Opinion
No. IP 99-0391-C-M/S
July 22, 2003.
Charles R Clark Beasley Gilkison Retherford Buckles Clark Muncie, IN David B Rodes Goldberg Persky Jennings Pittsburgh, PA Bart A Karwath Barnes Thornburg, Indianapolis, IN
ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT ON COUNT SEVEN
This matter comes before the Court on cross-motions for summary judgment with respect to Count Seven. In Count Seven, the only active count in the case, Plaintiffs, Carol Arena, et al. ("Plaintiffs"), allege that Defendants', ABB, Inc. (f/k/a ABB Power T D Company, Inc.), Asea Brown Boveri, Inc., and the Employee Benefits Committee of ABB, Inc. (collectively "ABB"), violated § 204(g) of the Employee Retirement Income Security Act ("ERISA") by amending the pension plan at issue to eliminate Plaintiffs' early retirement benefits. The parties do not dispute the facts relevant to this legal issue, and request that the Court decide the matter at the summary judgment stage. The parties have fully briefed their arguments, and the motion is now ripe for ruling.
I. BACKGROUND A. PLAINTIFFS' FAILURE TO NAME THE PENSION PLAN AS DEFENDANT
As a preliminary matter, the Court will address ABB's argument that Plaintiffs have made a fatal mistake by not naming the Asea Brown Boveri Inc. Cash Balance Plan ("Cash Balance Plan") as a defendant. As ABB notes, "ERISA permits suits to recover benefits only against the Plan as an entity . . ." Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1490 (7th Cir. 1996) ( quoting Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324 (9th Cir. 1985)). Plaintiffs sued ABB, Inc. (f/k/a ABB Power T D Company, Inc.), Asea Brown Boveri, Inc. (the parent corporation), and the Employee Benefits Committee of ABB, Inc., but did not not sue the Cash Balance Plan itself.
The Seventh Circuit has warned lawyers that ERISA suits, especially claims for benefits, "should name the plan as a defendant." Mein v. Carus Corp., 241 F.3d 581, 584 (7th Cir. 2001). See also 29 U.S.C. § 1132(d) ("Any money judgment under this subchapter against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this subchapter."). Despite this requirement, the Seventh Circuit has allowed ERISA cases to proceed with the company as the named defendant. See, e.g., Anstett v. Eagle-Picher Indus., Inc., 203 F.3d 501 (7th Cir. 2000); Olander v. Bucyrus-Erie Co., 187 F.3d 599 (7th Cir. 1999); Riordan v. Commonwealth Edison Co., 128 F.3d 549 (7th Cir. 1997). In deciding whether to dismiss an ERISA claim for failure to name the pension plan as a defendant, courts must consider whether or not the corporation and the plan are "closely intertwined." See Mein, 241 F.3d at 585.
In the instant case, the Court agrees with ABB that Plaintiffs should have named the Cash Balance Plan as a defendant. However, it is evident that there is a sufficiently close relationship between ABB and the Cash Balance Plan such that the suit may proceed. First, as in Riordan and Mein, the designated agent for legal process is the corporation itself. See Plan § 11.02. Second, as in Mein, the Plan Administrator is also the corporation itself. See id. ("The Administrator for the Plan . . . is hereby designated as Asea Brown Boveri, Inc."). Moreover, § 11.13 of the Cash Balance Plan gives the Plan Administrator, i.e., the corporation, the power to interpret the provisions of the Cash Balance Plan. Id. § 11.13. In addition, the Employee Benefits Committee of ABB amended the Plan in 1994, which was the action that eventually led to this lawsuit. Hence, there is some logical appeal to naming Asea Brown Boveri, Inc., and the ABB Benefits Committee as defendants. Under these circumstances, the Court considers it inappropriate to dismiss this case for failure to name the Cash Balance Plan as a defendant. See Mein, 241 F.3d at 585 (allowing suit to proceed under similar circumstances); Riordan, 128 F.3d at 551 (same).
B. FACTUAL BACKGROUND 1. Joint Venture between ABB and Westinghouse
During the 1980s, defendant Asea Brown Boveri, Inc., and/or its subsidiaries acquired a number of industrial plants across the United States. As a result of the acquisitions, there were a number of different and separate employee benefit plans in place at the various sites where the plants were located. In an effort to consolidate those plans, Asea Brown Boveri, Inc., established the Asea Boveri Brown Inc. Consolidated Pension Plan in 1989 ("Option 1 Plan").
Both parties agree that no outcome determinative facts relating to Count Seven are in dispute. The facts contained in this factual background come from the parties' brief summaries of the facts in their briefs, the affidavit of Stephen Buckley, the human resources manager at ABB's Muncie, Indiana, plant at all relevant times, and the Cash Balance Plan itself. See Def.'s Evid. Appdx. (Vol I).
In the mid-1980s, Westinghouse Electric Company ("Westinghouse") operated a number of electric Transmission and Distribution Plants known as its Power T D Business Unit. On February 14, 1989, Westinghouse entered into a joint venture agreement with Asea Brown Boveri, Inc., to own and operate jointly certain plants within Westinghouse's Power T D Business Unit. All employees of the joint venture who were employed by Westinghouse on February 13, 1989, and who became employed by the joint venture on February 14, 1989, continued to be participants under the Westinghouse Electric Corporation Pension Plan (the "Westinghouse Plan").
ABB subsequently exercised its option to purchase Westinghouse's interest in the joint venture, and established, effective December 31, 1989, the ABB Power T D Company, Inc. (renamed ABB Inc. in 2001), to own and operate the assets of the joint venture. Other than the employees who retired from the joint venture effective January 1, 1990, all employees of the joint venture as of December 31, 1989, became employees of ABB. Effective January 1, 1990, ABB created and put into place the ABB Power T D Company Inc. Pension Plan (the "Option 2 Plan") as an option for certain employees of ABB who were employed at a joint venture location and who were participants in the Westinghouse Plan on December 31, 1989.
2. The Pre-1994 Cash Balance Plan
On January 1, 1992, the Option 1 Plan and Option 2 Plan, along with other plans not relevant in this case, were merged into the ABB Cash Balance Plan. Upon creation of the Cash Balance Plan, the assets and liabilities of the predecessor plans were transferred to it.
One benefit contained in the predecessor plans that carried over to the Cash Balance Plan was the Special Early Retirement Pension benefit ("SERP"). The SERP provision provides benefits to plan participants who satisfy certain age, service, and eligibility requirements, and whose employment was "terminated as a result of a Permanent Job Separation." See Cash Balance Plan §§ 4.08, 4.09 4.10. In particular, § 4.08 of the Cash Balance Plan provides in relevant part:
(a) Eligibility. An Active Member who meets the following conditions shall be eligible for the immediate benefits provided under paragraphs (b), (c) and (d) of this Section 4.08:
(1) The Member was in employment . . . on December 31, 1991; and, (2) The Member was an employee of ABB Power T D Company Inc. at a Covered Location as of December 31, 1991 (including employees who were transferred to a Covered Location on or prior to December 31, 1991) and participated in either the Prior T D Plan or the Prior ABB Plan . . . and, (3) The Member incurs a Permanent Job Separation in a calendar year in which the Member has attained, or would have attained by December 31 of such year had he remained in active employment, one of the following age and service conditions.
— age 50 with 25 or more years of Vesting Service — age 51 with 22 or more years of Vesting Service — age 52 with 19 or more years of Vesting Service — age 53 with 16 or more years of Vesting Service — age 54 with 13 or more years of Vesting Service — age 55 with 10 or more years of Vesting Service . . .
Def.'s Evid. Appdx. (Vol. I), Plan § 4.08 (emphasis added). Individuals who met the eligibility requirements of § 4.08(a) would receive certain early retirement benefits detailed in (b), (c), and (d) of § 4.08. Id. Sections 4.09 and 4.10 of the Cash Balance Plan contain similar early retirement benefit provisions for different groups of employees. Id. The Cash Balance Plan defines "Permanent Job Separation" as the termination of an employee "through no fault of his own for lack of work for reasons associated with the business for whom an Employer or Affiliated Entity determines there is no reasonable expectation of recall." Id. § 1.41.
3. The 1994 Amendments
On May 6, 1994, ABB's Employee Benefits Committee (the "Benefits Committee") officially adopted amendments to the Cash Balance Plan that inter alia eliminated the SERP benefit in §§ 4.08, 4.09 4.10 for all non-represented salaried employees. The amendment was effective June 1, 1994 ("June Amendment"). On May 13, 1994, ABB gave written notice to all affected plan participants of the June Amendment and its effective date.
On August 23, 1994, the Benefits Committee officially adopted amendments to the Cash Balance Plan that inter alia eliminated the SERP Benefit in §§ 4.08, 4.09 4.10 for all non-represented hourly employees. The amendment was effective August 31, 1994 ("August Amendment"). On August 15, 1994, ABB gave written notice to all affected plan participants of the August Amendment and its effective date.
In 1998, ABB closed its Muncie, Indiana, plant, and the plant employees lost their jobs. The thirty-four named plaintiffs in this case were non-represented, salaried employees of ABB's Muncie Plant at the time of its closing.
On September 16, 2002, the Court, upon stipulation by the parties, certified the action as a class action under Fed.R.Civ.P. 23(b)(2) with respect to the claims raised by Counts Seven and Eight of the Second Amended Complaint. Doc. No. 95. The class consists of:
All persons who were participants in the Asea Brown Boveri, Inc. Cash Balance Plan (the "Plan") as of January 1, 1992, and who:
(1) had been participants in a predecessor plan that offered a Special Early Retirement Pension ("SERP"), and met the age and service requirements for a SERP
(a) on or before the applicable effective date of the 1994 amendments to the Plan (the "Effective Date"); or (b) after the Effective Date;
and after the Effective Date were involuntarily separated from ABB under circumstances meeting the pre-amendment requirements for a SERP; or
(2) had been participants in a predecessor plan that offered a SERP or other subsidized early retirement benefit, and
(a) met the pre-amendment requirements for a SERP or other subsidized early retirement benefit after January 1, 1992; or
(b) are still employed by ABB, are not yet eligible for Normal Retirement under the Plan, and may hereafter meet the pre-amendment requirements for a SERP or other subsidized early retirement benefit.
Doc. No. 95.
II. SUMMARY JUDGMENT STANDARD
As stated by the Supreme Court, summary judgment is not a disfavored procedural shortcut, but rather is an integral part of the federal rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). See also United Ass'n of Black Landscapers v. City of Milwaukee, 916 F.2d 1261, 1267-68 (7th Cir. 1990), cert. denied, 111 S.Ct. 1317 (1991). Motions for summary judgment are governed by Rule 56(c) of the Federal Rules of Civil Procedure, which provides in relevant part:
The judgment sought shall be rendered forthwith 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 any material fact and that the moving party is entitled to a judgment as a matter of law.
Once a party has made a properly-supported motion for summary judgment, the opposing party may not simply rest upon the pleadings but must instead submit evidentiary materials which "set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). A genuine issue of material fact exists whenever "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The nonmoving party bears the burden of demonstrating that such a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Oliver v. Oshkosh Truck Corp., 96 F.3d 992, 997 (7th Cir. 1996), cert. denied, 520 U.S. 1116 (1997). It is not the duty of the Court to scour the record in search of evidence to defeat a motion for summary judgment; rather, the nonmoving party bears the responsibility of identifying the evidence upon which she relies. See Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996). When the moving party has met the standard of Rule 56, summary judgment is mandatory. See Celotex, 477 U.S. at 322-23; Shields Enters., Inc. v. First Chi. Corp., 975 F.2d 1290, 1294 (7th Cir. 1992).
In evaluating a motion for summary judgment, the Court should draw all reasonable inferences from undisputed facts in favor of the nonmoving party and should view the disputed evidence in the light most favorable to the nonmoving party. See Estate of Cole v. Fromm, 94 F.3d 254, 257 (7th Cir. 1996), cert. denied, 519 U.S. 1109 (1997). The mere existence of a factual dispute, by itself, is not sufficient to bar summary judgment. Only factual disputes that might affect the outcome of the suit in light of the substantive law will preclude summary judgment. See Anderson, 477 U.S. at 248; JPM Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270, 273 (7th Cir. 1996). Irrelevant or unnecessary facts do not deter summary judgment, even when in dispute. See Clifton v. Schafer, 969 F.2d 278, 281 (7th Cir. 1992). "If the nonmoving party fails to establish the existence of an element essential to [its] case, one on which [it] would bear the burden of proof at trial, summary judgment must be granted to the moving party." Ortiz v. John O. Butler Co., 94 F.3d 1121, 1124 (7th Cir. 1996), cert. denied, 519 U.S. 1115 (1997).
III. DISCUSSION A. ERISA BACKGROUND AND STANDARDS
ERISA was enacted to ensure that employees would receive promised pension benefits upon retirement. See Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 1733, 64 L.Ed. 354 (1980). ERISA does not, however, "require employers to provide pension or early retirement benefits, or mandate a particular level of benefits." Heinz v. Ctr. Laborers' Pension Fund, 303 F.3d 802, 804 (7th Cir. 2002).
ERISA permits amendments to pension plans. 29 U.S.C. § 1102(b)(3). However, plan amendments may not decrease benefits that have already accrued. See Heinz, 303 F.3d at 804. This rule is referred to as ERISA's anti-cutback rule:
The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment as described in section 1082(c)(8) or 1441 of this title.29 U.S.C. § 1054(g)(1); ERISA § 204(g)(1). "Accrued benefit" is defined as "the individual's accrued benefit determined under the plan . . . expressed in the form of an annual benefit commencing at normal retirement age." 29 U.S.C. § 1002(23). Ancillary benefits like insurance or disability benefits are not accrued benefits under ERISA (and therefore are not protected against cutback). See Hickey v. Chicago Truck Drivers, Helpers and Warehouse Workers Union, 980 F.2d 465, 468 (7th Cir. 1992) ( citing H.R.Conf.Rep. No. 1280, 93rd Cong., 2d Sess. 60, reprinted in 1974 U.S.C.C.A.N. 5038, 5054).
As originally enacted, ERISA did not protect early retirement benefits under § 204(g). JOHN H. LANGBEIN AND BRUCE A. WOLK, PENSION AND EMPLOYEE BENEFIT LAW 164 (3d ed. 2000) [hereinafter LANGBEIN WOLK]. However, Congress amended § 204(g) in 1984 to explicitly include early retirement benefits within the ambit of accrued benefits, thereby protecting early retirement benefits from cutback. See Retirement Equity Act, Pub.L. No. 98-397 ("REA"); Ahng v. Allsteel, Inc., 96 F.3d 1033 (7th Cir. 1996). In particular, § 204(g)(2) of ERISA, as amended by the REA, provides:
[A] plan amendment which has the effect of (A) eliminating or reducing an early retirement benefit or a retirement-type subsidy . . . with respect of benefits attributable to service before the amendment shall be treated as reducing accrued benefits.
Id.
Thus, it is well-settled that a plan amendment that cuts early retirement benefits or retirement-type subsidies attributable to service before the amendment violates the plain language of § 204(g). The retirement benefits are protected even if they are conditioned on age and service requirements, as long as the plan participant satisfies those pre-amendment requirements. See Ahng, 96 F.3d at 1035 (reversing in favor of plaintiff in § 204(g) suit for early retirement benefits conditioned on either 10 years of service and 55 years of age or 30 years of service). Even if plan participants have not satisfied the plan conditions at the time of the amendment, they must be given the opportunity to "grow into" their early retirement benefits by satisfying the conditions after the amendment. See Ahng, 96 F.3d at 1036; 29 U.S.C. § 1054(g)(2).
However, when a plan conditions early retirement benefits on a contingency like a plant shutdown, courts diverge on whether or not these contingent retirement benefits are protected by § 204(g). Compare Bellas v. CBS, Inc., 221 F.3d 517 (3d Cir. 2000) (holding that special retirement benefits contingent on plant shutdown are protected by ERISA § 204(g)), Richardson v. Pension Plan of Bethlehem Steel Corp. and Subsidiary Cos., 67 F.3d 1462 (9th Cir. 1995) (" Richardson I") (reasoning that early retirement benefits contingent on plant shutdown are protected by ERISA § 204(g)), opinion withdrawn on other grounds, 112 F.3d 982 (9th Cir. 1997), and Harms v. Cavenham Forest Indus., Inc., 984 F.2d 686 (5th Cir. 1993) (same), with Ross v. Pension Plan for Hourly Employees of SKF Indus., 847 F.2d 329 (6th Cir. 1988) (holding that § 204(g) was not intended to protect shutdown benefits), and Roper v. Pullman Standard, 859 F.2d 1472 (11th Cir. 1988) (same).
Courts, commentators, and plans usually refer to these types of benefits as "plant shutdown benefits," "contingent early retirement benefits," or "permanent job separation benefits." The Court will refer to the benefits as the "SERP" benefits, or the "Permanent Job Separation" benefits.
Some of the confusion surrounding the permanent job separation benefit issue stems from the lack of a statutory or regulatory definition for "early retirement benefit" and "retirement-type subsidy." In the absence of Congressional guidance on the issue, courts generally have defined early retirement benefits as the retirement benefits that would begin at normal retirement age, actuarially reduced to reflect its commencement at an earlier date. See, e.g., Heinz, 303 F.3d at 810; Bellas, 221 F.3d at 538.
On the other hand, the term "retirement-type subsidy" has been more difficult to define. "The statute refers to a subsidy `as defined in the regulations.' Unfortunately there is no regulation which defines the term. We are on our own." Arndt v. Sec. Bank S.S.B. Employees' Pension Plan, 182 F.3d 538, 542 (7th Cir. 1999). However, the REA Senate Report did include a definition for a benefit subsidy: "The excess of the value of a benefit over the actuarial equivalent of the normal retirement benefit." S. Rep. No. 98-575, at 28 (1984). Consistent with the Senate Report, several courts have defined a retirement-type subsidy as the excess value over the actuarial equivalent of the normal retirement benefit. See, e.g., Bellas, 221 F.3d at 533; Constantino v. TRW, Inc., 13 F.3d 969, 977-78 (6th Cir. 1994). See also Richardson I, 67 F.3d at 1468 ("[C]ourts have held that a retirement benefit is a retirement-type subsidy if the sum of the monthly payments for the participant's life exceeds what that participant would have received as normal retirement benefits.") (citations omitted).
The normal retirement benefit is the benefit that begins at age sixty-five. See Plan § 1.34. If a plan allows the employee to draw a pension before age sixty-five and actuarially reduces the pension to make it the equivalent of the normal retirement benefit, then the benefit is an "early retirement benefit" for purposes of § 204(g). Any amount over that actuarial equivalent is considered a "retirement-type subsidy" because the participant will actually be receiving more than he would have received from the normal retirement benefit. For a description of the difference between the two terms, see DAN M. MCGILL DONALD S. GRUBBS, JR., FUNDAMENTALS OF PRIVATE PENSIONS, at 131-35 (Pension Research Council) (6th ed. 1989), reprinted in LANGBEIN WOLK 447-48.
The Senate Report on the REA also provides:
The bill provides that the term "retirement-type subsidy" is to be defined by Treasury regulations. The committee intends that under these regulations, a subsidy that continues after retirement is generally to be considered a retirement-type subsidy. The committee expects, however, that a qualified disability benefit, a medical benefit, a social security supplement, a death benefit (including life insurance) or a plant shutdown benefit (that does not continue after retirement age) will be not considered a retirement-type subsidy. The committee expects that Treasury regulations will prevent the recharacterization of retirement-type benefits as benefits that are not protected by the provisions.
S. Rep. No. 98-575 (1984), at 30 (emphasis added).
B. THE PARTIES' ARGUMENTS
ABB maintains that the SERP benefit in the Cash Balance Plan was not an early retirement benefit or a retirement-type subsidy. According to ABB, the benefit is more akin to an ancillary welfare benefit like a disability benefit, and welfare benefits can be cut by amendment because they are not considered accrued benefits under ERISA. Moreover, ABB argues that contingent event benefits like the one in the instant case do not accrue before the contingent event occurs. Thus, the argument goes, because the contingency (the plant shutdown) did not occur prior to the 1994 amendments, the SERP benefits were not accrued benefits at the time, and ABB was free to cut the provisions from the Cash Balance Plan. In addition, ABB asserts that a contingent event benefit cannot be funded until the unpredictable contingent event occurs, and a ruling that § 204(g) protects contingent event benefits would conflict with ERISA's concomitant funding provisions. In support of its position, ABB cites to Ross, Roper, IRS General Counsel Memorandum 39869 ("GCM"), and the Omnibus Budget Reconciliation Act of 1987 ("OBRA"), Pub.L. No. 100-203 § 9303, 101 Stat. 1330 (1987).
Plaintiffs argue that the Permanent Job Separation benefit is both an early retirement benefit and a retirement-type subsidy protected by § 204(g). According to Plaintiffs, the benefit is an "early" retirement benefit because it starts before the normal retirement age of 65. Furthermore, Plaintiffs maintain that it is a retirement-type subsidy because the SERP provision eschews any reduction of the normal retirement benefit to compensate for its earlier commencement (and consequent longer duration), and because it provides for fixed supplements above and beyond the normal retirement benefit. In addition, Plaintiffs contend that the inclusion of the "job loss" condition for eligibility does not deprive the SERP of its protected status under § 204(g). Plaintiffs rely on the circuit court opinions in Bellas, Harms, and Richardson I.
The Seventh Circuit has not addressed whether or not an early retirement benefit conditioned on permanent job separation is protected from cutback by § 204(g). However, a number of other circuit courts have weighed in on the issue, and the Court will begin its analysis with a review of those decisions.
C. RELEVANT CASE LAW
The Third Circuit recently addressed the precise issue before this Court. See Bellas, 221 F.3d 517. In fact, the Bellas case involved the Westinghouse Plan, one of the predecessor plans of ABB's Cash Balance Plan. The Westinghouse Plan and ABB's Cash Balance Plan provide the same definition of Permanent Job Separation, and both plans condition eligibility for early retirement benefits on age, service time, and permanent job separation. Compare Bellas, 221 F.3d at 519, with ABB Cash Balance Plan §§ 1.41, 4.08. After thoroughly analyzing the case law, the statute, and the legislative history, the court followed the reasoning of the Ninth Circuit in Richardson and rejected the contrary position taken in cases like Roper and Ross. See Bellas, 221 F.3d at 532-33. In essence, the Third Circuit made three conclusions: (1) plant shutdown benefits "that provide a benefit greater than the actuarially reduced normal retirement benefit are retirement-type subsidies, and therefore are accrued benefits under section 204(g), if the benefit continues beyond normal retirement age," (2) plant shutdown benefits accrue upon their creation rather than upon the unpredictable contingent event; (3) the position expressed in GCM 39869 is at odds with the language of § 204(g). See Bellas, 221 F.3d at 532-39. The court relied on both the language of § 204(g) and its legislative history to support its findings. See id.
The Ninth Circuit analyzed the same issue in Richardson I. See Richardson I, 67 F.3d 1462. As in the instant case, the plan in Richardson provided benefits to employees who met certain age and service requirements, and whose service was "broken by reason of a permanent shutdown of a plant." See id. at 1464. After determining that an amendment of the plan at issue did occur, the court concluded that the plant shutdown benefits were protected by § 204(g) because "the sum of the monthly payment for life exceeds what the [defendant's] employees would have received as normal retirement benefits." Id. at 1468. The court commented that "plant shutdown [benefits] are not miraculously transformed into normal retirement benefits when the recipient reaches age sixty-two," and rejected the defendant's arguments that the benefits were not protected because they did not accrue before the amendment. Id. at 1469.
As the parties point out, Richardson I was withdrawn on rehearing. See Richardson v. Pension Plan of Bethlehem Steel, 112 F.3d 982 (9th Cir. 1997) ("Richardson II"). The court concluded that there was never an amendment of the plan, and did not reach the issue of whether plant shutdown benefits were protected by § 204(g). See id. However, nothing in Richardson II indicated that the court would have decided the plant shutdown benefits issue differently, and the reasoning of Richardson I remains relevant to the extent that it is persuasive. See id.
The Fifth Circuit also has held that early retirement benefits contingent on an involuntary job separation are protected benefits under § 204(g). See Harms, 984 F.2d 686. Rejecting the defendant's arguments that the benefit was a contingent, unaccrued welfare benefit unprotected by § 204(g), the court concluded that the benefit was a retirement-type subsidy protected from cutback. See id. at 692. The court had two main rationales for its holding: (1) the benefits were payable for life, and (2) they were calculated like subsidies. See id. See also Wallace v. Cavenham Forest Indus., Inc., 707 F. Supp. 455, 459-60 (D.Or. 1989).
Two circuits have taken the contrary view. See Ross, 847 F.2d at 333-34 (6th Cir); Roper, 859 F.2d at 1473 (11th Cir.). Eligibility for the benefit in Ross was conditioned on age, service time and a cessation of active service due to permanent shutdown of the plant. See Ross, 847 F.2d at 333. After defining early retirement benefits as benefits that become available upon retirement at an age below the normal retirement age, the court concluded that the benefit at issue was not an early retirement benefit because it was conditioned on a plant shutdown. See id. The court also concluded that the benefit was not a retirement-type subsidy based on the legislative history of the REA: "The legislative history of the Retirement Equity Act . . . specifically addresses the question of whether a plant shutdown benefit falls within the category of retirement-type subsidy and specifically states that it does not." Id. The court arrived at that conclusion from this language in the REA Senate Report: "The committee expects, however, that a qualified disability benefit, a medical benefit, a social security supplement, a death benefit (including life insurance), or a plant shutdown benefit (that does not continue after retirement age) will not be considered a retirement-type subsidy." See id.; S. Rep. No. 575, 98th Cong., 2d Sess. 30, reprinted in 1984 U.S. Code Cong. Admin News 2547, 2576. In dicta and without analysis, the Eleventh Circuit followed the Ross court. See Roper, 859 F.2d at 1474. See also Blank v. Bethlehem Steel Corp., 758 F. Supp. 697 (M.D. Fl. 1990) (relying on Ross), aff'd, Blank v. Bethlehem Steel Corp., 926 F.2d 1090 (11th Cir. 1991).
D. THE COURT'S CONCLUSIONS
The Court embraces the reasoning and holdings of Bellas, Richardson, and Harms because it finds the cases to be more persuasive and more likely consistent with Congressional intent than the decision in Ross. Those three decisions, by the Third, Ninth and Fifth Circuits respectively, all postdated the Sixth Circuit's decision in Ross, and all three courts explicitly declined to follow the Ross court's holding. This Court also declines to follow Ross. The Court holds that if the benefit in the instant case extends beyond normal retirement age and provides a greater benefit than the actuarially reduced normal retirement benefit, it is a retirement-type subsidy. In addition, the benefits accrue upon their creation rather than upon the occurrence of the contingent event.
As the Bellas court explained, these conclusions are supported by both the language of § 204(g) itself and its legislative history. First, the REA Senate Report noted, "a subsidy that continues after retirement is generally to be considered a retirement-type subsidy." S. Rep. No. 575 at 30. The Ross court based its holding on the Senate Report's subsequent statement that a plant shutdown benefit would not be considered a retirement-type subsidy. See Ross, 847 F.2d at 333-34. However, the Senate Report qualified that statement with a parenthetical: "[A] plant shutdown benefit ( that does not continue after retirement age) will not be considered a retirement-type subsidy." Id. (emphasis added). In other words, a plant shutdown benefit that does continue after retirement age is considered a retirement-type subsidy. See Bellas, 221 F.3d at 532; Richardson I, 67 F.3d at 1468 ("We read the Senate Report to mean that shutdown benefits that do continue after retirement age are a retirement-type subsidy.").
ABB also argues that even if the SERP benefit is a retirement-type subsidy, it does not accrue until the contingent event occurs. In support of this contention, ABB relies primarily on GCM 39869. GCM 39869, issued by the IRS in October 1991, concluded that plant shutdown benefits only become protected by the REA upon occurrence of the event on which they are conditioned. Def.'s Appdx. of Legal Auth., Tab 1. See also I.R.C. § 411(d)(6) (which parallels ERISA § 204(g)). The GCM provides in relevant part:
Thus, treating a shutdown benefit as an accrued benefit and therefore as a section 411(d)(6) protected benefit at the time that the triggering event occurs is consistent with the treatment of this benefit as an unpredictable contingent event benefit for purposes of the additional funding requirements under sections 412(1) and 412(c)(7).
Id.
The position taken by ABB and GCM 39869 — that plant shutdown benefits are not accrued benefits until the occurrence of the contingent event — is unconvincing in light of the plain language of § 204(g). The drafters of the REA expressly contemplated that conditions would be placed on retirement-type subsidies, but made no distinction between "contingent" and "non-contingent" retirement subsidies:
a plan amendment which has the effect of — (A) eliminating or reducing an early retirement benefit or a retirement-type subsidy . . .
with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy.29 U.S.C. § 1054(g)(2) (emphasis added); see Bellas, 221 F.3d at 533. The plain language does not limit the type of condition that can be placed on a retirement-type subsidy — it only requires that any preamendment conditions are satisfied by the participant. As noted by the Third Circuit, "the plain language of the statute reveals that once a benefit is found to be a retirement-type subsidy, it is considered an accrued benefit . . . GCM 39869 . . . reads additional requirements into the language of section 204(g) — requirements for which there does not appear to be any support." Bellas, 221 F.3d at 534. See also LANGBEIN WOLK 166 (describing the position taken by GCM 39869, and questioning "Is this a correct reading of the statute?").
ABB also asserts that any uncertainty in the construction of § 204(g) must be resolved in favor of harmonizing it with its concomitant funding provisions. See I.R.C. § 412(d)(7)(B)(I); OBRA. This argument was also soundly rejected by the Third Circuit in Bellas:
While the construction of 204(g) proffered by appellants would lend some consistency between section 204(g) and ERISA's funding provisions, it does not appear that the statute or its legislative history requires or compels such consistency. Appellants assert that until the contingent event occurs, shutdown benefits are more akin to insurance than an anticipated benefit. Under this logic, appellants appear to suggest that the occurrence of the contingent event somehow transforms insurance into a retirement benefit. As stated above, however, Congress discouraged this attempt at recharacterizing retirement-type benefits.Bellas, 221 F.3d at 535. Though the Court recognizes that ABB's argument has some logical appeal, OBRA's funding provisions did not alter ERISA's substantive definition of accrued benefits, and the Court will not put a judicial gloss on § 204(g) that does violence to the intent of the drafters of the REA.
At bottom, the Court is unpersuaded by ABB's criticisms of the Bellas opinion, and Bellas is squarely on point. According to ABB, "the Bellas decision is flawed and internally inconsistent throughout." Def.'s Brief in Support at 30. However, ABB takes quotes out of context to demonstrate supposed internal inconsistencies in the opinion, and ABB generally fails to convince the Court that Bellas was wrongly decided.
For example, ABB maintains that the Third Circuit violated the Chevron/Mead deference doctrine by rejecting GCM 39869. The Court disagrees. Mead alerts courts that "deference to agency positions is not an all-or-nothing position; more informal agency statements and positions receive a more flexible respect, in which factors like `the degree of the agency's care, its consistency, formality, and relative expertness, and . . . the persuasiveness of the agency's position,' are all relevant." U.S. Freightways Corp. v. C.I.R., 270 F.3d 1137, 1141 (7th Cir. 2001) ( quoting United States v. Mead Corp., 533 U.S. 218, 121 S.Ct. 2164 (2001). Under Mead, GCM 39869 deserves little deference because: (1) GCMs are informal, internal legal opinions that do not represent the position of the IRS; and (2) the memo is unpersuasive in light of its conflict with the plain language of § 204(g). Thus, the Third Circuit was correct to give GCM 39869 limited deference.
In addition, the Bellas court's reliance on the analysis of the Ninth Circuit in Richardson I was proper. Richardson II reversed the prior decision in Richardson I because it determined that no amendment took place. However, Richardson II did not indicate that the court had reconsidered its analysis of the plant shutdown benefit issue. Thus, courts are free to consider the Ninth Circuit's discussion of the issue to the extent they find the rationale helpful and persuasive. Though not binding precedent, courts routinely look to scholarly articles or treatises in resolving difficult legal issues, and the Third Circuit's reliance on Richardson I is no different.
In sum, the Court finds ABB's criticisms of Bellas to be unwarranted. Based on the plain language of § 204(g) and its legislative history, the Bellas court concluded that the plant shutdown benefits in that case were protected by ERISA's anti-cutback rule. Because this Court believes Bellas was persuasively reasoned and rightly decided, it will follow Bellas in this case.
E. UNRESOLVED QUESTIONS
The Court still must determine whether the particular provisions in the Cash Balance Plan are retirement-type subsidies or early retirement benefits (for definitions of the terms, see supra at 11-12). The parties understandably focused on the issues resolved above, and gave little attention to the specifics of §§ 4.08. 4.09, and 4.10. Plaintiffs gave a brief description of the benefits, to which ABB did not respond. ABB asserted that §§ 4.08(d)-(f) were not retirement-type subsidies even under the Bellas analysis, but did not address whether §§ 4.08(d)-(f) are early retirement benefits.
Although it appears that some of the provisions are either early retirement benefits or retirement-type subsidies, or both, the Court prefers that the parties brief the issue in a more meaningful way to aid the Court in making an accurate holding with regard to each provision. The provisions in §§ 4.08, 4.09, and 4.10 are more difficult to navigate than most pension plan provisions because they refer back to the prior plans that were consolidated into the Cash Balance Plan. For example, § 4.08(b)(4)(A) refers to early retirement subsidies in the Westinghouse Plan, and the parties have not provided the Court with a copy of the Westinghouse Plan. The Court is uncertain if the provisions referred to from the Westinghouse Plan are the same provisions that were at issue in Bellas. The Court requests that the parties address whether the specific provisions at issue are early retirement benefits and/or retirement-type subsidies, paying particular attention to the following questions:
This includes §§ 4.08(b)-(f), 4.09(b)-(c), and 4.10(b).
1. Which benefit provisions provide the actuarial equivalent of the normal retirement benefit to plan participants before age sixty-five?
2. Which benefit provisions provide more than the actuarial equivalent of the normal retirement benefit?
3. Which benefit provisions continue after retirement?
IV. CONCLUSION
Consistent with the recent Third Circuit decision in Bellas, the Court holds that benefits extending beyond normal retirement age and providing a benefit greater than the actuarially reduced normal retirement benefit are retirement-type subsidies protected by ERISA § 204(g). Moreover, plant shutdown benefits accrue upon their creation rather than upon the occurrence of the contingent event. However, because the Court may not have all the relevant evidence needed to apply these standards to the relevant benefit provisions in the instant case, it requests further briefing by the parties on the issues specified in section III. E. The Court now requests briefing on the following schedule: Plaintiffs' brief on the issue is due on or before August 8, ABB's response is due on or before August 29, and Plaintiffs' reply is due on or before September 5.