Baker v. Otis Elevator Co., 79-1185
| Decision Date | 13 November 1979 |
| Docket Number | No. 79-1185,79-1185 |
| Citation | 609 F.2d 686 |
| Parties | 1 Employee Benefits Ca 1998 Joseph W. BAKER, Plaintiff-Appellant, v. OTIS ELEVATOR COMPANY, U.T.I. Products, Inc., Local 490, International Union of Electrical, Radio and Machine Workers, A.F.L.-C.I.O., United Technologies Corporation, Bankers Trust Company, and Citibank N. A., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Third Circuit |
Joseph W. Baker, Karcher, Reavey & Karcher, P. A., Sayreville, N. J., for plaintiff-appellant.
S. Joseph Fortunato, Warren J. Casey, Pitney, Hardin & Kipp, Morristown, N. J., for defendants-appellees.
Before SEITZ, Chief Judge, and GARTH and SLOVITER, Circuit Judges.
This appeal requires us to decide whether § 206(a) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1056(a) (1976), extends its coverage to an employee who voluntarily left work before that provision of ERISA became effective. We conclude, as did the district court, that it does not. We therefore affirm the district court's order granting summary judgment to the defendants. 1
Joseph Baker, Sr. was employed by the Otis Elevator Company from 1943 to 1970. In 1970, when he was 50 years old, Baker voluntarily left Otis to accept other employment. At the time of his departure from Otis, a pension plan instituted for the benefit of certain hourly-paid employees included Baker within its coverage. The plan provided both regular retirement benefits and early retirement benefits. Regular benefits were afforded to those who worked at Otis for ten years and who reached age 35 before leaving employment. These benefits, however, would begin and be paid only when the employee reached age 65. Early benefits were available to employees who had completed fifteen years of service, and who then left Otis after reaching age 55. 2 Such benefits would begin immediately upon retirement.
Sometime about 1975, some five years after Baker had left Otis, Otis experienced a sharp drop in demand for elevator equipment due to a decline in new construction. As a result, Otis experienced large scale layoffs during 1976 and 1977. Otis and Baker's Union entered into a series of agreements designed to cushion the impact of the layoffs on the affected workers. One feature of these agreements expanded the availability of early retirement benefits. The first such agreement provided early benefits to employees Laid off (as distinct from voluntary departures) between March 1 and July 1, 1976, with fifteen years of service, who were between 54 and 55 years old at the time of layoff. The second agreement consisted of an oral extension of the first agreement to cover those employees Laid off between July 1, 1976 and March 31, 1977. The third agreement was included in a new collective bargaining contract entered into by Otis and the Union, which went into effect April 1, 1977. This last agreement provided early benefits to all employees with fifteen years of service who were Laid off prior to their 55th birthday.
In 1971, shortly after Baker left the company, Otis advised him by letter that he was entitled only to regular retirement benefits, which would not commence until 1985, after his 65th birthday. 3 In July, 1976, when Baker was 56, he wrote Otis seeking "early" retirement benefits. Otis denied his request and restated its original position, that he was entitled only to regular retirement benefits, which would commence in 1985. Baker then filed this action in which he seeks payments now for early retirement.
After a complicated procedural history in the district court, which need not be recited here, summary judgment was granted to the defendants and against Baker on all of Baker's claims. This appeal followed.
Baker's sole substantial claim 4 rests on § 206(a) of ERISA, 29 U.S.C. § 1056(a) (1976) (hereinafter § 206(a)). In relevant part, this section provides:
In the case of a plan which provides for the payment of an early retirement benefit, such plan shall provide that a participant who satisfied the service requirements for such early retirement benefit, but separate(d) 5 from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially reduced under regulations prescribed by the Secretary of the Treasury.
On its face, this provision, if applicable, would plainly support Baker's claim: he is a participant who is now 55 years old, who satisfied the service requirement for early benefits (15 years), but separated from the service before satisfying the 55 year age requirement. The statute requires that a former employee in Baker's position be given early benefits once he reaches the retirement age specified, and, as we have previously observed, Baker has reached age 55. But the question we then must resolve is whether this section of the statute applies to an employee, like Baker, who left work prior to the date on which this section became effective.
To assist us in answering this question, we have had our attention called to an administrative regulation which bears on the very issue presented here, and which, if deemed controlling, would oblige us to deny relief to Baker. In order to understand the relevance of this regulation, however, we must first briefly review the structure of ERISA.
As enacted, ERISA consisted of four titles, two of which have no bearing on the issue in this case. Referring then to the two titles relevant here, we find that Title I contains provisions for the protection of employee benefit rights. These provisions are codified in Title 29 of the United States Code. Title II contains amendments to the Internal Revenue Code regarding taxation of pension plans, which are codified in Title 26 of the U.S. Code. These tax provisions of Title II embody requirements for pension plans that must be satisfied to make the plan eligible for certain favorable tax treatment, an essential feature of the legislation. The tax terms in Title II are closely analogous to, and almost identical to, the employee benefit provisions for pension plans set forth in Title I. Thus, § 206(a) of Title I, on which Baker rests his claim, has a substantively correspondent tax analogue in § 1021(d) of Title II. Section 1021(d) has been codified in the U.S. Code as 26 U.S.C. § 401(a)(14) (1976), and provides in part:
In the case of a plan which provides for the payment of an early retirement benefit, a trust forming a part of such plan shall not constitute a qualified trust under this section unless a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially, reduced under regulations prescribed by the Secretary.
To demonstrate the coincidence between the two sections, and the identical language utilized to effectuate the legislative purpose, we reproduce below a combination of the relevant portions of § 206(a) of Title I and § 1021(d) of Title II, bracketing that segment of § 1021(d) which does not appear in § 206(a) and underlining those segments of § 206(a) which do not appear in § 1021(d). This exercise is virtually conclusive proof that the two sections were intended to be the same for all practical purposes and should be so construed:
In the case of a plan which provides for the payment of an early retirement benefit, (a trust forming a part of such plan shall not constitute a qualified trust under this section unless) Such plan shall provide that a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially, reduced under regulations prescribed by the Secretary Of the Treasury.
We stress the identity of Title I and Title II because Congress specifically delegated to the Treasury Department, rather than to the Labor Department, authority to issue regulations concerning participation, vesting and funding standards. Congress further provided that the regulations issued by Treasury would apply as well to the analogous employee benefit sections of Title I in these areas. 6 Moreover, Congress required that any violation of Title I must be referred by the Secretary of Labor to the Treasury Department. 7 It is therefore not surprising that the relevant sections of Titles I and II were drawn in identical fashion to require uniform results in their interpretation.
In light of this clear delegation to the Treasury Department of rule making power respecting participation standards, and Congress's clear directive that Treasury regulations shall govern the employee benefit provisions as well as the tax provisions of ERISA, we conclude that our analysis must begin with the Treasury Department regulations relevant to the issue presented by Baker. And, indeed, the Treasury Department has addressed this very question.
The Treasury Department, in a regulation promulgated under § 206(a)'s tax analogue, § 1021(d) of Title II, has ruled that § 1021(d), and hence § 206(a), does Not include or cover participants who retired before the date on which both sections became effective. The regulation, 26 C.F.R. § 1.401(a)-14(c)(3) (1978),...
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