Cinotto v. Delta Air Lines Inc.
Decision Date | 23 March 2012 |
Docket Number | No. 10–14704.,10–14704. |
Citation | 52 Employee Benefits Cas. 2505,674 F.3d 1285,23 Fla. L. Weekly Fed. C 855 |
Parties | Jean Marie CINOTTO, on behalf of herself and all others similarly situated, Plaintiff–Appellant, v. DELTA AIR LINES INC., The Administrative Committee, The Administrative Subcommittee of Delta Air Lines, Inc., Lisa A. Brown, Cherie Caldwell, et al., Defendants–Appellees. |
Court | U.S. Court of Appeals — Eleventh Circuit |
OPINION TEXT STARTS HERE
Lindsay Nako, Teresa Susan Renaker, Julie Hayden Wilensky, Lewis, Feinberg, Lee, Renaker & Jackson, PC, Oakland, CA, for Plaintiff–Appellant.
Patrick Connors DiCarlo, Alston & Bird, LLP, Atlanta, GA, for Defendants–Appellees.
Mary E. Signorille, AARP Foundation Litigation, Washington, DC, for AARP, Amicus Curiae.Appeal from the United States District Court for the Northern District of Georgia.Before CARNES and HULL, Circuit Judges, and ROTHSTEIN,* District Judge.HULL, Circuit Judge:
This appeal involves the anti-cutback rule in § 204(g) of the Employee Retirement Income Security Act of 1974 (“ERISA”), codified as 29 U.S.C. § 1054(g). Specifically, § 204(g)'s anti-cutback rule forbids, with a few exceptions, a pension plan amendment that decreases a participant's “accrued benefit.” The particular pension plan here has always used a Social Security offset to reduce a participant's pension retirement benefits. The narrow question before us is whether this pension plan amendment violated the anti-cutback rule when it changed the calculation of that Social Security offset for participants who had not yet reached age 52, the plan's earliest retirement age, at the time of the amendment. We hold that it did not.
Although the ERISA issue is complex, the relevant facts are undisputed. Plaintiff–Appellant Jean Marie Cinotto works as a flight attendant for Defendant–Appellee Delta Air Lines, Inc. In that capacity, Cinotto has worked for Delta for approximately thirty years, and still does. She is a participant in Delta's Family–Care Retirement Plan (“the Plan”), which covers all employees except pilots. The Plan's calculation of a participant's retirement benefit factors in (1) years of service, (2) earnings at Delta, and (3) an offset for the amount of the participant's Social Security benefit. The earliest retirement age under the Plan is age 52.
On March 31, 2007, the Plan amended its calculation of the Social Security offset, and on that date, Cinotto had not yet attained age 52. The relevance of these undisputed facts is explained below.
The Delta Plan is a “defined benefit” pension plan. The Plan provides two types of defined benefits: (1) “retirement” benefits under Article Five for employees who retire directly from Delta, and (2) “termination” or “deferred vested” (hereinafter “termination”) benefits under Article Six for certain employees who terminate employment from Delta for any reason other than retirement or death.
As to the first type, a Plan participant is eligible to receive retirement benefits upon attaining age 52. A participant who retires between ages 52 and 65 takes “early retirement,” while a participant who retires at or after age 65 takes “normal retirement.” If a participant chooses to commence payment of his benefits between the ages of 52 and 65, his benefits are actuarially reduced. By contrast, if a participant waits until age 65 to commence payment, he receives a larger benefit amount, or “normal retirement income benefit.” The Plan also states that “a Participant's retirement income benefit under the Plan shall become non-forfeitable no later than the Participant's Normal Retirement Date.”
As to the second type of defined benefit, a Plan participant is eligible to receive “termination” benefits upon (1) completing at least five years of continuous service or reaching age 52, and (2) then terminating employment for a reason other than retirement or death. A participant commences receiving termination benefits similarly to retirement benefits. That is, a participant receives a larger monthly benefit by waiting to draw benefits until age 65, but if he draws benefits between the ages of 52 and 65, his monthly benefit is actuarially reduced. The Plan also states that “if a Participant has a termination of employment” with Delta “(i) after attaining age 52 or (ii) after completing 5 years of continuous service, the Participant shall be 100% vested in his or her Accrued Benefit under this Plan.”
In both types of defined benefits, the benefit amount is determined using a Social Security offset, as discussed later.
Because the anti-cutback rule applies only to an accrued benefit, we review the Plan's definition of an accrued benefit.
In Article One, the Plan defines the term “Accrued Benefit.” An “Accrued Benefit” under the Plan “as of any determination date shall be an annual benefit payable monthly (as determined [under the Plan] ) commencing on the Participant's Normal Retirement Date, or on the Annuity Starting Date if later.” As part of this definition of “Accrued Benefit,” the Plan states:
The Plan defines “Normal Retirement Date” as “the first day of the month coinciding with or next following the date he or she attains age 65.” “Normal Retirement Date” is thus tied to being 65. By contrast, the “Annuity Starting Date” applies to a participant who takes early retirement, which is at or after age 52 but before age 65.1 The “Annuity Starting Date” is defined as “[t]he first day of the first period for which a retirement benefit is paid as an annuity, or, in the case of a retirement benefit that is not paid in the form of an annuity, the first day on which all events have occurred which entitle the Participant to such benefit.”
In addition, a defined benefit pension plan generally provides a formula whereby a participant can determine what benefit, if any, is payable to him. The Delta Plan provides such a formula, using the same factors for both retirement and termination benefits. To determine a participant's benefit, three factors are used: (1) a participant's Final Average Earnings (“FAE”); 2 (2) his Primary Social Security Benefit (“PSSB”);3 and (3) his months–of–credited–service–to–30–years ratio. The final average earnings benefit is the product of the credited-service ratio and the difference of 60% of the FAE less 50% of the PSSB. The full amount of this monthly benefit is payable to participants beginning at age 65; participants may begin receiving a reduced benefit as early as age 52.
The deduction of the PSSB is commonly referred to as the “Social Security offset.”4 The Plan's formula for determining the Social Security offset is the center of this case's dispute. Delta has amended the formula for the Social Security offset twice in recent years, in amendments known as Amendments Seven and Eight. Only Amendment Eight is challenged here. The next sections describe how the Social Security offset worked before and after each Amendment.
Prior to Amendment Seven, the Plan's methods for determining a participant's PSSB—and thereby his Social Security offset—worked as follows. The Plan separated participants based on whether they had reached age 52 as of June 30, 2003.
For a participant age 52 or older on June 30, 2003, the Social Security offset was “determined by assuming the Participant had no income after June 30, 2003.” This assumption of no future income meant no future Social Security contribution, which resulted in a smaller Social Security offset and a larger Plan benefit. As discussed later, Amendments Seven and Eight to the Plan did not change the “no income” offset formula for participants age 52 or older on June 30, 2003.
However, if a participant had not reached age 52 by June 30, 2003, then the Plan (prior to Amendments Seven and Eight) determined the Social Security offset “based on [1] whether the Participant terminates employment with [Delta] before or after June 30, 2010 and [2] whether the Participant is eligible for a retirement income benefit ... or a [termination] benefit.” If that participant terminated employment before June 30, 2010, and was eligible for a retirement benefit, the Social Security offset was “determined by assuming the Participant had 2003 Level Pay ... from July 1, 2003 to the date the Participant attains age 52.” If instead that participant terminated employment before June 30, 2010, and was eligible for only a termination benefit, the Social Security offset was “determined by assuming the Participant had 2003 Level Pay until the Participant attained age 65.”
If a participant terminated employment after June 30, 2010, the Plan provided that, regardless of whether the participant is eligible for a retirement or termination benefit, the Social Security offset was “determined by assuming the Participant had no income after the earlier of the date the Participant attains age 52 or June 30, 2010.”
On December 31, 2005, Amendment Seven to the Plan became effective. The Amendment made two primary changes: (1) a freeze of benefit accruals, and (2) a modification of the Social Security offset for participants under age 52 on June 30, 2003.
By virtue of Amendment Seven, the amended Introduction to the Plan provided that “[e]ffective December 31, 2005, all benefits under the Plan are frozen for all Participants and there shall be no further accruals of benefits under this plan after that date.” Amendment Seven also added this language to the end of the Plan's definition of “Accrued Benefit”: ...
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