Frommert v. Conkright
| Citation | 328 F.Supp.2d 420 |
| Decision Date | 30 July 2004 |
| Docket Number | No. 00-CV-6311L.,00-CV-6311L. |
| Parties | Paul J. FROMMERT, et al., Plaintiffs, v. Sally L. CONKRIGHT, Patricia M. Nazemetz and Lawrence M. Becker, Xerox Corporation Retirement Income Guarantee Plan Administrators and Xerox Corporation Retirement Income Guarantee Plan, Defendants. |
| Court | U.S. District Court — Western District of New York |
Robert H. Jaffe, Jaffe & Schlesinger, P.A., Springfield, NJ, for Plaintiffs.
Margaret A. Clemens, Nixon Peabody LLP, Rochester, NY, Stephanie M. Caffera, Nixon Peabody LLP, Rochester, NY, for Defendants.
DECISION AND ORDER
Although adopted for salutary purposes, pension and other employee benefit plans have spawned much litigation over the years, particularly since the adoption of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1101 et seq., in 1974.1 This case presents one more example.
At issue in this case is the pension plan of Xerox Corporation, The plan called the Retirement Income Guarantee Plan ("RIGP" or "Plan") has already been the subject of several prior decisions of this Court2 and other courts.3
The details of plaintiffs' claims will be spelled out below, but in a nutshell, they contend that the Plan administrator has wrongfully calculated the amounts of plaintiffs' benefits under the Plan. The net result of that calculation is that plaintiffs receive (or will receive, in the case of those plaintiffs who have yet to retire) hundreds, and in some cases even thousands, of dollars less per month than plaintiffs believe they should. Plaintiffs ask the Court to declare that the administrator should calculate their benefits according to plaintiffs' view of the Plan provisions.
After this Court granted defendants' motion to dismiss, in part, (Frommert v. Conkright, n. 1, supra), plaintiffs filed an amended complaint styled the First Consolidated Amended Complaint joining Levy v. Conkright (01-CV-6447) with this case in one complaint on behalf of roughly 100 present and former employees of Xerox. In that complaint, plaintiffs contend that defendants — the administrators of the Plan — violated various provisions of ERISA in calculating plaintiffs' retirement benefits.
All the plaintiffs share this common circumstance: they were all former employees of Xerox who left, requested and received lump-sum distributions from the Pension Plan and, years later, were rehired by Xerox, which resulted in their accruing benefits again under the Plan. Some plaintiffs have retired again and object to the benefits calculated by defendants; others, probably the majority, still work at Xerox and seek a declaration now of their rights to benefits in the future.
The principal matter of contention is whether the administrators properly offset plaintiffs' prior lump-sum distributions, as enhanced, against the retirement benefits accruing as a result of the employees being rehired. Prior distributions become a factor, as an offset, because the Plan directs that all the years of service count in calculating benefits — both years before receiving the lump-sum distribution and years of service once rehired. The offset is calculated by the value of the prior lump-sum distribution plus any sum that the distribution would have earned (hypothetically) had it remained in the fund and been invested. The parties refer to this as the "phantom account" offset. For several reasons, plaintiffs object to this method of calculating benefits and seek a declaration under § 1132(a)(1)(B) that the Administrator erred in calculating benefits using this formula.4
Xerox has moved for summary judgment dismissing the complaint. Plaintiffs Paul Frommert and Alan Clair have cross-moved for summary judgment, although the declaratory and injunctive relief that they seek would seemingly inure to the benefit of all the plaintiffs. Frommert is typical of those employees who, after joining this action, left Xerox's employ, and who seek additional benefits in accordance with their interpretation of the Plan. Clair is typical of the majority of the plaintiffs in this action, who are still employed by Xerox and seek a declaration clarifying the manner in which their benefits will be calculated in the future.
An understanding of plaintiffs' claims requires some familiarity with certain Plan provisions, as well as with the Plan's various restatements and amendments over the years. The RIGP was first adopted in 1977. At all times relevant to this action, the Plan has provided that, upon retiring, an employee will receive benefits in an amount equal to the highest result of three alternative calculation methods.
The first calculation method is the retirement plan formula ("RIGP Formula"), which is a guaranteed annuity calculated by multiplying years of service (up to thirty years) by 1.4 percent of the highest-average yearly pay (defined as the average of the employee's five highest-paying calendar years with Xerox). If an employee retires early, defined as retiring after the age of 55 but before the age of 65, that person's RIGP Formula benefit is reduced by five percent for each year that he receives retirement benefits before reaching the age of 65. For rehired employees, the number of years of service includes the total time the employee worked for Xerox not just the period of employment following rehire.
The second method for calculating retirement benefits under the Plan is based on the employee's Cash Balance Retirement Account ("CBRA"), which consists of yearly contributions by Xerox of an amount equal to five percent of the employee's salary, accruing interest at a yearly fixed rate of one percent above the one-year Treasury Bill rate. For those employees who began their tenure with Xerox prior to the end of 1989, their CBRA also includes the transferred balance of a Profit Sharing Retirement Account ("Retirement Account") that Xerox maintained for each employee up until December 31, 1989.
The third calculation method under the Plan, which is only applicable to employees hired by Xerox prior to 1989, is based on the employee's Transitional Retirement Account ("TRA"). The TRA consists of the employee's transferred Retirement Account balance as of December 31, 1989, together with any increase that would have occurred if the balance had remained invested.
Because the calculation of an employee's benefits is based upon all the employee's years of service, some mechanism is needed to reflect prior lump-sum payments received by employees who, like plaintiffs, had previously left Xerox and then returned. Otherwise, the employee would receive a windfall. To that end, the Plan has, over the years, contained several provisions dealing with offsets for prior distributions. For example, the 1989 RIGP () stated in § 9.6:
Section 9.6. Nonduplication of Benefits. In the event any part or all of a Member's accrued benefit is distributed to him prior to his Normal Retirement Date, if Section 8.8 [] does not apply to such distribution and such Member at any time thereafter recommences active participation in the Plan, the accrued benefit of such Member based on all Years of Participation shall be offset by the accrued benefit attributable to such distribution.
Becker Aff. Ex. F.
In 1990, the Plan was amended in several respects. Among other things, § 1.8 was amended. Prior to the 1990 amendment, § 1.8 had simply defined the CBRA as "[t]he Account established for a Member pursuant to Article 18." Becker Aff. Ex. F. Article 18 set forth the provisions governing the CBRA. The 1990 Amendment added substantial additional language to § 1.8, including the following:
Where a Member has received a distribution from his Cash Balance Retirement Account prior to the relevant time [i.e., the time as of which the calculation of an accrued benefit is determined], it shall be assumed that his actual Cash Balance Retirement Account balance at the relevant time includes an amount equal to the sum so distributed as it would have increased during the period from the time of the distribution to the relevant time if such sum had continued to be invested in the Cash Balance Retirement Account.
The 1990 amendments also added similar language to § 1.41 of the Plan, which dealt with the TRA. Prior to being amended, § 1.41 of the 1989 Restatement had defined the TRA as "[t]he account established for a Member pursuant to Article 17." Becker Aff. Ex. F. The 1991 amendment to § 1.41 added several provisions regarding the TRA, including the following:
Where a Member has received a distribution from his Transitional Retirement Account prior to the relevant time, it shall be assumed that his actual Transitional Retirement Account balance at the relevant time includes an amount equal to the sum so distributed as it would have increased or decreased during the period from the time of the distribution to the relevant time if such sum had been invested in the General Fund, the Guaranteed Fund, the Income Fund or the Segregated Assets Fund, in whichever the Member participated at the time of the distribution.
A new restatement of the Plan was issued in 1993. The 1993 restatement included language largely identical to that in the above amendments. See Becker Aff. Ex. G at §§ 1.9, 1.41. In addition, the 1993 restatement provided in § 1.45(f) that "[t]he benefit payable under this Plan to such Member who has received a prior distribution will be reduced by the previously distributed amount with adjustments to the `relevant time' under Section 1.9 or 1.41, or at the time of the subsequent distribution under Section 4.2." Becker Aff. Ex. G.
The Plan has been restated since then, in 1996 and 1998 for example, and each restatement has included...
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