Rose v. Long Island R.R. Pension Plan

Decision Date03 September 1987
Docket NumberD,No. 959,959
Citation828 F.2d 910
Parties, 8 Employee Benefits Ca 2443 Mary ROSE, Plaintiff-Appellant, v. The LONG ISLAND RAILROAD PENSION PLAN, Long Island Railroad Pension Plan's Board of Managers, Long Island Railroad Pension Plan's Joint Board on Pension Applications, Morgan Guaranty Trust Company of New York as Trustee of the Plan, T.P. Moore and John Doe, as members of the Plan Board of Managers, T.M. Taranto, J.B. Huff and H.J. Libert, as members of the Plan Board of Managers and the Joint Board on Pension Applications, E. Yule, W. Styziak and J. Bove, as members of the Joint Board on Pension Applications, and the Long Island Railroad, Defendants-Appellees. ocket 86-7942.
CourtU.S. Court of Appeals — Second Circuit

Edgar Pauk, Legal Services for the Elderly, New York City (David S. Preminger, Rosen, Szegda, Gersowitz, Preminger & Bloom, of counsel), for plaintiff-appellant.

Eugene P. Souther, New York City (Seward & Kissel, Bruce D. Senzel, Mark J. Hyland and Dan J. Schulman, the Long Island R. Co., Thomas M. Taranto and Roger J. Schiera, of counsel), for defendants-appellees.

Roger M. Olsen, Asst. Atty. Gen., Washington, D.C. (Michael L. Paup, David English Carmack and B. Paul Klein, Attorneys, Dept. of Justice, William F. Nelson, Chief Counsel, I.R.S., George S. Salem, Solicitor of Labor, Dept. of Labor, Gary M. Ford, Gen. Counsel, Peter H. Gould, Deputy Asst. Gen. Counsel, Kenton Hambrick, Attorney, Pension Benefit Guar. Corp.), for the U.S. amicus curiae.

Judith A. Gordon, New York City, Asst. Atty. Gen. of the State of N.Y. (Robert Abrams, Atty. Gen. of the State of N.Y.), for the State of N.Y. as amicus curiae.

Before MESKILL, PIERCE * and ALTIMARI, Circuit Judges.

ALTIMARI, Circuit Judge:

This case brings before us, for the second time, the question of whether the Long Island Railroad's ("LIRR") pension plan is as We conclude that during the period of time relevant to this appeal, the LIRR Pension Plan was a "governmental plan," and we affirm the decision of the district court.

                a "governmental plan" within the meaning of section 3(32) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Sec. 1002(32), and is therefore exempt from compliance with Title I of that statute.  See 29 U.S.C. Sec. 1003(b)(1).  The issue arises in the context of Mary Rose's suit for survivor's benefits, to which she claims entitlement pursuant to section 205(a) of ERISA, 29 U.S.C. Sec. 1055(a).  Following a remand from this court in 1982, the District Court for the Eastern District of New York (Bramwell, J.) held that ERISA did not apply to the LIRR Pension Plan because it was a "governmental plan."    The district court accordingly granted defendants' motion for summary judgment and dismissed Rose's complaint for lack of subject matter jurisdiction

The story of this litigation begins in 1976 with the death of Richard Rose. Rose had been employed as a clerk by the Long Island Railroad. Although he was fully vested in the LIRR Pension Plan ("the Plan") and had for some months been eligible to retire, Richard Rose was still working at the time of his death.

Under the Plan, Richard Rose was entitled to receive a "service-age" pension upon retirement, payable monthly for his lifetime without survivorship benefits. He also had the option of converting the "service-age" benefits into a pension of equivalent actuarial value, payable to the retiree for life and then to the surviving spouse for life. Under the terms of the Plan then in effect, the survivorship option had to be elected in writing at least six months prior to retirement or death. Had Richard Rose elected this option, the monthly benefits payable during his own lifetime would have been reduced to reflect the future payments to his surviving spouse.

Richard Rose never elected the survivorship option. After he died, his widow, Mary Rose ("Rose"), applied to the LIRR for survivorship benefits. The Board of Managers of the Plan denied her application because her late husband had not made the required election. The decision of the Board of Managers was subsequently affirmed by the LIRR's Joint Board on Pension Applications.

On June 5, 1981, Rose commenced the instant action for survivor's benefits and other relief in the Eastern District of New York, alleging that the LIRR Pension Plan violated section 205 of ERISA, 29 U.S.C. Sec. 1055. That section requires that all retirement plans covered by ERISA must provide benefits to the surviving spouses of employees who die before retirement. Id. Sec. 1055(a)(2). These survivorship benefits are payable unless they are expressly waived by the employee. See id. Sec. 1055(c)(1)(A). It is undisputed that Richard Rose never expressly waived survivorship benefits.

The district court concluded that the LIRR Plan was exempt from compliance with ERISA's vesting provisions because it was a "governmental plan" under 29 U.S.C. Sec. 1002(32). On January 4, 1982, the district court dismissed Rose's complaint for lack of subject matter jurisdiction.

Rose appealed the dismissal of her complaint, and on September 28, 1982, this court reversed the decision of the district court. We noted that the language of the "governmental plan" exemption was ambiguous, and proceeded to examine the legislative history of ERISA in order to determine whether Congress would have intended the LIRR Plan to be exempt from its coverage. We held that the LIRR Plan was subject to the vesting and participation requirements of ERISA, because such a holding would "not implicate any of the concerns that led Congress to exempt governmental employee benefit plans."

Following this court's reversal of the district court, defendants petitioned for rehearing. In support of the petition, both the State of New York and the United States of America filed briefs as amici curiae, taking the position that the LIRR Plan was an exempt "governmental plan." The The panel accordingly vacated and withdrew its previously-issued opinion, vacated the decision of the district court and remanded "in order that [the significant] matters might be presented to and considered fully by the district court."

                panel granted rehearing on December 23, 1982, finding that "significant matters exist in this case that were not fully litigated in the district court and that, therefore, were not fully presented on appeal."    These "significant matters" included the extensive state funding of the LIRR through the Metropolitan Transportation Authority, and the potential impact on state taxpayers if the LIRR Plan were required to comply with ERISA's funding requirements.  Defendants argued that if the financial burden of ERISA compliance were to fall on the taxpayers, then the Congressional concerns behind the "governmental plan" exemption would indeed be implicated

On remand, the parties engaged in extensive discovery. In April 1986, defendants moved for summary judgment, still asserting that the LIRR Plan was exempt from ERISA coverage. Rose cross-moved for summary judgment in June 1986.

On September 26, 1986, Judge Bramwell issued a brief ruling from the bench, granting defendants' motion for summary judgment, denying plaintiff's cross-motion for summary judgment and once again dismissing her complaint. The district court held:

After carefully considering the voluminous submissions of the parties in connection with these motions, the Court is again convinced, as it was back in December of 1981, that the LIRR Plan is and has been at all times relevant to this case a "governmental plan" as defined by Section 1002(32) of ERISA.

It is from this dismissal that Mary Rose now appeals. 1

I. The "Governmental Plan" Exemption from ERISA Coverage.

ERISA was enacted, after years of study, in order to remedy long-standing abuses and deficiencies in the private pension system. See generally H.R.Rep. No. 533, 93d Cong., 2d Sess., reprinted in, 1974 U.S.Code Cong. & Ad.News 4639. See also 29 U.S.C. Sec. 1001. These deficiencies included inadequate vesting provisions, insufficient assets to assure payment of future benefit obligations, and premature termination of under-funded benefit plans. See id.

Title I of ERISA, 29 U.S.C. Secs. 1001 et seq., contains various substantive and procedural requirements with which covered plans must comply. These include standards for vesting, funding and fiduciary responsibility, as well as the survivorship provision under which Mary Rose claims a right to benefits. Title II of ERISA is codified in the Internal Revenue Code, 26 U.S.C. Secs. 401 et seq., and contains requirements pertaining to the qualification of pension plans for favorable tax treatment. Title III, 29 U.S.C. Secs. 1201 et seq., contains ERISA's administrative and enforcement provisions. Title IV, 29 U.S.C. Secs. 1301 et seq., establishes the Pension Benefit Guaranty Corporation ("PBGC"), which guarantees the payment of benefits by plans which terminate with insufficient assets to pay those benefits.

Although Congress considered whether ERISA should apply to "public" or "governmental" benefit plans, it ultimately decided to exempt such plans from compliance with most of ERISA's requirements. See H.R.Rep. No. 533, 1974 U.S.Code Cong. & Ad.News at 4647. Instead, Congress decided to undertake further study of the adequacy of public retirement plans, in order to determine "the necessity for Federal legislation and standards with respect to The governmental plan exemption was included for several reasons. First, it was generally believed that public plans were more generous than private plans with respect to their vesting provisions. H.R.Rep. No. 533, 1974 U.S.Code Cong. & Ad.News at 4667. Second, it was believed that "the ability of the governmental entities to fulfill their obligations to employees through their taxing powers" was an adequate substitute for both minimum funding standards and plan...

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