Opinion ID: 6934839
Heading Depth: 2
Heading Rank: 1

Heading: The Trustees’ Failure to Pay the Lump Sum Inter-Vivos

Text: O’Shea argues that the district court erred in finding that the Plan administrators discharged their duties, as ERISA requires, “in accordance with the documents and instruments governing the plan.” 29 U.S.C. § 1104(1)(D). This argument requires a close examination of the Plan. Section 8.01 of the Plan sets forth several alternative methods of paying benefits to participants. The Trustees relied on Section 8.01(d) in deciding to pay Talbot’s benefits to the Lippolis Defendants. That paragraph states: If the Participant dies ... having made an election, before the lump sum is paid (if method (a) was elected), ... then for the purpose of determining how to distribute his Accrued Benefit ... the Participant shall be treated as having died before reaching his Normal Retirement Date (whether he did or not) and the distribution of his Accrued Benefit shall be governed by Article IX.... Pursuant to this provision, the Trustees decided to pay the benefits according to Talbot’s Designation Form, as provided for in Article IX, Section 9.01, which governs the designation of beneficiaries. We find this to be a reasonable construction of the Plan. O’Shea, however, argues that because Talbot reached age 70?é in 1990 and had not elected a method of payment as of April 1, 1991, the Trustees should have given her the entire benefit in a lump sum on April 1,1991. He relies on Section 8.04, which provides a “default form” of benefit payment in “a lump sum distribution” for participants who fail to elect a method for payment of benefits. While the Plan does not explicitly state when the Trustees must make this default lump sum payment, section 8.05 indicates that “benefits must commence not later than April 1 of the calendar year following the calendar year in which the Participant attains age 70j£” O’Shea argues that the April 1 deadline imposed under Section 8.05 applies to the lump-sum default payment method specified in Section 8.04, and that Talbot’s accrued benefits were therefore required to be paid to her in a lump sum on April 1, 1991. Under O’Shea’s interpretation of the Plan, the entire accrued benefit should be deemed part of Talbot’s estate, subject to distribution under the terms of her will. The Trustees note that around April 1, 1991, they paid Talbot the minimum amount required by the Internal Revenue Code. O’Shea argues that this payment was insufficient. Even assuming that O’Shea’s interpretation is reasonable, the only question presented here is whether the Trustees’ interpretation is also reasonably consistent with the Plan’s terms. We believe that it is. Section 5.01 of the Plan provides that [notwithstanding anything to the contrary contained in any of the other provisions of this Plan, a Participant may continue Service as an Employee after his Normal Retirement Date and, subject to Section 8.05, unless the Participant elects otherwise payment of benefits shall not begin until the Participant’s actual retirement. In light of this provision, we see nothing unreasonable in the Trustees’ determination that the default payment method designated in Section 8.04 did not apply to Talbot on April 1,1991, because she had not yet retired from First Manhattan, and that Section 8.05 required only that Talbot receive the minimum distribution permissible under the Internal Revenue Code when she reached age 70Ü It cannot be said in view of these circumstances that the Trustees’ decision to distribute Talbot’s remaining benefits pursuant to Article IX of the Plan was arbitrary and capricious.