The opinion of the court was delivered by: WERKER
This is a class action
arising out of the disassociation of the Neighborhood Health Service Program ("NHSP") from defendant St. Luke's Hospital Center ("Hospital") and the resultant termination of the participation of 57 NHSP employees in the Hospital's pension plan. Plaintiffs seek a judgment declaring that the termination constituted a partial termination of the pension plan within the meaning of 26 U.S.C. §§ 401(a)(7) & 411(d)(3) and that plaintiffs are therefore entitled to payment of their vested interest in the plan as of the date of the termination. Jurisdiction is premised upon 29 U.S.C. § 1132(e)(1). The matter presently is before the court on defendants' motion for summary judgment.
Since the parties have stipulated that, for the purposes of this motion, no facts are in dispute, the matter is ripe for summary judgment. The relevant facts, as agreed to by the parties, are as follows.
NHSP is a community health care facility that provides out-patient health care services for its geographical area. Its major source of financing is the federal government. In order to receive federal grants, NHSP became affiliated with the Hospital in or about 1968. As a result, NHSP employees were placed on the Hospital payroll, and those who met the eligibility requirements of the pension plan became participants in the plan on the same basis as all other Hospital employees. NHSP reimbursed the Hospital for any payroll and pension benefits made by the Hospital for the benefit of NHSP employees.
In 1975, Congress passed an amendment to the Public Health Service Act that made it impossible for NHSP to receive federal funding as long as it continued its affiliation with the Hospital. See 42 U.S.C. § 254c(e)(3)(G). Thus, on or about May 7, 1977, NHSP severed its relationship with the Hospital, and all NHSP employees were removed from the Hospital's employ.
The Hospital plan is an "employee pension benefit plan" as defined in the Employee Retirement Income Security Act of 1974 ("ERISA"). 29 U.S.C. § 1002. Section 7 of the Hospital's pension plan sets forth the consequences of employment termination. According to section 7,
if a Participant's employment terminates (other than by retirement or death) after he has completed at least 10 years of Service, he shall be entitled to receive a normal retirement income commencing on his Normal Retirement Date computed in accordance with Section 4 based upon his Credited Service rendered up to his date of termination.
At the time of NHSP's disassociation from the Hospital, there were 5 NHSP employees who had completed at least 10 years of service with the Hospital, and, pursuant to the terms of the Hospital pension plan, these employees became eligible to receive retirement benefits. The remaining 52 NHSP employees, the members of the class in this action, had not fulfilled the 10-year service requirement of the plan, and their participation in the plan thus was terminated.
The basis of plaintiffs' claims is that their exclusion from participation in the Hospital pension plan constituted a partial termination of the plan, thus entitling them to recover the contributions NHSP made to the plan on their behalf. Section 411(d)(3) of the Internal Revenue Code provides that, upon the partial termination of a pension plan, the rights of affected employees to the benefits that have accrued as of the date of the partial termination are not forfeitable. 26 U.S.C. § 411(d)(3). According to section 1.411(d)-2(b)(1) of the regulations promulgated by the Internal Revenue Service ("IRS"),
whether or not a partial termination of a qualified plan occurs . . . shall be determined by the Commissioner with regard to all the facts and circumstances in a particular case. Such facts and circumstances include: the exclusion, by reason of a plan amendment or severance by the employer, of a group of employees who have previously been covered by the plan; and plan ...