The opinion of the court was delivered by: OWEN
Plaintiff John S. Morse, a top executive with many productive years of working life in front of him, left his employer and went to a competitor. He commenced this action to compel defendants, the trustees of his former employer's profit-sharing plan, to accelerate the payment of his vested retirement benefits -- an amount in excess of $203,000. He contends that defendants have failed to administer the Bowne Profit-Sharing Trust (the "Trust") in accordance with its own terms and, alternatively, that they have violated the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. by failing to administer the Trust solely in the interest of its beneficiaries. Having considered the evidence adduced at the trial, I conclude that neither the profit-sharing plan nor federal law requires the early distribution to plaintiff of benefits. Plaintiff's action is therefore dismissed with costs and disbursements.
I hold instead that defendants, as trustees of the Trust, implemented a policy of paying accelerated benefits only to terminated plan participants who either left Bowne to take employment with companies which did not directly compete with Bowne or whose vested benefits were not greatly in excess of $10,000. I further conclude that ERISA does not mandate the payment of accelerated benefits upon request, as plaintiff urges, unless the retirement plan so provides or unless the plan's trustees administer the plan in an arbitrary and capricious fashion so as to exclude the payment of benefits to an individual otherwise entitled thereto.
John S. Morse was employed by Bowne of New York City, Inc. ("Bowne New York") from approximately November 1, 1964 through July 27, 1980. Bowne New York is a wholly owned subsidiary of Bowne & Co., Inc. ("Bowne"), and is engaged in the financial printing business. At Bowne New York, Morse was a highly-successful salesman of financial printing services specializing in an area of financial investment known as the unit investment trust. At the time he left to take a job with a competitor, he was a vice-president.
Bowne New York maintained a profit-sharing plan -- the Bowne Profit-Sharing Trust -- for the benefit of its employees. That Trust was first established on November 1, 1961, and has been amended several times since then. It qualifies within the terms of ERISA and is funded by employer contributions. These contributions are made on a yearly basis from the profits of the previous taxable year.
The Trust is administered by four trustees -- the named individual defendants -- who possess the "sole and absolute discretion" to administer the provisions of the Trust. Their duties include the allocation of employer contributions to the accounts of individual employees and the payment of accrued vested benefits to qualifying terminated plan participants.
The termination payment procedure is set forth in section 8.1 of the Trust.
It calls for the payment of vested benefits upon the later of
(1) the earlier of the Participant's Early Retirement Date or Normal Retirement Date, or
(2) the termination of the Participant's employment with all Controlled Companies.
Section 8.1 also allows the Trustees to "establish procedures to make distribution to a Terminated Participant at an earlier date than that [otherwise provided]." At the time plaintiff left Bowne New York, it is clear that the Trustees had neither published nor disseminated accelerated payment procedures.
During the late 1970's, Morse it appears, felt dissatisfaction with the way his accounts were being serviced and was unhappy with his compensation. Consequently, as of June 25, 1980, Morse resigned from Bowne New York to take a position with Pandick Press, Inc., a direct competitor of Bowne New York in the financial printing business. Although Morse had discussions with various officers of Bowne New York prior to his departure about the terms of his departure, he did not at that time enter into any agreement either modifying the terms of the Trust or exempting him from its provisions.
Subsequent to his leaving Bowne New York, Morse formally requested the Trustees to accelerate the payment of his benefits. This application was denied in a letter dated September 25, 1980. After further correspondence, the Trustees reiterated this denial in an October 31, 1980 letter, which stated:
The Trustees do not accelerate payment in those instances where an employee leaves to go with a competitor if the employee's profit-sharing balance exceeds $10,000 at ...