Opinion ID: 2787077
Heading Depth: 3
Heading Rank: 1

Heading: The Plans’ Texts Support the Employees’

Text: Position. To determine whether Loughlin’s second interpretation contradicts the actual words of the 1980 and 1987 Plans, we quote the relevant provisions. Article VII of the 1980 Plan reads: 7.01 Required Service for Vesting If a Participant’s employment shall terminate prior to his Normal Retirement Date [age 65, § 4.01] or an Early Retirement Date [age 60, § 4.02], for any reason other than death, he shall be entitled to a deferred vested Retirement Income if he is credited with at least ten . . . years of Vesting Service at the time of his employment termination. . . . 7.02 Amount and Commencement of Deferred Vested Retirement Income The amount and time of commencement of a deferred vested Retirement Income to a Participant who satisfies the requirements of Section 7.01 shall be determined in accordance with the provisions of Section 5.03, based on the Participant’s Benefit Service and Average Compensation at the time of employment termination. . . . Section 5.03 provides: A Participant who retires on an Early Retirement Date may elect to receive one of the following: 14 (a) His Accrued Retirement Income computed as of his Early Retirement Date commencing at the end of the month in which his Normal Retirement Date would have occurred. (b) A reduced amount of Retirement Income to begin at the end of the month in which his Early Retirement Date occurs, computed so as to be a percentage of the benefit provided for him under paragraph (a) of this Section 5.03, in accordance with the following table: Number of Years Prior to Normal Retirement Date (Interpolate if not a Percentage Whole Number) 0 100.0% 1 100.0% 2 100.0% 3 100.0% 4 93.3% 5 86.7% On October 27, 1988, United put in place “Amendment 5” to the 1980 Plan, effective July 1, 1987. Amendment 5, which applies to all class members covered by the 1980 Plan, in relevant part rewrites § 5.03 of the 1980 Plan to read in its entirety: A Participant who retires on an Early Retirement Date will receive his Accrued Retirement Income computed as of his Early Retirement Date commencing at the end 15 of the month in which his Early Retirement Date occurs. “Accrued Retirement Income . . . as of any particular date” is defined under § 5.02 as an amount to be computed in accordance with § 5.01, which lays out the method of calculation for the “annual rate of Retirement Income.” Section 5.01 describes the method of calculation as (roughly speaking) a percentage of average compensation multiplied by time of service with United, with qualifications and complications not at issue in this appeal. To summarize, per § 7.02 a TVP gets retirement income in accordance with § 5.03, which states that a participant who retires is entitled to “Accrued Retirement Income,” which is calculated under § 5.01 with respect to a participant’s average compensation and length of service with the company. The 1987 Plan is quite similar as it concerns this appeal. Article VII provides: 7.01 Required Service for Vesting. If a Participant’s employment shall terminate prior to his Normal Retirement Date for any reason other than death, he shall be entitled to a deferred vested Retirement Income if he is credited with at least five . . . years of Vesting Service at the time of his employment termination. . . . 16 7.02 Amount and Commencement of Deferred Vested Retirement Income. The amount of a deferred vested Retirement Income to a Participant who satisfies the requirements of Section 7.01 shall be determined in accordance with the provisions of Section 5.03, based on the Participant’s Benefit Service and Average Compensation at the time of employment termination. . . . Section 5.03 provides: Early Retirement Annual Accrued Retirement Income. A Participant who retires on an Early Retirement Date will receive his Accrued Retirement Income computed as of his Early Retirement Date commencing at the end of the month in which his Early Retirement Date occurs. “Accrued Retirement Income” is the amount specified in § 5.02, which, as in the 1980 Plan, is the “amount computed in accordance with Section 5.01,” which in turn provides a formula roughly based on a percentage of average compensation multiplied by the employee’s tenure at United. The Early Retirement Date under the 1987 Plan initially occurred the month after an employee turned 60, but it was lowered effective February 1, 1996, to age 59½. A straightforward reading of the 1980 and 1987 Plans, consistent with United’s early interpretations of these Plans, leads to the conclusion that TVPs were entitled to pensions in an amount that did not include an actuarial adjustment for the number of years younger than 65 that they were when they 17 retired. Under both plans, § 7.02 tells us that a TVP gets retirement income in accord with § 5.03, which states that a retiree is entitled to “Accrued Retirement Income,” which is calculated under § 5.01 with respect to a participant’s average compensation and length of service with the company. Not one of these provisions treats TVPs differently from people who retire directly from United, and no provision requires actuarial adjustment (read reduction) for taking retirement benefits early. Loughlin’s second interpretation conflicted with the plain meaning of the terms of the Plans and thus denied the Employees benefits due them in violation of § 1132(a)(1)(B), notwithstanding the Plans’ conferral on him of discretion to interpret Plan provisions. Epright v. Envtl. Res. Mgmt., Inc. Health & Welfare Plan, 81 F.3d 335, 342–43 (3d Cir. 1996) (“By imposing a requirement which is extrinsic to the Plan[s], [Defendants have] acted arbitrarily and capriciously.”). The second interpretation also violated the anticutback rule, which occurs when an “accrued benefit” is eliminated or reduced by a “plan amendment.” 29 U.S.C. § 1054(g)(1). “There is no question but that a standard early retirement benefit, provided exclusively upon the satisfaction of certain age and/or service requirements, is an accrued benefit that is protected by” § 1054(g).1 Bellas v. CBS, Inc., 1 The statute reads: (g) Decrease of accrued benefits through amendment of plan
plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(d)(2) or 1441 of this title [neither of which applies in our case]. 18 221 F.3d 517, 524 (3d Cir. 2000). Sections 7.01 and 7.02 of both Plans provide precisely the early retirement benefits described in Bellas and are thus “accrued benefits.” United argues, however, that the early retirement benefits are not “accrued benefits” because § 5.01 of both Plans provide calculations for “[t]he annual rate of Retirement Income payable to a Participant who retires on or after his Normal Retirement Date.” (emphasis added). Thus, according to United, anyone who retires before his normal retirement date has no accrued retirement benefits. What this argument ignores is the combined effect of §§ 7.01, 5.03, 5.02, and 5.01. Section 7.01 vests retirement income in TVPs; § 5.03 directs the administrator to calculate TVPs’ Accrued Retirement Income as of the date of early retirement, while § 5.02 states that the amount of Accrued Retirement Income is computed “in accordance with Section 5.01.” In other words, §§ 5.01, 5.02, and 5.03 provide the method for computing TVPs’ benefits, while § 7.01 actually confers the benefits, making them “accrued” within the meaning of ERISA. Our Court’s “view of what constitutes an ‘amendment’ to a pension plan has been construed broadly to protect
amendment which has the effect of— (A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations), or (B) eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. 29 U.S.C. § 1054. 19 pension recipients.” Battoni v. IBEW Local Union No. 102 Employee Pension Plan, 594 F.3d 230, 234 (3d Cir. 2010). “An erroneous interpretation of a plan provision that results in the improper denial of benefits to a plan participant may be construed as an ‘amendment’ for the purposes of” § 1054(g). Hein v. F.D.I.C., 88 F.3d 210, 216 (3d Cir. 1996).2 The critical question in this case, in light of the absence of a formal plan amendment, is whether Loughlin’s “interpretation of the Plan improperly denied accrued benefits to” the Employees. Id. at 216–17. The answer is yes. In 1988, United’s understanding of the Plans accorded with the plain reading of the Plans that we have discussed above. By 2005, United had reinterpreted the Plans and decided that they required actuarial adjustments to the amounts paid to TVPs who took early retirement. This incorrect interpretation resulted in the improper denial of TVPs’ accrued early retirement benefits and thus violated ERISA’s anti-cutback rule. 2 Some Circuits have taken a narrower view of the meaning of “amendment” than Hein—see Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 987 (9th Cir. 1997); Dooley v. Am. Airlines, Inc., 797 F.2d 1447, 1451–53 (7th Cir. 1986)—but, as the Second Circuit has noted, a Treasury Regulation interpreting the provision of the Internal Revenue Code that implements 29 U.S.C. § 1054(g) supports our Court’s view and is entitled to deference under Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). Kirkendall v. Halliburton, Inc., 707 F.3d 173, 183 (2d Cir. 2013) (discussing Limitations on Availability of Benefits, 53 Fed. Reg. 26,050-01, 26,064 (July 11, 1988) (codified at 26 C.F.R. § 1.411(d)–4)). 20