Opinion
00 Civ. 4394 (JSM)
August 29, 2001
Brian K. Saltz, Somma, Zabell Associates, LLP, for the Plaintiff.
Jennifer B. Liebman, Sagot, Jennings Sigmond, for the Defendant.
MEMORANDUM OPINION AND ORDER
Ralph Paoli ("Plaintiff") brings this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001et. seq., against the International Painters Allied Trades Industry Pension Fund (the "Pension Fund") and its administrator Gary J. Meyers (collectively "Defendants") seeking to recover benefits under a pension plan. Plaintiff alleges that Defendants improperly calculated his pension benefit and breached their fiduciary duties by misleading him to believe that his pension benefit would be calculated at a higher rate. Both parties move for summary judgement. For the reasons set forth below, Defendants' motion is granted and Plaintiff's motion is denied.
BACKGROUND
The Pension Fund is a trust fund established under the Taft-Hartley Act, 29 U.S.C. 186(c)(5). Gary J. Meyers is the current administrator of the Pension Fund. The Pension Fund established a pension plan (the "Pension Plan") to provide retirement benefits for employees covered under collective bargaining agreements between contractors and Local Union and District Council affiliates of the International Union of Painters and Allied Trades, AFL-CIO, CLC ("IUPAT"). Members of Local Union and District Council affiliates of the IUPAT may opt to participate in the Pension Plan, and contractors who are signatories to collective bargaining agreements with IUPAT affiliates who participate in the Pension Plan are required to make contributions to the Pension Fund for each hour of work for every employee who performs work covered under the collective bargaining agreements.
Plaintiff was a member of District Council #9 ("DC 9") of the IUPAT in New York City from approximately 1960 through 1994. Prior to 1978, DC 9 maintained its own pension plan. In January 1978, the DC 9 Plan was merged into the IUPAT Pension Plan.
Plaintiff worked for employers who made pension contributions to the DC 9 plan on his behalf in the years 1960 through 1977. In or around 1977, Plaintiff suffered from a disability which prevented him from working. During the time that he was unable to work, Plaintiff received Social Security Benefits and no pension contributions were made on his behalf.
In or around 1980, Plaintiff was able to return to work and resumed working for employers who made contributions to the Pension Fund on his behalf. Since the DC 9 plan had merged with the IUPAT Plan by 1980, Plaintiff became a participant in the Pension Fund upon his return to work. Sometime in 1983, Plaintiff wrote to the Pension Fund and inquired about the status of his pension credits with the Pension Fund. Richard Meyers, the Fund Administrator at that time, wrote to Plaintiff on or about October 6, 1983. The letter stated in relevant part:
The Rules and Regulations of [the DC 9 Plan] . . . state that unless an employee is vested, he will incur a break in employment if he fails to earn at least one year of service credit during a consecutive three-year period. Upon incurring a permanent break in employment, the employee's previously accumulated service credits shall be nullified.
. . . .
Upon reviewing the records we received from the [DC 9 Plan], we found that you earned 18 Service credits from 1956 through 1975. However, as you had not attained the age of 55 you were not yet vested and it therefore, appears that you incurred a break in employment during the period from 1976 through 1979.
Based on the above, we regret to advise that the credit earned prior to your break in employment will be nullified from the records.
(Saltz Aff. Ex. 1.)
By letter dated October 25, 1983, Plaintiff informed the Fund Administrator that he was on Social Security Disability during the period that he was not working. On November 7, 1983, Richard Meyers sent a letter in response stating:
You indicated . . . that you were on Social Security Disability during the period of time we previously advised you had incurred a break in employment. . . . If [that] is the case, you wouldn't have incurred a break in employment.
(Saltz Aff. Ex. 2.) Presumably, pension credits were not cancelled for breaks in employment resulting from a disability because such a break could be considered involuntary.
In a letter dated December 7, 1983, Plaintiff submitted proof of his disability to Richard Meyers. On December 22, 1983, Richard Meyers sent a letter to Plaintiff indicating that:
Due to the fact that you were disabled from 1975 through 1981, we are pleased to advise that you did not incur a Permanent break in employment as we previously indicated.
We wish to now inform you that the credit and vesting years you earned under the former District Council #9 Pension Plan prior to the merger will not be canceled from our records.
Further, we are happy to advise that you have attained a vested status and your pension benefits will be computed based upon the Rules and Regulations of this Plan at the time of your retirement.
(Saltz Aff. Ex. 3) (emphasis added)
In 1995, Plaintiff applied for early pension benefits because a work-related injury prevented him from continuing to work. Sometime in 1996, Plaintiff contacted the Pension Fund to request an explanation of the calculation of his pension benefit. On November 6, 1996, Gary Meyers, then and current Fund Administrator, wrote a letter to Plaintiff to provide the clarification that Plaintiff sought. The letter stated:
As you probably know, a participant's pension amount is determined on the total units of pension credit earned and the contribution rate under which the last 12 credits were worked. However, it is not as simple as this when a participant leaves covered employment after acquiring a right to a retirement benefit and returns after a period of three consecutive years during when he failed to earn at least 3 units of pension credit. In this case, the proportional amount for the covered employment prior to the three year period will be determined by taking into consideration the credits and contribution rate prior to the time he left covered employment. The proportional amount for the period after the three year period will be computed on the basis of the credits and the current contribution rate.
Since you earned no credit from 1978 through 1980, we figured your pension using two rates. We calculated the credit accrued from 1960 through 1977 under the starting rate of 95¢ for District Council No. 9 participation. The credit from 1981 through 1994 was figured under an hourly rate of $2.16.
(Saltz Aff. Ex. 5.)
Believing that his pension benefit amount was incorrectly reduced by the application of the 95¢ rate for the credits accumulated from 1960 through 1977 because he did not have a permanent break in service, Plaintiff retained counsel. Plaintiff's counsel contacted Gary Meyers and stated his belief that nothing in the Pension Plan provided for the use of the 95¢ rate in the calculation of Plaintiff's benefits. (Saltz Aff. Ex. 6.) In response, Gary Meyers referred Plaintiff's counsel to the Rules and Regulations of the Pension Plan, Article 3, Section 3.20 in support of the Pension Fund's calculation of Plaintiff's pension benefit. (Saltz Aff. Ex. 7.) Article 3, Section 3.20, entitled "Computation of Benefits," states:
(a) [A] Participant who returns to Covered Employment shall have the portion of his or her pension benefit that was earned prior to the termination of Covered Employment calculated based on the benefit level that was in effect prior to the termination of Covered Employment, and the portion of his or her pension benefit earned after the return to Covered Employment calculated based on the rate that was in effect upon termination of Covered Employment subsequent to the return to Covered Employment.
(Saltz Aff. Ex. 4 at 38.) The Pension Plan defines the term "Covered Employment" as "employment as an Employee by a Contributing Employer. . . ." (Saltz Aff. Ex. 4 at 28.)
On May 3, 2000, Plaintiff's counsel wrote to Gary Meyers for a second time, asserting that Plaintiff had been informed by Richard Meyers that he did not incur a break in employment during the years he was not able to work, and therefore Plaintiff believed there was no termination of covered employment and no return to covered employment to trigger the pro-rated calculation provided for in Section 3.20(a) of the Pension Plan's Rules and Regulations.
Defendants contend that Plaintiff did not appeal his pension benefit calculation through the Fund's appeal procedures, but Plaintiff insists that he attempted to resolve the matter without initiating litigation. In any event, the exchange of letters with Gary Meyers did not satisfy Plaintiff's concerns, and on or about June 14, 2000, Plaintiff filed the complaint in this action claiming that Defendants miscalculated his pension benefits and breached their fiduciary duties by leading him to believe that he did not have a break in employment. Since the Pension Fund properly calculated Plaintiff's benefits and did not mislead him about his status, summary judgement is granted for Defendants and the action is dismissed.
DISCUSSION
"[A] denial of benefits challenged under [ERISA] is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57(1989). Here, the Trust Agreement establishing the Pension Fund confers discretionary authority on the Board of Trustees "to determine eligibility for benefits or to construe the terms of the plan." (Def. Mot. Summ. J. App. Ex. 2 at 6-7.) Plaintiff argues that a de novo standard is appropriate here because the plain language of the Pension Plan carves out exceptions to the administrator's discretionary authority. See Heidgerd v. Olin Corp., 906 F.2d 903, 908-09 (2d Cir. 1990). In the alternative, Plaintiff argues that Defendants' calculation of his pension was arbitrary and capricious because the administrator "interpret[ed] the plan in a manner inconsistent with its plain words." Shelden v. Barre Belt Granite Employer Union Pension Fund, 25 F.3d 74, 80 (2d Cir. 1994) (citation omitted). However, it is not necessary to dwell on the proper standard of review because Defendants' calculation was correct under the plain language of the Pension Plan. Thus, Plaintiff's claim fails even under a de novo standard of review.
The case essentially turns on the difference between "permanent breaks" in employment, which can cause the cancellation of pension credits, and termination of "covered employment," which impacts the rates used in the calculation of benefits. It is not surprising that Plaintiff may have misunderstood the letter he received from Richard Meyers indicating that he did not suffer a break in employment and the effect that had on his pension. Indeed, Gary Meyers, the current Fund Administrator stated that he understood why Plaintiff might have expected that he had not terminated covered employment. (G. Meyers Dep. at 24.) Gary Meyers also failed to clarify the difference between the terms during his deposition when he said that terminating covered employment and having a break in covered employment are "pretty much" synonymous. (G. Meyers Dep. at 22-23.) However, a careful examination of the Pension Plan and the letters from both Richard and Gary Meyers reveals that there is a significant difference between a "permanent break in employment" and a termination of "covered employment."
The Pension Plan contains eleven articles. Article 3, "Pension Eligibility and Amount," includes Section 3.20, set forth above, which specifies that two different rates are used to calculate a participant's pension when there has been a termination and return to covered employment. Article 4, "Pension Credits and Years of Vesting Service," includes the explanation of the effect of "Breaks in Service" on a participant's pension credits. Section 4.07 states:
A Participant who has a Permanent Break in Service before he or she is vested, or before he or she has become eligible for a Normal, Reduced, Early Retirement, Disability or Vested Pension, shall have his or her standing under this Plan cancelled; that is, participation, previously credited years of vesting service, and previous pension credits will be canceled under the Plan.
(Saltz Aff. Ex. 4 at 43.) Thus, both the structure and language of the Pension Plan indicate that breaks in service and termination of covered employment are two different concepts. The former impacts the number of pension credits and vesting, and the latter can effect the rate at which pension benefits are calculated.
Richard Meyers' letters of 1983 indicate that he was evaluating the Plaintiff's pension credits and vesting status, rather than the rates to be used in calculating Plaintiff's benefits. Each letter refers to a "break in an employment" and the final letter, dated December 22, 1983, informed Plaintiff that he "did not incur a Permanent break in employment as we previously indicated," and therefore his pension credits earned before 1977 would not be cancelled. It was appropriate for Defendants to allow Plaintiff to keep the pension credits that he earned before his disability because his inability to work was involuntary. See Van Fossan v. Int'l Bhd. of Teamsters, 649 F.2d 1243, 1248-49 (7th Cir. 1981);Cossack v. Burns, 970 F. Supp. 108, 116 (N.D.N.Y. 1997). Once the Administrator received proof of the disability, Plaintiff was informed that he did not have a permanent break in service and his credits would not be nullified as previous letters had indicated. However, Richard Meyers' final letter also stated that Plaintiff's "pension benefits would be computed based upon the Rules and Regulations of this Plan at the time of your retirement." (Saltz Aff. Ex. 3.)
The Pension Plan clearly states that when a participant leaves covered employment and then returns to covered employment, his pension will be calculated at two different rates. Covered employment is defined by the Pension Plan as "employment as an employee by a Contributing Employer." (Saltz Aff. Ex. 4 at 28.) Plaintiff terminated covered employment when he was on disability because he was not an employee of a contributing employer. Although Plaintiff was informed that he did not have a permanent break in employment and therefore the pension credits earned before he left covered employment were not canceled, he was never told that the years that he was on disability would be considered "covered employment." While his confusion is understandable and it is unfortunate that his disability has resulted in a reduced pension benefit, Defendants' determination of Plaintiff's pension benefit was consistent with the plain language of the Pension Plan. Thus, under any standard of review, it must be affirmed.
CONCLUSION
For the reasons set forth above, Plaintiff's motion for summary judgement is denied, and Defendants' motion for summary judgement is granted and the Complaint is dismissed.
SO ORDERED.