Opinion ID: 6935449
Heading Depth: 1
Heading Rank: 3

Heading: Age Discrimination Claims under ERISA and ADEA

Text: We first consider whether the OBRA amendments to the ADEA and ERISA prohibit Lockheed from excluding Spink’s and putative class members’ pre-1988 years of service when calculating their accrued benefits. We conclude they do. Prior to OBRA 1986, the ADEA and ERISA permitted an employer to deny participation in its pension plan to an employee who was over age sixty when hired if the plan’s retirement age was sixty-five. See ERISA § 202(a)(2), 29 U.S.C. § 1052(a)(2) (1982 & Supp. V 1988); ADEA § 4(f)(2), 29 U.S.C. § 623(f)(2) (1982 & Supp. V 1988). Congress enacted OBRA 1986 to change this situation. The overall objective of the OBRA amendments was to “prohibit arbitrary age discrimination in employment.” ERISA § 2, 29 U.S.C. § 621 (1988). To that end, § 9202 of OBRA 1986 amended ERISA by adding: [A] defined benefit plan shall be treated as not satisfying the requirements of this paragraph if, under the plan, an employee’s benefit accrual is ceased, or the rate of an employee’s benefit accrual is reduced, because of the attainment of any age. 29 U.S.C. § 1054(b)(l)(H)(i) (1988). Similarly, OBRA § 9201 amended the ADEA by providing: [I]t shall be unlawful for an employer, an employment agency, a labor organization, or any combination thereof to establish or maintain an employee pension benefit plan which requires or permits— (A) in the ease of a defined benefit plan, the cessation of an employee’s benefit accrual, or the reduction of the rate of an employee’s benefit accrual, because of age, ADEA § 4(i)(l), 29 U.S.C. § 623(i)(l) (1988 & Supp. V 1993). With regard to the effective date of these sections, OBRA 1986 provides: The amendments made by sections 9201 and 9202 shall apply only with respect to plan years beginning on or after January 1, 1988, and only to employees who have 1 hour of service in any plan year to which such amendments apply. Pub.L. No. 99-509, § 9204(a)(1); 100 Stat. 1979 (1986), codified at 29 U.S.C. § 623 note. The parties agree that OBRA 1986 prohibits terminating or reducing the rate of benefit accrual because of the employee’s age after January 1, 1988. They part ways over whether this prohibition requires that employers consider service years before the effective date of OBRA 1986 in calculating benefit accrual. As with every question of statutory interpretation, we start with the language of the statute. The most natural reading of the text of OBRA 1986 §§ 9201 and 9202 compels us to conclude that pre-enactment service years must be included in benefit accrual calculation. OBRA prohibits age-based reduction in “the rate of benefit accrual.” Denying credited service years that an employee would have accumulated but for prior age-based exclusion from the Plan results in a reduced rate of benefits for that employee. Therefore, denying credited service years that an older employee would otherwise have accumulated is unlawful under OBRA. 1 In the context of this case, the Plan provides that “eligibility for benefits under the Plan and the amount of a Member’s benefit are determined on the basis of service.” Plan § 4.01. An employee could participate in the Plan, and therefore accumulate credited service years, “upon being employed in a Covered Group” unless — prior to OBRA’s effective date — the employee commenced employment when he or she was sixty years of age or older. Plan § 2.01(B) & (C). Because Spink began work in a Covered Group after he had celebrated his sixtieth birthday, he did not become a Member of the Plan when he began work. Had he not been excluded because of his age, he would have begun to accumulate credited service years when he started working in a Covered Group and all those years would be used to calculate the amount of his benefits. Put another way, Spink’s credited service was calculated as lower than that of a younger employee’s because he was denied credit for all years of his employment in a Covered Group. 2 Such an age-based reduction in the rate of accrual is the essence of OBRA’s express prohibitions. The fact that the reduction would be accomplished indirectly, through reducing the number of credited service years, rather than directly by reducing the rate itself, is of no consequence. Lockheed would have us focus on the cause of the disparity: the previously lawful exclusion of older employees from participation in the Plan. This argument raises the question of cause and effect. Since the cause of the disparity was lawful, Lockheed urges, the disparate result must therefore be lawful. However, OBRA 1986 does not speak to causes. Rather, by invalidating age-based reductions in the Plan’s benefit accrual, OBRA 1986 forbids the discriminatory effects of the Plan. Lockheed cannot avoid the prohibition against age-based reductions in benefits by pointing to previously lawful causes of those reductions. See 29 U.S.C. § 1001(b); Kayes v. Pacific Lumber Co., 51 F.3d 1449, 1468 (9th Cir.1995) (remedial purpose of ERISA requires broad reading). Congress explicitly excepted some nondiscriminatory causes from its prohibition against disparities in benefit accrual. For example, ERISA § 204(b)(l)(H)(ii), 29 U.S.C. § 1054(b)(l)(H)(ii) (1988), provides: A plan shall not be treated as failing to meet the requirements of this subpara-graph because the plan imposes (without regard to age) a limitation on the amount of benefits that the plan provides or a limitation on the number of years of service or years of participation which are taken into account for purposes of determining benefit accrual under the plan. Under this provision, differences in accrual caused by a plan’s service cap or early retirement provisions are permissible, even though they may result in disparities. See Atkins v. Northwest Airlines, Inc., 967 F.2d 1197, 1200-01 (8th Cir.1992). When Congress enumerates an exception or exceptions to a rule, we can infer that no other exceptions apply. Koniag v. Koncor Forest Resource, 39 F.3d 991, 998 (9th Cir.1994); Horner v. Andrzjew, 811 F.2d 571, 574-75 (Fed.Cir.), cert. denied, 484 U.S. 912, 108 S.Ct. 257, 98 L.Ed.2d 215 (1987); 2A Norman J. Singer, Sutherland Statutes and Statutory Construction § 47.23 (5th Ed.1992). Therefore, Congress’ express exception of some nondiscriminatory causes of disparities in benefit accrual indicates that other discriminatory causes — such as Lockheed’s previously lawful exclusion of Spink from participation — are not permissible. Research into the legislative history also verifies our reading of the language of the OBRA 1986 amendments. An earlier version of OBRA 1986 adopted a Senate amendment that specifically provided that OBRA 1986 would apply only to individuals employed after December 31, 1988 and only to accrual computation periods beginning after December 31, 1986. H.R.Rep. No. 99-1012, 99th Cong., 2d Sess. 377 (1986), reprinted in 1986 U.S.C.C.A.N. 4022, and 132 Cong.Rec. 25,044 (1986). Under this provision, pre-1986 employment was clearly excluded. However, Congress rejected this proposal in conference, see H.R.Rep. No. 99-1012, 99th Cong., 2d Sess. 378 (1986), reprinted in 1986 U.S.C.C.A.N. 4023, and instead adopted a provision that would apply to all employees “who have one hour of service in any plan year to which the amendments apply.” OBRA § 9204(a)(1). Congress knew the appropriate and specific language necessary to exclude pre-1988 service and chose not to include it. See Arizona Elec. Power Co-op. v. United States, 816 F.2d 1366, 1375 (9th Cir.1987). When Congress includes limiting language in an earlier version of a bill, but deletes it prior to enactment, we presume that the limitation was not intended. See Russello v. United States, 464 U.S. 16, 23-24, 104 S.Ct. 296, 300-01, 78 L.Ed.2d 17 (1983). Finally, we note that other provisions of OBRA 1986 demonstrate that Congress was well aware of how to limit application of the amendment to post-enactment service years. Section 9204(b) provides that “amendments made by section 9203 [amending 29 U.S.C. §§ 1002(24)(B) & 1052(a)(2) and 26 U.S.C. §§ 410(a)(2) & 411(a)(8)] shall apply only with respect to plan years beginning on or after January 1, 1988, and only with respect to service performed on or after such date.” (Emphasis added). Since Congress chose not to include such a limitation in OBRA § 9204(a), the provision governing the effective date of §§ 9201 and 9202, we can infer that Congress did not intend that limitation to apply to those sections. See Russello, 464 U.S. at 23, 104 S.Ct. at 300-01. Lockheed contends that § 9204(b) compels the opposite result. To reach this conclusion, Lockheed points to the fact that § 9204(b) amends ERISA § 202, 29 U.S.C. § 1052, which contains minimum participation standards. Lockheed starts with the observation that ERISA §§ 204(b)(1) and (b)(4)(A) provide that benefit accrual is based on years of participation. From there, Lockheed reasons that by limiting the retroactivity of participation requirements through § 9204(b), Congress indirectly limited the benefit accrual calculation to years after OBRA 1986’s effective date. If § 9204(b) were the only statement about the effective date of OBRA 1986, Lockheed’s reasoning might be persuasive. However, § 9204(b) is directly preceded by § 9204(a)(1), which explicitly pertains to the amendments made by the OBRA provisions at issue, §§ 9201 and 9202. The first clauses of §§ 9204(a)(1) and 9204(b) are virtually identical. Both state that the amendments they govern shall apply “only with respect to plan years beginning on or after January 1,1988,.... ” However, the latter portion of § 9204(b) includes the further limitation that the amendments made by § 9203 apply “only with respect to service performed on or after such date.” By contrast, § 9204(a)(1) concludes that §§ 9201 and 9202 apply “only to employees who have 1 hour of service in any plan year to which such amendments apply.” We cannot comprehend any logical reason why Congress would not include a limitation in the immediately preceding subsection, which would directly limit the application of benefit accrual standards, but instead include a temporal limitation in § 9204(b), thereby indirectly limiting the application of benefit accrual standards. See Russello, 464 U.S. at 23, 104 S.Ct. at 300-01 (declining to find that differing language in two subsections has the same meaning). All aspects of OBRA 1986’s language, structure, and legislative history indicate Congress’ intention that pre-enactment service years be included in calculating benefit accrual for older employees. 3 Lockheed withheld Spink’s service years from 1979 to December 25, 1988. Therefore, Spink has stated a claim for violation of OBRA 1986 upon which relief can be granted. 4