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BUTLER v. NEW YORK STATE TEAMSTERS CONFERENCE PENSION

February 15, 2005.

JERRY BUTLER AND JAMES G. HARRIS, Plaintiffs,
v.
NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, Defendant.



The opinion of the court was delivered by: HOWARD MUNSON, Senior District Judge

MEMORANDUM DECISION AND ORDER

BACKGROUND

  The New York State Teamsters Conference Pension and Retirement Fund (the "NYS Fund") is a multi-employer pension plan that provides pension benefits to persons covered by collective bargaining accords entered into by certain employers and local unions of the International Brotherhood of Teamsters. The NYS Fund is a Taft-Hartley pension plan fund that was established, and is maintained by an eight member board of trustees ("Board of Trustees"). Four members of the Board of Trustees represent employers who contribute to the Fund, and four members represent the International Brotherhood of Teamsters, whose members benefit under the NYS Fund.

  Pension benefits under the NYS Fund are based on the number of pension credits participants earn and the contributions made to the NYS Fund by employers on their behalf. Usually, participants earn pension credits under the NYS Fund by working in employment under collective bargaining agreements that require employers to make contributions to the NYS Fund on the participants behalf ("Contributory Service Credit"). Participants may earn up to a maximum of one credit for each year, or portion thereof, that they work for an employer that is required to make contributions to the NYS Fund on their behalf.(Plan Document Ex, § 3.2(c)). Under § 4.1 of the NYS Fund's Plan Document, a participants monthly pension benefit ("Normal Page 3 Pension") is calculated by adding the benefit the participant earns for each year of service credit. The benefit earned for each year of service credit is generally determined by taking the greater of: (a) 2.6% times the contributions made to the NYS Fund on the participant's behalf for the year, or (b) the minimum benefit set forth in the plan document for the year in question, multiplied by the pension credit earned by the participant for that year, up to a maximum of one credit per year.

  The minimum benefit referred to in (b) supra is an amount that depends upon the employer's contribution rate to the NYS Fund. Ordinarily, the higher the employer contribution rate, the higher the minimum benefit. (Plan Document, Ex. 4 § 4.1) Inasmuch as contributions made on a participant's behalf discontinues when he or she stops working in the covered employment. A participant is commonly entitled to the minimum benefit that was in effect at the time he or she worked in employment covered by the NYS Fund.

  The following is an example of a calculation of the Normal Pension: Assume that Worker A earned one pension credit for each of the 25 years for which contributions were made to the NYS Fund on his behalf. For his last 20 years of employment, his employer contributed $3,000 per year to the NYS Fund, but for his first five years, his employer only contributed $1,000 per year. Worker A's Normal Pension under the NYS Fund would be calculated by taking the sum of the greater of; (a) 2.6% times the contributions made on his behalf for each year to the Fund, or (b) the minimum benefit for the year, which is assumed to be $35 for this example, times the pension credit earned for the year. For the last 20 years the $3,000 that was contributed on Worker A's behalf, 2.6% times $3,000 is $78 per year, which is greater than the minimum benefit. For the first five years, however, 2.6% times $1,000 Page 4 amounts to $26 per year. Because the minimum benefit of $35 is greater that $26, the $35 minimum benefit will be paid for the first five years. Under § 4.1 of the NYS Fund plan, Worker A's monthly pension benefit would equal the sum of $78 per year for 20 years, $78 x 20 = $1,560, plus $35 per year for five years, $35 x 5 = $175, making a total monthly benefit of $1,735.

  By and large, NYS Fund participants are eligible to receive their Normal Pension any time after reaching age 65 or, if they have earned at least 15 years of service credit, upon reaching age 60. Participants do not have to wait until age 60 to begin receiving benefits because the NYS Fund has two dissimilar early retirement options, one that is actuarially reduced and another that is not. Participants reaching age 55 and earned at least 15 years of service credit may decide to receive a pension benefit equal to their Normal Pension actuarially reduced for each year, or fraction thereof, that their benefits commence before age 60. (Plan Document, Ex. 4 § 4.3).

  Years ago, the NYS Fund became a signatory of the 1964 National Reciprocal Agreement for Teamsters Pension Funds ("1964 National Reciprocal Agreement"), in which it agreed to provide certain reciprocal pension benefits to individuals whose service is split between NYS Fund and any other fund that is a signatory to the 1964 National Reciprocal Agreement. (1/28/02 Affidavit of David E. Menter, Executive Administrator of the NYS Fund, Ex. 1 to Cross Motion ¶ 6). These reciprocal pension benefits are provided, in part, because, the signatory pension funds have agreed to recognize pension credits earned under signatory funds ("Related Service Credit"). At the denouement, both signatory funds wind up paying a proportionate share of the participant's pension benefit. Page 5

  Benefit calculations under the 1964 National Reciprocal Agreement consist of a three step process. First, a signatory fund, e.g. Fund X, must add the service credits a participant has earned under Fund X with the Related Credits Earned under the other signatory fund, Fund Y, to ascertain the participant's Combined Service Credit. (1964 National Reciprocal Agreement, Ex. 2 Exhibit A § 4). Second, Fund X must calculate the participant's pension benefits under the terms of its own pension plan, based on the participant's Combined Service Credit (1964 National Reciprocal Agreement, (Ex. 2 Exhibit A § 8(a)). Importantly, the 1964 National Reciprocal Agreement does not specify the level of benefits that is to be used in calculating the participant's pension benefits. Instead, the level of benefits to be used is determined by each signatory fund independently. (National Reciprocal Agreement Ex. 2). As previously pointed out, the NYS Fund benefit formula is based upon the greater of (a) 2.6% times the contributions made to the NYS Fund on the participant's behalf for the year, or, (b) the minimum benefit for the year multiplied by the pension credit earned by the participant for the year. Thus, when an participant is working under the other fund, the NYS Fund will use the minimum benefit to determine the participant's benefit for that year.

  Returning to the example, once the participant's level is determined for each year, step three in the calculation in the 1964 National Reciprocal Agreement involves multiplying benefits for all years by a fraction ("Reciprocal Pension Factor") determined by dividing the participant's Contributory Service Credit earned under Fund X by the participant's Combined Service Credit earned under Funds X and Y. (1965 Reciprocal Agreement (Ex. Example A § 8.(b). The resulting amount is Fund X's share of the individuals' reciprocal pension benefit. (National Reciprocal Agreement (Ex. 20)). Fund Y will be responsible for paying its share after Page 6 performing a similar calculation.

  The application of the 1964 National Reciprocal Agreement, nevertheless, can produce an amount that is less than the amount earned by the participant under the NYS Fund, regardless of the 1964 National Reciprocal Agreement; so the NYS Fund, as a final step determines if a participant's Normal Pension from the NYS Fund, based on the participant's Contributory Service Credit, is greater than the amount calculated under the 1964 National Reciprocal Agreement. If it is, the NYS Fund will pay the participant his or her Normal Pension amount, while using the participant's Combined Service Credit to determine the participant's eligibility for various pension payment options available under the NYS Fund's plan.

  About or during 1997, a revised National Reciprocal Agreement was proposed, and was adopted by the NYS Fund effective January 1, 1999. The 1997 National Reciprocal Agreement was integrated in the Fund's plan as Article 12 and states that:
Participants who on the Date of this Article [January 1, 1999] were eligible for and had applied for, or were receiving Reciprocal Benefits under the predecessor National Reciprocal Agreement shall not, by reason of the adoption of this Article governing Reciprocal Pension Benefits, forfeit or suffer any reduction of their Reciprocal Pension Benefits. The benefits provided pursuant to this Article shall not apply to any Participant who has retired prior to the Effective Date.
  Plaintiff James Harris retired in 1998, prior to the effective date of the 1987 National Reciprocal Agreement, and Plaintiff Jerry Butler was eligible for, and applied for, a reciprocal pension benefit from the NYS Fund in 1998. Hence, both Plaintiffs agree that their benefits must be calculated under the predecessor 1964 National Reciprocal Agreement. The 1997 National Reciprocal Agreement also does not apply to the Plaintiffs because the other fund under which they earned credit, the Central States Southeast Southwest Area Pension Fund, ("Central Page 7 States Fund"), never adopted the 1997 National Reciprocal agreement, but were a signatory of the 1964 National Reciprocal Agreement.

  Butler earned 16.0 and Harris earned 9.1 Contributory Service Credits under the NYS Fund, as well as the pension credits they earned under the Central States Fund. Both Plaintiffs, applied for, retired, and began receiving pension benefits from the NYS Fund based upon their Combined Service Credit between the NYS Fund and the Central States Fund. They each claimed initially that the NYS Fund incorrectly calculated their pension benefits under the 1964 National Reciprocal Agreement claiming that the NYS Fund paid a monthly benefit of $3,500 for participants who had 30 years of service.

  The Fund replied that it does not pay a monthly benefit of $3,500 to participants having 30 years of service. It then pointed out that it pays a benefit for each year of service that is equal to the greater of (a) 2.6% of the contribution made to the fund for the year on the participant's behalf; or (b) the minimum benefit factor for the year multiplied by the pension credit earned by the individual for the year multiplied by the pension credit earned by the individual for the year. Plaintiffs then claimed that the NYS Fund should have counted the contributions that were made to the Central States Fund as if they ...


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