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BOESEL v. CHASE MANHATTAN BANK

June 16, 1999

RICHARD C. BOESEL, ET AL., PLAINTIFFS,
v.
THE CHASE MANHATTAN BANK, N.A., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Siragusa, District Judge.

  DECISION AND ORDER

This is an action pursuant to ERISA, 29 U.S.C. § 1001, et seq., in which former employees of the defendant Chase Manhattan Bank allege that the defendants used an incorrect formula to compute their retirement benefits. The plaintiffs state that they "seek retirement benefits that are expressly granted to them at Section 7.9 of the Current Chase [Retirement] Plan and in the two [summary plan descriptions (SPDs)] describing that Plan." In the alternative, the plaintiffs allege that even if the correct formula was used to compute their benefits, the defendants misled them for years as to how their benefits would be computed, by providing them with misleading plan summaries and brochures, and that the defendants should therefore be estopped from denying the additional benefits to which the plaintiffs' believed they were entitled. The defendants contend that they used the correct formula, and that the plaintiffs were given proper notice as to how their benefits would be computed. Now before the Court are the parties' cross-motions for summary judgment [# 29] [# 36]. For the reasons that follow, the plaintiffs' motion is denied, and the defendants' motion is granted.

BACKGROUND

The relevant facts are not disputed. Until July of 1984, the plaintiffs were employed by Lincoln First Bank ("Lincoln") and were participants in Lincoln's retirement plan (the "Lincoln Plan"). In July of 1984, Lincoln was merged into the Chase Manhattan Bank ("Chase"), and was renamed Chase Lincoln First Bank ("Chase Lincoln"). At the time of the merger, some of the Lincoln employees transferred to Chase, while others continued with Chase Lincoln. Chase had its own retirement plan (the "1976 Chase Plan"), which provided better benefits than the former Lincoln plan. Rather than allowing the Chase Lincoln employees to join the more beneficial Chase plan, the defendant created the Chase Lincoln Plan. In order to deal with the former Lincoln employees who transferred to Chase, Chase also amended its 1976 Chase Plan by adding Section 7.9.*fn1 Under the Chase Lincoln Plan, at retirement, former Lincoln employees would receive the greater of a) the accrued benefit under the Lincoln First plan as of the merger date [July 31, 1984], plus the Chase Lincoln Formula from that date onward; or b) the Lincoln First plan retirement benefit for the participant's entire career, both with Lincoln First before July 31, 1984, and with Chase Lincoln after July 31, 1984. (See, Chase Lincoln plan, Article IV, Section 4.01(c), (d) and Appendix A). Under the 1976 Chase Plan as amended by the addition of Section 7.9, at retirement, former Lincoln employees would similarly receive the greater of the "Lincoln plus Chase" formula, or the "all-Lincoln" formula for all years of service. In 1985, Chase Lincoln issued a Summary Plan Description (SPD) of the Chase Lincoln plan.*fn2 This SPD reiterated that former Lincoln First employees would receive the greater of a benefit calculated under a) and b) above.

On January 1, 1988, the Chase plan and the Chase Lincoln plan were merged, therefore the former Lincoln First employees became participants in the Chase Plan. Under the merged plan, which retained Subsection 7.9 set forth above, the former Lincoln First employees continued to have their benefits calculated as they had been under the Chase Lincoln plan. (See, 1989 Chase Plan, Appendix VIII).

On September 21, 1988, the defendant's board of directors approved an amended plan, to take effect on January 1, 1989 (the "1989 Chase Plan"). The 1989 Chase Plan*fn3 states, in relevant part:

  2.40 "Retirement Benefit" means monthly payments for
  life or other payments under the Retirement Plan, as
  determined under Section 7 or Section 7-A that are
  paid in the manner provided in Section 8 and Section
  7-A, as the case may be.

RETIREMENT BENEFITS

  7.1 In General. Except for the case of an Eligible
  Member described in Section 7-A.6 ["Grandfathered"
  former Lincoln First employee] who makes the election
  provided in such section, the Retirement Benefit of a
  Member under this Section 7 expressed as an annual
  benefit on the Normal Form shall be the net amount of
  a benefit determined under this Section 7 as of
  December 31, 1988. The Retirement Benefit of an
  Eligible Member described in Section 7-A.6C who makes
  the election provided in Section 7-A.6A expressed as
  an annual benefit on the Normal Form shall be the net
  amount of a benefit as determined in this Section 7
  as of the Eligible Member's Separation Date. A
  Retirement Benefit determined under this Section 7
  shall consist of the payments, if any, from a
  Superseded Plan not attributable to contributions
  paid by the Member and payments from the Retirement
  Plan Trust. If any part of a Retirement Benefit is
  payable from a Superseded Plan, the Named Fiduciaries
  may, as a condition to the making of any payment from
  the Retirement Plan, require the Member to take such
  steps under the Superseded Plan as may be necessary
  to provide for payments from the Superseded Plan, or
  from the Retirement Plan on account of the Superseded
  Plan, as nearly as possible in conformance with the
  Retirement Benefit and form of payment thereof under
  Section 8 of the Retirement Plan.
  7.9 Lincoln Retirement Plan Participants. A —
  Notwithstanding anything contained in this Section 7
  to the contrary, the Retirement Benefit of a Member
  who was a participant in the Lincoln First Bank's
  Retirement Plan immediately prior to becoming a
  Member in the Retirement Plan shall be equal to the
  greater of: (i) the Retirement Benefit of such Member
  calculated without regard to this Section 7.9, or
  (ii) that benefit which would have been payable to
  such employee under the Lincoln First Bank's
  Retirement Plan (as in effect immediately prior to
  the date on which Lincoln First Bank, N.A. and its
  affiliates became members of the Controlled Group)
  were such Member's service and Compensation with an
  Employer taken into account in determining such
  Member's entitlement to a benefit under the Lincoln
  First Bank's Retirement Plan, reduced by any benefit
  payable to such Member under such Lincoln First
  Bank's Retirement Plan.
 
  7.11 Frozen Retirement Benefits. In the case of a
  member (other than an Eligible Member who makes the
  election described in Section 7-A.6) who becomes
  eligible to receive a Retirement Benefit under
  Section 7 on or after the Second Restatement Date
  [January 1, 1989], the Retirement Benefit under this
  Section 7 shall be determined, under the rules set
  forth in this Section 7, as if such Member had
  terminated his employment with a member of the
  Controlled Group on December 31, 1988.,

SECTION 7-A

  [Sub-sections 7-A.1 through 7-A.5 describe the
  creation and funding of Chase Retirement Accounts for
  each Member, beginning in January 1989, and how upon
  retirement, those accounts will be used, depending
  upon the option chosen by the retiring employee, to
  purchase annuities, make lump-sum payments, or
  provide a combination of an annuity and lump-sum
  payment.]

7-A.6 Election by Eligible Member to Have Benefits Determined Under Section 7. [Grandfathering Provision]

  A — In lieu of having his Retirement Benefit,
  optional benefit forms or other rights for Benefit
  Service after December 31, 1988 determined under this
  Section 7-A, an Eligible Member described in Section
  7-A.6C below may elect, within the 120 day period
  ending on his Benefit Commencement Date, to have his
  Retirement Benefit under Section 7 include the
  Post-December 31, 1988 Accrual Period described in
  Section 7-A.6B and to receive his Retirement Benefit
  under the Retirement Plan in one of the benefit forms
  provided in Section 8 or 10, as applicable. A Member
  who makes an election under this Section 7-A.6A shall
  file an election form designated for this purpose
  with the Named Fiduciaries prior to the Benefit
  Commencement Date.
  B — Post-December 31, 1988 Accrual Period. For the
  purpose of Section 7-A.6A, the Post-December 31, 1988
  Accrual Period shall be that period of Benefit
  Service beginning on January 1, 1989 which (1)
  continues the Member's most recent period of Benefit
  Service which began prior to December 31, 1988, and
  (2) ends on the Member's Separation from Service
  Date.
  C — Eligible Member. [It is undisputed that the
  plaintiffs do not meet the criteria of "eligible
  members," i.e. they are not eligible to be
  "grandfathered."]

CLAIMS PROCEDURE

  14.1 In General. Any member or any other person
  entitled to benefits under the Retirement Plan
  ("claimant"), or his duly authorized representative,
  may make a claim for a Retirement Plan benefit by
  filing such claim in writing with the Administrator.
  Such claims shall be heard and considered by the
  persons or the department or office designated by the
  Named Fiduciaries for such purpose.
  14.2 Rights Upon Denial of a Claim. In the event
  that a claim is denied, in whole or in part, a
  claimant shall be furnished with notice of the
  decision by the Administrator within a reasonable
  period of time after the filing of the claim. Such
  notice of the decision shall be in writing and shall
  state the specific reason(s) for the denial, the
  specific provision(s) of the Retirement Plan on which
  the denial was based. . . .
  14.3 Appeal to the Named Fiduciaries. Every
  claimant shall have a reasonable opportunity to
  appeal a denial of a claim to the Named Fiduciaries.
  14.4 Decision by the Named Fiduciaries. A decision
  shall be rendered by the Named Fiduciaries within 60
  days after the receipt of the request for review,
  provided that where special circumstances make a
  longer period for decision necessary or appropriate,
  decision may be postponed. . . . Any decision

  by the Named Fiduciaries shall be in writing and
  shall set for the specific reason(s) for the decision
  and the specific Retirement Plan provision(s) on
  which the decision is based.

ADMINISTRATION

  13.1 Named Fiduciaries. The authority to control
  and manage the operation and administration of the
  Retirement Plan . . . subject to the provisions of
  Sections 13.3 and 13.4 hereof, shall be vested
  jointly in the named Fiduciaries. The Named
  Fiduciaries shall be designated by the Board of
  Directors of the Bank to serve until the next annual
  organization meeting of the Board and until their
  successors are designated and qualified. . . .
  13.5 Amendment of the Retirement Plan. The Named
  Fiduciaries shall have the power to amend the
  Retirement Plan and the Declaration of Trust to the
  extent required in order to effectuate the authority
  vested in them under Sections 13.2, 13.3 and 13.4
  13.11 Power to Construe. The Named Fiduciaries
  shall have power to construe the provisions of the
  Retirement Plan and to determine any questions of
  fact which may arise thereunder.

(Italics added).

Pursuant to Section 7-A above, the January 1, 1989 Chase Plan utilized, from that date forward, the Chase Retirement Account ("CRA") as its retirement benefit. The CRA required Chase to make contributions to an employee's pension plan at a predetermined rated based on a participant's years of service. Under this plan, employees had their accrued benefits frozen as of December 31, 1988, and from that point forward, they only continued to accrue benefits under the CRA calculation.*fn4 Accordingly, upon retirement, such an employee would receive the benefits that they had earned under the Chase Plan through December 31, 1988, plus whatever benefit they had subsequently accrued under the CRA program. However, as noted above under Subsection 7-A.6, certain "grandfathered" employees could elect not to have their benefits calculated under the CRA method. Instead, those eligible employees who were grandfathered had the option of electing to have their benefits calculated as under the former Chase Plan.*fn5 To be grandfathered, employees had to meet certain requirements for age and years of service. It is undisputed that the plaintiffs are not grandfathered. However, the plaintiffs contend that because of the "notwithstanding" language contained in Subsection 7.9, they retained the right to have their retirement benefits computed under the "all Lincoln" formula, even though they do not meet the requirements for grandfathering under Subsection 7-A.6. Moreover, the plaintiffs contend that because of the "notwithstanding" language in Subsection 7.9, the December 31, 1988 benefit determination date contained in Subsections 7.1 and 7.11 has no effect on them.

On October 24, 1988, the defendant notified employees by letter that it had made changes to the employee benefits plan, effective January 1, 1989. This letter mentioned the CRAs, but did not provide specific details of any changes in retirement benefits. (White Aff. [# 33], Exhibit 3). Along with this letter, the defendant distributed a pamphlet entitled "Designs for the Future." (Plaintiffs' Exhibit 11). This pamphlet states, in relevant part:

  On January 1, 1989, we are making changes in our
  retirement program . . . changes which introduce a
  new and innovative approach to providing your
  retirement benefits.

***

  Your new retirement program is called a Chase
  Retirement Account (CRA).

***

  [I]f you are eligible to retire within the next eight
  (8) years, there are special rules to protect your
  retirement benefits to assure they will be as good as
  or better than the benefits under the current plan.

***

  Finally, although our new approach becomes effective
  on January 1, 1989, rest assured that all benefits
  you have earned under the current plan up through
  December 31, 1988, will be secured for you.

***

  If you are employed by Chase as of December 31,
  1988, and you are participating in the current
  retirement plan, you will automatically participate
  in the revised plan, and a Chase Retirement Account
  will be set up for you. . . .

***

  [B]enefits earned under the current plan through
  December 31, 1988 do not change. Chase will
  calculate your benefit on that date and secure the
  benefit you have earned under the old formula.

***

SPECIAL RULES FOR THOSE NEARING RETIREMENT AGE

  Special rules will apply to protect current benefit
  levels for employees who, as of December 31, 1988:
  • are age 47 or more with at least 17 years of
  service;

• are age 52 or more; or,

• have 25 or more years of service.

  If you meet any of these criteria when you are ready
  to retire, you may choose between:
  • the retirement benefit calculated under the current
  plan formula, as revised to comply with the law, at
  the time your benefit is paid, or
  • you total benefit under your Chase Retirement
  Account.

You make the choice.

  [W]hen you consider all of your sources of future
  financial security, you must include not only your
  new CRA and your December 31, ...

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