled as defined by the plan. Here, the LTD plan specifically contemplates a situation in which Control Data's discretion to change the plan is circumscribed. We find that the interpretive maxim of expressio unius est exclusio alterius--the expression of one thing is the exclusion of another--properly applies to this case. See Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 179 (1st Cir.1995) (using expressio unius maxim as an ERISA interpretive device to determine parties' intent in a severance agreement). By explicitly listing a qualification to Control Data's ability to change the LTD plan, it is proper to infer that the right to make other changes to disabled participants' benefits was reserved. While the maxim of expressio unius is not dispositive, it does carry weight. Id. Supporting this interpretation is language in the LTD master plan stating that all participants are bound by amendments; under the same section, disabled employees are considered participants. Aplt.App. 495-96. Our conclusion makes particular sense in this case, where plaintiffs' reading of the plan would render the termination exception superfluous; under plaintiffs' interpretation, Control Data may not alter the benefits of disabled participants under any condition, regardless of whether the plan terminates. 23 Plaintiffs suggest that the termination proviso itself vests the benefits of the plan in an employee once he becomes disabled, because the right to benefits cannot be withdrawn by terminating the plan. Contractual vesting of a welfare benefit is an extra-ERISA commitment that must be stated in clear and express language. Wise, 986 F.2d at 937. The plain reading of this provision clearly pinpoints plan termination, not employee disability, as the vesting trigger. Contractual vesting is a narrow doctrine. Id. at 938. We are unwilling to hold that the vesting of benefits upon the occurrence of a specific expressed condition (termination) can be read broadly to include vesting generally upon an unexpressed condition (attaining disability). See Restatement (Second) of Contracts § 203(c) (specific and exact terms are given greater weight than general language). A reasonable person in the position of an LTD Plan participant could read the termination provision in the SPD only as allowing Control Data to modify or terminate the plan when it deems necessary, but if the plan terminates certain benefits may not be withdrawn. 3 Plaintiffs attempt to distinguish the reservation of rights clause in the case at bar from those in which amendment and termination controlled the promise of vested rights. We agree with the district court that the termination clause retained almost unlimited discretion in Control Data to change the plan. See Musto v. American Gen. Corp., 861 F.2d 897, 904 (6th Cir.1988) (finding that termination clause controlled a promise of continued benefits, stating that the company fully intends to continue the plan indefinitely and to meet any foreseeable situations that may occur. However, the company does, as it always has, reserve the right to change the plan and, if necessary, discontinue it.), cert. denied, 490 U.S. 1020, 109 S.Ct. 1745, 104 L.Ed.2d 182 (1989). The term if necessary, found in the SPDs of all four Control Data plans, is not conditioned on any event or circumstance. Thus its meaning cannot fairly imply, as plaintiffs suggest, that the plans can only be amended if necessary to their fiscal survival. See id. at 906 n. 5. In this manner, the reservation of the right to amend in Control Data's plans differs from that in Alexander v. Primerica Holdings, Inc., 967 F.2d 90 (3d Cir.1992), a case relied on by plaintiffs. There, the right to amend was ambiguous in its scope because the company only necessarily reserve[d] the right to amend, modify, or discontinue the Plan in conformity with applicable legislation and also subject to any applicable collective bargaining agreement. Id. at 93. This clause could reasonably be read to limit plan modifications to those necessary to comply with changes in the law. Id. at 92-93. 4 The term, if necessary, in the Control Data plan SPDs cannot be read to limit the reserved right in any significant manner. 5 24 The interpretive principles suggested by the plaintiffs do not fit circumstances such as these, where the employer has expressly reserved the right to amend the plan. The Yard-Man inference that retiree benefits are in a sense 'status benefits' which ... carry with them an inference that they will continue so long as the prerequisite status is maintained, International Union, UAW of America v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1002, 79 L.Ed.2d 234 (1984), is an interpretive aid that applies once the provisions of the plan are determined ambiguous. See id. at 1480. Moreover, Yard-Man emphasized that the context in which benefits are written is important in making the inference; such an inference is more appropriate in the collective bargaining context where parties bargained over the language of retirement benefits. See id. at 1482; see also Armistead v. Vernitron Corp., 944 F.2d 1287, 1295-96 (6th Cir.1991). In any event, the plan in Yard-Man contained no reservation of rights clause. Likewise, Hansen v. Continental Ins. Co. 940 F.2d 971, 982 (5th Cir.1991), cited by plaintiffs for the proposition that language in a contract is resolved against the drafter, only applies once the court determines the plan or SPD contains ambiguities. Id. In fact, of the cases cited by plaintiffs in which the court found the language of benefits in the plan to be ambiguous, none contained language in which the employer unequivocally reserved the right to modify the plan. 25 We conclude that the Control Data/Ceridian plans are not ambiguous with respect to the employer's right to modify LTD benefits so long as the LTD Plan remained in operation. Company-paid health benefit premium payments did not vest upon plaintiffs' qualification for long-term disability. 6 26