United States District Court, Northern District of New York
August 6, 1999
CONCETTA COPELAND, PLAINTIFF,
GEDDES FEDERAL SAVINGS & LOAN ASSOCIATION RETIREMENT INCOME PLAN; AND GEDDES FEDERAL SAVINGS AND LOAN ASSOCIATION, DEFENDANTS.
The opinion of the court was delivered by: Hurd, United States Magistrate Judge.
MEMORANDUM-DECISION and ORDER
The plaintiff, Concetta Copeland ("Copeland" or "plaintiff"), is a
resident of Camillus, New York, located within the Northern District of
New York, and brings this action pursuant to the Employee Retirement
Income Security Act, 29 U.S.C. § 1001-1461 ("ERISA"). The defendant
Geddes Federal Savings & Loan Association Retirement Income Plan
("Plan") is an employee benefit plan within the meaning of ERISA §
1002(2)(A). The defendant Geddes Federal Savings and Loan Association
("Bank"), is the administrator of the Plan within the meaning of §
1002 (16)(A) and a fiduciary to the Plan within the meaning of § 1002
(21)(A). Plaintiff is seeking past and future retirement benefits
pursuant to the Plan.
A one day bench trial was conducted on March 15, 1999, in Syracuse, New
York. The plaintiff called five witnesses: (1) Sylvia Salvagno, a former
employee of the Bank and a former administrator of the Plan; (2) Gerald
Heaton, an actuary called as an expert witness; (3) the plaintiff; (4),
Jack F. McPeak, a senior Vice President/Chief Financial Officer with the
Bank, and the current administrator of the Plan; and (5) John Harrison,
President of the Bank. The defendant called two witnesses: (1) Mr.
McPeak; and (2) James A. Hughes, the Plan consultant for the Bank. In
addition, the parties stipulated or made no objection to the receipt into
evidence of thirty-two documentary exhibits. Post trial memorandums of
law were filed by both sides on May 7, 1999.
Based upon a review of the minutes of the trial, the exhibits received
into evidence, the pleadings, and all other submissions, together with an
evaluation of the credibility of the various witnesses, the following
constitutes the Findings of Fact and Conclusions of Law pursuant to Fed.
III. FINDINGS OF FACT
Copeland was an employee of the Bank from March 24, 1986 to December
31, 1993. As an employee of the Bank, she was, and still is, a
participant in the Plan.
The Plan was amended and restated effective January 1, 1981. (Pl's Ex.
1.) On November 13, 1984, the Plan was amended to enhance the early
retirement options, including the Social Security Option. The amendment
provided that the "[e]arly retirement
percentage factor [would be] increase[d] to 1/2 then on present plan
tables with an approximate additional annual cost of $3800.00 per year."
(Pl.'s Ex. 3.) The adjustment factors to achieve that result were
contained in Table A to the Plan. (Pl's Ex. 6.)
In May 1989, Rosemary Campagnoni, a Bank employee, elected to retire
under the Social Security Option. She received her retirement benefits as
computed using the 1984 Amendment and Table A. Neither the Bank nor the
Plan raised any objection or claimed that a mistake was made concerning
the calculation of Mrs. Campagnoni's benefits.
In late 1989, two other Bank employees, Emma Fedeli and Jean Avery
elected to retire under the Social Security Option. At this time, Mr.
Hughes, as the Plan consultant, discovered that the Social Security
Option, as amended in 1984, was costing the Plan substantially more than
the normal retirement option. He brought this matter to the attention of
the Plan's Board of Directors ("Board"), and recommended that they either
increase the funding or reduce the Social Security Option benefits.
As a result, on January 12, 1990, the Board passed a resolution
proposing to amend the Plan to discontinue using the factors in Table A
and, instead, make all of the retirement options actuarially equivalent.
(Defs.' Ex. Al.) This resolution became Amendment No. 4 which reads:
Based upon a motion of the Board of Directors on
January 12, 1990, the Geddes Federal Savings and Loan
Association Retirement Income Plan is hereby amended
as follows effective January 1, 1990:
Section 10.3 Social Security Option shall be amended
in it's (sic) entirety and replaced with the
"A participant who retires before his or her normal
retirement date may elect to receive a reduced benefit
prior to and until his or her social Security
Commencement date; so that the amount of the benefit
received from the Plan when combined with anticipated
Social Security Benefit will remain approximately
level. Benefits under this option will be the
actuarial equivalent of the normal retirement benefit
described in Section 9.2."
(Defs.' Ex. A2.)
Mr. McPeak attempted to characterize the purpose of Amendment No. 4 as
"clarifying a misunderstanding," (Tr. at 86), and "correct[ing] a
mistake." Id. at 88. The defendants also described it as a "correction"
to the Social Security Option in the 1984 Amendment, which "was
incorrectly computed." (Defs.' Ex. C.) However, the 1984 Amendment was,
in fact, being properly applied and had been done so in Mrs. Campagnoni's
case. Even Mr. Hughes admitted that there was no error.*fn1 There was,
however, a problem. The 1984 Social Security Option, as properly
applied, was apparently underfunded and would tend to encourage employees
to choose early retirement in order to receive the enhanced benefits. In
order to correct the problem, the Board passed the above resolution and
attempted to amend the Plan, to reduce the Social Security Option
Thereafter, instead of publishing the resolution and Amendment No. 4 to
Plan participants and explaining the situation, the Bank proceeded to
take the following steps:
1. January 23, 1990 — Terminated Mrs. Salvagno
as the Plan Administrator and replaced her with
2. February 15, 1990 — Mr. McPeak informed Mrs.
Fedeli (one of the two employees requesting
retirement under the Social Security Option) that
the benefits she was quoted
were based upon an incorrect method of
computation, but did not tell her that the Social
Security Option in the Plan had been amended.
3. March 16, 1990 — Mr. McPeak advised SALNY
Services, Inc. (the administrator of the Plan) that
the Social Security Option had been amended, and
sent a copy of Amendment No. 4 to them.
4. Mrs. Salvagno was advised by the Board that the
Plan had not been amended.
5. Mr. McPeak and Mr. Hughes testified that there were
some employee meetings about the Plan, but the
testimony was vague, with no specifics, nor any
evidence that the resolution or Amendment No. 4
were ever distributed to the employees of the Bank
and participants in the Plan.*fn2
6. January 17, 1991 — The Bank sent a letter to
the employees which stated as follows:
Your retirement plan has undergone some changes over
the past year in order to bring it into conformance
with current regulations governing these plans.
During this process it was discovered that the Social
Security Option, which is on of the plan's payout
options, was incorrectly computed. This was corrected
so that all payout options under the plan are the
equivalent of each other and, therefore, no one
employee or group of employees will receive a greater
or lesser benefit than any other employee in a similar
situation. Without this corrective action, the plan's
funding may have been jeopardized
The Social Security Option will be an available option
under the plan and it will be calculated so that it is
the financial and actuarial equivalent of any other
option. . . .
(Defs.' Ex. C.)
Copeland retired effective December 31, 1993. She elected the Social
Security Option. The defendants computed her retirement benefits under
the provisions of Amendment No. 4. Copeland demanded benefits pursuant to
the 1984 Amendment, but the defendants refused. This action ensued.
III. CONCLUSIONS OF LAW
The defendants argue that the issue in this case is whether the denial
of plaintiffs claim for Social Security Option benefits was reasonable,
or was in fact, arbitrary and capricious. Such is not the case. The
Supreme Court has held that "a denial of benefits challenged under §
1132(a)(1)(B) is to be reviewed under a de novo standard unless the
benefit plan gives the administrator to fiduciary discretionary authority
to determine eligibility for benefits or to construe the terms of the
plan." Firestone Tire & Rvbber Co. v. Bruch, 489 U.S. 101, 115, 109
S.Ct. 948, 103 L.Ed.2d 80 (1989) (italics in original). In the instant
however, there is no disagreement as to the interpretation of the Plan or
Copeland's eligibility for benefits. Thus, this case does not involve
interpretation of the Plan, but rather, which provision of the Social
Security Option applies to the plaintiff — the 1984 Amendment or
Amendment No. 4 of 1990.
Contrary to defendants' assertion, the real issue in this case is
whether the defendants properly amended the Plan in 1990. If so, the
plaintiff would only be entitled to the Social Security Option benefits
pursuant to Amendment No. 4. If not, the plaintiff would be entitled to
the higher Social Security Option benefits under the 1984 Amendment.
Based upon the pleadings alone, wherein the defendants deny an
amendment was made in 1990 and also assert the affirmative defense that
there was no amendment, it would be proper to conclude that the Social
Security Option was never amended in 1990, and therefore, the plaintiff
is entitled to benefits pursuant to the provisions of the 1984
Amendment.*fn3 However, the merits of the claim will nevertheless be
I. Requirements Concerning Notice of Amendment
Plaintiff contends that defendants failed to provide adequate written
notice of Amendment No. 4, and therefore, said amendment was not properly
adopted. ERISA mandates that
A plan described in paragraph (2) may not be amended
so as to provide for a significant reduction in the
rate of future benefit accrual, unless, after adoption
of the plan amendment and not less than 15 days before
the effective date of the plan amendment, the plan
administrator provides a written notice, setting forth
the plan amendment and its effective date, to (A) each
participant in the plan. . . .
29 U.S.C. § 1054 (h)(1).*fn4 "[S]ignificant reduction[s] in early
retirement benefits triggers the notice requirements of § 1054(h)."
Normann v. Amphenol Corp., 956 F. Supp. 158, 165 (N.D.N.Y. 1997)
In the present case, the January 12, 1990 resolution resulted in a
substantial reduction in benefits for those choosing the Social Security
Option. This is clear not only from the numbers,*fn5 but also from the
fact that the Board was fearful that if a change was not made, the entire
Plan would be in jeopardy for inadequate funding. Consequently, the Bank
must demonstrate that adequate notice was given to all plan
participants, particularly Copeland, at the proper time, in accordance
with § 1054(h).
As stated above, notice must be given "after adoption of the plan
amendment and not less than 15 days before the
effective date of the plan amendment." § 1054(h)(1). In this case,
the Board amended the Plan on January 12, 1990, but the effective date of
the amendment was January 1, 1990, eleven days earlier. (Defs.' Ex. A2.)
By making the effective date retroactive, the Board made it impossible to
give notice of the amendment 17 days before its effective date.
Consequently, the Bank could not, and did not. give timely notice of the
adoption of Amendment No. 4.
In addition to its failure to timely notify plan participants that it
amended the Plan, the Bank also failed to provide adequate notice. The
plan administrator is required to set forth "the plan amendment and its
effective date" to each plan participant. § 1054(h)(1). The only
"notification" the Bank provided to employees was a one-page ambiguous
memorandum that referred to an incorrect computation of the Social
Security Option that was "corrected" in order to save "the plan's
funding." (Defs.' Ex. C.) In addition, this memorandum did not state, in
any manner, that an amendment had been made and when the effective date
was; nor did it explain that the specific early retirement reduction
factors were being eliminated. Furthermore, the terms if Amendment No. 4
were never provided to the Plan participants as required by § 1054.
Finally, as further evidence that Amendment No. 4 is not binding on plan
participants, the bank actually denied that an amendment had been made.
Accordingly, plaintiff is entitled to receive Social Security Option
benefits under the 1984 amendment.
2. Breach of Fiduciary Duty Claim
Plaintiff also claims that the Bank breached its fiduciary duties by
denying her claim for benefits under the 1984 Amendment. This claim
appears to be, in substance, a reiteration of her claim for a
recalculation of benefits under 29 U.S.C. § 1132 (a)(1)(B). To the
extent that Copeland suggests that she may recover on a separate, breach
of fiduciary duty theory, she misconstrues the relevant statutory
provisions. ERISA's civil enforcement provisions specify the grounds upon
which plan participants may seek relief. See § 1132. A review of
§ 1132 reveals that there is no provision where a plan participant
may raise a claim for breach of fiduciary duty on his or her own behalf.
The subsection which deals with liability for fiduciary misconduct,
§ 1132(a)(2), only authorizes "relief to the plan itself, and [is]
not a separate source of entitlement to relief for individual plan
participants." Algie v. RCA Global Communications, Inc., 891 F. Supp. 839,
868 (S.D.N.Y. 1994), aff'd, 30 F.3d 956 (2d Cir. 1995) (citing
Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140-44, 105
S.Ct. 3085, 87 L.Ed.2d 96 (1985)). "Given the availability of a statutory
remedy upon the showing of an entitlement to benefits, there is no reason
to define a separate claim-not supported by statutory language-that would
provide the same relief for the same wrong." Id.
To the extent that plaintiffs breach of fiduciary duty claim is
premised on § 1132(a)(3),*fn6 it has been held that "[a] plaintiff
may not pursue a claim for breach of fiduciary duty based on section
502(a)(3) [§ 1132(a)(3)] where that claim seeks relief that
duplicates the relief sought on a claim for benefits under section
502(a)(1)(B) [§ 1132(a)(1)(B)]." Joyce v. Curtiss-Wright Corp.,
992 F. Supp. 259, 270 (W.D.N.Y. 1997), aff'd 171 F.3d 130 (2d Cir. 1999)
(citing Wald v. Southwestern Bell Corp. Customcare Med. Plan, 83 F.3d 1002,
1006 (8th Cir. 1996)).
Copeland contends that she is entitled to a recalculation of benefits
consistent with the terms contained in the 1984 Amendment, rather than
the terms of the 1990 Amendment on the theories that: (1) Amendment No. 4
is not binding because plan participants were not provided adequate or
timely notice; and (2) the Bank breached its fiduciary duties. Thus, she
seeks the same relief based upon both theories. Plaintiffs breach of
fiduciary duty claim must, therefore, be dismissed since it duplicates
her claim to recover benefits due pursuant to § 1132(a)(1)(B).
As a result of the Bank's failure to give timely or adequate notice of
the terms of Amendment No. 4 to its participants, said amendment was not
in effect at the time Copeland elected to receive early retirement
benefits pursuant to the Social Security Option. Consequently, she is
entitled to the Social Security Option benefits under the 1984
Both experts (Mr. Heaton and Mr. Hughes), agreed that under the Social
Security Option in the 1984 Amendment, plaintiff is entitled to $458.34
per month from January 1, 1994, through August 1, 2002, and $5.00 per
month thereafter. The plaintiff is also entitled to pre-judgment interest
at 9% per annum.*fn8 This results in an award of $42,605.10.*fn9
The plaintiff is also awarded reasonable attorney's fees and expenses.
See 29 U.S.C. § 1132 (g)(1). The parties are encouraged to settle or
stipulate the amount. All other claims of the plaintiff are denied.
Based upon the above, it is ORDERED, that
1. Plaintiff is awarded the sum of $42,605.10;
2. Defendants are directed to pay plaintiff $458.34 per month from
August 1, 1999, through August 1, 2002, and $5.00 per month thereafter
for the remainder of her natural life;
3. Plaintiff is awarded reasonable attorney's fees and expenses, and
may file and serve an application with contemporaneous records by August
20, 1999. The defendants may file and serve a response on or before
September 3, 1999. The issue will be decided on submit and a final
judgment will be entered thereafter.
IT IS SO ORDERED.