Opinion ID: 2604
Heading Depth: 2
Heading Rank: 2

Heading: Early Retirement Package

Text: In 1994, Unisource offered an Early Retirement Package (ERP) to employees age 55 and older. Paneccasio, who was 57, accepted, and retired effective April 1, 1994. The ERP was described in a brochure provided to Paneccasio entitled, Your Personal Early Retirement Package: A Window of Opportunity. As a result of his election, Paneccasio received, among other things: a one-time cash bonus of $7,500; full vesting in the company's pension plan; continued medical coverage until age 65; term life insurance paid by Unisource until age 65; full vesting in an Alco stock participation plan, with stock worth $471,840; full vesting in the 1980 deferred compensation plan, resulting in a $3,024 monthly payment starting at age 65 and continuing for 10 years; and 65 percent vesting in the 1991 Plan. Other than his claims relating to the 1991 Plan, it is undisputed that Paneccasio received all benefits pertaining to his early retirement. But for the ERP, an employee who left employment prior to vesting in the 1991 Plan would be entitled only to the return of the deferred salary in a lump sum, without interest. For such employees, the ERP conferred the benefit of accelerated partial vesting. Partial vesting allowed the retiring employee to leave his deferred salary in the Plan where it would continue appreciating, and thereby enjoy the deferral of tax on the income until age 65, at which time he would receive annuity and life insurance benefits proportionate to his vesting. Partial vesting also allowed the retiring employee to retain his interest in the pre-age-65 life insurance benefit of $450,000, as long as he continued to pay a quarterly premium of $231.75 through age 65. Attached to Paneccasio's copy of the ERP brochure was a personalized statement called, A Personal Look ... At Your Retirement, which estimated the benefit enhancements specifically applicable to Paneccasio under the various Unisource benefit plans. As to the 1991 Plan, the Personal Look calculated that Paneccasio would be eligible at age 65 to receive 65 percent of the Plan's Option II benefits, i.e., $9,750 each year for 10 years. With respect to the 1991 Plan's life insurance policy, the ERP's partial vesting would allow for a post-age-65 cash value of $61,750 and a death benefit of $243,750. Other than providing for accelerated vesting in the 1991 Plan, the ERP brochure did not address any other feature of the Plan. It did not alert participants that Alco retained the right to terminate the 1991 Plan, or explain how early termination might affect the 1991 Plan's annuity and life insurance provisions. The ERP brochure did, however, include a broad disclaimer applicable to all benefits plans discussed in the brochure. In bold type in a highlighted box, it said: In an effort to keep the language as clear and non-technical, yet correct, as possible, the benefits described in this brochure are only summaries of the Early Retirement window's major provisions. More detailed information is available from plan documents and insurance contracts. In case of any dispute, the official legal documents or contracts will govern over this brochure. This disclaimer is followed by a more specific one in which Alco reserves the right to change the medical and dental plans, including offering other plan(s) of comparable coverage and cost. (No such specific reservation is made as to the 1991 Plan.) The brochure counsels employees to ask your local Human Resources representative for assistance in making this very important decision, and to gather your personal resources, consider the advantages and disadvantages, talk to your financial advisor, and make your decision. The description of the ERP's effect on various benefit plans, including deferred compensation plans, concludes with the warning: IMPORTANT: This section is not meant as legal or financial advice; please consult with your tax advisor or financial planner before making any decisions. Paneccasio testified at his deposition that the only person he consulted before accepting early retirement was his spouse. He did not attend company presentations regarding the ERP and did not consult a human resources representative at the company or a personal financial advisor. He does not recall reviewing 1991 Plan documents before making his decision.