Appellant Pompano commenced an action for claimed violations of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. when upon retirement from appellee, Michael Schiavone & Sons, Inc., he was denied pension benefits in a lump sum. He appeals from the judgment which dismissed this action, entered in the United States District Court for the District of Connecticut, Burns, J., following a bench trial. Affirmed. Judge Mansfield dissents in a separate opinion.
Before Kaufman, Mansfield and Cardamone, Circuit Judges.
Appellee Michael Schiavone and Sons, Inc. ("Schiavone") had a pension plan for the benefit of its employees, one of whom was appellant Ralph Pompano. When Pompano reached retirement age (65) after 36 years as an employee of Schiavone, he sought a single lump sum payment which, under Article IV § 2 of the plan, was one of the optional modes of settlement a participant could elect "in lieu of the normal pension to which he would otherwise be entitled." The plan provided that the lump sum option was available only with the "prior approval of the (Pension) Committee."
When the plan became effective in 1972, all of Schiavone's employees were given a pamphlet which explained its major provisions in simple terms. The pamphlet made clear that the lump sum option was available "only with the permission of the Committee." Pompano's request for a lump sum payment was considered by the Committee ("Committee") and denied. He retired December 31, 1975, was awarded and is presently receiving monthly pension payments of $296.83.
In March 1976 Pompano commenced the instant action against Schiavone and the Revised Pension Plan of Michael Schiavone & Sons, Inc. ("Plan"), for: damages for claimed violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq.; release of his pension benefits in a lump sum, and for costs and attorneys fees. A bench trial was had on September 23, 1980 before the United States District Court for the District of Connecticut, Ellen B. Burns, Judge, which resulted in a judgment dated October 23, 1981 in favor of appellees dismissing the action. From that judgment this appeal is taken.
At issue is the Committee's range of discretion in the awarding of pension benefits, the procedures used by the Committee in exercising that discretion and whether Schiavone discriminated against appellant by not inviting him to a dinner for retiring employees.
This appeal raises questions the answers to which can be found only after an analysis of ERISA. To construe a statute we look first to the words actually used by the drafters, remembering that words are but signs that point to ideas. We may also examine the statute's legislative history to ensure that the meaning we have ascribed to these words fits their purpose, as that was what Congress intended. Legislators' expectations in creating laws are best described in Shakespeare's aphorism "I endow'd thy purposes with words that made them known."*fn1 See, Note, Intent, Clear Statements, and The Common Law: Statutory Interpretation In The Supreme Court, 95 Harv.L.Rev. 892 (1982).
ERISA provides that a "summary plan description of any employee benefit plan" must be furnished to participants and must be "written in a manner calculated to be understood by the average plan participant, ... sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. § 1022(a)(1) (1976). The Plan, which made a lump sum payment available only with prior approval of the Committee, was written up in summary form in simple and unmistakable language easy enough for the average plan participant to be reasonably apprised of his rights and obligations under the Plan.
Included in the specific information which the summary of the plan must contain is a description of the "circumstances which may result in disqualification, ineligibility, or denial or loss of benefits." 29 U.S.C. § 1022(b) (1976) (emphasis supplied). As the emphasis illustrates, and as the policy of Congress-"many employees with long years of employment are losing anticipated retirement benefits," 29 U.S.C. § 1001a (1976 & Pub.L.No.96-364, § 3, 94 Stat. 1208, 1209 (1980))-makes plain, the focus of concern with circumstances that might cause a participant or beneficiary not to receive benefits. The summary of the Schiavone Plan included all that ERISA requires.
It is appellant's contention, however, that there existed a secret, unwritten rule which he claims violated section 1022(a)(1) because it denied lump sum benefits to long term employees. While it might appear plausible to argue that the summary should have enumerated the factors to be considered by the Committee in making its determinations, such a requirement would defeat the purpose of a summary, i.e., a brief restatement. Such argument would also find little or no support in ERISA or its legislative history.
No specific mode of payment is provided for in ERISA. The policy considerations underlying the statute mandate the setting of standards only as to the fiscal soundness of a plan. 29 U.S.C. § 1001a. To accomplish that objective, standards of conduct, responsibility and obligation are imposed on the fiduciaries who control and manage each plan. They are required to act with the care and diligence of a "prudent man," id. at § 1104(a)(1)(B) (1976), and subject themselves to personal liability for a breach of that fiduciary duty, id. at § 1109(a) (1976). A reading of the statute's legislative history compels the conclusion that ERISA's purpose is to secure guaranteed pension payments to participants by insuring the honest administration of financially sound plans. See H.R.Rep.No.93-1280, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Ad.News 4639, 5038-5165. Thus the plan must specify the basis on which payments are to be made to participants and beneficiaries, U.S.Code Cong. & Ad.News at 5078, so as to meet the legislative purpose of having each participant know exactly where he stands with respect to the plan. See, H.R.Rep.No.93-533, 93d Cong., 1st Sess., reprinted in 1974 U.S.Code Cong. & Ad.News 4639, 4649. This requirement is not intended, however, to undercut the flexibility essential to effective and responsible financial management of the plan which Congress intended when it adopted for ERISA fiduciaries the "prudent man" standard. U.S.Code Cong. & Ad.News at 5083 (1974).
The trial court found no bad faith or arbitrariness on the part of Schiavone based on its denial of the lump sum payment to Pompano. The Plan's lump sum option was never granted lightly. The evidence showed that the Plan's actuaries had, in 1972, advised the Committee not to make lump sum payments for three reasons: first, Plan assets might have to be sold in order to pay large lump sum amounts; second, free availability would complicate long term investment strategy; and third, such payments invalidate long term mortality assumptions. The Committee had previously granted some lump sum requests, but only where the requesting employee's lump sum payment was less than $3,000. Such did not constitute a drain on the fund and the minimal monthly payments on such a small vested amount would not have met the major purpose of the plan-assurance of a monthly income that one can retire on-and would have been a bookkeeping nuisance. An actuary testified that plaintiff's lump sum option amounted to $38,172,*fn2 well over the $3,000 preclusion level set by the Committee. Concededly, the actuary testified that he did not know if there would have been any actual monetary loss to the Plan, whose assets were then $1,252,000, if the plaintiff had been granted the lump sum amount. The trial court also found that the lump sum option was rarely granted; e.g., there was evidence that a company executive also had his request for a lump sum distribution turned down at approximately the same time as appellant. However, the court found that the Committee did not follow an arbitrary path, but instead listened to advice from its actuaries in formulating this policy.
Appellant's request could be detrimental to the other beneficiaries of the Plan and the Committee owed a fiduciary duty to them (as well as to appellant) to insure a stable retirement fund. 29 U.S.C. §§ 1101-1114 (1976 & Pub.L.No.96-364, 94 Stat. 1208 (1980)); see also, 29 C.F.R. 2550.404a-1 (1981). Such an amount, singly or in combination with other lump sum requests, can reasonably be said to be capable of having an adverse impact on the three factors mentioned in the ...