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NASS v. STAFF RETIREMENT PLAN

May 4, 1981

C. William NASS, Plaintiff,
v.
STAFF RETIREMENT PLAN OF LOCAL 810, I.B.T., Defendant



The opinion of the court was delivered by: CANNELLA

After a trial on the merits of plaintiff's complaint, the Court finds for the defendant and the complaint is dismissed. Plaintiff is entitled to monthly pension benefits in the amount of $ 111.61 commencing September 1, 1981 or an actuarial equivalent of that figure to commence at an earlier date selected by plaintiff.

FACTS

 Plaintiff C. William Nass brings this action pursuant to section 502 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132, seeking monthly pension benefits in the amount of $ 408.21 retroactively to January 1977. Complaint PP 8-9 (filed July 26, 1979). *fn1" Defendant Staff Retirement Plan of Local 810, International Brotherhood of Teamsters (the "Plan"), does not dispute plaintiff's eligibility for benefits under the Plan, but calculates that instead of $ 408.21, plaintiff is entitled to a monthly pension of $ 111.61 commencing September 1, 1981, or a reduced actuarial equivalent commencing prior to that date. Plaintiff demands the award of past due pension benefits, plus interest and attorney's fees, as well as injunctive relief requiring the Plan to pay benefits in the higher amount in the future.

 On January 1, 1961, Local 810, International Brotherhood of Teamsters ("Local 810"), adopted the Plan and executed a trust agreement to provide retirement benefits for its employees. See Plaintiff's Exhibit 1, Exhibits B and C (hereinafter Plaintiff's Exhibits will be referred to as "PX" and Defendant's Exhibits will be referred to as "DX"). Local 810 adopted an amended and Restated Plan effective January 1, 1976 (the "Restated Plan") which was intended to meet the requirements of ERISA. See id., Exhibit A. The provisions of the Restated Plan apply only to an employee who terminates employment on or after January 1, 1976 and since plaintiff terminated his employment with Local 810 on December 8, 1976, the Restated Plan applies to his claim. Id., Exhibit A, Art. I.

 The Restated Plan provides that a participating employee *fn2" of Local 810, retiring at age 65 or after ten years service, whichever is later, see id., Exhibit A, Art. II, § 1(w), shall receive pension benefits payable monthly for the remainder of the pensioner's life in an amount equal to 1/12th of 3% of his Average Annual Compensation or $ 5, whichever is greater, for each year of credited service *fn3" up to a maximum of 25 years. See id., Exhibit A, Art. IV, § 2. *fn4" Average Annual Compensation for an employee who became a participant of the Plan prior to January 1, 1970, like plaintiff, is his annual rate of compensation on December 31, 1969. *fn5" See id., Exhibit A, Art. II, § 1(q). A participant with at least ten years of service who has not yet reached normal retirement age under the Plan is eligible to receive a vested retirement benefit commencing on his normal retirement date or within the ten years preceding that date in an adjusted amount. See id., Exhibit A, Art. II, § 1(z); Art. IV, §§ 5, 6.

 The Restated Plan further provides that the Plan shall be administered by an Administrative Committee (the "Committee") appointed by Local 810 which is and was headed at all pertinent times by Dennis Silverman. The Committee is authorized to make all determinations regarding the right of any person to a benefit, id., Exhibit A, Art. VI, §§ 1, 2, 3, and has "such duties and powers as may be necessary to discharge their duties hereunder," including the power "to construe and interpret the Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder." Id., Exhibit A, Art. VI, § 5(a). To aid in the performance of its duties, the Committee may adopt such rules and actuarial tables as it deems necessary or appropriate and "(all) rules and decisions of the Committee shall be uniformly and consistently applied to all Participants in similar circumstances. When making a determination or calculation, the Committee shall be entitled to rely upon information furnished by a Participant or beneficiary, the Employer, the legal counsel of the Employer, or the Actuary." Id., Exhibit A, Art. VI, § 6. Moreover, the Committee may deny all benefits to a participant who makes any misrepresentation upon which the Committee relies in his application for benefits. Id., Exhibit A, Art. IV, § 12. The Committee, however, does not have the power "to add to, subtract from or modify any of the terms of the Plan, or to change or add to any benefits provided by the Plan, or to waive or fail to apply any requirements of eligibility for a Pension under the Plan." Id., Exhibit A, Art. VI, § 5.

 With this brief summary of the Plan in mind, a review of the parties' contentions is appropriate before discussing the facts of this case. Plaintiff has two objections to defendant's calculation of his pension benefits. First, plaintiff contends that the Plan lacks the power to delay the starting date of his entitlement to benefits based on an alleged misrepresentation of his age at the time he became employed by Local 810. Alternatively, plaintiff contends that defendant's decision to delay his retirement date for that reason is arbitrary and capricious. Second, plaintiff challenges the validity of the 1969 salary figure used by defendant to compute his benefits. Defendant contends that during the period plaintiff was employed by Local 810, he was also employed by and performed services for other related organizations. These organizations and Local 810 allocated among themselves that portion of plaintiff's salary attributable to work performed for each organization. Defendant computed plaintiff's pension benefits based on the portion of his 1969 salary attributable to work he performed for Local 810, rather than basing this computation on his gross 1969 salary from all of these organizations. Plaintiff, on the other hand, contends that he was solely an employee of Local 810 and that his pension should be computed on the basis of his gross 1969 salary regardless of how the various organizations for which he performed services chose to allocate his salary expense among themselves. In addition, plaintiff contends that defendant calculated his benefits differently from two former employees of Local 810, who retired before plaintiff. These individuals, like plaintiff, performed services for the related organizations and their salaries were also allocated among them. Defendant nonetheless calculated their benefits on the basis of their gross 1969 salary rather than the portion of it attributable to work performed for Local 810.

 The Court now turns to the facts of this case. In July 1964, Milton Silverman, the President of Local 810, hired plaintiff as an accountant. During an interview, plaintiff, who was born August 12, 1906, see PX 3, represented to Silverman that he was forty-seven years old, although he was actually fifty-seven years old, because he feared he would not be hired if he told Silverman his true age. *fn6" Local 810 employed plaintiff from July 20, 1964 until he was discharged on December 8, 1976. At that time, plaintiff retired at seventy years of age following twelve years, four months and twenty days of employment with Local 810.

 During the course of his employment, plaintiff performed various bookkeeping responsibilities for Local 810, including maintenance of its bank accounts, drawing checks that were signed by its officers, preparing reports to various governmental agencies, preparing Social Security and Unemployment Insurance tax payments, and monitoring Local 810's investments. See Transcript of Proceedings at 27, 40, 65, 73, Nass v. Staff Retirement Plan of Local 810, IBT, 79 Civ. 3884 (filed Jan. 16, 1981) (hereinafter "Tr."). During this period, plaintiff supervised an office staff of approximately eighteen to twenty people, *fn7" and his immediate superior was first Milton Silverman and later Milton's son, Dennis Silverman. *fn8"

 Plaintiff, as well as several other Local 810 employees, also performed services for a number of organizations related to Local 810. These organizations, located in the same offices as Local 810, include the United Wire, Metal and Machine Pension Fund (the "Pension Fund"), the United Wire, Metal and Machine Health and Welfare Fund (the "Welfare Fund"), Local 810's Dental Plan and Medical Fund and an independent union, Local 1614, International Brotherhood of Electrical Workers ("Local 1614"). *fn9" With the exception of Local 1614, these organizations provide benefits to the members of Local 810 and are funded by employer contributions pursuant to the terms of collective bargaining agreements. The defendant Plan, on the other hand, was created to provide pension benefits for approximately nineteen to twenty-five individuals employed by Local 810. *fn10" Employees of the other organizations are not eligible for benefits under the Plan, although these individuals, as well as employees of Local 810, are also eligible for benefits from the Pension and Welfare Funds as well as other pension funds to which Local 810 made contributions on their behalf. *fn11" Tr. at 148-49.

 Plaintiff was paid for his services from 1964 to 1969 by checks with the account title "Local 810 Administrative Fund" (the "Administrative Fund"). Tr. at 32. During this period, employees of the Pension and Welfare Funds were also paid from this account. Thereafter, the New York State Department of Labor required Local 810 to maintain a payroll separate from the Pension and Welfare Funds. Accordingly, in 1969 plaintiff's paychecks were drawn on an account entitled "Local 810, IBT Payroll Account" (the "Payroll Account") *fn12" while the Pension and Welfare Funds had separate payroll accounts for employees that worked only for those entities. Id. Plaintiff testified that virtually all of the employees who were paid by the Payroll Account, like plaintiff, performed some services for the other organizations. Tr. at 33. It is undisputed that the organizations that received the services of these employees paid an allocated portion of their salary and the taxes attributable thereto, in accordance with ratios determined by Milton Silverman and approved by the New York State Department of Labor, by making payments to the Payroll Account. Tr. at 62-63, 103-04. *fn13" Moreover, as bookkeeper, plaintiff kept records entitled "Allocation of Payroll" which recorded the contributions of the various organizations to the Payroll Account. See PX 4, DX A. *fn14" Plaintiff's 1969 salary from the Payroll Account was $ 13,150, of which $ 3,620 was allocated to Local 810. The current President of Local 810, Dennis Silverman, testified at trial that the Payroll Account was not the exclusive property of Local 810, but rather belonged to all the organizations contributing to it. Tr. at 115. He further testified that the Administrative Fund and later the Payroll Account were established to obviate the inconvenience of paying these individuals with separate checks from the individual entities and to avoid the payment of additional social security contributions and withholding taxes that would thereby be necessitated. *fn15" Tr. at 118-19. Nonetheless, Local 810's officers opened the Payroll Account and were authorized to sign its checks. Tr. at 112; PX 9. *fn16"

 Following his discharge, plaintiff applied for benefits under the Plan by letter dated February 28, 1977 to Henry Brickman, counsel for the Plan. See DX B. By letter dated August 4, 1977, Dennis Silverman responded that plaintiff's application was under consideration. PX 1, Exhibit G. On April 13, 1978, the Plan forwarded a letter from the Plan's actuary to plaintiff's attorney. In that letter, the actuary, Ira F. Fishman, who did not testify at trial, found that plaintiff's misstatement of age at the time he commenced employment was "significant actuarially," and he recommended that "(w)hen such a correction first becomes known at point of retirement in a plan of this size (19 active participants), a common treatment is to hold the participant to his original data. Applied to Mr. Nass, and it seems appropriate to do so, his normal retirement date for plan purposes would remain at September 1, 1981 (the beginning of the month following his 65th birthday if his misstatement of age is accepted)." PX 1, Exhibit H; see Tr. at 160. Fishman also found that plaintiff could elect to receive an actuarial equivalent amount of benefits prior to his normal retirement date pursuant to Article IV, § 6(b) of the Restated Plan. Id.

 On July 6, 1978, the Plan informed plaintiff that it had adopted the actuary's computation of his monthly benefits amounting to $ 111.61 commencing September 1, 1981. Id., Exhibit I. The Plan's notification to plaintiff enclosed the following calculation made by the Plan's actuary: 1. Final average plan earnings-- Local 810 only (no increases after 1969 recognized for plan purposes) . . . . . . . . . . . . $ 3,620.00 2. Unit plan benefit (minimum = $ 5: 1/12 X item 1 X 3% . . . . . . . . . . $ 9.05 3. Credited plan service: 7/20/64 - 12/8/76 . . . . . . . . . . 12.333 yrs.* 4. Accrued vested monthly pension benefit payable at normal retirement date : Item 2 X item 3 . . . . . . . . . . $ 111.61

 Id. *fn17" In his July 17, 1978 letter responding to plaintiff's inquiries concerning the 1969 earnings figure used to ...


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