United States District Court, S.D. Illinois
March 10, 2004.
LINDA CALL, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
THE AMERITECH MANAGEMENT PENSION PLAN, Defendant
The opinion of the court was delivered by: G. PATRICK MURPHY, Chief Judge, District
MEMORANDUM AND ORDER
This matter is before the Court on Defendant's motion to dismiss
(Doc. 48), Defendant's motion for summary judgment (Doc. 52), and
Plaintiffs motion for summary judgment (Doc. 56). The Court held a
hearing on September 15, 2003, and took the motions under advisement. For
the reasons set forth below, Plaintiff's motion for summary judgment is
granted, and Defendant's motions are denied.
This action involves a claim asserted under the Employee Retirement
Income Security Act of 1974("ERISA"), 29 U.S.C. § 1001-1461. The
class representative, Linda Call, was an employee of Ameritech
Corporation from May 28, 1968, to November 30, 1999, and was a
"participant" in the Ameritech Management Pension Plan ("the Plan")
within the meaning of Section 3(7) of ERIS A. When Ms. Call terminated
her employment in November 1999, she elected to receive her Plan benefit
as a lump sum distribution. The terms and provisions of the Plan as
adopted and amended
were set forth in an instrument captioned " Ameritech Management
Pension Plan (As Amended and Restated Effective as of May 1, 1995)" (the
"AMPP95"). (See Exhibit A to Doc. 55.) Ms. Call was a
"transition participant" and, therefore, entitled to a transition benefit
(as those terms are defined in Supplement B to the AMPP95), because on
May 1, 1995, she was within five years of being eligible for a service
pension. As a transition participant, Ms. Call was entitled to a benefit
in an amount equal to the greater of her transition benefit and her
defined lump sum (DLS) benefit. On or about December 12, 1999, the Plan
paid Ms. Call $219,312.14, which was the actuarial equivalent, determined
in accordance with the "Eleventh Amendment" to the AMPP95, of the
immediate annuity to which she was entitled under Section B-4 of
Supplement B to the AMPP95. The parties agree that as a matter of
arithmetic, the amount of the lump sum paid to Ms. Call was correctly
computed under the terms of the Eleventh Amendment. However, if Ms. Call
had retired on the day before the Eleventh Amendment was effective, the
actuarial value of the B-4 immediate annuity she would have received
using the 1983 Group Annuity Mortality ("83 GAM") table and the
applicable Pension Benefit Guaranty Corporation ("PBGC") interest rates
The parties agree there is no statutory or regulatory impediment to
what the Plan seeks diminished lump sum transition benefit
payouts and that the contest turns on the Plan language. Excepted
from this agreement is the effect of the May 1, 1995, amendment which the
Court will take up first in its analysis. The destination is clear enough
but the route is tortuous, so some background is required for sure
Ms. Call was a member of a class originally defined by this Court in
the case of Malloy v. Ameritech, No. 98-CV-488-GPM (S.D. Ill.
July 21, 2000). She was excluded from that class, however, after the
Court amended the class definition on July 12, 2001. The Court entered
judgment in favor of a class of plan participants in
theMalloy case, holding, inter alia, that the plan was
required by its terms to use the PBGC interest rates for valuing lump
sums and the 83 GAM table to value lump sum distributions made after
January 1, 1994. See Malloy v. Ameritech, No. 98-CV-488-GPM
(S.D. Ill. February 7, 2000).
On August 26, 2003, this Court certified a class pursuant to
Rule 23(a)(b)(2) of the Federal Rules of Civil Procedure defined as:
All participants in the Ameritech Management
Pension Plan who qualified for a Transition
Benefit, received a lump sum distribution of that
Transition Benefit after July 1, 1999, and whose
lump sum distribution was less than it would have
been had 1) the participant resigned on the day of
the Eleventh Amendment, and 2) his or her lump sum
had been computed utilizing the interest rate used
by the PBGC to value lump sums as of the year in
which they received their distribution and the
mortality table set out in Revenue Ruling 95-6
which is a blended table derived from the
mortality table used by the PBGC for valuing
The Court also at that time appointed Plaintiff Linda Call as class
Ms. Call claims that the Plan administrator's application of Section
12.1 of the Plan is unlawful. That section provides:
Amendment. While it is expected
that the Plan will be continued, either the
Company or the Committee may terminate the Plan or
amend the Plan from time to time subject to
Supplement C; provided, however, that no amendment
will reduce a Participant's accrued benefit to
less than the accrued benefit that he would have
been entitled to receive if he had resigned from
the employ of the Employers and Related Companies
on the day of the amendment . . . and no
amendment will eliminate an optional form of
benefit with respect to a Participant or
Beneficiary except as otherwise permitted by law
and applicable regulation.
(AMPP95 Exhibit A to Doc. 55, pp. 31-32.) This section was
in effect before the adoption of the
Eleventh Amendment and the legislation which authorized the
Eleventh Amendment. Specifically, Ms. Call argues that the Eleventh
Amendment to the Plan, adopted July 1, 1999, cannot serve to provide her
with a lump sum transition benefit less than what she would have received
had she retired on the date the Eleventh Amendment became effective.
Through this Amendment, the lump sum provisions of the Plan were amended.
Lump sum distributions made after July 1, 1999, would be valued as the
greater of the distribution produced by use of (1) the PBGC interest
rates for valuing lump sums and the UP-1984 mortality table or (2) the
interest rate on 3 0-year treasury bonds and the 83 GAM table. The Plan
argues that the administrator's interpretation of Section 12.1 is not
arbitrary and capricious and is, accordingly, lawful because the
administrator is granted discretion to interpret the Plan language.
Ms. Call asserts that she and the members of the class should have
received the lump sum distributions they would have received had they
resigned before the Eleventh Amendment took effect, utilizing the factors
this Court found were required in the Malloy case, that is, the
83 GAM table and the PBGC interest rates structure. The Plan argues that
Ms. Call's payment was properly computed, and she was paid all she was
entitled to receive.
Under the well-settled standard, summary judgment is proper "if the
pleadings, depositions, answers to interrogatories and admissions on
file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to
judgment as a matter of law." FED. R. Civ. P. 56(c); Cox v. Acme
Health Servs., Inc., 55 F.3d 1304, 1308 (7th Cir. 1995). A genuine
issue of material fact exists for trial when, in viewing the record and
all reasonable inferences drawn from it in a light most favorable to the
nonmovant, a reasonable jury
could return a verdict for the nonmovant. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). The movant bears the burden
of establishing that there exists no genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the movant meets this burden, the nonmovant must set forth specific
facts that demonstrate the existence of a genuine issue for trial. FED.
R. CIV. P. 56(e); Celotex, 477 U.S. at 324. Rule 56(c) mandates
the entry of summary judgment against the party "who fails to make a
showing sufficient to establish the existence of an element essential to
the party's case, and in which that party will bear the burden of proof
at trial." Celotex, 477 U.S. at 322. When, as here,
cross-motions for summary judgment are filed, the Court looks to the
burden of proof that each party would bear on an issue at trial and
requires that party to go beyond the pleadings and affirmatively
establish a genuine issue of material fact. See Santaella v.
Metropolitan Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997).
Interpretation of an ERISA plan "is a subject particularly suited to
disposition by summary judgment." Grun v. Pneumo Abex Corp.,
163 F.3d 411, 419 (7th Cir. 1998) (citing Metalex Corp. v. Uniden
Corp., 863 F.2d 1331, 1333 (7th Cir. 1998)).
With respect to the motion to dismiss, the Court must take all
allegations in the complaint to be true and view them, along with all
reasonable inferences to be drawn therefrom, in the light most favorable
to the plaintiff. Powe v. City of Chicago, 664 F.2d 639, 642
(7th Cir. 1981). A motion to dismiss is properly granted only if it
appears beyond doubt that a plaintiff is unable to prove any set of facts
which would entitle him or her to relief. Benson v. Cady,
761 F.2d 335, 338 (7th Cir. 1985) (citing Conley v. Gibson,
355 U.S. 41, 45-46 (1957)). When the issue is exhaustion of administrative
remedies, the Court has discretion to require exhaustion before bringing
suit under ERISA. See Powell v. AT & T Comm., Inc.,
938 F.2d 823, 825 (7th Cir. 1991).
Motion to Dismiss
Initially, the Plan seeks dismissal pursuant to Federal Rule of Civil
Procedure 12(b)(6) on the grounds that Ms. Call has failed to exhaust her
administrative remedies. (See Docs. 48-49.) Ms. Call alleges in
her complaint that exhaustion would be fufile, and she opposes the Plan's
late attempt to dismiss her complaint on this basis. (See Doc.
82.) Exhaustion is not mandated by ERISA, see Powell, 93 8 F.2d
at 825, and in the Seventh Circuit, it is commonly excused when it would
be fufile. See, e.g., Gallegos v. Mt. Sinai Med. Ctr.,
210 F.3d 803, 808 (7th Cir. 2000); Smith v. Blue Cross & Blue Shield
United of Wis., 959 F.2d 655, 658-59 (7th Cir. 1992).
Here, the motion to dismiss was not filed until the case was ripe for
adjudication on the issue of liability. The Plan continues to deny that
Ms. Call and the class she represents are entitled to more than they
received there is no reason to believe that their response would
be any different if the claims were returned to the administrative level
almost two and a half years after the action was filed. The Court finds
that Ms. Call has shown that it is certain her claim would be denied, and
the futility exception to the exhaustion requirement applies. See
Robyns v. Reliance Standard Life Ins. Co., 130 F.3d 1231, 1238 (7th
Cir. 1997). Defendant's motion to dismiss is denied.
Motions for Summary Judgment
There are no factual disputes as to the liability issues; the only
issue is whether Ameritech violated the literal terms of the Plan when it
made the lump sum distribution to Ms. Call.
Ms. Call argues that if she had retired and requested a lump sum
distribution of her retirement benefit before the Eleventh Amendment took
effect, the Plan would have been required to compute the present value of
her benefit by using (a) the PBGC interest rates, and (b) the 83 GAM
table. If Ms. Call's lump sum benefit had been computed in this manner,
it would have been
more than what she was actually paid.
This Court found in Malloy that the Plan's terms required use
of the PBGC interest rates for valuing lump sums and the 83 GAM table.
According to Ameritech, Malloy is inapplicable because it
involved an earlier version of the Plan and not the Plan in effect just
before the adoption of the Eleventh Amendment.
Insofar as the May 1, 1995, amendment purports to use something other
than the PBGC interest rates and the 83 GAM table, it is unlawful and,
thus, ineffective. Ms. Call argues that this Court's order in
Malloy collaterally estops the Plan from relitigating the issue
of the proper interest rates. There is no reason to analyze the merits of
this argument, because the result is unavoidably the same.
The Retirement Protection Act of 1994 (the "RPA"), which became
effective December 8, 1994, authorizes in certain cases the use of the
interest rate on 30-year U.S. Treasury securities rather than the PBGC
rates and the 83 GAM tables. But to avail itself of this option, the Plan
had to be amended to embrace the so-called GATT (General Agreement on
Tariffs and Trade) assumptions which did not happen until its
adoption of the Eleventh Amendment. So, if Ms. Call had retired the day
before the Eleventh Amendment took effect, she was entitled to receive
$255,088.45 rather than the $219,312.14 she received later that year. The
question is whether the larger sum is an "accrued benefit" protected by
Section 12.1 of the Plan.
The parties agree that the Eleventh Amendment which expressly adopted
the GATT assumptions was specifically excepted from the Internal Revenue
Code's anti-cutback rules. See 26 U.S.C. § 411(d)(6).
Section 12.1 of the Plan could have been amended along with the Eleventh
Amendment to reduce lump sum payouts to the extent of the actuarial
assumptions authorized by
the RPA. But Section 12.1 was not amended, and as far as the Court
knows, it is to this day a part of the Plan.
The jargon of ERISA is foreign to the larger culture. It is more akin
to a code that only tutored experts can decipher. In this specialized
realm, when pension experts use technical words like "accrued benefit"
and the like, those words have special meaning and significance. See
Hickey v. Chicago Truck Drivers, Helpers, and Warehouse Workers
Union, 980 F.2d 465, 468 (7th Cir. 1992) ("The term `accrued
benefit' has a statutory meaning, and the parties cannot change that
meaning by simply labeling certain benefits as `accrued
benefits'. . . "). There is not much room for ambiguity and
interpretation this is not like a case where a person could
reasonably argue that a "Cosmo" means a magazine instead of a popular
Ms. Call's argument is simple. She does not claim she was deprived of
an optional form of benefit. Instead, she argues that the actuarial
assumptions used to calculate her lump sum distribution were a part of
her "accrued benefit." In this regard she cites Revenue Ruling 81-12
(see 1981 WL 165942), certain Treasury Regulations, and
26 U.S.C. § 411(d)(6), the so-called "anti-cutback" rule. The Plan
argues that the lump sum distribution that Ms. Call received is an
optional form of benefit and not an accrued benefit. According to the
Plan, § 411(d)(6) only provides that reducing early retirement
subsidies or eliminating optional forms of benefit shall be
treated as reducing accrued benefits. Admittedly, there is a
distinction between treating something as if it were something else and
expressly stating that the things are one and the same. But does this
distinction really make a difference? In light of Revenue Ruling 81-12
and Regulation 1.411(d)-3, it does not. See
26 C.F.R. § 1.411(d)-3 ("Plan provisions indirectly affecting accrued benefits
include, for example, provisions relating to . . . actuarial factors
for determining optional or early retirement
benefits.") Actuarial assumptions are part of the "accrued
benefit," and whether the benefit is taken as an annuity or lump sum
makes no difference for ERISA purposes.
At the conclusion of the hearing on this matter, counsel for the Plan
was asked to explain why the term "accrued benefit" as used in Section
12.1 of the Plan did not carry the actuarial assumptions as it does for
purposes of Internal Revenue Code § 411(d)(6). The answer was
couched in terms of the Plan administrator's discretion to interpret the
Plan. The discretion is purportedly triggered by the inclusion of the
term "optional form of benefit" which is also found in Section 12.1. The
idea is that this section specifically authorizes the elimination of an
optional form of benefit in certain instances; namely, when "otherwise
permitted by law and applicable regulation." Again, the exact language
No amendment will eliminate an optional form
of benefit with respect to a Participant or
Beneficiary except as otherwise permitted by law
and applicable regulation.
("AMPP95" Exhibit A to Doc. 55, p. 32.) At this point, the
Plan's argument collapses.
There is nothing in Section 12.1 of the Plan that even arguably implies
that Ms. Call's lump sum distribution was not an accrued benefit. It is
true that in certain instances, an optional form of benefit can be
completely eliminated. But that possibility was not even implicated in
this case. Ms. Call's right to take her accrued benefit in a lump sum is
not challenged. She took her pension as a lump sum by choice on her part,
not by grace on the part of the Plan. Moreover, insofar as the language
"otherwise permitted by law" is concerned, the RPA provides only that
adoption of the GATT actuarial assumptions will not work to constitute a
violation of the anti-cutback provisions of 411(d)(6). There is no law
or regulation that authorizes the Plan to restrict Ms. Call's right to
take her pension in a lump sum. And, it is abundantly clear that the
words "otherwise permitted by law"
refer only to the term "optional form of benefit;" these words do
not in any way qualify the term "accrued benefit" which is found in the
immediately preceding independent clause. Section 12.1 could have been
drafted to take advantage of the GATT actuarial assumptions, in which
event Ms. Call would have had to be satisfied with what she actually
received; but that never happened and the Plan now will have to come
through with what it promised.
Section 12.1 of the AMPP95 is clear and unambiguous. The Plan
administrator does not have the discretion to interpret the term "accrued
benefit" so that it does not carry the actuarial assumptions that it does
in the rest of the ERISA world in this type of situation. There is
nothing in Section 12.1 that attenuates the express promise that a
participant's accrued benefit will not be diminished by future Plan
amendments. There is no law or regulation that sanctions the elimination
of Ms. Call's right to take her accrued benefit as a lump sum. The
argument that when Ms. Call exercised her option to take her pension in
the immediate annuity form of a transition benefit it was no longer
protected as an "accrued benefit" is wholly without merit.
In light of the foregoing, Plaintiff's motion for summary judgment
(Doc. 56) is GRANTED, and Defendant's motion for summary
judgment (Doc. 52) is DENIED. Likewise, Defendant's motion to
dismiss (Doc. 48) is DENIED.
IT IS SO ORDERED.
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