United States District Court, N.D. Illinois, Eastern Division
M. MICHAEL REILLY, Plaintiff,
CONTINENTAL CASUALTY CO., Defendant
For M. Michael Reilly, Plaintiff: Derke Jeffrey Price, LEAD ATTORNEY, Darcy L. Proctor, Ancel, Glink, Diamond, Bush, DiCianni & Rolek, P.C., Chicago, IL.
For Continental Casualty Co., Defendant: Richard Burk Lapp, LEAD ATTORNEY, Edward Chester Young, Nathan Thomas Kipp, Samuel Michael Schwartz-Fenwick, Seyfarth Shaw LLP, Chicago, IL.
OPINION AND ORDER
SARA L. ELLIS, United States District Judge.
Plaintiff M. Michael Reilly (" Reilly" ) and Defendant Continental Casualty Company (" CNA" ) bring cross-motions for summary judgment on Reilly's Complaint alleging that CNA violated Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1132(a)(1)(B), by denying his claim for additional benefits. Reilly seeks to collect the full amount of retirement benefits as previously quoted to him by CNA, challenging the downward adjustment of those benefits just before his eligibility began as without rational basis. Because the Court
agrees that the administrative record provides no reasonable basis for CNA's denial of benefits, Reilly's Motion for Summary Judgment  is granted and CNA's Motion for Summary Judgment  is denied.
Reilly was a CNA employee from January 1, 1991 until October 29, 1999. Reilly participated in CNA's Retirement Plan (the " Plan" ) and Supplemental Executive Retirement Plan (the " SERP" ), known at the time of his employment as the CNA Employees' Benefit Equalization Plan. CNA used the SERP to give highly compensated participants a benefit equal to what they would have been eligible for under the Plan but for Internal Revenue Code compensation limitations. CNA is the plan administrator for both the Plan and the SERP and has the exclusive right to interpret their terms and provisions. It also has discretion in the administration of the Plan. Under the terms of the Plan, CNA is given the power to decide eligibility and benefits questions, including determining and approving benefit payments and correcting mistakes in current or future benefit amounts.
An employee covered by the Plan becomes eligible to receive a benefit in the form of a lifetime monthly annuity when he or she reaches age sixty-five. The Plan explains the process for calculating the monthly annuity. One of the elements of the annuity calculation is the " Highest Average Monthly Compensation," which is derived from the sixty-consecutive months that will produce the highest average monthly compensation. Compensation is defined by the Plan as:
regular salary paid to an Employee, including any incentive compensation, employees' tax deferred contributions made pursuant to a Code section 401(k) qualified " cash or deferred" arrangement, a Code section 125 " cafeteria plan" maintained by the Employer, overtime, and incentive or performance bonuses such as under the Annual Incentive Bonus Plan, Performance Achievement Rewards, part-time bonuses and variable plans.
JSMF ¶ 18. Excluded from compensation are
bonuses which are not incentive or performance bonuses, including miscellaneous pay, educational bonuses, referral bonuses, retention or stay bonuses, overseas allowances, hiring bonuses, service anniversary bonuses and retirement bonuses. Also excluded from the compensation are bonuses which are paid after an Employee's Break in Service, all benefits not paid in cash, lump sum payments
of unused vacation days, and all severance payments.
Id. (emphasis omitted). To calculate a benefit for an employee covered by both the Plan and SERP, CNA calculates a single retirement benefit based on the Plan without applying the compensation limits contained in the Internal Revenue Code and then divides the benefit between the two plans for payment.
Reilly became eligible for the monthly annuity distribution when he turned sixty-five in September 2012. Thirteen years elapsed between the time Reilly left his employment with CNA and when he became eligible for benefits. During that period, CNA periodically sent Reilly communications containing an estimate of his combined monthly benefit. In 1999, relying on a pay history document (" 1999 Pay History" ) and using a Highest Monthly Average Compensation figure based on the last ten months of 1992 through the first two months of 1997 (" 1999 Compensation Calculation" ), CNA calculated ...