Court Opinion

ID: 9486888
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:03:28.43538+00
Date Added: 2024-06-11T17:51:59.866261
License: Public Domain

KENNEDY, Circuit Judge,
dissenting.
Because I conclude that the Plan at issue in this case is of the kind that clearly gives the administrator discretion “to determine eligibility for benefits or to construe the terms of the plan ’’ Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989), I respectfully dissent.
Section 7.01(c) of the Plan was amended in December 1989, retroactive to April 15,1989, to provide:
[i]n the event of the termination of the Plan without establishment of a successor plan, or in the event of the sale by an Employer of substantially all of the assets of a trade or business or the sale of a subsidiary of an Employer, provided that in the case of such a sale the Member continues employment with the buyer, the entire amount to the credit of the Member’s Accounts may be distributed, in the [administrator’s] discretion....
The Internal Revenue Code permits employers to make retroactive amendments to stock bonus plans such as the Plan here, effective as of the first day of the plan year. 26 U.S.C. § 401(b). Thus, we must also consider this amended provision in determining whether the trustees had discretion.
*1379Section 8.07 of the Plan provides that the committee “from time to time shall establish rules for the administration of the Plan and the transaction of its business. The determination of the Committee as to any disputed question shall be conclusive.” Plans with similar language have been held to invoke the arbitrary and capricious review standard. See, e.g., Johnson v. Eaton Corp., 970 F.2d 1569, 1571-72 (6th Cir.1992) (holding arbitrary and capricious standard applicable given plan’s terms that administrator “shall have all such powers and authority as may be necessary to carry out the provisions of this Plan,” that administrator may “establish rules for the administration of this Plan ... and [to] determine the application of such rules,” and that administrator’s decision on the denial of claims “shall constitute the final disposition under [the] Plan.”); Callahan v. Rouge Steel Co., 941 F.2d 456, 459 (6th Cir.1991) (holding arbitrary and capricious standard applicable given plan’s terms that “[fji-nal decisions shall be made by the Company as to the interpretation and application of this policy,” and that fiduciary is granted “discretionary authority ... [to] construe the terms of the plan.”). In this ease, the administrator’s power to resolve disputes over the terms of the Plan, including the distribution, is evident by the administrator’s authority under section 8.07 to have its decisions over any disputed question be deemed conclusive. See Johnson, 970 F.2d at 1572. Given the language in sections 8.02 and 8.07, as well as the language in section 7.01(c), I would review Quantum’s interpretation of the phrase “termination of employment” under an arbitrary and capricious standard. The majority limits section eight’s discretion to disputes as to the meaning and application of any rules the committee might establish pursuant to the first sentence of section 8.01. That first sentence reads:
The general administration of the Plan and the responsibility for carrying out the provisions of the Plan shall be placed in a committee of not less than three persons appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors.
I cannot read the sentence so restrictively, especially in view of section 8.02 which provides:
The members of the Committee shall elect a chairman from their number and a secretary who may be but need not be one of the members of the Committee; may appoint from their number such subcommittees with such powers as they shall determine; may authorize one or more of their number or any agent to execute or deliver any instrument or make any payment on their behalf; may retain counsel, employ agents and provide for such clerical, accounting, and consulting services as they may require in carrying out the provisions of the Plan; and may allocate among themselves or delegate to other persons all or such portion of their duties under the Plan, other than those granted to the Trustee under the trust agreement adopted for use in implementing the Plan, as they, in their sole discretion, shall decide.
(Emphasis added.)
A decision of a plan administrator is not arbitrary and capricious when it is possible to offer a rational explanation, based on the evidence, for that outcome. Wells v. United States Steel & Carnegie Pension Fund, Inc., 950 F.2d 1244, 1248 (6th Cir.1991). Thus, even if an aggrieved applicant offers a reasonable interpretation of the terms of a plan that conflicts with that of the administrator, we should not disturb the decision of the administrator so long as that interpretation is also reasonable. Id.
I cannot find that the administrator’s interpretation, that a “termination of employment” did not occur when Quantum sold its division and its employees continued to work for the purchaser without interruption, was unreasonable.
I am unable to agree that the tax cases relied on by the District Court are not helpful. The Internal Revenue Code, subsection 401(a), governs whether an employee’s stock ownership plan, or any other retirement plan, is qualified for tax-favored status. Plan administrators must comply with Revenue Rulings which do not consider an employee “separated from service” where he or she *1380continues in the same job for another employer. Rev. Rul. 79-336, 1979-2 C.B. 187 and Rev. Rul. 81-141, 1981-1 C.B. 204. The Plan had to comply with tax laws to be approved so contributions could be deductible.
At the time of the sale of the Emery Division, the Plan provided for distributions upon a participant’s “termination of employment.” It also permitted former employees to remain members, that is, participants in the Plan, until benefits were distributed and to defer distribution until age 70 1/2. The Plan provides for methods of requesting distributions. Yet, plaintiffs did not formally elect distribution of their accounts. Under the terms of the Plan, a member is not entitled to distribution prior to age 66, unless he or she formally elects distribution. Thus, even if I were to agree with the majority’s analysis, plaintiffs are not entitled to summary judgment.