Opinion ID: 3173483
Heading Depth: 1
Heading Rank: 3

Heading: The Offset Issue.

Text: Section 3.6 of the Plan defined Ingram’s years of “Benefit Service” to include both the 4.5 years he worked at Terminal and the 35.5 years he worked at Union Pacific. Thus, his Gross Terminal Pension equaled 1.5% of Average Monthly Earnings times 40 years of service. However, under § 5.5(b) of the Plan, the pension paid by Terminal was reduced by the “retirement income payable” under his Union Pacific plan. In determining Ingram’s monthly Single Life Annuity retirement benefit, Paubel interpreted the Plan as requiring an offset equal to the normal retirement benefits Ingram would have received under the Union Pacific plan, rather -10- than the lower benefits he was in fact receiving because he took early retirement.4 Applying the abuse-of-discretion standard of review, the district court concluded that Paubel did not abuse his discretion as Plan administrator because he adopted a reasonable interpretation of the relevant Plan provisions. Ingram argues on appeal, as he did to the district court, that this decision was contrary to the Plan under any standard of review because the plain meaning of the Plan term “retirement income payable” is the benefits actually paid by Union Pacific. The sentence at issue was part of the first paragraph of § 5.5(b): “The retirement income benefit payable under this Plan shall be offset by the amount of retirement income payable under any other defined benefit plan” (emphasis added). Citing dictionaries that define “payable” as “requiring payment on a certain date,” Am. Heritage Dictionary (4th ed. 2000), Ingram argues that the plain meaning of payable in § 5.5(b) “requires resolution of the simple question: In January 2011 when Ingram retired from [Terminal], what was the ‘amount of retirement income payable’ from the UP Pension Plan? The answer is: Ingram’s UP Pension Plan early retirement pension of $3,252.79 per month.” The problem with this plain language argument is that, in legal contexts, “payable” has a less definite meaning, which creates ambiguity -- a sum of money “that is to be paid. An amount may be payable without being due.” Black’s Law Dictionary (9th ed. 2009). In his letter explaining the denial of Ingram’s appeal, Plan administrator Paubel expressly considered this ambiguity: The offset being applied to Mr. Ingram’s monthly benefit is part of the calculation of the Normal Retirement Benefit [in Plan § 5.1(a)] -- the amount of the single life annuity payable at age 65. . . . Section 5.5 4 Ingram receives $3,252.79 per month from Union Pacific’s single life retirement benefit annuity. Had he waited to retire from Union Pacific until age 65, he would have received $4,280.38 per month in normal retirement benefits. -11- refers to the amount “payable,” not the amount paid. The amount actually paid . . . is subject to variation depending on both the timing of the commencement of benefits and the form of benefit elected. I have interpreted the Plan to provide that the offset to the Normal Retirement Benefit required by Section 5.1 must be a normal retirement benefit, regardless of the time and form of the actual payment. Under this interpretation, a normal retirement benefit is offset by a normal retirement; there is an apples to apples correlation. Under the interpretation you propose, the Normal Retirement Benefit under the Plan of two identically situated participants would vary simply because one participant chose to commence his benefit under another defined benefit plan earlier than the other. . . . Your interpretation produces this anomalous result because it offsets a normal retirement benefit by an early retirement benefit, an apples to oranges correlation. On appeal, in addition to his plain meaning contention, Ingram notes that the second paragraph of § 5.5(b) provided that, if the other plan’s benefit was paid in a form other than a monthly Single Life Annuity, such as a lump sum, the amount of the offset was expressly stated to be the monthly benefit that would have been payable under the other plan “commencing on the Participant’s Normal Retirement Date.” Ingram argues that the absence of this specific language in the first paragraph of § 5.5(b) means that Paubel’s interpretation impermissibly changed that offset provision by adding the words, “retirement income that would have been payable at normal retirement age.” Terminal responds that Ingram’s interpretation impermissibly adds the words, “when the participant begins his benefit under this Plan,” to the term “retirement income payable” in the first paragraph of § 5.5(b). Terminal argues that the second paragraph of § 5.5(b) supports Paubel’s decision “because it again ties the offset to the amount payable at the Participant’s Normal Retirement Date.” Seeking to give linguistic legitimacy to Paubel’s “apples to apples” analysis, Terminal further argues that Paubel reasonably interpreted the first paragraph of § 5.5(b) by giving the same -12- meaning -- normal retirement date -- to the word “payable” when it was used twice in the same sentence. On a more practical level, Terminal argues that Ingram seeks an improper subsidy from Terminal by having its Plan “make up the difference between” his reduced early retirement benefit and his normal retirement benefit under the Union Pacific plan. Ingram’s reply brief responds that Paubel’s decision sought to correct an oversight in the drafting of Terminal’s 2002 Plan amendments “by twisting and ignoring Plan language to increase the offset.” The district court carefully considered these complex Plan provisions and concluded that the Plan administrator’s interpretation was reasonable because it was not inconsistent with Plan language, was consistent with Plan goals and ERISA, and rationally construed the offset so that the Normal Retirement Benefit under the Plan does not vary because of the form of payment chosen under another plan. After careful review applying the deferential abuse of discretion standard, we agree. Ingram’s textual arguments have some force, but they do not persuade us that the term “retirement income payable” is susceptible of only one reasonable interpretation. Paubel’s interpretation of § 5.5(b) was carefully explained and was not unreasonable textually. It also reasonably avoided benefit disparities between similarly situated retiring participants by using normal retirement age offset criteria in determining Ingram’s normal retirement age monthly benefit from Terminal. Under the abuse-ofdiscretion standard, it is irrelevant that we might have construed § 5.5(b) differently, as the court did in Cocker v. Terminal R.R. Ass’n of St. Louis Pension Plan for Nonschedule Emps., 2015 U.S. Dist. LEXIS 75116, No. 12-1239 (S.D. Ill.), appeal docketed, No. 15-2690 (7th Cir. Aug. 11, 2015). We respectfully disagree with that district court’s decision. For the foregoing reasons, the judgment of the district court is affirmed. ______________________________ -13-