Parry v. Sbc Communications, Inc.
| Decision Date | 27 June 2005 |
| Docket Number | No. 3:04 CV 128 JBA.,3:04 CV 128 JBA. |
| Citation | 375 F.Supp.2d 31 |
| Court | U.S. District Court — District of Connecticut |
| Parties | William R. PARRY, Jr., et al. v. SBC COMMUNICATIONS, INC., et al. |
Ian O. Smith, Moukawsher & Walsh, Hartford, CT, Thomas G. Moukawsher, Moukawsher & Walsh, Groton, CT, for William R. Parry, Jr., et al.
Carla R. Walworth, Patrick W. Shea, Zachary R. Osborne, Paul, Hastings, Janofsky & Walker, Stamford, CT, Christopher J. Lynch, Halloran & Sage, Hartford, CT, for SBC Communications, Inc., et al.
Substituted Ruling on Plaintiffs' Motion for Partial Summary Judgment [Doc. # 77]; SBC/SNET Defendants' Motion for Judgment on the Pleadings or in the Alternative for Summary Judgment [Doc. # 73]; Motion for Summary Judgment by Defendants Cingular Wireless LLC, Cingular Wireless Bargained Pension Plan and Cingular Wireless Bargained Pension Plan Trust [Doc. # 80]
At issue in this case is the proper interpretation of the plan amendments in the pension plans of defendant SBC Communications Inc.'s ("SBC") subsidiary, the Southern New England Telephone Company ("SBC/SNET") and defendant Cingular Wireless LLC ("Cingular"). For the reasons discussed below, plaintiffs' motion for partial summary judgment is GRANTED in part and DENIED in part. The SBC/SNET defendant's motion is GRANTED. Cingular's motion is DENIED.
Plaintiffs are current and former employees of SBC/SNET and Cingular,1 who claim they are entitled to certain cash balance pension benefits under the terms of their pension plans. All plaintiffs began their employment with SNET, and became employees of SBC in 1998 upon its purchase of SNET. In 2001, SBC transferred some plaintiffs to Cingular, which is a joint venture between SBC and BellSouth Corporation.
Since 1995, SBC/SNET has had in place a so-called "cash balance" pension plan for its employees, in which pension benefits are reflected in a hypothetical account balance ("Cash Balance Plan Account" or "CBPA") for each employee that increases each year as the employer adds service and interest credits. Although such plans resemble defined contribution plans in form, they are in fact defined benefit plans,2 and are governed by ERISA's defined benefit plan rules. Thus, for example, the SBC/SNET plan defines "accrued benefit" not as the balance of an individual's account, but rather as follows:
A Participant's CBPA [Cash Balance Plan Account] is a hypothetical account. A Participant's actual accrued benefit under the Plan is a monthly benefit commencing at his Normal Retirement Age, which is the actuarial equivalent of the participant's CBPA. Effective beginning September 18, 1998, such accrued benefit shall be computed by adding interest thereon projected to the Normal Retirement Age. The rate of interest shall be the Negotiated Interest Crediting Rate. Converting such amount into a lifetime pension shall be determined by multiplying the Participant's projected CBPA by the appropriate factor in Appendix A using the later of the Participant's age at Normal Retirement Age or the Participant's actual age, and dividing the resulting amount by 12.
In 2001, SBC/SNET and its union, Local 1298 of the Communications Workers of America ("CWA"), entered into negotiations over the terms of the cash balance pension plan for employees who chose to retire early. Many union members had been dissatisfied with the cash balance plan, and the union's aim during the 2001 pension negotiations was to "try and make up for the losses of the detrimental effects of the cash balance conversion as it related to the members who stayed with SNET." Declaration of Glenn P. Kalata, Sr. [Doc. # 123, Ex. 44] at ¶ 3. The Memorandum of Understanding, signed on February 6, 2001, provided as follows:
For any regular bargained-for employee who retires during the period July 1, 2001 through December 31, 2004 and who (a) has completed 30 or more years of Benefits NCS [Net Credited Service], or (b) is age 55 or older with 20 or more years of Benefits NCS, and who is under age 65 when the pension distribution is effective, the monthly pension attributable to the CBP [Cash Balance Pension] account will be determined as though the participant was age 65. If the employee is under age 65 and elects distribution of the CBP benefit as a single life annuity, the monthly pension benefit will be equal to the CBP account divided by 119.04.
Memorandum of Understanding ("MOU") [Doc. # 123, Ex. 32].
In 2001, approximately 64 SBC/SNET employees sought to retire early, and an outside actuary, Mellon HR Solutions, calculated their pension benefits by projecting the value of their cash balance accounts forward with interest credits to age 65, then applying the age 65 annuity factor of 119.04. These employees retired in reliance on the actuary's calculation, but before they received their retirement benefits, SBC rejected Mellon's benefits calculation, asserting that it overstated the pension benefits to which the employees were due under the 2001 MOU. In SBC/SNET's view, the MOU did not require the cash balance account to be projected forward with interest credits to age 65, only that the amount in the cash balance account would be multiplied by 119.04 (the age 65 annuity factor). The 2001 retirees ultimately settled with SNET, and the 2001 retirees who elected to collect their retirement benefits as an annuity received 60% of the additional sums they would have been entitled to under the benefit calculations furnished by Mellon. SNET settled with Mellon for half of that extra cost.
After settling with the 2001 retirees, SBC amended the SNET Pension Plan on May 17, 2002. Under the SBC/SNET Plan, employees have the option of receiving their pension benefit as either a lump sum distribution or a lifetime annuity. As amended to reflect the Memorandum of Understanding, the applicable provisions of the SBC/SNET plan include the following:
7.3 Cash Balance Plan Account Distribution Options
Employees who terminate employment on or after March 31, 1995, for any reason and who are eligible for a service pension or a service disability pension or a deferred vested pension will be eligible to elect to receive a distribution of the vested CBPA, unless the amount to which they are entitled under the Early Out Offer or the Enhanced Pension benefit is greater, in which case the CBPA would not be payable....
The normal form of payment of the vested CBPA shall be a joint and survivor annuity for a married Employee, and a single life annuity for an unmarried Employee.
The monthly payment amount of the CBPA, if payable as a single life annuity, shall be determined by multiplying the Employee's accrued monthly CBPA benefit at his Normal Retirement Age by the applicable factor in Table 6.7 in Appendix A using the Employee's age at the time of commencement of the pension benefit. The Employee's accrued monthly benefit is determined by multiplying the Employee's CBPA by the applicable factor in Table 6.6 in Appendix A using the Employee's age at the time of the commencement of the pension benefit. Effective January 1, 2000, the Employee's accrued monthly CBPA benefit is determined by:
1. projecting the Employee's CBPA from termination of employment to Normal Retirement Age using the Negotiated Interest Crediting Rate, and
2. dividing the amount from (1) immediately above by the applicable factor in table 6.1 in Appendix A using the Employee's age at Normal Retirement Age, and
3. multiplying the amount from (2) immediately above by the applicable factor in Table 6.7 in Appendix A using the Employee's age at the time of commencement of the pension benefit.
For any Regular Employee who (a) retires during the period July 1, 2001, through December 31, 2004, (b) either has 30 or more Years of Service or is age 55 or older with 20 or more years of Service, and (c) is under age 65 when the pension distribution is effective, the monthly pension attributable to the CBP account will be determined as though the Participant was age 65. If the Employee is under age 65 and elects distribution of the CBP benefit as a single life annuity, the monthly pension will be equal to the CBP account divided by 119.04.
. . . . .
(e) Lump Sum Distribution Options for Regular Employees
At the time of termination of employment, an Employee (other than a Temporary Employee or a Job Bank Employee) may elect to receive 25%, 50% or 100% of the vested CBPA to be payable in a lump sum distribution.
Availability of lump sum distribution options after election to defer receipt of pension benefits upon retirement or termination shall be determined in accordance with the following provisions:
(1) The 25% or 50% lump sum distribution options shall not be available to any Employee who elects to defer receipt of pension benefits upon his retirement or other termination of employment.
(2) A Participant who terminated employment prior to September 18, 1998, and who elects to commence receipt of benefits before January 1, 2000, shall not be permitted to elect a 100% lump sum.
(3) A Participant who terminated employment prior to September 18, 1998, and who has not commenced receipt of benefits as of December 31, 1999, shall be permitted to elect a 100% lump sum effective January 1, 2000.
The lump sum distribution of an Employee's CBPA as of the commencement date shall be the greater of:
(i) the Employee's CBPA; and
(ii) the present value of the Employee's accrued benefit as described in 5.2....
For any Employee who terminates Employment on or after October 21, 1997, the present value of the Employee's accrued benefit calculated pursuant to this paragraph (ii) shall be the present value of the annuity calculated as of Normal Retirement Age (or current age, if later) using the...
To continue reading
Request your trial