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MCDONALD v. PENSION PLAN OF THE NYSA-ILA PENSION TRUST F.

March 29, 2001

JAMES MCDONALD, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED PLAINTIFF,
v.
PENSION PLAN OF THE NYSA-ILA PENSION TRUST FUND, AND BOARD OF TRUSTEES OF THE PENSION PLAN OF THE NYSA-ILA PENSION TRUST FUND, IN THEIR OFFICIAL AND PERSONAL CAPACITIES, DEFENDANTS.



The opinion of the court was delivered by: Naomi Reice Buchwald, United States District Judge.

  OPINION AND ORDER

Plaintiff, James McDonald, brings this putative class action against the defendants, the Pension Plan of the New York Shipping Association International Longshoremen's Association Pension Trust Fund ("Pension Plan"), and the Board of Trustees of the Pension Plan ("Board" or "Trustees") alleging multiple violations of the Employee Retirement Income Security Act of 1974, as amended ("ERISA" or the "Act"), 29 U.S.C. § 1001 et seq.*fn1 Currently before the Court are plaintiff's motion for partial summary judgment and defendants' motion for summary judgment. For the reasons set forth in this opinion, plaintiff's motion is granted in part and denied in part, and defendant's motion is granted in part and denied in part.

BACKGROUND

A. The Defendants and the Pension Plan's Benefit Structures

The material facts are not in dispute. Defendant Pension Plan is a joint labor-management trust fund that administers a defined-benefit, multi-employer employee pension plan for the benefit of employee longshoremen and their beneficiaries. Defendants' Statement of Undisputed Material Facts ("Defs.' 56.1 Statement"), ¶¶ 1-2; Pl.'s Compl., ¶ 7. Defendants' Trustees are the administrators of that plan. Defs.' 56.1 Statement, ¶ 4.

The Pension Plan has been modified several times since its inception in 1950. From 1950 to the enactment of ERISA in 1974, the Pension Plan had a single benefit structure providing for the payment of a flat monthly sum, called a Service Retirement Pension ("SRP"). 1950 Agreement and Declaration of Trust and Plan of the NYSA-ILA Pension Trust Fund and Plan ("1950 Plan"), A201;*fn2 Defs.' 56.1 Statement, ¶ 8. Eligibility for the SRP was originally limited to those 65 years of age or older who had been continuously employed in the industry for at least 25 years and were actively employed at the time of their retirement. Defs.' 56.1 Statement, ¶ 9; 1950 Plan, A193-94. The amount of the SRP has increased over the years, paying a maximum monthly benefit of $950 in 1983, $1,045 in 1986 and $1,250 in 1992 based on 40 years of credited service. Defs.' 56.1 Statement, ¶ 10.

Under the terms of the 1950 plan, an employee's employment in the industry was deemed "terminated" and "shall no longer be considered continuous" when the employee has worked fewer than 400 hours a year for more than two calendar years, subject to certain exclusions not applicable to the present litigation. 1950 Plan, A194. This is an example of a so-called "break-in-service" provision.

After the enactment of ERISA, the Pension Plan was modified to provide an additional Vested Rights Pension ("VRP") for those who did not meet the eligibility requirements of the SRP. Defs.' 56.1 Statement, ¶ 12. The VRP provides benefits according to the following formula:

(a) For years of credited service in the industry prior to January 1, 1976, he shall receive 1-1/2% of the maximum monthly benefit in effect at the time he ceased employment in the industry, multiplied by years of credited service earned prior to January 1, 1976, [PLUS]
(b) For years of credited service after January 1, 1976, he shall receive 3% of the maximum monthly benefit in effect at the time he ceased employment in the industry, multiplied by the number of years of credited service earned on or after January 1, 1976, [PLUS] 3% of (a) above multiplied by the number of years of credited service after January 1, 1976.
(c) in no event shall a participant receive more than 100% of the maximum monthly benefit in effect at the time he ceased employment in the industry.

1985 Plan, A270; 1995 Plan, A388-89.*fn3

Under the plan, a "year of credited service" is defined as:

(1) for years prior to October 1, 1978, any year in which a participant had at least 400 hours of employment in the industry provided that such participant had an average of 700 hours employment per year during such years prior to October 1, 1978 and provided further no credit shall be given for any year(s) of employment occurring prior to a break in service which break in service occurred prior to January 1, 1976; and
(2) commencing October 1, 1978, any year in which a participant has at least 700 hours of employment in the industry.

1985 Plan, A228-29; 1995 Plan A351-52. Thus, the post-ERISA versions of the Plan retain the break in service provision of the 1950 Plan.

On November 14, 1995, the Plan was again amended, retroactive to January 1, 1976. 1995 Amendment, A122-23. As amended, the 1995 Plan provided that all vested participants would accrue*fn4 benefits in accordance with the VRP benefit formula above, and further provided that those eligible for the SRP and the VRP at retirement would receive the greater of the two benefits.*fn5 Id.

After the adoption of the 1995 Amendment, the Plan's actuary reviewed the Plan's records, and provided retroactive adjustments to some beneficiaries' pensions without interest. Defs.' 56.1 Statement, ¶¶ 30-31; Affidavit of Joseph Rossetti, Executive Director of the Pension Plan ("Rosetti Aff."), ¶¶ 24-25. Defendants' actuary asserts, and plaintiff does not dispute,*fn6 that the defendants have made all adjustments required by the 1995 Amendment for all beneficiaries. Affidavit of Susan E. Lee, actuary at the Segal Company, ("Lee Aff."), ¶¶ 3-7.

Effective October 1, 1996, the Plan was amended to replace the previous SRP benefit formula with an accrued benefit of $50 per month for each year of credited service up to a maximum of $2,000 per month based on 40 years of credited service for those retiring after the effective date. Defs.' 56.1 Statement, ¶ 11, 1999 SPD, A551. Those retiring before October 1, 1996 continue to receive benefits based on the VRP formula in the 1995 Plan, as amended. The effect of this most recent amendment is not challenged in the present action, as plaintiff retired before its effective date. Thus, we do not address the question of whether the Plan's new benefit structure satisfies ERISA's requirements. Accordingly, all references to the Plan, unless otherwise specified, are to the 1995 Plan, as amended. We now turn to the plaintiff and his claims.

B. The Plaintiff

Plaintiff, a former longshoreman, receives a lifetime pension from the Pension Plan. Plaintiff's Statement Pursuant to Local Rule 56 ("Pl.'s 56.1 Statement"), ¶ 1. Plaintiff first worked under the plan in 1953, and had sufficient hours under the terms of the plan to earn a year of credited service for each of the following thirteen years: 1953-60, 1963, 1965 and 1967-69. Pl.'s 56.1 Statement, ¶ 4. Plaintiff also worked sufficient hours to earn a year of credited service for the years 1973-74 and 1976-81, 1985 and 1986. Id. ¶ 3. In each of three consecutive years from 1970 through 1972, plaintiff failed to work a sufficient number of hours to earn a year of credited service, Id., ¶ 5, and under the terms of the plan then in effect, suffered a break in service. 1950 Plan, A194.

The Board ruled that the plaintiff had only 10 years of credited service and was therefore not eligible for the SRP, but only for the VRP. November 14, 1995 Minutes of the Board, A104-111. Thus, defendants awarded plaintiff a VRP pension in the amount of $263.38 per month based on ten years of credited service subsequent to 1972, disregarding plaintiff's first 13 years of credited service under the break in service provision of the 1950 Plan. Pl.'s 56.1 Statement, ¶¶ 1, 4. Defs.' 56.1 Statement, ¶ 21.

C. Plaintiff's Claims

Plaintiff filed a nineteen count complaint challenging the Board's calculation of his pension and alleging various violations of ERISA. Claims one through ten seek class relief, while claims eleven through nineteen seek individual relief.*fn7 Six of the original nineteen claims were subsequently abandoned by the plaintiff or deemed moot by the parties.*fn8 Defendant seeks summary judgment on the thirteen remaining claims, while plaintiff seeks partial summary judgment on his first, second and eleventh claims. After setting forth the appropriate standard of review,*fn9 we turn first to the plaintiff's individual claims, followed by his class claims.

DISCUSSION

I. Sunuary Judgment Standard

Summary judgment is properly granted "`if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact and that the moving party is entitled to judgment as a matter of law.'" R.B. Ventures, Ltd. v. Shane, 112 F.3d 54. 57 (2d Cir. 1997) (quoting Fed. R. Civ. P. 56(c)). The Federal Rules of Civil Procedure mandate the entry of summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

In reviewing the record, we must assess the evidence "in the light most favorable to the non-movant and . . . draw all reasonable inferences in his favor." Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 177 (2d Cir. 1990). The mere existence, however, of an alleged factual dispute between the parties will not defeat a motion for summary judgment. In order to defeat such a motion, the non-moving party must affirmatively set forth facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 256 (1986). An issue is "genuine . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248 (internal quotation omitted).

II. Plaintiff's Individual Claims

A. Application of the Plan's Pre-ERISA Break in Service Rules to Plaintiff's Accrued Benefit Violates ERISA

Plaintiff's eleventh claim challenges defendants' application of the Plan's pre-ERISA break in service rules to exclude his thirteen years of pre-break credited service in calculating his accrued benefit. Compl. ¶¶ 94-102. With respect to plaintiff's eleventh claim for relief, for the reasons stated below, plaintiff's motion for summary judgment is granted and defendants' motion for summary judgment is denied.

Plaintiff contends that once he completed sufficient years of service to become a vested participant in the Plan, the Board could not disregard his first ten years of credited service in calculating his accrued benefit based on his break in service.*fn10

More specifically, the plaintiff contends that ERISA permits a plan to disregard service pursuant to its pre-ERISA break in service rules only for vesting purposes, and that once an employee's pension has vested, such service must be included in calculating the employee's accrued benefit. Plaintiff's Motion for Partial Summary Judgment ("Pl.'s Mem."), at pp. 3-14; Plaintiff's Memorandum of Law in Opposition to Defendant's Motion ("Pl.'s Opp'n Mem."), at pp. 4-8. In other words, plaintiff argues that all his years of service must be taken into account except those which can be disregarded under the permitted statutory exclusions for participation and accrual purposes.

Defendants, in contrast, contend that ERISA permits a plan to disregard service that would have been discredited under a plan's pre-ERISA break in service rules for accrual as well as vesting purposes. Defs.' Mem., at pp. 23-25; Defs.' Opp'n Mem., at pp. 1-3. Specifically, defendants argue that ERISA § 203(b)(1)(F), 29 U.S.C. § 1053 (b)(1)(F), which permits a plan to apply its pre-ERISA break in service rules for vesting purposes, applies when determining the accrued benefit of a vested employee under ERISA § 204, 29 U.S.C. § 1054.

For the reasons discussed below, we conclude that the language and structure of ERISA §§ 202-204, 29 U.S.C. § 1052-54, provide ample support for the plaintiff's position. Moreover, regulations and other documents from the Internal Revenue Service and the Department of Labor support the same result. Accordingly, we find that ERISA § 203(b)(1)(F), 29 U.S.C. 1053(b)(1)(F), which permits plans to exclude, for vesting purposes, years of service that would have been disregarded under a pre-ERISA plan's break in service rules, is not applicable in determining the accrued benefit payable to an employee who has satisfied the vesting requirements. But see, Jones v. UOP, 16 F.3d 141 (7th Cir. 1994) (holding that ERISA § 203(b)(1)(F) is applicable to accrued benefit calculations under ERISA § 204(b)(1)(D)); Hass and Cass v. Boeing Co., 1992 WL 221335 (E.D.Pa. 1992) (same), aff'd without op., 993 F.2d 877 (3rd Cir. 1993)

1. The Language and Structure of Sections 202-204 of ERISA

The Supreme Court has recognized that ERISA is "an intricate, comprehensive statute." Boggs v. Boggs, 520 U.S. 833, 840 (1997) When construing ERISA, as with any other statute, our analysis "begins with `the language of the statute.'" Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999). See also. e.g., Washington v. Schriver, 240 F.3d 101, 108 (2d Cir. 2001) (noting that the first step of statutory interpretation is to determine whether the language at issue has a "plain and unambiguous meaning with regard to the particular dispute in the case" as determined "by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole. Where the meaning of a statute is textually ambiguous, we may consult its legislative history.") (internal quotation marks and citations omitted)

If Congress has directly addressed "the precise question at issue," the Court, like administrative agencies, "must give effect to the unambiguously expressed intent of Congress." Chevron U.S.A., Inc. v. Natural Res. Defense Council. Inc., 467 U.S. 837, 842-43 (1984). If Congress has not addressed the precise question at issue, the question for the Court is "whether the agency's answer is based on a permissible construction of the statute." Id. In addressing the second step of the Chevron inquiry, the Court "need not conclude that the agency construction was the only one it permissibly could have adopted," id. at 843, and "may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency." Id. at 843 n.11.*fn11

We find that, through the language of ERISA §§ 202-204, Congress has addressed the precise question at issue here and answered it in the plaintiff's favor. Moreover, even if the precise question at issue here is not resolved by reference to the Act's text, the agencies charged with interpreting the Act have given the same answer, which even if not required by the statutory text, is a reasonable interpretation of the relevant statutory language.

In passing ERISA, Congress found that "many employees with long years of employment are losing anticipated retirement benefits owing to the lack of vesting provisions in such plans." 29 U.S.C. § 1002 (a). ERISA was designed to reduce, by various means, the number of employees losing expected pension benefits. See. e.g., Duchow v. New York State Teamsters Conference Pension & Ret. Fund, 691 F.2d 74, 76 (2d Cir. 1982); Carollo v. Cement & Concrete Workers Dist. Council Pension Plan, 964 F. Supp. 677, 681 (E.D.N Y 1997). See also Smith v. Contini, 205 F.3d 597, 604 (3rd Cir. 2000) ("Congress's chief purpose in enacting [ERISA] was to ensure that workers received promised pension benefits upon retirement."). To this end, ERISA provides detailed regulations concerning employee participation, vesting and accrual governing employee benefit plans. See ERISA § 202, 29 U.S.C. § 1052 ("Minimum participation standards"); ERISA § 203, 29 U.S.C. § 1053 ("Minimum vesting standards"); ERISA § 204, 29 U.S.C. § 1054 ("Benefit accrual requirements").

(a) ERISA § 202 — Minimum Participation Standards

ERISA § 202 sets forth the "Minimum participation standards" governing the limits employers may impose on employee participation in benefit plans. See 29 U.S.C. § 1052. Specifically, ERISA § 202(a)(1)(A) mandates that "[n]o pension plan may require, as a condition of participation in the plan, that an employee complete a period of service" extending beyond the later of the date on which the employee attains 21 years of age, 29 U.S.C. § 1052 (A)(1)(A)(i), or completes 1 year of service,*fn12 29 U.S.C. § 1052 (A)(1)(A)(ii).

ERISA § 202(b) further provides:

(1) Except as otherwise provided in paragraphs (2), (3), and (4) all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of subsection (a)(1) of this section.

29 U.S.C. § 1052 (b)(1) (emphasis added). Thus, for purposes of an employee's participation in a plan, ERISA requires that "all years of service" be taken into account, with certain enumerated exceptions. Those exceptions, set forth in ERISA § 202(b)(2)-(4), 29 U.S.C. § 1052 (b)(2)-(4), (collectively, "participation exceptions" or "section 202(b) exceptions")*fn13 do not include an exclusion for service subject to a plan's pre-ERISA break in service provisions, and as noted at the margin, would not exclude plaintiff's pre-break service. See 29 U.S.C. § 1052 (b)(2)-(4)

(b) ERISA § 203 — Minimum Vesting Standards

Section 203 sets forth the "minimum vesting standards" for plans subject to ERISA. 29 U.S.C. § 1053. A defined benefit plan satisfies the minimum vesting requirements pertaining to employer contributions if it provides either than an employee who has completed at least 5 years of service has a nonforfeitable right to 100 percent of the employee's accrued benefit derived from employer contributions, 29 U.S.C. § 1053 (a)(2)(A), or satisfies the vesting schedule set forth in subparagraph (a)(2)(B) for employer contributions. Under either method, the minimum vesting standards are based on the employee's "period of service." 29 U.S.C. § 1053 (a)(2).

Computation of an employee's period of service for vesting purposes is governed by ERISA § 203(b) which provides, in part:

(1) In computing the period of service under the plan for purposes of determining the nonforfeitable percentage under subsection (a)(2) of this section, all of an employee's years of service with the employer or employers maintaining the plan shall be ...

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