The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court
MEMORANDUM OPINION AND ORDER
Before the Court are Defendant Aon Corporation's (hereinafter, "Aon") Motion to Dismiss and a Combined Motion to Dismiss by all other Defendants. For the following reason, the Motions are granted in part and denied in part.
As Benjamin Franklin once famously wrote, nothing in this world can be said to be certain, except death and taxes. This case deals with the latter and what recourse someone has when a retirement plan gives unto Caesar more than his fair share. The answer, unfortunately for Plaintiffs, is precious little.
Plaintiff Ramon Mejia ("Mejia") is a citizen of Panama who worked in Latin America for Verizon Communications Inc. ("Verizon") for thirty (30) years. Plaintiff Mario Boeri ("Boeri") was a Verizon employee for thirty-six (36) years. He is a citizen of Italy and worked in the Dominican Republic. Except where indicated, the following is Plaintiffs' version of events.
Plaintiff Mejia is a participant in four Verizon-related plans: the Verizon Management Pension Plan (the "Pension Plan"), the Verizon Excess Pension Plan (the "Excess Pension Plan," Verizon's GTE Executive Retired Life Insurance Plan (the "Life Insurance Plan") and the Verizon Income Deferral Plan (the "Income Deferral Plan"). Plaintiff Boeri is a participant in the Pension Plan and the Excess Pension Plan.
Verizon is the sponsor of all plans, which are governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. Defendant Verizon Employee Benefits Committee ("VEBC") is the plan administrator of the Pension Plan, although Verizon has also sometimes been referred to as the plan administrator by Defendants. Verizon is the plan administrator of the Life Insurance Plan.
Wells Fargo and Company ("Wells Fargo") is or was the withholding agent for one or more of the plans.
Aon Corporation ("Aon") in 2010 acquired Hewitt Associates, Inc. ("Hewitt"), the administrative and record keeping agent for one or more of the plans. Hewitt has also sometimes been listed by Defendants as a plan administrator of one or more of the plans.
FMR LLC ("Fidelity") is either the plan administrator or claims administrator with respect to one or more of the plans.
Morgan Stanley Smith Barney LLC ("Morgan Stanley") is successor-in-interest to Solomon Smith Barney, which was the administrator of the GTE stock-options program, a predecessor Verizon-related plan in which Mr. Boeri participated.
John Does 1-25 are unknown plans, fiduciaries of the plans or service providers to the plans.
Neither Plaintiff ever worked nor resided in the United States, making their employment income and benefits from their retirement plans "foreign-source" benefits not subject to U.S. taxes. Sometimes, foreign-source employees must file a Form W-8BEN certifying they are not a U.S. Citizen and their income is "not effectively connected with the conduct of a trade or business in the United States." Form W-8BEN, Part IV, 3; available at http://www.irs.gov/pub/irs-pdf/fw8ben.pdf.
Nonetheless, in 1998 and 1999, Morgan Stanley's predecessor withheld approximately $94,202 from Boeri when he exercised options in GTE's (predecessor to Verizon) stock-option program. In 2000, Morgan Stanley's predecessor sent Boeri an Internal Revenue Service ("IRS") "Notice of Information Discrepancy." A few months later, Verizon sent a follow-up letter, explaining Morgan Stanley had "incorrectly reported stock-option exercises you have performed to the U.S. Internal Revenue Service." The mistake occurred, Verizon said, because Morgan Stanley's computers could not distinguish between the Verizon Global ID number and a U.S. Social Security Number. It promised to assign Boeri and others a new Global ID "to prevent this from reoccurring."
But Boeri never received a refund of the $94,202.00.
In 2004, both Plaintiffs retired. Before Boeri did so, he inquired about whether any U.S. taxes would be withheld from his benefits and Verizon "and/or" Aon's predecessor assured him nothing would be withheld as long as the proper form was on file before payment was issued. When Boeri elected his retirement benefits, he noted his foreign-source status, included a W-8BEN form and informed administrators he was not subject to U.S. taxes.
Nonetheless, Boeri's Pension Plan took out U.S. taxes, and the lump-sum he received from the Excess Pension Plan did too, amounting to a withholding of more than $50,000. The plans deducted taxes from Mejia as well.
Mejia attempted to rectify the situation by taking actions including the following:
C Writing a letter to Fidelity on February 28, 2008 complaining of "erroneous withholding" and noting his Form W-8BEN was on file. Fidelity refused to stop the withholding on the grounds that the U.S.
does not have a tax treaty with Panama, a misunderstanding of the tax laws, Plaintiffs say. C Providing Fidelity with another Form W-8BEN on March 25, 2008 and again explaining, in writing, his tax-exempt status. Fidelity again cited the treaty issue and claimed the W-8BEN form was irrelevant to that issue. Fidelity further said it was acting in accordance with procedures established by Verizon.
C Writing to Fidelity again on April 17, 2008, explaining the error and imploring it to review the Internal Revenue Service Code and correct the problem. Fidelity again cited the treaty issue. C Writing to Fidelity on May 12, 2008 and this time enclosing copies of the relevant Internal Revenue Service ("IRS") publications.
C Sending the same materials on May 17, 2008 to the
Wells Fargo predecessor, the withholding agent. Wells Fargo demurred that it just provided ministerial services to Verizon and that it took its marching orders from Fidelity.
Finally, on July 24, 2009, Verizon Manager of Retiree Strategy & Administration Michael J. Thivierge ("Thivierge") wrote to Mejia and apologized for the confusion, explaining that the Verizon Benefits Center had not had his Form W-8BEN on file and mistakenly treated the benefits as if they had been earned inside the United State. Thivierge explained that Verizon tax attorneys had since reviewed the matter, ascertained that Verizon had the appropriate paperwork on file and promised that "Going forward, Mr. Mejia's monthly qualified pension and non-qualified deferred compensation payments will not be taxed." Verizon instructed Mejia to apply to the IRS for a refund for those years where the refund statute of limitations had not yet run (there is a three-year limitation) and agreed to reimburse him for the taxes for which he could no longer apply for a refund.
Mejia got a partial reimbursement from Verizon for the taxes withheld in 2005 and applied to the IRS for subsequent years, receiving partial refunds (the Complaint does not say why he did not receive a complete refund).
Despite Verizon apparently admitting its mistake, it continued to withhold taxes from Mejia's Income Deferral Plan, and continues to do so.
Apparently concerned for others similarly situated, when Mejia received the good news, he wrote a letter on August 25, 2009, thanking Verizon but expressing concern for other Verizon retirees whose taxes were still being withheld. Verizon's Thivierge responded September 4, 2009, promising it would "be communicating directly with those impacted retirees."
Rather than any meaningful communication with those retirees, the Verizon Benefits Center, managed by Aon "and/or" Verizon sent a mass mailing on November 20, 2009 informing them that their Social Security numbers matched those of a deceased individual, and asked them to sign a notarized affidavit attesting that their Social Security numbers were, in fact, correct.
Of course, none of the retirees has a Social Security number, not being United States citizens. Plaintiffs interpret this mass mailing as yet another instance of some of Defendants' computers confusing Verizon Global ID numbers with Social Security numbers -- the same problem identified with Mr. Boeri in 2000 that Verizon promised to fix but apparently never did. Because the pre-printed affidavits contained retirees' Verizon Global ID number and asked (upon threat of suspension of benefit payments) retirees to swear it was their Social Security number, Plaintiffs claim this is evidence of fraud by Defendants.
Boeri faced a Kafkaesque nightmare similar to Mejia's. When he filed an ERISA complaint with the Verizon Claims Review Unit (the "VCRU") about the $50,000-plus deducted from his excess income lump-sum payments in 2004, the VCRU mistakenly told him he was not eligible for a tax exemption. Boeri believed them, and pursued the matter no further, until 2009, when he apparently learned of Mr. Mejia's limited success. He complained in writing to Verizon's Pension Department on September 16, 2009. Verizon Corporate Benefits personnel noted "it appears that his circumstances were identical to Mr. Mejia's" and at least 24.12 percent of his benefits should have been "exempt from U.S. taxes."
But Verizon was not as generous with Boeri, denying his claim on April 5, 2010, saying it had previously denied it in 2005 and would not now treat his renewed efforts as an appeal. The Complaint does not say if Verizon fixed Boeri's improper withholding issues.
Plaintiffs filed this class-action complaint on June 9, 2011 under ERISA.
It alleges aiding and abetting a breach of fiduciary duty against all Defendants (Count 5) and asks for an injunction against all Defendants that would prohibit them from future wrongful withholdings (Count 3). Count 1 is a claim for benefits against the four plans, arguing Plaintiffs are due the tax monies that were improperly withheld. Count 2 alleges breach of fiduciary duty against Verizon and the VEBC. Count 4 charges Verizon and the VEBC with co-fiduciary liability. Count 6 claims the VEBC and Verizon failed to furnish ERISA plan documents requested by Mejia. Counts 7 and 8 are claims in the alternative, filed in the event that any claims are construed not to be governed by ERISA. ...