Opinion ID: 766103
Heading Depth: 2
Heading Rank: 1

Heading: United Way's Pension Plans

Text: 4 United Way provides its employees with a qualified defined benefit plan under which pension benefits are calculated as a function of an employee's average salary over a five-year period, multiplied by a fixed ratio, and multiplied again by the employee's years of service. Pursuant to I.R.C. § 415, however, there is a maximum benefit an employee may receive pursuant to this plan in the neighborhood of $100,000 per annum $90,000 upwardly adjusted for cost of living increases. See 26 U.S.C. §415(b)(1). 5 On February 27, 1984, the Executive Committee met to consider adopting a non-qualified pension plan (Replacement Benefit Plan or RBP) that would provide those highly compensated employees subject to the § 415 limitation, including Aramony, with benefits offsetting the impact of § 415 and certain other tax-code limitations on the qualified defined benefit plan. United Way's usual practice when considering pension plan proposals was for the Executive Committee to approve the concept of the plan, leaving the details to be worked out between United Way employees specializing in employee benefits, such as senior vice president and CFO Stephen Paulachak, and United Way's insurer, Mutual of America Life Insurance Co. The adoption of the RBP proceeded along these lines. 6 At the February 27 meeting, Paulachak distributed an agenda setting forth the basic principles of a proposed RBP. Aside from indicating the purpose of the proposed plan, the agenda did not refer to specific details, although it did recommend that the Executive Committee authorize United Way... to establish a Replacement Benefit Plan . . . as outlined under [the attached draft plan]. 7 The referenced attachment was a partially incomplete sample RBP document, i.e., the document left blank significant terms such as its effective date and controlling law, offered but did not select from among various options for determining eligibility and benefit amounts, and did not contain a signature or signature line. This draft plan did, however, include two specific provisions of note. First, it contained a benefit calculation formula provision based on United Way's qualified defined benefit plan. Second, it contained a felony forfeiture provision stating: 8 The right to the payment of any amount provided under this Plan shall be subject to forfeiture upon the commission of a prohibited act by the Participant. A prohibited act shall be the commission of a fraud, embezzlement or other felony involving the Employer for which the Participant has been convicted in a Court of competent jurisdiction. 9 The draft plan went on to state, however, that [e]xcept as may be provided in [the felony forfeiture provision], the Participant's rights under this Plan shall become nonforfeitable upon termination of employment. 10 The Executive Committee accepted the recommendation reflected on the agenda and authorized the establishment of an RBP, expecting Paulachak to work out the specific details of the plan in conjunction with Mutual. Accordingly, Paulachak relayed the Executive Committee's decision to Mutual, asking it to create the plan document embodying the RBP. About one year later the time lapse unaccounted for in the record Mutual produced a final document. On May 16, 1985, Paulachak signed it on United Way's behalf. 11 There are two significant differences between the plan produced by Mutual and signed by Paulachak (the signed plan) and the draft plan that had been attached to the agenda at the February 1984 board meeting (the draft plan). First, whereas the draft plan's benefit-calculation formula referred to and depended upon United Way's qualified defined benefit plan, the signed plan's benefit-calculation formula referred to and depended upon a qualified defined contribution plan. United Way did not have a defined contribution plan. Second, the signed plan did not contain the felony forfeiture clause contained in the draft plan, providing instead only that benefits become nonforfeitable upon termination of employment. 12 In addition to providing Aramony benefits under the RBP, in October 1984 United Way entered into yet another compensation arrangement with Aramony, the Supplemental Benefits Agreement (SBA). In the SBA, United Way agreed to give Aramony an additional retirement benefit equal to the balance on a hypothetical account to which United Way would contribute $2,083.33 per month until Aramony's retirement, plus interest at United Way's option. In contrast to both versions of the RBP, the SBA was silent on the question of forfeiture.