Court Opinion

ID: 2642353
Source: CourtListenerOpinion
Date Created: 2013-11-15 19:50:18.154839+00
Date Added: 2024-06-11T13:13:11.047541
License: Public Domain

United States Court of Appeals
                       For the First Circuit

No. 13-1515

         RONALD R. BONNEAU, RICHARD DONNELLY, JAMES KOZIERA,
                       AND JOHN F. TONER, JR.,

                       Plaintiffs, Appellees,

                                 v.

  PLUMBERS AND PIPEFITTERS LOCAL UNION 51 PENSION TRUST FUND, BY
 AND THROUGH ITS TRUSTEES, ROBERT BOLTON, DAVID RAMPONE, MICHAEL
   ST. MARTIN, DAVID GREENBERG, ROBERT WALKER, WILLIAM DEMELLO,
               MICHAEL VOLINO, AND THOMAS HANFIELD,

                       Defendants, Appellants.

            APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF RHODE ISLAND

         [Hon. John J. McConnell, Jr., U.S. District Judge]

                               Before

                         Lynch, Chief Judge,
                        Selya, Circuit Judge,
                    and Hillman,* District Judge.

     James F. Grosso, with whom O'Reilly, Grosso & Gross, P.C.,
Michael W. Murphy, and Rodio & Ursillo, Ltd. were on brief, for
appellants.
     William J. Conley, Jr. for appellees.

                          November 15, 2013

     *
         Of the District of Massachusetts, sitting by designation.
              LYNCH, Chief Judge. This is a dispute between a group of

now-retired union employees over certain "banked hour" benefits

which their union Pension Trust wants to eliminate, and the Trust,

which is in distress and trying to find sources of funding to meet

its obligations to its larger group of plan participants.                     The

Trustees agreed not to impose the cuts until a court had finally

determined whether these cuts, effectuated through Plan Amendment

Nine,    violated     the   anti-cutback     provisions     of   the    Employee

Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001

et seq., which protects "accrued benefits" against reduction by

amendment.      Id. § 1054(g)(1).

              This case raises a question of first impression in this

circuit as to whether a retroactively conferred benefit during the

course   of    employment      constitutes   a   "benefit    attributable      to

service" and so an "accrued benefit" for purposes of ERISA's

anti-cutback rule.          On cross-motions for summary judgment, the

district court entered summary judgment for the plaintiffs.                  While

the Trustees' arguments to the contrary are far from frivolous, we

find the plaintiffs' benefits are in fact "accrued" and that

Amendment Nine would violate the anti-cutback provisions.                      We

affirm the district court on this basis.

                                       I.

              The   Plumbers   and   Pipefitters   Local    Union      #51   ("the

Union") is a labor organization situated in East Providence, Rhode

                                      -2-
Island.   The Union represents pipefitters and plumbers in Rhode

Island and southeast Massachusetts.      The Union came to be on

September 1, 1997 through the merger of four former local unions.

After the merger, the local unions' employee benefits plans and

related plans and funds also merged.   The result was the Plumbers

and Pipefitters Local Union #51 Pension Plan ("Post-Merger Plan"),

dated September 1, 1998.   This is the plan which concerns us.   The

pre-merger plans no longer exist.

          Among the pension benefits promised under both the Pre-

and Post-Merger Plans were "banked hour" benefits.   "Banked hours"

are hours of service worked in covered employment or otherwise

accrued by plan participants within a given year in excess of the

minimum number of hours required to earn a full year of service for

pension credit under the applicable plan.   Such hours are "banked"

for a variety of uses, including filling in of hours of service for

years in which the participant fell short of the minimum required

for a full year of credit and "cash[ing] in" as additional pension

credits upon retirement.

          One problem the Post-Merger Plan had to deal with was

that the "banked hour" provisions were different in each of the

four pre-merger plans.     Indeed, the provisions contained in the

various pre-merger plan documents had different accrual, use, and

value of "banked hours."   For example, under the pre-merger plans,

the minimum number of hours of service needed for the receipt of a

                                -3-
full year of pension credit ranged from 1,200 in one plan to 1,710

hours in another.         The Post-Merger Plan Document eliminated those

variations and chose to use as to each "banked hour" provision

among the most generous benefit terms from the earlier provisions.

For example, under the Post-Merger Plan, the minimum number of

hours of service required for the receipt of a full year of pension

credit was only 1,200 hours for all participants.1               The Post-Merger

Plan Document's more generous "banked hour" provisions had both

prospective and retrospective effect.                As a result, a number of

plan       participants,     the    plaintiffs        among     them,    received

retrospectively increased levels of "banked hour" pension credits

and increased pension benefit levels immediately after the merger

pursuant to those more generous provisions.                   This case involves

only those retrospective benefits.

               Over the past several years, the Trust has experienced

funding deficiencies caused by a number of factors, including stock

market fluctuations and decreased pension contributions resulting

from       unemployment    and   lack   of    work   opportunities      for   plan

       1
        This benefit provision was subsequently amended                        and
prospectively reduced. That amendment is not at issue here.

                                        -4-
participants.2       The Trustees explored and adopted various measures

intended to improve the Plan's financial health.3

               In   August    2011,   after     discussions    with   the   Plan's

actuarial consultant, the Trustees voted upon and enacted Amendment

Nine to the Post-Merger Plan Document.             Amendment Nine purports to

reduce plan participants' retrospective "banked hour" pension

benefits for hours accumulated prior to September 1, 1998, the date

of the Post-Merger Plan, back to the lower levels promised under

plan       participants'     respective    pre-merger   plan    document.      The

Trustees say Amendment Nine would reduce the Plan's liability by

several million dollars. On or about October 6, 2011, the Trustees

sent a notice to all participants in the Post-Merger Plan alerting

them to the retroactive benefit reductions that would result from

Amendment Nine.

       2
       In 2010 and again in 2012 the Post-Merger Plan was declared
to be in critical status under the Pension Protection Act of 2006
("PPA"), Pub.L. No. 109–280, 120 Stat. 780. The Trustees do not
argue that either the fact that the Plan was in critical status
under PPA or the fact that they were required as a result to
formulate a Rehabilitation Plan in any way alters the law on the
anti-cutback rule.
     The anti-cutback rule does permit the decrease by amendment of
accrued benefits in cases where a plan faces a "substantial
business hardship," 29 U.S.C. § 1082(d)(2), and in cases involving
terminated multi-employer plans, id. § 1441. Neither exception
applies here.
       3
       Should the Post-Merger Plan ultimately become insolvent, the
federal Pension Benefit Guaranty Corporation (PBGC), which insures
multi-employer pension plans such as this one, will be required to
intervene. See Sun Capital Partners III, LP v. New Eng. Teamsters
& Trucking Indus. Pension Fund, 724 F.3d 129, 132 n.2 (1st Cir.
2013).

                                          -5-
            On November 3, 2011, the plaintiffs filed this action

against    the   Trustees   in    the   district    of   Rhode   Island.    The

plaintiffs alleged that the implementation of Amendment Nine would

conflict    with   ERISA's       so-called     "anti-cutback"     rule,    which

prohibits the "decrease[] by amendment" of any "accrued benefit of

a participant" in an ERISA plan.              29 U.S.C. § 1054(g)(1).       The

plaintiffs maintained that all of their pre-September 1, 1998

"banked hour" benefits, whether prospective from September 1 or

retrospective, had "accrued." They relied on 29 U.S.C. § 1002(23),

which defines the term "accrued benefit" for purposes of ERISA.

The Trustees agreed to suspend the implementation of Amendment Nine

pending the result of this action.

            On April 5, 2013, the district court orally granted the

plaintiffs' motion for summary judgment and denied the Trustees'

cross-motion for summary judgment.             The district court held that

the plaintiffs' pre-September 1, 1998 "banked hour" benefits did

constitute "accrued benefits" under ERISA.                The district court

noted that, at the time of the merger and the bestowing of uniform

"banked hour" benefits in the Plan, the plaintiffs were active

employees as opposed to retirees.             The Plan was also unchanged at

their retirement date. Indeed, they had received the very benefits

after retirement that the Trustees now seek to cut.               As such, the

district court reasoned, "[w]hen the Plaintiffs retired, their

expectations of receiving the banked-hours benefits in the [Post-

                                        -6-
Merger] Plan were justified."         On this basis, the district court

concluded that the implementation of Amendment Nine would result in

the "decrease[] by amendment" of the plaintiffs' "accrued benefits"

in violation of 29 U.S.C. § 1054(g)(1).

                 On appeal, the Trustees argue that the district court

erred in holding that the plaintiffs' pre-September 1, 1998 "banked

hour" retrospective benefits are "accrued benefits" under ERISA.

                                      II.

                 This court reviews a grant of summary judgment de novo,

taking the facts in the light most favorable to the non-moving

party.       Lloyd's of London v. Pagán-Sánchez, 539 F.3d 19, 21 (1st

Cir. 2008). "On an appeal from cross-motions for summary judgment,

the standard does not change; we view each motion separately and

draw       all   reasonable   inferences    in   favor   of   the   respective

non-moving party." Roman Catholic Bishop of Springfield v. City of

Springfield, 724 F.3d 78, 89 (1st Cir. 2013).             The parties agree

upon all material facts.           This court is left to address pure

questions of law.4

                 ERISA's anti-cutback rule prohibits the "decrease[] by

amendment" of any "accrued benefit of a participant" in an ERISA

plan. 29 U.S.C. § 1054(g)(1); accord 26 U.S.C. § 411(d)(6)(A); see

       4
       We have no reason to reach an argument made by the
plaintiffs that the initial provision of benefits to them upon
retirement somehow estops the Trustees from denying the benefits
were "accrued."

                                      -7-
also Cent. Laborers' Pension Fund v. Heinz, 541 U.S. 739, 744

(2004) (describing ERISA's anti-cutback rule as "crucial to th[e]

object" of protecting employees' justified expectations).     A plan

must not violate the rule in order to remain qualified for tax-

exempt status.   26 U.S.C. § 411(d)(6)(A).   The purpose of this was

set forth in Central Laborers' Pension Fund, where the Supreme

Court said:

            [W]hen Congress enacted ERISA, it wanted to
            . . . mak[e] sure that if a worker has been
            promised a defined pension benefit upon
            retirement -- and if he has fulfilled whatever
            conditions are required to obtain a vested
            benefit -- he actually will receive it.
541 U.S. at 743 (alterations in original) (quoting Lockheed Corp.

v. Spink, 517 U.S. 882, 887 (1996)) (internal quotation marks

omitted).

            The Trustees' core argument is that the plaintiffs did

not   "earn"   these   retrospective   benefits   by   working;   the

retrospective benefits were a gratuity resulting from a prior

merger of benefit plans.5   The term "earned" appears nowhere in the

statute, although it does in some case law as a shorthand term,6

and we do not adopt it as a substitute term for the statutory

      5
       The parties agree that Amendment Nine would result in the
"decrease[]" of the plaintiffs' retrospective pre-September 1, 1998
"banked hour" benefits under their ERISA plan.
      6
       See, e.g., Thornton v. Graphic Commc'ns Conference of Int'l
Bhd. of Teamsters Supplemental Ret. & Disability Fund, 566 F.3d
597, 602 (6th Cir. 2009); Silvernail v. Ameritech Pension Plan, 439
F.3d 355, 359 (7th Cir. 2006).

                                 -8-
language.    The Trustees argue, based on the concept of "earned"

benefits, that the plaintiffs' pre-September 1, 1998 "banked hour"

benefits were conferred retroactively, and that retroactively

conferred benefits are unearned gratuities and as a result cannot

"accrue[]." We disagree. The Trustees' position is not irrational

as a matter of policy, but Congress chose otherwise. The Trustees'

position has no basis in the statutory text.

            The Trustees' position is that in order for a benefit to

"accrue[]" under section 1054(g)(1), the promise of the relevant

benefit must necessarily predate the service to which that benefit

corresponds.    The Trustees argue that an employee can only "earn"

a benefit through service if she has been promised that benefit in

advance.    This is based on the reasoning that any benefit not

promised beforehand is by definition unexpected, and that any

unexpected benefit constitutes a mere gratuity.     In other words,

according to the Trustees, a benefit can only be "earned" through

service if the promise of a benefit could have provided incentives

to perform that service.    ERISA does require that the promise of a

benefit provide incentives to continue employment in order for that

benefit to "accrue[]."     But that condition is satisfied here.

            Section 1054(g) explains that the anti-cutback rule

applies only to "benefits attributable to service" prior to the

amendment at issue.      29 U.S.C. § 1054(g).    And in this sense,

"accrued benefits" are contrasted with mere "gratuit[ies]." Bd. of

                                  -9-
Trs. of Sheet Metal Workers' Nat'l Pension Fund v. Comm'r, 318 F.3d
599, 604 (4th Cir. 2003).     In addition, contrasted with other

statutory language the restriction on "benefits attributable to

service" means that "accrued benefits" must be attributable to

service already performed.   See Cinotto v. Delta Air Lines Inc.,

674 F.3d 1285, 1294 (11th Cir. 2012) (observing the distinction

between "accrued benefits" and "anticipated benefits based on

future years of service").   Here, however, the plaintiffs' pre-

September 1, 1998 "banked hour" benefits are clearly "attributable

to" the plaintiffs' pre-September 1, 1998 service.      That those

benefits were conferred retroactively does not defeat that point.

          Other than through section 1054(g), the text of ERISA

provides few clues as to the interpretation of "accrued benefit."

Section 1002 of Title 29 defines "accrued benefit" as follows:

          (23) The term "accrued benefit" means--

                 (A) in the case of a defined benefit
                 plan, the individual's accrued benefit
                 determined under the plan and, except
                 as provided in section 1054(c)(3) of
                 this title, expressed in the form of an
                 annual benefit commencing at normal
                 retirement age, or

                 (B) in the case of a plan which is an
                 individual account plan, the balance of
                 the individual's account.

          The accrued benefit of an employee shall not
          be less than the amount determined under
          section 1054(c)(2)(B) of this title with
          respect   to   the   employee's  accumulated
          contribution.

                               -10-
29 U.S.C. § 1002(23); accord 26 U.S.C. § 411(a)(7)(A). Because the

Post-Merger Plan is a defined benefit plan, most relevant here is

section 1002(23)(A). Under that provision, an "accrued benefit" is

"the individual's accrued benefit determined under the plan and

. . . expressed in the form of an annual benefit commencing at

normal retirement age."     29 U.S.C. § 1002(23)(A).    As the Supreme

Court has observed, section 1002(23)(A)'s "rather circular[]"

definition provides little guidance. Cent. Laborers' Pension Fund,
541 U.S. at 744.     Indeed, "[t]he only apparent textual limit" is

that an "accrued benefit" must be "expressed in the form of an

annual benefit commencing at normal retirement age."            Bd. of

Trustees of Sheet Metal Workers' Nat'l Pension Fund, 318 F.3d at

603 (discussing the parallel provision in the Internal Revenue

Code).   The parties agree that limit is satisfied in this case.

Apart from that limit, section 1002(23)(A) appears to be nothing

more than a "signpost directing us to look to the terms of the plan

at issue."     Id. at 602-03.7

             Section 1002(23) does explain that "[t]he accrued benefit

of an employee shall not be less than the amount determined under

section 1054(c)(2)(B) of this title with respect to the employee's

accumulated contribution."       29 U.S.C. § 1002(23); accord 26 U.S.C.

§ 411(a)(7)(D).       For present purposes, the substance of this

     7
       The plan document at issue contains no language to suggest
that the plaintiffs' pre-September 1998 "banked hour" benefits were
not intended to be eligible for "accru[al]."

                                   -11-
requirement is of no matter.          What is relevant is the provision's

use of the term "employee" as well as its tethering of "accrued

benefits" to the "employee's accumulated contribution."                There is

no doubt that the plaintiffs were employees at the time they were

promised the benefits.8         This benefit scheme also applied at the

time they retired.9

               Section 1002(6) of Title 29 defines "employee" as "any

individual employed by an employer."           29 U.S.C. § 1002(6).      Under

ERISA,    an    "employee"   thus     contrasts   with    a   "participant."

"Participant" is in turn defined by section 1002(7) as:

               any employee or former employee of an
               employer, or any member or former member of an
               employee organization, who is or may become
               eligible to receive a benefit of any type from
               an   employee  benefit   plan   which   covers
               employees of such employer or members of such
               organization, or whose beneficiaries may be
               eligible to receive any such benefit.

Id. § 1002(7).

               That there is a relevant distinction between "employees"

and   mere     "participants"    as   to   accrual   is   reinforced    by   the

contrasting language of section 1054(g)(1).           Under that provision,

"[t]he accrued benefit of a participant under a plan may not be

      8
       Although the plaintiffs are all now retired, the parties
agree that each plaintiff worked in the service for a covered
employer for some period of time following the merger.
      9
       We are not faced with a situation in which a post-retirement
increase in benefits was specified in pension plan documents while
the employee worked in the service of the employer. See Thornton,
566 F.3d at 607.

                                       -12-
decreased by an amendment of the plan."             29 U.S.C. § 1054(g)(1)

(emphasis added); accord 26 U.S.C. § 411(d)(6). Section 1054(g)(1)

refers to "participant[s]" rather than "employee[s]" for good

reason: If ERISA's purpose is to "mak[e] sure" that a worker

"actually . . . receive[s]" the defined pension benefit promised to

her "upon retirement," Nachman Corp. v. Pension Benefit Guaranty

Corp., 446 U.S. 359, 375 (1980), it would be nonsensical for anti-

cutback   protection   to   cease   the    moment    employment   ends   and

retirement begins.

           Taken together, sections 1002(23) and 1054(g)(1) outline

the following scheme: "[A] retirement benefit may be 'accrued' only

by an 'employee', but, once accrued, the benefit is protected from

diminution as long as the individual who accrued the benefit is a

'participant' in the plan, whether as an employee or as a retiree."

Thornton, 566 F.3d at 607 (discussing parallel Internal Revenue

Code provisions) (quoting Bd. of Trs. of the Sheet Metal Workers'

Nat'l Pension Fund v. Comm'r, 117 T.C. 220, 228-29 (2001)).          Under

this scheme, a promised benefit must provide incentives for future

employment in order for that benefit to "accrue[]," just in the

sense that the promise of a benefit must predate an individual's

retirement or termination.      See, e.g., Williams v. Rohm & Haase

Pension Plan, 497 F.3d 710, 714 (7th Cir. 2007) (holding that cost

of living adjustment ("COLA") was an "accrued benefit" where

promise of COLA predated plaintiffs' retirement); Bd. of Trs. of

                                    -13-
Sheet Metal Workers' Nat'l Pension Fund v. Comm'r, 318 F.3d 599,

604 (4th Cir. 2003) (holding that COLA was a "gratuitous benefit"

where promise of COLA postdated plaintiffs' retirement).           Once an

individual continues employment in exchange for a promised benefit,

that is enough, other things being the same, to generate the sort

of "justified expectation[]" the anti-cutback rule is designed to

protect.     Cent. Laborers' Pension Fund, 541 U.S. at 743.

             We sum up.   The Trustees properly concede that under the

terms   of   the   Post-Merger   Plan   prior   to   Amendment   Nine,   the

plaintiffs' pre-September 1, 1998 service entitles them to at least

their pre-September 1998 prospective "banked hour" benefits.             The

Trustees concede further that the plaintiffs were "employee[s]"

under the Post-Merger Plan when that plan went into effect.

Finally, the Trustees concede that the plaintiffs are still plan

"participant[s]."     We conclude that the plaintiffs' pre-September

1, 1998 "banked hour" benefits, prospective and retrospective, are

"accrued benefits" for purposes of section 1054(g)(1) and, so, that

Amendment Nine is inconsistent with the requirements of ERISA's

anti-cutback rule.        The Trustees' real argument is that the

plaintiffs did not "earn" their pre-September 1998 retrospective

"banked hour" benefits -- that they were a "gift" of sorts.              But

ERISA's anti-cutback rule does not ask whether benefits were

                                   -14-
"earned."10   Rather, it asks whether benefits have "accrued."   We

decline the Trustees' invitation to amend the statute.

          The district court is affirmed.

     10
       The Trustees contend that their interpretation of the anti-
cutback rule finds support in the decisions of other circuits. The
decisions on which the Trustees rely, however, concern only
benefits promised after retirement. See Rohm & Haas Pension Plan,
497 F.3d at 714 (holding that benefit cannot "accrue[]" if it is
"not included in the plan during the term of the participants'
employment" (emphasis added)); Thornton, 566 F.3d at 609 (holding
that an amendment cannot give rise to an "accrued benefit" for an
individual if "the amendment occurred after he or she permanently
separated from covered employment" (emphasis added)); Bd. of Trs.
of Sheet Metal Workers' Nat'l Pension Fund, 318 F.3d at 604 ("[T]he
benefit could not have been an 'accrued benefit' because it did not
accumulate during their service so as to become part of their
legitimate expectations at retirement under the terms of the Plan
then in effect." (emphasis added)).

                               -15-