Appeal by employees of Western Union International, Inc., from a judgment of the Southern District of New York, John E. Sprizzo, Judge, dismissing their claim against it and its corporate parents that its amendment of its Pension Plan to reduce early retirement benefits for which they would have been eligible violated their rights under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1368 (1982), and under federal and state common law.
Before MANSFIELD, KEARSE and PRATT, Circuit Judges.
MANSFIELD, Circuit Judge.
The principal issue on this appeal is whether Western Union International, Inc. ("Western Union") and its corporate parents, Microwave Maintenance Corporation and M.C.I. Communications Corporation (collectively referred to as "MCI"), violated rights of Western Union's long-term non-bargaining unit employees under its Pension Plan ("Plan") by amending that Plan in November 1982 to reduce certain early retirement benefits for which they were or would have become eligible. Plaintiffs, long-term non-bargaining unit employees of Western Union, appeal from a judgment of the Southern District of New York, John E. Sprizzo, Judge, dismissing 12 counts of their complaint, which alleged that Western Union's Amendment of the Plan violated their rights under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1368 (1982), and under federal and state common law. We affirm in part, reverse in part and remand the case for further proceedings.
In the 1950s and early 1960s, when most of the plaintiffs-appellants were hired by Western Union, its Plan provided for two types of retirement benefits: (1) a "Class A" pension, which provided that a participating employee who had completed 20 or more years of credited service with Western Union would be eligible at age 55 to receive full benefits, and (2) a "Class 80" pension, which entitled an employee whose years of age plus years of service totalled 80 to similar full benefits. In 1972 the Class 80 pension was replaced by a "Class 75" pension under which employees with at least 20 years of service, whose age and service years totalled at least 75, would be eligible for full retirement benefits. In 1975, to meet ERISA's requirements, an "Age 65" pension was added, under which a full retirement benefit would become available to an employee upon his reaching 65 years, with the proviso that an employee might become eligible before reaching 65 for a different retirement benefit known as a Deferred Vested Benefit pension, which could be taken before age 65 on an actuarially-reduced basis.
The formula used by Western Union to calculate the amount of the benefits payable per year to an employee under the Class A, Class 75 and Age 65 pensions was the same: the employee was entitled to one and two-thirds percent (1 2/3%) x the average of his three highest consecutive years salary x his years of service. Since almost all of the plaintiffs-appellants had been employed by Western Union for 20 years prior to the amendment of its Plan they could look forward to receiving upon early retirement benefits under the Class A or Class 75 pensions. This prospect was changed shortly after the January 1982 "Purchase and Sale Agreement" between MCI and Xerox Corporation, by which MCI acquired WUI, Inc., a holding company whose subsidiaries included Western Union. In November 1982, MCI and Western Union adopted an Amendment to the Plan ("Amendment"), under which plaintiffs and all other non-bargaining unit employees would no longer be eligible for Class A or Class 75 pensions but only for Age 65 pensions or a deferred vested pension payable at age 65 or earlier on an actuarially-reduced basis. The effect of the amendment was to deprive plaintiffs of the higher unreduced benefits they would have received under Class A and Class 75 pensions upon early retirement. Instead, they would be forced to wait until age 65 if they wanted full benefits or receive an actuarially-reduced benefit if they retired before 65 years of age. Plaintiffs contend that the difference between the two monthly benefits for an employee retiring before 65 could be substantial, depending on his age and prior years of service, and that the amendment also had the effect of (1) releasing Western Union from its former obligation of contributing large sums to provide Class A and Class 75 pension benefits to the plaintiffs, and (2) freeing up for other purposes funds that had been put aside to provide for payment of the Class A and Class 75 pensions.
On March 10, 1983, plaintiffs-appellants commenced the present action by filing a complaint alleging in 15 Causes of Action that the Amendment violated their rights under (1) ERISA, 29 U.S.C. §§ 1001-1368 (1982), (2) the Purchase and Sale Agreement between MCI and Xerox, and (3) state and federal common law. The principal ERISA claims are that the defendants' Amendment
(1) decreased plaintiffs' "accrued benefits" in violation of ERISA § 204(g), 29 U.S.C. § 1054(g), and Internal Revenue Code ("IRC") § 411(d)(6) (quoted infra, p. 6041),
(2) amounted to unlawful self-inurement by Western Union, which is prohibited by ERISA § 403 (c)(1), 29 U.S.C. § 1103(c)(1),
(3) constituted a breach of defendants' fiduciary duties imposed on them by ERISA §§ 404(a)(1)(A), (B) & (D), 406 (a)(1)(D), and 406(b)(1) & (2), 29 U.S.C. §§ 1104(a)(1)(A), (B) & (D), 1106(a) (1)(D) and 1106(b)(1) & (2).
(4) unlawfully reduced plaintiffs' vested benefits, ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1) (D) and ERISA ) 203, 29 U.S.C. § 1053,
(5) failed to allocate and distribute assets to plaintiff as required upon a partial termination of a plan, ERISA § 4044, 29 U.S.C. § 1344, IRC § 411 (d)(3), and ERISA §§ 404(a)(1)(A), (B), and (D), 29 U.S.C. §§ 1104(a)(1)(A), (B), and (D), and
(6) violated ERISA's notice and reporting requirements, ERISA §§ 4041 and 4043, 29 U.S.C. §§ 1341 and 1343.
In addition the complaint alleged that the Amendment
(1) violated specific provisions of the Plan and Trust Agreement documents, amounting to a breach of contractual obligations under state and federal common law,
(2) was a tortious interference with plaintiffs' contractual rights, thus violating both state and federal common law and ERISA § 510, 29 U.S.C. § 1140,
(3) rendered the defendants liable on principles of unjust enrichment,
(4) violated the terms of the defendants' Purchase and Sale Agreement, rendering defendants liable under ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a) (1)(D) and at common law, and
(5) subjected defendants to being estopped from denying plaintiffs' third party beneficiary rights under the Purchase and Sale Agreement.
Three Causes of Action (Thirteenth, Fourteenth and Fifteenth) allege claims under ERISA § 510, 29 U.S.C. § 1140, that were not dismissed by the district court: discrimination against plaintiffs, retaliation against plaintiffs (for having asserted their pension rights), and unlawful termination of employees to prevent their obtaining pension benefits. The complaint sought (1) appointment of a temporary receiver to take possession of the pension fund assets, (2) a declaration that the Amendment is null and void and that plaintiffs are entitled to the value of their accrued Class A and Class 75 pension benefits, (3) an injunction against further reduction of plaintiffs' benefits and retaliatory conduct and (4) damages and attorney's fees.
Upon defendants' motion to dismiss the first 12 Causes of Action pursuant to Fed. R. Civ. P. 12(c)(1) and (6), Judge Sprizzo in a reasoned opinion dismissed the first 12 claims except for that part of the Sixth Cause of Action which alleged that Western Union violated the notice and reporting requirements of ERISA § 4043(b) (2), 29 U.S.C. § 1343(b)(2), by failing to report a "reportable event," i.e., the Plan's reduction in the amount of benefits payable to employees under Class A and 75 pensions on early retirement. The district court concluded the ERISA's prohibition against any decrease in "accrued benefits", ERISA § 204(g) and IRC § 411(d) (6), applied only to benefits payable at normal retirement age (i.e., age 65), not to unreduced full benefits payable upon early retirement, which the court held not to be "accrued benefits", and that under ERISA § 204 (c)(3), 29 U.S.C. § 1054(c)(3), the only accrued early retirement benefit is the actuarially-reduced equivalent of the full benefit payable at age 65.
Since he found that the Amendment did not reduce plaintiffs' "accrued benefits", Judge Sprizzo further concluded that Western Union's fiduciary obligations under ERISA § 404(a) were not violated, that there had been no unlawful transfer of the Plan's assets in violation of ERISA § 406, that there was no inurement of the Plan's assets to the benefit of the employer (Western Union) in violation of ERISA § 403(c)(1), and that there was no requirement that Plan assets be allocated to Class A and Class 75 beneficiaries under ERISA § 404 as if there had been a "partial termination" of the Plan under IRC § 411(d)(3). The district court further held that, since there was no partial termination of the Plan, ERISA's "notice and reporting" provisions, § 4043(a), did not require Western Union to so report but that its failure to report the decrease in the benefit payable under the Amendment did state a claim under ERISA § 4043(b)(3).
Turning to the complaint's common law claims, plaintiff's allegation that the Amendment breached the terms of the defendants' Plan was dismissed in view of the district court's holding that Western Union's reduction in early retirement benefits did not violate ERISA. Plaintiffs' claim of violation of the Summary Plan Description was held to be unsupported since Western Union specifically reserved the right to change the plan. Plaintiffs' claims of unilateral contract, interference with contractual relations, an unjust enrichment were dismissed on the ground that they were preempted by ERISA § 514(a). In the exercise of his discretion Judge Sprizzo dismissed the complaint's pendent state claims because its federal claims had been dismissed. From the district court's decision plaintiffs appeal.
Claim that the Amendment Unlawfully Decreased
The principal issue raised by this appeal, affecting the district court's dismissal of several causes of action stated in the complaint, is the construction to be given to ERISA § 204(g), 29 U.S.C. § 1054(g), and IRC § 411(d)(6), which are alleged to have been violated by Western Union's 1982 Amendment. They provide:
"(6) Accrued benefit not to be decreased by amendment
"A plan shall be treated as not satisfying the requirements of this section if the accrued benefit of a participant is decreased by an amendment of the plan, other than an amendment, described in section 412(c)(8), or section 4281 of the Employee Retirement Income Security Act of 1974."
The term "accrued benefit" is defined by ERISA § 3(23), 29 U.S.C. § 1002(23), as follows:
"(23) The term 'accrued benefit' means/--
"(A) in the case of a defined benefit plan, the individual's accrued benefit determined under the plan and, except as provided in section 1054(c)(3) of this title, expressed in the form of an annual benefit commencing at normal retirement age, or
"(B) in the case of a plan which is an individual account plan, the balance of the individual's account."
See also I.R.C. § 411(a)(7)(A)(i). ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3), in turn states:
"(3) For purposes of this section, in the case of any defined benefit plan, if an employee's accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age, or if the accrued benefit derived from contributions made by an employee is to be determined with respect to a benefit other than an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retirement age, the employee's accrued benefit, or the accrued benefits derived from contributions made by an employee, as the case may be, shall be the actuarial equivalent of such benefit or amount determined under paragraph (1) or (2)."
See also I.R.C. § 411(c)(3).
Plaintiffs-Appellants argue that the Amendment violated the foregoing provisions by reducing the benefits payable under the Class A and 75 Pensions since those benefits are "expressed in the form of an annual benefit commencing at normal retirement age," being calculated by the same formula (1.67% x average of 3 highest years' salary x years of service) used to determine a benefit payable at normal retirement age (i.e., age 65). The district court and Western Union, on the other hand, take the view that to be "accrued" within the meaning of the statute a benefit must commence at age 65 or, it payable earlier, be determined as the actuarially-reduced equivalent of the amount to which the employee would be entitled under a plan at age 65. Appellants, in turn, point out that the statutory definition of "accrued benefit" does not simply refer to a benefit payable at normal retirement age but to a benefit " expressed in the form of an annual benefit commencing at normal retirement age" (emphasis supplied). Since the Class A and 75 benefits are expressed in such a form, calculated by precisely the same formula and expressed as the same dollar amount payable at age 65, appellants contend they are "accrued benefits" within the meaning of ERISA § 3(23), 29 U.S.C. § 1002(23).
A similar statutory construction issue is presented with respect to ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3), supra, which the district court interpreted as meaning that when the amount of the benefit is to be determined "other than . . . at normal retirement age" it entitles the beneficiary only to the "actuarial equivalent" of the benefit commencing at normal retirement age. Here again appellants point out that the district court and the defendants ignore the statutory language " determined as an amount other than an annual benefit commencing at normal retirement age" (emphasis supplied). Appellants argue that since the Class A and 75 benefits were determined as an amount calculated by the same formula as that to which the employee is entitled at normal retirement age, ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3), does not apply to the situation before us. In short, the statutory language was designed to insure against an employee's receiving less that the actuarial equivalent and not to affect provisions of a plan entitling him to more.
The language, purpose and legislative history of the statute favor the construction of the statutory provision urged by plaintiffs-appellants. To interpret the statute's definition of "accrued benefit" as referring only to the "amount" of money payable at normal retirement age would read out of 29 U.S.C. § 1002(23) the words "in the form of" or give them no force and effect. No early retiree (whether under WU's "Class A" or "Class 75" Plan) could reasonably expect to receive by was of pension an "amount" as high per year as the amount to which he or she would be entitled after waiting until 65 to retire. But if that early retiree's pension entitlement were stated in the same form as that to which he or she would be entitled at age 65 (i.e., in this case an amount equal to 1.67% x average of 3 highest years' salary x years of service) the risk of the early retiree's being pensioned off at an amount less than the actuarial equivalent of the age 65 benefit would be minimal or non-existent. Applying the rule that an effort should be made to give some reasonable meaning to words used in a statute rather than no meaning at all, Platt v. Union Pacific R.R. Co., 99 U.S. 48, 58, 25 L. Ed. 424 (1878) ("Congress is not to be presumed to have used words for no purpose"); National Insulation Transportation Committee v. ICC, 221 U.S. App. D.C. 192, 683 F.2d 533, 537 (D.C. Cir. 1982) ("a court must, if possible, give effect to every phrase of a statute so that no part is rendered superfluous"); Fulps v. City of Springfield, Tenn., 715 F.2d 1088, 1093 (6th Cir. 1983) ("Required, as we are, to construe the language of a statute so as to avoid making any work meaningless or superfluous ..."); Zimmerman v. North American Signal Co., 704 f.2d 347, 353 (7th Cir. 1983) ("As a general rule, a court should not construe a statute in a way that makes words or phrases meaningless, redundant, or superfluous."), it is apparent that the "form of" language when read together with 29 U.S.C. § 1054(3) and in the light of the statute's legislative history, was designed to require that a plan assure a retiree of at least as much as an actuarially-reduced equivalent but not permit the employer to deprive him of any more than might be provided by the plan.
The foregoing interpretation is confirmed not only by the statute's purpose but also by its general legislative history, the interpretation given to it by the Internal Revenue Service (IRS) as the "long recognized . . . primary authority ... in construing the Internal Revenue Code." Bob Jones Univ. v. United States, 461 U.S. 574, 76 L. Ed. 2d 157, 103 S. Ct. 2017 ...