766 F.3d 1205 (9th Cir. 2014), 12-36051, Andersen v. DHL Ret. Pension Plan
|Citation:||766 F.3d 1205|
|Opinion Judge:||BERZON, Circuit Judge:|
|Party Name:||RANDAL ANDERSEN; QUIN ARNOLD; GILBERT ARTER; JAMES DEWEY ASHBY, JR.; LYNN BATAYOLA; CAROL BLANKFIELD; DAVID A. BOOZER; SHARON ANN BRAUN, AKA Sharon Ann Sanders; DAVID BRENT; JACQUELINE BROWN; RANDY BUCHANAN; LORETTA BUCKHOLZ; ROBERT CASSIDY; THOMAS CLARK; TRACY CLARK; LAURA COCHRANE; PATRICK CURRY; WALLACE DANIELSON; KRISTEN DELARA; SHARON DENISON;|
|Attorney:||Robert S. Catapano-Friedman (argued), The Catapano-Friedman Law Firm, Albany, New York; Michael E. Withey, Law Offices of Michael E. Withey, Seattle, Washington, for Plaintiffs-Appellants. Brian T. Ortelere (argued) and Jeremy P. Blumenfeld, Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania...|
|Judge Panel:||Before: Mary M. Schroeder, Richard A. Paez, and Marsha S. Berzon, Circuit Judges. Opinion by Judge Berzon.|
|Case Date:||September 15, 2014|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Argued November 8, 2013
Submitted, Seattle, Washington September 8, 2014
Appeal from the United States District Court for the Western District of Washington. D.C. No. 2:12-cv-00439-MJP. Marsha J. Pechman, Chief District Judge, Presiding.
The " anti-cutback" rule of the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1054(g), prohibits any amendment of an employee benefits plan that would reduce a participant's " accrued benefit." Our question is whether Defendants' (collectively, " DHL" ) decision to eliminate Plaintiffs' right to transfer their account balances from DHL's defined contribution plan to its defined benefit plan violated the rule. We hold it did not.
Plaintiffs are former employees of Airborne Express, Inc. (" Airborne" ) who participated in both Airborne's defined benefit pension plan (" the Retirement Income Plan" ) and its defined contribution
plan (" the Profit Sharing Plan" ).1 The Retirement Income Plan is a so-called floor-offset plan. That is, its benefits are calculated on the basis of a participant's final average compensation and years of service, with an offset for any account balance in the Profit Sharing Plan.
A floor-offset feature works as follows:
The employee's annual benefit in the defined benefit pension -- the floor -- is offset by the annual annuity value of the [defined] contribution plan. (The annual annuity value of a defined contribution plan . . . is the dollar amount available each year if the account balance at retirement were used to purchase an annuity, using standard assumptions for interest rates and life expectancy.) . . . .
Essentially, a . . . guaranteed benefit level is established in the defined benefit plan -- based on age, service and/or compensation. If the annuity value of the defined contribution plan is equal to or greater than the guaranteed level of the [defined benefit] plan, all of the benefit will come from the [defined contribution] plan. However, if the annuity value of the account balance of the [defined contribution] plan is less than the guaranteed benefit of the [defined benefit] plan, the [defined benefit] plan will make up the difference.
U.S. Dep't of Labor, Bureau of Statistics, Employee Benefits Survey, People Are Asking . . . What is a floor-offset plan?, http://bls.gov/ncs/ebs/peopleboxfloorpl.htm (last modified May 9, 2002). If, for example, a participant was entitled to receive $5,000 in monthly benefits under the Retirement Income Plan but had a balance in the Profit Sharing Plan that would equate to a $3,000 monthly annuity, he would receive a monthly benefit of $2,000 from the Retirement Income Plan. If his balance in the Profit Sharing Plan would equate to a $6,000 monthly annuity, he would receive nothing from the Retirement Income Plan.
Before the amendment challenged here, participants could transfer the funds from their Profit Sharing Plan accounts to the Retirement Income Plan's general pool before the participant's benefits were calculated. The transfer option was described in section 7.11 of Airborne's Retirement Income Plan:
A Participant may transfer his/her nonforfeitable Employer Profit Sharing Plan account balance to this Plan in order to be paid an annuity benefit from such transferred account balance.
This transfer option, if exercised, provided increased funds for the Retirement Income Plan. It also allowed participants to drop their Profit Sharing Plan balances to zero, eliminating any offset when the benefit payable from the Retirement Income Plan was calculated. So, in the first example provided above, if a participant transferred the entire balance of his Profit Sharing Plan account to the Retirement Income Plan when he retired, he would be entitled to (at least) the full $5,000 monthly annuity from the Retirement Income Plan; 2 he
would, of course, have nothing remaining in his Profit Sharing Plan account, and would therefore be paid nothing from that account.3
In 2003, DHL acquired Airborne and began a process of merging the two companies' retirement plans. All relevant features of Airborne's plans were preserved in the merger, with one exception: on December 31, 2004, DHL eliminated the right of participants to transfer their account balances from the Profit Sharing Plan to the Retirement Income Plan. It did so by amending section 7.11 of the Retirement Income Plan to " add the following to the end thereof: Notwithstanding the foregoing, the [Retirement Income] Plan shall not accept transfers of any Profit Sharing Plan account balances after December 31, 2004." The Profit Sharing Plan was not amended; it continues to allow transfers to any eligible retirement plan that will accept them. As we discuss in Part III, due to differential actuarial assumptions used in the two plans, the elimination of the right to transfer these funds into the Retirement Income Plan caused many participants in the two plans to receive reduced overall periodic benefits.
The Tasker litigation. On February 11, 2009, former Airborne employee Jeffrey R. Tasker sued DHL alleging that the December 31, 2004 elimination of the transfer option violated ERISA's anti-cutback rule. Tasker's case is instructive in understanding the magnitude of the benefits reduction Plaintiffs could experience as a result of the plan amendment:
After more than thirty-two years of service, Tasker retired on March 4, 2004. As of the end of 2003, his [Profit Sharing Plan] balance was $370,338.22. At his retirement, he received a benefits estimate stating that his single life annuity under the [Retirement Income Plan] alone would be . . . $4,163.92 per month . . . if he transferred his [Profit Sharing Plan] balance into the [Retirement Income Plan]. Tasker selected . . . [that] option, to begin payments upon his request on or after October 1, 2008. In April 2008, Tasker learned . . . that his expected monthly benefits were approximately $2,200.00, not $4,163.92. . . . [T]he 2004 figure was higher because it contemplated Tasker's exercise of his transfer right -- a right that was subsequently eliminated.
Tasker v. DHL Ret. Sav. Plan, No. 09-CV-10198-NG, 2009 WL 4669936, at *2
(D. Mass. Nov. 20, 2009), aff'd, 621 F.3d 34 (1st Cir. 2010).
The district court dismissed Tasker's complaint, holding that a United States Department of the Treasury regulation (" Regulation A--2" ) specifically permits the elimination of a transfer right, even when " such transfer may reduce or eliminate protected benefits." [WL] at *5. Pursuant to Regulation A--2, the court concluded, a transfer right " may be eliminated without running afoul of the anti-cutback rule." Id. The First Circuit affirmed. Tasker, 621 F.3d at 40.
The current action. On March 12, 2012, Plaintiffs brought this action against DHL, also alleging that DHL's elimination of the transfer option violated the anti-cutback rule. The complaint alleges that " [s]ome of the Plaintiffs [who] have already applied for their pension benefits" were denied the right to transfer their Profit Sharing Plan account balances to the Retirement Income Plan, and " are now receiving . . . benefits of far less value than the amount to which they were fully vested and to which they were entitled." Others have not yet applied for their benefits, but assume that their benefits...
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