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DECARLO v. ROCHESTER CARPENTERS PENSION

May 24, 1993

FRANK DECARLO, JOSEPH PETRILLO, JAMES V. LOMBARDO, JOSEPH KUSOVICH, and JAMES BARONE, Plaintiffs,
v.
ROCHESTER CARPENTERS PENSION, ANNUITY, WELFARE AND S.U.B. FUNDS, Defendants.



The opinion of the court was delivered by: MICHAEL A. TELESCA

 INTRODUCTION

 Plaintiffs, all retired members of Rochester Carpenters Union Local 85, brought this action pursuant to the civil enforcement provision of ERISA, 29 U.S.C. § 1132, seeking pension benefits they allegedly have not received due to an alleged breach of fiduciary duty by the Trustees of the defendant Funds. Defendants now move for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Jurisdiction in this Court is provided by 29 U.S.C. § 1132(e) and 28 U.S.C. § 1331.

 For the reasons set forth below, I find that there are no material factual issues, and that as a matter of law, defendants have not breached a fiduciary obligation to plaintiffs. Moreover, I conclude that, as a matter of law, the so-called "thirteenth check" is not a permanent benefit, and thus may be paid in any year in which circumstances exist to support such payments without creating a vested right or expectancy as a regular benefit.

 BACKGROUND

 The following material facts are not disputed by the parties. The Rochester Carpenters Pension Fund ("the pension Fund"), is a multiemployer employee benefit plan pursuant to ERISA, 29 U.S.C. § 1003(37)(A). Although the complaint names two related funds as defendants, all of the allegations in the complaint refer only to the Pension Fund.

 The Pension Fund is administered by a board of trustees consisting of four trustees appointed by the three participating carpenter local unions, and four trustees appointed by an employer association, the Building Trades Employer Association. The Trustees at all times relevant to this action relied upon an actuary's estimates of costs, liabilities, rates of interest, and other factors to determine the funding requirements for the Pension Plan. Unlike a single employer pension fund, multi-employer pension funds receive contributions for each hour worked by active participants. Contribution levels are set through collective bargaining in advance of the work being done. The actuary therefore must project employment levels for the upcoming year.

 At various times between 1986 and 1990, the Pension Fund's annual actuarial valuation revealed a projected overfunding (called a "margin"). Based upon an analysis made by the actuary of the various benefit improvements which could be made given the overfunding, the Trustees on February 19, 1987 increased the rate at which retirement benefits would accrue for active participants from $ 7.60 to $ 8.50 per month for each service credit earned since 1966. However, this benefit applied only to those active participants who retired after January 1, 1986, the date of the most recent actuarial valuation. Plaintiffs all retired prior to that date.

 For the plaintiffs and other participants who had already retired, the Trustees voted to pay each of them an additional one month's benefit, referred to as a "thirteenth check." The cover letter accompanying this check indicated that it was a "one-time payment," equal to 8.3% of the pensioner's annual benefit.

 There was no benefit increase in 1987. On November 10, 1988, the Trustees increased the accrual rate for active participants from $ 8.50 to $ 9.00 effective for those members retiring after January 1, 1989. Again, pensioners who were not eligible for this benefit received another thirteenth check as of December, 1988.

 On November 7, 1989, the Trustees again improved the acrual rate for active participants, increasing the rate to $ 10.50 for all active participants who retired after January 1, 1990. Plaintiffs and other retiree participants received another one-time thirteenth check in December, 1989.

 On November, 20, 1990, the Trustees increased the accrual rate from $ 10.50 to $ 11.50, effective for all active participants who retired after January 1, 1991. However, the Trustees decided not to award a thirteenth check to plaintiffs, but instead increased the benefits payable to plaintiffs and others similarly situated by a permanent 5%, retroactive to January, 1990.

 The decision not to award a thirteenth check was influenced by a warning from the actuary, who indicated that awarding a third consecutive thirteenth check could cause the IRS to consider this a "regular" benefit requiring permanent funding. Under ERISA's "anti-cutback" provisions, such a ruling would mean that the Trustees could not reduce that improvement with respect to those participants and retirees who had become vested with that improvement. Subsequently, thirteenth checks were paid to plaintiffs in 1991 and 1992. The Trustees do not intend to issue a thirteenth check this year because of the prohibition against three consecutive payments.

 Thus, plaintiffs have received five thirteenth checks (an 8.3% benefit each year), as well as a permanent five percent increase in benefits effective January 1, 1990. In this action, they argue that the Trustees have violated their fiduciary duty by instituting benefit increases which favor current workers over those who have already retired. Plaintiffs also take the position that the thirteenth check was meant to be permanent, and thus the Trustees violated their fiduciary duty by not paying the benefit for 1987 or 1990, and will violate their duty by not paying the benefit this year. Plaintiffs also allege ...


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