United States District Court, Northern District of Illinois, E.D
July 24, 1980
WILLIAM R. JANOWSKI AND ROBERT H. BARNHISEL, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL NO. 710 PENSION FUND ET AL., DEFENDANTS.
The opinion of the court was delivered by: McMILLEN, District Judge.
DECISION ON CROSS-MOTIONS FOR SUMMARY JUDGMENT ON THE AMENDED
Both parties have filed motions for summary judgment on the
Amended Complaint. Plaintiffs brought this action contesting
certain amendments to the Local 710 pension plan, effective
February 1, 1976. This case has been certified as a class action
pursuant to F.R.C.P. 23(b)(2). Plaintiffs contend that the
amendments violate the requirements of E.R.I.S.A. and the
trustees' fiduciary duties thereunder. The motions raise solely
questions of law.
The court rejects defendants' preliminary challenges to
plaintiffs' right to bring this action, as well as defendants'
suggested standard of review. Plaintiffs' standing to sue as
participants in the plan is created by 29 U.S.C. § 1132(a)(3). We
also hold that if the plan amendments violate E.R.I.S.A.
requirements, then defendants' official actions are arbitrary and
capricious as a matter of law. Thus we deal with plaintiffs'
contentions seriatim on the merits, as follows.
1. The alteration of the "normal retirement age" from 57 to 65.
The old plan defined an employee's normal retirement date as the
date when he attained his 57th birthday or otherwise became
eligible for retirement benefits. Under § 1.16 of the new plan,
normal retirement age is 65, "or if later," the participant's age
on the tenth anniversary of his participation. Thus the normal
retirement date under the new plan is the first day of the month
following the participant's attainment of "normal retirement
age," per § 1.17.
The crucial phrase "normal retirement age" is defined in
E.R.I.S.A. at 29 U.S.C. § 1002(24) and in the Internal Revenue
Code at 26 U.S.C. § 411(a)(8). It is the earlier of
(A) the time a plan participant attains normal
retirement age under the plan, or
(B) the later of —
(i) the time a plan participant attains age 65, or
(ii) the tenth anniversary of the time a plan
participant commenced participation in the plan.
Defendants contend that the definition in § 1.16 of the new plan
is controlling, while plaintiffs contend that "normal retirement
age" has acquired a technical meaning under this plan as a whole
and that age 57 should be retained.
The above definition permits the plan to fix a normal
retirement age, subject to certain limitations. Section 1.16 of
the new plan does just that. Accordingly, defendants are correct
that age 65 is the normal
retirement age under the new plan. See Ernst & Ernst v.
Hochfelder, 425 U.S. 185, 197, 96 S.Ct. 1375, 1382-1383, 47
L.Ed.2d 668 (1976).
Absent a clearly expressed legislative intention to the
contrary, the statutory language must ordinarily be regarded as
conclusive. See Consumer Product Safety Commission v. GTE
Sylvania, ___ U.S. ___, ___, 100 S.Ct. 2051, 2055-2056, 64
L.Ed.2d 766 (1980). The legislative history here confirms, rather
than detracts from, defendants' position. The House Ways and
Means Committee Report twice declares that a given plan will
define the normal retirement age, subject to the statutory
limitations. 1974 U.S.Code Cong. & Ad.News, pp. 4639, 4670, 4687,
4726. The House Conference Report is to the same effect:
. . In general, the accrued benefit is to be
defined in terms of the benefit payable at normal
retirement age. Normal retirement age is generally to
be the age specified under the plan. However, it may
not be later than age 65 or the tenth anniversary
of the time the participant commenced
participation, whichever last occurs.
1974 U.S.Code Cong. & Ad.News pp. 5038, 5054-55.
Defendants' position is also consistent with the interpretation
adopted by the agency charged with the responsibility to
administer these new statutory provisions. Cf. Zenith Radio Corp.
v. United States, 437 U.S. 443, 450-51, 98 S.Ct. 2441, 2445-2446,
57 L.Ed.2d 337 (1978). Department of Treasury Regulation 26
C.F.R. (1979) § 1.411(a)-7(b) is squarely supportive of that
position, as is Revenue Ruling 78-120, 1978-1 C.B. 117, requiring
special treatment below age 55.
Plaintiffs rely upon the meaning of "normal retirement age" as
generally understood prior to the enactment of E.R.I.S.A. That
argument cannot stand against the language of the statute and its
legislative history. While plaintiffs cite an interpretive letter
from A.D. Fields, Chief, Employee Plans Technical Branch
(I.R.S.), which apparently supports their position (Exhibit A to
plaintiffs' reply memorandum), that opinion likewise is overcome
by the much weightier sources to the contrary.
Plaintiffs' claim that 57 is technically the "normal retirement
age" under the new plan is the linchpin for several alleged
E.R.I.S.A. violations. In view of our conclusion that age 65 is
the "normal retirement age" under § 1.16 of the new plan, the
remainder of this decision addresses only plaintiffs' claims that
do not depend upon their erroneous interpretation of "normal
2. Section 3.10 of the new plan should provide for a minimum
vested pension for participants who were employed before February
1, 1976. Section 3.10 of the new plan provides for the
calculation of a vested pension. The participant becomes eligible
under § 3.09 after 10 years of service if other pension
alternatives are not available to him. Section 3.10 provides for
a level of benefits which plaintiffs correctly contend is in part
inconsistent with 26 U.S.C. § 411(b)(1)(D) and
29 U.S.C. § 1054(b)(1)(D). These sections provide in pertinent part as
(D) Subparagraphs (A), (B), and (C) shall not apply
with respect to years of participation before the
first plan year to which this section applies, but a
defined benefit plan satisfies the requirements of
this subparagraph with respect to such years of
participation only if the accrued benefit of any
participant with respect to such years of
participation is not less than . . . (i) his accrued
benefit determined under the plan, as in effect from
time to time prior to September 2, 1974. . . .
Defendants contend that the old plan, dated August 1, 1973,
contained no accrued benefit formula such as now appears in §
3.10 of the new plan and that therefore the foregoing subsection
(i) is inapplicable. However, the old plan did provide for
specific benefits to persons retiring at age 57 after 20 years of
qualified service. Since the full benefit was $450.00 per month,
1/20th was implicitly accrued in each of the 20 years of
qualified service. Thus § 3.10 of the new plan should be
liberalized as proposed by plaintiffs in their filing of February
3. Defendants have failed to provide appropriate accrual for
part-time service. This claim attacks § 4.04 of the new plan,
which allocates service credit on three broad bases: (1) those
with less than 20 weeks of covered service receive no credit, (2)
those with 20 but less than 35 weeks receive one-half credit, and
(3) those with 35 weeks or more receive one full year's credit.
This rough allocation of credit is, in our opinion, contrary to
26 U.S.C. § 411(b)(3)(B), which provides as follows:
(B) Less than full time service. For purposes of
this paragraph, except as provided in subparagraph
(C), in the case of any employee whose customary
employment is less than full time, the calculation of
such employee's service on any basis which provides
less than a ratable portion of the accrued benefit to
which he would be entitled under the plan if his
customary employment were full time shall not be
treated as made on a reasonable and consistent basis
[such a basis is mandated by § 411(b)(3)(A).]
29 C.F.R. (1979) § 2530.200b-3(e)(ii) provides that each week
of service be treated as the equivalent of 45 service hours. If
each week is the equivalent of 45 hours, § 4.04 of the new plan
gives no credit for less than 900 hours because it gives none for
less than 20 weeks. The plan gives one-half year credit for 900
to 1574 hours, and a full year's credit for 1575 or more hours.
The regulations, however, offer two examples which are designed
to satisfy the statutory requirement: (1) each employee with more
than 1000 hours of covered service is granted credit on a pro
rata basis, or (2) those with more than 1000 hours are granted a
percentage of a full year's credit in gradations of 10 percent
(29 C.F.R. (1979) § 2530.204-2(c)(4)).
Therefore, although defendants are not required by §
411(b)(3)(C) to grant credit for the first 1000 hours
(approximately 21 service weeks at 45 service hours per week),
the statute and regulations require a more accurate pro rata
credit thereafter. Section 4.04 of plaintiffs' proposed plan
amendment, filed February 4, 1980, should be incorporated in the
new plan, thus conforming it to the "ratable portion of the
accrued benefit" requirement set forth in § 411(b)(3)(B).
4. Section 3.08 of the new plan sets out a deficient schedule
for awarding early retirement benefits. Plaintiffs have
demonstrated that the schedule in § 3.08 reduces early retirement
benefits which were payable under the prior plan. (See paragraph
18 of the Amended Complaint which, although denied in defendants'
answer, has subsequently been effectively conceded.) A reduction
violates 26 U.S.C. § 411(d)(6), and 26 C.F.R. (1979) §
Defendants amended the new plan effective July 1, 1979, by
permitting participants who entered covered employment prior to
July 1, 1976 to choose the previous early retirement benefits.
The amendment should have applied retroactively, in order to make
it available to those persons who terminated their employment
prior to the amendment.
Since the improper schedule contained in the new plan prior to
the amendment could be re-adopted by the trustees, and since
retroactivity is not specifically provided for, plaintiffs are
entitled to injunctive relief on this phase of their case.
5. Defendants have improperly reduced vested retirement
benefits. Under the old plan, an employee with 20 or more years
of service was entitled to a deferred benefit payable for life
after reaching the age of 65. (Article III, Sec. 18.) Under §
3.09 of the new plan, a vested pension benefit is available to
those covered employees with more than 10 years of service, but,
for employees with 20 or more years of service the deferred
benefit is less than would have been paid under the old plan.
Thus the benefit level for these employees, when the employee is
not eligible for some
other plan benefit, has been reduced relative to the old plan.
This also violates § 411(d)(6).
Defendants contend that, in practice, the deferred benefit
option available under the old plan is made available to covered
employees who would have qualified thereunder. This practice is
not spelled out in the new plan nor in its descriptive pamphlet.
29 U.S.C. § 1022(b) requires that the plan description and
summary plan description describe all provisions for
Therefore, the practice which defendants contend is available
under the new plan should be specifically provided for, as
contained in plaintiffs' proposed amendment to § 3.10, filed
February 4, 1980.
Both parties have asked for attorneys' fees and costs pursuant
to 29 U.S.C. § 1132(g). We perceive no ground for making such an
award to defendants, and any award to plaintiffs will depend upon
the proper interpretation and application of § 1132(g).
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that plaintiffs
file an order for declaratory and injunctive relief, agreed as to
form, within fifteen (15) days of the entry hereof, which will
accomplish the following amendments to defendants' plan as it now
(1) Section 3.08 shall provide for early retirement benefits on
at least the same terms as under the old plan, retroactively for
those who terminated employment prior to July 1, 1979, without
any further reduction by amendment;
(2) Section 3.10 shall provide for calculation of a vested
pension, including appropriate accrual of benefits for covered
service prior to 1976;
(3) Section 3.10 shall be amended to provide for a deferred
benefit, as under the old plan, payable after 20 or more years of
covered service at age 65;
(4) Section 4.04 shall provide a reasonable and consistent
basis for calculating accrual of benefits for less than full time
Plaintiffs may also serve and file a motion for attorneys' fees
and costs, supported by affidavits of the time expended and the
qualifications of the attorney charging such time, to be briefed
pursuant to Local Rule 13.
This case will be called for entry of a judgment order on
Monday, September 8, 1980 at 11:30 a.m.
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