Opinion ID: 172426
Heading Depth: 1
Heading Rank: 6

Heading: Amendment 2003-5 to the Plan

Text: In late 2003, the Plan's Design Committee enacted Amendment 2003-5. Amendment 2003-5, in pertinent part, amended the Plan to eliminate the Pensioner Death Benefit, including the DLS Equivalent option, for employees retiring on or after January 1, 2004.
Edward Kerber and Nelson Phelps, Oregon and Colorado residents, respectively, were formerly employed as management-level employees within the human resources department at U.S. West. Id. at 26-27. Both men retired, effective February 28, 1990, after numerous years of service with U.S. West. Id. Both men currently receive a service pension in the form of a monthly annuity. Id. Joanne West and Nancy Meister, Utah and Minnesota residents, respectively, were formerly employed with Qwest. Id. at 27-28. Both women retired, effective February 11, 2004, after numerous years of service with Qwest. Id. Both received a lump sum service pension from the Qwest Pension Plan which did not include the value of any Pensioner Death Benefit. Id. Thomas Ingemann, Jr., a Minnesota resident, retired from Qwest, effective March 2, 2005, after almost forty years of service. Id. at 28. Ingemann currently receives a service pension annuity from the Qwest Pension Plan. Id.
On March 15, 2005, Kerber, Phelps, West, Meister, and Ingemann (the plaintiffs) filed suit against the Qwest Pension Plan, Qwest Employees Benefit Committee, and Qwest. Plaintiffs twice amended their complaint, first on May 6, 2005, and again on November 18, 2005. In the Preliminary Statement section of their second amended complaint, plaintiffs alleged that [f]or many decades, a stable feature of the Qwest Pension Plan (and predecessor plans) ha[d] been [the] `Pension[er] Death Benefit,' id. at 24, and that Qwest and its predecessors ha[d] a long history of treating the Pension[er] Death Benefit as an `accrued' or protected pension benefit payable from trust fund assets, id. at 25. Plaintiffs noted that, pursuant to Amendment 2003-5, Qwest had amended the ... Plan so as to eliminate the Pension[er] Death Benefit for persons retiring on or after January 1, 2004, and alleged that [a]n actual controversy exist[ed] between themselves and defendants as to whether this amendment [wa]s illegal and whether the Pension[er] Death Benefit should be treated as a vested, protected or accrued defined pension benefit under the Plan. Id. Accordingly, plaintiffs alleged they were asserting claims for relief under ERISA ... to clarify ... Plan participants' rights to future Pension[er] Death Benefits under the terms of the [P]lan and for other declaratory, injunctive and appropriate equitable relief. Id. at 25-26. The second amended complaint asserted four claims for relief. The first claim for relief asserted a breach of fiduciary duty and equitable estoppel arising out of defendants' alleged failure to disclose material information. Id. at 56. More specifically, this claim alleged that [p]rior to December 2003, none of the defendants made a formal disclosure in the SPDs [summary plan descriptions] distributed to the plaintiffs and other Plan participants advising that the Pension[er] Death Benefit was not a vested or protected benefit or that the Pension[er] Death Benefit could either be reduced or eliminated ... even in the absence of a PLAN termination. Id. at 57. The claim further alleged that the position adopted via Amendment 2003-5 that the Pension[er] Death Benefit c[ould] be either reduced or eliminated ... was never disclosed to the plaintiffs or other Plan participants when they were making their respective retirement choices. Id. at 57-58. In connection with this claim, plaintiffs sought, in pertinent part, a declaration that ... the Pension[er] Death Benefit was a vested, protected or accrued pension benefit, not subject to reduction or elimination absent a PLAN termination, and an order forbidding Defendants and successors from ever altering, modifying, or eliminating or terminating the plaintiffs' and other Plan participants' expected Pension[er] Death Benefits in the absence of a PLAN termination. Id. at 60. The second claim for relief, entitled Violations Due to Illegal Elimination of Pension[er] Death Benefit, id. at 60, alleged that in four consecutive years beginning in 1998, the Plan sponsor, acting pursuant to the provisions of Section 401(h) and 420 of the Internal Revenue Code, made qualified transfers and use[d] `excess assets' in the pension plan to fund retiree medical benefits for persons who [we]re retired participants in the Plan. Id. at 61. The claim further alleged that, [i]n accordance with the requirements of [Internal Revenue Code] § 420, and applicable federal regulations, each such qualified transfer resulted in the plaintiffs' pension benefits, including the Pension[er] Death Benefit, bec[oming] nonforfeitable.... Id. at 62. In turn, the claim alleged that Amendment 2003-5 violate[d] the anti-cutback provisions of ERISA Section 204(g), 29 U.S.C. § 1054(g), since accrued benefits ha[d] been reduced or eliminated. Id. at 64. Based upon these allegations, the second claim for relief sought: (a) an order reforming the PLAN by striking ... Amendment 2003-5; and (b) an order requiring the PLAN to notify and make payment of the correct amount of the Pension[er] Death Benefit ... to each PLAN participant and qualified beneficiary to whom the Pension[er] Death Benefit became payable after January 1, 2004. Id. The third claim for relief, entitled ERISA Section 502(a)(1)(B) Claim to Clarify Future Rights to the Pension[er] Death Benefit, sought a declaration that those persons receiving a monthly pension annuity and their mandatory beneficiaries, to the extent there [we]re any at time of death, [we]re entitled to the Pension[er] Death Benefit from the PLAN, id. at 65, and that all persons who retired on or after January 1, 2004 and received a lump sum distribution [we]re entitled to an additional lump sum payment representing the unpaid Pension[er] Death Benefit, plus interest, id. at 66. The fourth claim for relief, entitled ERISA Section 502(a)(2) Claim to Correct Faulty PLAN Documents, Including SPD, id., alleged that Qwest ha[d] issued a current SPD which falsely state[d] the Pension[er] Death Benefit [wa]s a welfare benefit, subject to reduction or elimination at any time, id., and sought an order requiring [defendants] to correct the ... faulty language in the ... SPD and issue a corrected SPD with language disclosing the Pension[er] Death Benefit [wa]s a vested, protected or accrued defined pension benefit, not subject to reduction or elimination absent a PLAN termination, id. at 66-67. Defendants moved to dismiss, for lack of subject matter jurisdiction, the second and third claims for relief set forth in the second amended complaint, as asserted by plaintiffs Kerber and Phelps. The motion noted that Kerber and Phelps, both Pre-2004 Retirees, d[id] not allege that Qwest announced any intention to discontinue providing the [Pensioner] Death Benefit to ... [pre-2004] retirees.... Id. at 113. On October 5, 2006, the district court [2] issued an order granting in part and denying in part defendants' motion to dismiss. Id. at 390. In doing so, the district court concluded that Kerber and Phelps lacked standing to bring the second claim for relief because they each retired in 1990, yet Claim Two assert[ed] violations caused by, and s[ought] remedies for, the adoption of Amendment 2003-5 which eliminated ... the Death Benefit for Plan participants who retired on or after January 1, 2004. Id. at 396. The district court also concluded, with respect to the third claim for relief, that Kerber and Phelps had asserted a valid claim in that they allege[d] that they ha[d] made irrevo[c]able retirement decisions based on the prior definition of [Pensioner] Death Benefit as a protected one and ... [we]re unable to adjust their retirement plans to address the benefit as one that c[ould] be eliminated at any time. Id. at 401. Defendants subsequently moved for summary judgment with respect to all remaining claims. On September 19, 2008, the district court issued an order granting defendants' motion in its entirety. Turning first to Claim Three of the second amended complaint, the district court concluded that plaintiffs had failed to establish that the Pensioner Death Benefit was either (1) an accrued pension benefit or (2) a welfare benefit that contractually vested by virtue of the plan's language and was, therefore, protected from reduction or elimination by ERISA's anti-cutback rule. Id. at 1199. More specifically, the district court concluded the Pensioner Death Benefit d[id] not meet ERISA's definition of a pension benefit because it d[id] not provide `retirement income to employees,' or `result in a deferral of income.' Id. at 1201. Further, the district court noted that plaintiffs had failed to offer any authority to support their assertion that the Pensioner Death Benefit change[d] its character upon inclusion in a lump sum pay out of accrued retirement benefits upon early retirement [i.e., selection of the DLS Equivalent], id. at 1207, and it concluded that [i]nclusion [of the Pensioner Death Benefit] in the lump sum election d[id] not change it into an accrued pension benefit. Id. at 1208. The district court also rejected plaintiffs' argument that the Pensioner Death Benefit was a retirement-type subsidy under ERISA's so-called anti-cutback provision, 29 U.S.C. § 1054(g)(2)(A). Finally, the district court rejected the notion that the Pensioner Death Benefit had contractually vested by way of the payment priority status of the Pensioner Death Benefit in the Plan's termination clauses, or as a result of language in the various plans and SPDs stating that the Pensioner Death Benefit w[ould] be paid and that beneficiaries were entitled to collect the Pensioner Death Benefit. The district court next turned to Claim Two of the second amended complaint. The district court noted that the plaintiffs, in their response to defendants' summary judgment motion, did not address their assertion ... that the Pensioner Death Benefit vested when the Plan Sponsor transferred assets under Section 420 of the [IRC], and, [t]o the extent the plaintiffs continue[d] to assert this claim, they d[id] not cite any plan language that constitute[d] the `clear and express language' of vesting required under [this court's decision in] Chiles[ v. Ceridian Corp., 95 F.3d 1505 (10th Cir.1996)]. Id. at 1216. In addressing Claim One of the second amended complaint, the district court first noted that plaintiffs, in their response to defendants' summary judgment motion, assert[ed] that `since Amendment 2003-5 violate[d] the anti-cutback provisions of ERISA Section 204(g),' they could `prove their claim that Plan fiduciaries ha[d] violated ERISA Section 404(a) duties to comply with ERISA's statutory requirements.' Id. The district court rejected this theory, noting that under the Supreme Court's decision in Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 443, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999), `[p]lan sponsors who alter the terms of a plan do not fall into the category of fiduciaries,' and in turn concluding that defendants were not acting as fiduciaries when implementing Amendment 2003-5.... Id. As for plaintiff's claim for equitable estoppel, the district court first noted that this court `ha[d] neither adopted nor rejected an equitable estoppel rule in the ERISA context.' Id. at 1218 (quoting Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d 1270, 1277 (10th Cir.1996)). Assuming for purposes of argument that this court would adopt such a rule, the district court concluded that plaintiffs' equitable estoppel claim fail[ed] as a matter of law because there [wa]s an absence of misrepresentation of any term of the plan which would trigger the plaintiffs' reasonable detrimental reliance. Id. at 1218 (internal quotation marks omitted). Finally, addressing Claim Four of the second amended complaint, the district court concluded it was redundant of Claims One and Two, and that defendants [were thus] entitled to summary judgment on the claim. Id. at 1219. Judgment was entered in the case on September 23, 2008. Plaintiffs subsequently filed a timely notice of appeal.