Silvernail, John G. v. Ameritech Pension Pl ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-1535
JOHN G. SILVERNAIL,
Plaintiff-Appellant,
v.
AMERITECH PENSION PLAN and
AMERITECH CORPORATION,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Central District of Illinois.
No. 03 C 3291—Richard Mills, Judge.
____________
ARGUED NOVEMBER 30, 2005—DECIDED FEBRUARY 27, 2006
____________
Before ROVNER, WOOD, and EVANS, Circuit Judges.
EVANS, Circuit Judge. John Silvernail worked for
Ameritech, then known as the Illinois Bell Telephone
Company, for almost 11 years, from February 1967 to
January 1978. He was 18 years old when he started and
29 when he left. Based on these years of service, Silver-
nail, who is now 57, believes the company will owe him a
pension when he turns 65.
Silvernail began trying to nail down his entitlement to
benefits in 1999. He has lost at every step along the
way and is here today appealing the district court’s grant-
ing of the defendants’ (Ameritech Corporation and the
2 No. 05-1535
Ameritech Pension Plan) motion to dismiss. Resolving the
appeal requires a trip through the history of the plan (we’ll
call it the Illinois Bell Plan, the name at the time Silvernail
was an employee).
Illinois Bell’s pension plan evolved during Silvernail’s
tenure, most significantly when Congress passed the
Employee Retirement Income Security Act (ERISA) in 1974.
As the district court interpreted the relevant statutes and
Illinois Bell policies, Silvernail never met the vesting
requirements for any pension. Silvernail presses his case on
appeal, basing his arguments mostly on what he believes
Congress intended when it wrote ERISA, as opposed to
what Congress actually said.
Under Illinois Bell’s pension plan as amended in 1967,
shortly after Silvernail began working there, pension eligi-
bility was based on years of employment, either alone or in
some combination with age. Both sides agree that Silver-
nail’s relatively brief employment at a young age would
not have qualified him for a pension under the 1967 plan.
Illinois Bell amended its plan in 1969, creating a “de-
ferred service” pension. Under the terms of that plan, an
employee who reached the age of 40, had worked for the
company for at least 15 years, and subsequently left Illinois
Bell, would get a pension when he reached age 65. Again,
Silvernail earned no vested rights to a pension under this
plan.
Congress’s passage of ERISA prompted Illinois Bell to
make another round of changes to its plan in 1976. First,
the company adopted “cliff vesting,” under which an
employee became vested all at once upon completion of 10
years service, as opposed to vesting gradually. Second, the
company shortened the vesting period for deferred service
pensions from 15 years to 10 years and began counting
No. 05-1535 3
years of service completed after age 22.1 Thus, Silvernail,
who turned 22 in September 1970, clearly would have
become eligible for a deferred service pension had he
worked for Illinois Bell until September 1980, rather than
leaving in 1978.
Silvernail’s claim that he actually did qualify under 10-
year cliff vesting focuses on the ERISA provision that
allows such plans to disregard an employee’s service before
age 22. In essence, Silvernail seeks the benefit of the
1976 Illinois Bell plan changes, which shortened vesting
from 15 to 10 years, but thinks his vesting period should
have begun not at age 22, as the 1976 plan (tracking
ERISA) provided, but rather when he began his employ-
ment at age 18.
The district court dismissed Silvernail’s claim, finding
that Ameritech had not wrongfully denied Silvernail’s claim
for benefits. Since it assumed that the company had acted
under its discretionary authority as plan administrator to
determine eligibility, the district court applied an “arbitrary
and capricious” standard of review. See Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 114 (1989); Wilczynski
v. Kemper Nat’l Ins. Cos., 178 F.3d 933, 934 (7th Cir. 1999).
However, we interpret Silvernail’s arguments not as a claim
that the plan administrator made a mistake, but as a claim
that the terms of Illinois Bell’s plan violate ERISA. This is
a question of law, and our review is de novo. Small v. Chao,
398 F.3d 894, 897 (7th Cir. 2005).
Silvernail contends that the section of ERISA regarding
years of service before age 22, § 203(b)(1)(A),2 is “latently
1
By contrast, the 1969 plan for deferred service pensions
effectively disregarded years of service before age 25, since
it required both a minimum of 15 years tenure and attainment
of the age of 40.
2
ERISA has been amended several times, and the text of its
(continued...)
4 No. 05-1535
ambiguous and therefore requires other extrinsic evi-
dence to know the legislative intent.” Section 203(b)(1)
stated that in computing the period of service for determin-
ing an employee’s nonforfeitable pension benefit,
all of an employee’s years of service with the employer
or employers maintaining the plan shall be taken
into account, except that the following may be disre-
garded:
(A) years of service before age 22, except that in the
case of a plan which does not satisfy subpara-
graph (A) or (B) of subsection (a)(2), the plan
may not disregard any such year of service
during which the employee was a participant[.]
....
Subsection (a) stated in pertinent part:
(a) Each pension plan shall provide that an
employee’s right to his normal retirement benefit is
nonforfeitable upon the attainment of normal retire-
ment age and in addition shall satisfy the requirements
of paragraphs (1) and (2) of this subsection.
....
(2) A plan satisfies the requirements of this para-
graph if it satisfies the requirements of subpara-
graph (A), (B), or (C).
(A) A plan satisfies the requirements of this
subparagraph if an employee who has at
least 10 years of service has a nonfor-
2
(...continued)
current codification differs from the law in effect at the time of
Silvernail’s employment. Thus, to avoid confusion, we cite to
the sections of the original ERISA law. See Pub. L. No. 93-406,
88 Stat. 829 (1974).
No. 05-1535 5
feitable right to 100 percent of his accrued
benefit derived from employer contribu-
tions. [Subparagraphs (B) and (C) are not
relevant to Silvernail’s claim.]
Section 203(a)(2)(A) is a description of 10-year cliff
vesting pensions. Since Illinois Bell’s 1976 plan satisfied
this subparagraph, § 203(b)(1)(A) allowed the company to
disregard years of service before age 22. Despite Silvernail’s
protestations to the contrary, there is nothing ambiguous,
latently or otherwise, about these provisions.
Attempting to spin an interpretation that might help him,
Silvernail insists that in order to understand the
true meaning of § 203, it is necessary to also consult
“extrinsic evidence” from congressional committee re-
ports, legislators’ floor statements, federal regulations,
and case law. But this we are not free to do, since the
language is neither ambiguous nor in conflict with some
other part of the statute that is necessary to resolve this
case. “The basic rule in statutory interpretation is that
plain statutory language governs.” Nestle Holdings, Inc. v.
Cent. States, S.E. & S.W. Areas Pension Fund, 342 F.3d
801, 804 (7th Cir. 2003). The Supreme Court has repeatedly
explained that ERISA is a “comprehensive and reticulated
statute, the product of a decade of congressional study . . . ,”
Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S.
204, 209 (2002) (citation and internal quotation marks
omitted), and we have understood this to mean that courts
should take care to interpret ERISA strictly according to its
plain language, Nestle, 342 F.3d at 805. See also Conn. Nat’l
Bank v. Germain, 503 U.S. 249, 253-54 (1992) (“[C]ourts
must presume that a legislature says in a statute what it
means and means in a statute what it says there. When the
words of a statute are unambiguous, then, this first canon
is also the last: ``judicial inquiry is complete.’ ” (citations
omitted)). Even if we were inclined to agree with Silvernail
that his interpretation of the vesting rules “is consistent
6 No. 05-1535
with ERISA’s overall purpose,” the Supreme Court reminds
us that, especially when it comes to ERISA, “vague no-
tions of a statute’s basic purpose are . . . inadequate to
overcome the words of its text regarding the specific issue
under consideration.” Great-West, 534 U.S. at 220 (citation,
emphasis, and internal quotation marks omitted).
In any case, the citations to outside authorities that
Silvernail offers do not help him, because they appear to
consist mostly of short, highly selective snippets that
have been taken out of context. For example, his brief
quotes the following from a House committee report: “Years
of service prior to the effective date [of ERISA] also are to
be counted for purposes of determining the extent to which
the employee is entitled to vesting.” See House Rep. No.
93-807 (1974), as reprinted in 1974 U.S.C.C.A.N. 4670,
4723. The report goes on to describe how, for example, an
employee who was 30 when he joined a company plan and
40 when ERISA became law would retain credit for 10 years
service. But Silvernail’s citation of this sentence to bolster
his argument is misplaced, because the surrounding text
makes clear that this discussion in no way affects other
parts of the bill that authorize plans to disregard service
before a certain age. See id. at 4722-24. Such use of author-
ity amounts at best to sloppy lawyering, and at worst it is
an attempt to mislead us. In any case, other parts of the
legislative history make clear that Congress did indeed
intend to allow employers to disregard service before age 22
for 10-year cliff vesting plans. See, e.g., H.R. Conf. Rep. No.
93-1280 (1974), as reprinted in 1974 U.S.C.C.A.N. 5038,
5050 (“Generally, [a pension] plan may also ignore service
performed before age 22.”)
Even though ERISA’s language is unambiguous,
Silvernail believes that Congress did not intend the provi-
sion regarding service before age 22 to apply “retroactively”
to employees who had begun working at a younger age
before ERISA became law. In support of his belief that new
No. 05-1535 7
terms amended into a plan “could only be applied prospec-
tively,” Silvernail relies on Central Laborers’ Pension Fund
v. Heinz, 541 U.S. 739 (2004).
Heinz, which concerned a vested pensioner who was
already receiving benefits, interpreted ERISA’s “anti-
cutback rule” to prohibit a change in terms to a pension
plan that would have eliminated or reduced a benefit
already earned. See id. at 741-44. This case is not applicable
to the situation before us. Silvernail apparently confuses a
policy amendment that reduces a worker’s actual accrued
benefits, which was the issue in Heinz and which ERISA
prohibits, with an amendment that changes how an em-
ployee becomes vested. He believes, mistakenly, that since
Illinois Bell was all the while paying into a pension trust
fund on his behalf, denying him vesting credit between ages
18 and 22 was tantamount to depriving him of benefits he
had earned during those years. Benefit accrual and vesting
are related but different concepts. “Vesting provisions do
not affect the amount of the accrued benefit, but rather
govern whether all or a portion of the accrued benefit is
nonforfeitable.” Hoover v. Cumberland, Md., Area Teamsters
Pension Fund, 756 F.2d 977, 983-84 (3rd Cir. 1985).
Silvernail cannot pick and choose among terms of the
1976 plan, claiming the benefit of provisions that help him
while arguing that the company has no right to apply
provisions that cut against him. Since he had not yet vested
and thus could claim no nonforfeitable right to any benefits,
the 1976 amendments did not “retroactively” deprive
Silvernail of anything to which he had legal entitlement.
If Silvernail is a victim in any sense, he may have
been a victim of congressional compromises that allowed
companies to disregard some service when employees
were very young in exchange for reforms that improved
the pension system overall. There is no evidence that
Illinois Bell used the ERISA changes to thwart employ-
8 No. 05-1535
ees’ legitimate expectations. Moreover, as defendants
note (and Silvernail does not dispute), Illinois Bell’s
policy went an extra step by allowing an employee to use, in
lieu of the 1976 plan, any rule of eligibility previously in
effect during any part of his employment. And so if
Silvernail wanted to avoid the “retroactive” effects of
the 1976 plan, he had the option of remaining under the
rules of the 1967 or 1969 plans. But of course those plans
were less advantageous. Apparently, the only one that
began counting service from age 18 was the 1967 plan—but
under that option, Silvernail would have had to work for
the company for at least 30 years.
Finally, Silvernail believes that where ERISA refers to a
“participant,” it means someone with a separate, more
protected status than a mere “employee.” He argues that
although he never became vested, he was already a partici-
pant in the Illinois Bell plan when the 1976 changes went
into effect (presumably because the company was making
contributions to the plan on his behalf), and sees this as
another reason why the exclusion of service before age 22
could not be applied to him “retroactively.” However,
ERISA’s definitions section indicates that participants are
a subset of employees, not a separate group. See § 3(6)-(7).
Thus, even if Silvernail was a participant in the Illinois Bell
plan, the plain language of § 203(a)-(b), allowing 10-year
cliff vesting plans to disregard the service of an “employee”
before age 22, encompassed him.
The judgment of the district court is AFFIRMED.
No. 05-1535 9
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-27-06