Lindsay v. Thiokol Corporation

F I L E D
United States Court of
Appeals
PUBLISH April 18, 1997
PATRICK FISHER
UNITED STATES COURT OF APPEALS Clerk
TENTH CIRCUIT
GRANT T. LINDSAY, F. BRUCE )
STEVENS, RUSSELL M. RASMUSSEN, )
THOMAS C. LABAU, individually and )
on behalf of a class of similarly situated )
similarly situated individuals, )
)
Plaintiffs-Appellants, )
)
v. ) No. 96-4033
)
THIOKOL CORPORATION and )
THIOKOL CORPORATION PENSION )
PLAN, )
)
Defendants-Appellees. )
Appeal from the United States District Court
for the District of Utah, Northern Division
D. C. No. 94 NC 174
Jonah Orlofsky of Plotkin & Lacobs, Ltd., Chicago, Illinois, for Plaintiffs-Appellants.
Mary Anne Q. Wood of Wood, Quinn & Crapo, L.C., Salt Lake City, Utah, for Defendants-
Appellees.
Before HENRY, MURPHY, and RONEY*, Circuit Judges.
*
The Honorable Paul H. Roney, Senior Circuit Judge for the Eleventh Circuit,
sitting by designation.
RONEY, Senior Circuit Judge.
Thiokol Corporation amended its pension plan to change the definition of "normal
retirement age" from the age of 65 to 67. Several former employees, who took early
retirement and who would be receiving greater benefits had the plan not been changed, sued
under ERISA, claiming a violation of four separate provisions of the Act. The district court
entered summary judgment for Thiokol on the ground that Thiokol's amended plan satisfied
ERISA because it met the ERISA benefit protection requirements for employees reaching
ERISA's definition of "normal retirement age." We affirm.
The issue on this appeal is one of pure statutory interpretation: whether ERISA, as
a matter of law, prohibits a pension plan from setting a "normal retirement age" greater than
65 years of age.
Plaintiffs brought suit under the ERISA civil enforcement mechanism, 29 U.S.C. §
1132, claiming Thiokol's plan violated four separate ERISA provisions: 29 U.S.C. §
1002(24), which defines "normal retirement age" (Count I); 29 U.S.C. § 1053(a), which
requires that "normal retirement benefits" be unforfeitable upon reaching normal retirement
age (Count II); 29 U.S.C. § 1056(a), which requires that benefits payments begin upon the
plan participant reaching normal retirement age (Count III); and 29 U.S.C. § 1054(b), which
requires that the accrued benefit payable at normal retirement age be equal to the normal
retirement benefit (Count IV).
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The first count, the crux of the controversy, arises from the effect ERISA's definition
of "normal retirement age," which does make 65 years of age the outside limit for anyone
who has participated in a pension plan more than five years by age 65:
The term "normal retirement age" means the earlier of--
(A) the time a plan participant attains normal retirement age
under the plan, or
(B) the later of--
(i) the time a plan participant attains 65, or
(ii) the 5th anniversary of the time a plan
participant commenced participation in the plan.
29 U.S.C. § 1002(24). This definition sets the age at which certain benefits outlined
elsewhere in ERISA must vest as the earlier of two ages: (a) any age earlier than 65 a
particular plan has declared as its "normal retirement age," and (B) a maximum age of 65,
except for late-joining participants. Under this definition, the use of the words "normal
retirement age" elsewhere in the ERISA statute can never mean over 65 for employees who
have participated in the plan for at least five years.
Plaintiffs seem to argue that 29 U.S.C. § 1002(24) permits the plan to define "normal
retirement age" only earlier than 65, not later. If Congress had intended this, it could have
easily said so. There is no support for the argument that the statute should be judicially
rewritten to make this modification. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 495
n.13 (1985) ("[C]ongressional silence, no matter how 'clanging,' cannot override the words
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of the statute."). The exceptions to our obligation to interpret a statute according to its plain
language are "few and far between." Resolution Trust Corp. v. Westgate Partners, Ltd., 937
F.2d 526, 529 (10th Cir. 1991) (citing three exceptions: (1) "rare cases in which the literal
application of a statute will produce a result demonstrably at odds with the intention of its
drafters," United States v. Ron Pair Enters., 489 U.S. 235, 242 (1989); (2) "if such an
interpretation would lead to 'patently absurd consequences,'" United States v. Brown, 333
U.S. 18, 27 (1948); and (3) "when two provisions whose meanings, if examined individually,
are clear, but whose meanings, when read together, conflict, it is up to the court to interpret
the provisions so that they make sense," Love v. Thomas, 858 F.2d 1347, 1354 (9th Cir.
1988), cert. denied sub nom., AFL-CIO v. Love, 490 U.S. 1035 (1989)).
Nowhere in the statute is the plan-declared "normal retirement age" required to be the
same as that defined in the statute for the purposes of the statute. See Johnson v. Franco, 727
F.2d 442, 443-45 (5th Cir. 1984) ("[T]he statutorily intended meaning of 'normal retirement
age' is provided by ERISA's own definitions section, which defines the meaning of terms
used for purposes of that statute.").
Having defined "normal retirement age," the statute then goes on to set forth certain
requirements that must be met by a plan for employees reaching normal retirement age as
defined by the statute. If those requirements are met by the plan, then there has been no
violation of the statute by the amended plan. It appears clear that Thiokol has established age
67 as the benchmark in its pension plan from which benefits for all employees are
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determined, but has maintained the age-65 benefit accrual and vesting requirements of
ERISA.
Thiokol's pension plan is considered a defined benefit plan under ERISA. 29 U.S.C.
§ 1002(35). An "accrued benefit" in a defined benefit plan is a participant's "accrued benefit
determined under the plan . . . and expressed in the form of an annual benefit, starting at
normal retirement age," 29 U.S.C. § 1002(23)(A), or the actuarial equivalent of such a
benefit, 29 U.S.C. § 1054(c)(3).
In addition to the terminology dispute surrounding normal retirement age, Thiokol's
plan has engendered controversy with its use of the term "accrued benefit." The plan
provides
7.1 Eligibility. A participant whose employment . . .
terminates on or after he has attained age 55 with five years of
Vesting Service but before his Normal Retirement Age shall be
eligible to receive an Early Retirement Benefit under the Plan .
...
7.2 Amount. Except as otherwise provided in this Plan
document, the amount of the monthly benefit payable to a
participant under section 7.1 shall be equal to--
(a) the Participant's Accrued Benefit, reduced by [the
following formula].
Thiokol Plan, Article VII ("Early Retirement Benefits") (emphasis added). Under the
formula set forth in the remainder of section 7.2 of Thiokol's plan, an employee retiring at
age 65 receives 86.7% of what the plan calculates as the "accrued benefit." See Summary
Plan Description Distributed to Thiokol Employees in Mid-January 1991 at 11 (applying the
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section 7.2 formula to calculate the percentage of pension available at each retirement age
from 55 to 67, ranging from 43.4% to 100%). We dismiss the "accrued benefit" controversy
for much the same reason that we approve Thiokol's declaration of age 67 as normal
retirement age. Regardless that the 65-year-old retiree's benefit is 86.7% of some other
quantity, the 65-year-old's entitlement to that plan-defined retirement benefit is afforded the
full protection required by ERISA.
Relevant to the accrual and vesting issues in this dispute, ERISA provides in part:
(1) All accrued benefits are protected from reduction by a plan
amendment, whether or not they are vested (nonforfeitable). 29
U.S.C. § 1053(c).
(2) A defined benefit plan must determine a participant's
accrued benefit by a specified method that satisfies at least one
of three alternatives. 26 U.S.C. § 411(b)(1)(A); 29 U.S.C. §
1054(b)(1)(A).
(3) A plan must provide that a participant's accrued benefit
vests (becomes nonforfeitable) at specified rates. 29 U.S.C. §
1053(a).
(4) An employee must be fully vested in his accrued benefit at
the plan's normal retirement age. 29 U.S.C. § 1053(a).
(5) A participant's right to the accrued benefit derived from his
own contribution must be nonforfeitable at all times. 29 U.S.C.
§ 1053(a)(1).
(6) A pension plan must guarantee an employee's right to the
highest pension benefit the employee has earned through their
service, whether they earned that benefit at age 65 or younger.
29 U.S.C. § 1053.
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(7) Payment of benefits must commence within 60 days of the
latest of the plan year in which the participant: turns 65,
celebrates his tenth anniversary of participation, or terminates
service. 29 U.S.C. § 1056(a).
(8) Accrued pension benefits may not be waived in the later
years of service. 29 U.S.C. § 1054.
There is no dispute that Thiokol's plan fulfills those benefits for persons who reach
65 years of age, even though that is two years prior to the plan's declared age for normal
retirement. Thus, once an employee reaches the age of 65, the benefits required by ERISA
are preserved.
Plaintiffs receive less under the new plan than they would have under the old plan in
part due to the elimination of the opportunity to accrue early retirement subsidies. An early
retirement benefit would normally consist of the benefit the employee has accrued at the
early retirement age and would be entitled to begin receiving at age 65, actuarially reduced
to reflect the fact that the plan must pay the employee this benefit over a longer period of
time. Thiokol's old plan softened the impact of this actuarial reduction for early retirees by
including a subsidy to raise the amount of the early retirement benefit. These subsidies
accrued to the employees at specified rates. The new plan eliminates the further accrual of
early retirement subsidies.
Thiokol may not eliminate accrued benefits by plan amendment. 29 U.S.C. § 1053(a).
With the 1983 Retirement Equality Act, Congress amended ERISA "to make clear that 'a
plan may not be amended to eliminate or reduce an early retirement benefit or a retirement-
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type subsidy with respect to benefits attributable to service before the amendment.'" Ahng
v. Allsteel, Inc., 96 F.3d 1033, 1036 (7th Cir. 1996) (quoting John H. Langbein & Bruce A.
Wolk, Pension and Employee Benefit Law, 142-43 (2d ed. 1995) (discussing 29 U.S.C. §
1054(g))). Thiokol's plan complies with 29 U.S.C. § 1054(g) because it preserves all early
retirement benefits, including subsidies, that accrued prior to the effective date of the
amendment.
Plaintiffs' sharp focus on ERISA's terms does not disclose a violation of the accrual
and vesting requirements. Count II alleges a violation of 29 U.S.C. § 1053(a), which
provides:
Each pension plan shall provide that an employee's right to his
normal retirement benefit is nonforfeitable upon the attainment
of normal retirement age . . . .
(emphasis added). ERISA defines "normal retirement benefit" as
the greater of the early retirement benefit under the plan, or the
benefit under the plan commencing at normal retirement age.
29 U.S.C. § 1002(22) (emphasis added). Though used several times in the ERISA statute,
"early retirement benefit" is never specifically defined. We construe the term in the specific
context it appears. The statutory definition of nonforfeitable applies only to a benefit "which
arises from a participant's service." 29 U.S.C. § 1002(19). Accordingly, where, as here, the
normal retirement age under the plan is not less than 65 years, we read 29 U.S.C. § 1053(a)
to state:
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Each pension plan shall provide that an employee's right to [the
greater of (1) any pre-age 65 retirement benefit under the plan
and (2) the age 65 benefit under the plan] is nonforfeitable upon
the attainment of normal retirement age . . . .
The ERISA normal retirement age for the plaintiffs here, who all participated in the plan well
beyond five years, was 65. For them, 29 U.S.C. § 1053(a) requires that
[the Thiokol] plan shall provide that an employee's right to [the
greater of (1) any pre-age 65 retirement benefit under the plan
and (2) the age 65 benefit under the plan] is nonforfeitable upon
the attainment of [age 65].
The Thiokol plan so provides.
Count III alleges a violation of 29 U.S.C. § 1056(a), which provides that
[e]ach pension plan shall provide that unless the participant
otherwise elects, the payment of benefits under the plan to the
participant shall begin not later than the 60th day after the latest
the close of the plan year in which
(1) occurs the date on which the participant
attains the earlier of age 65 or the normal
retirement age specified under the plan . . . .
Plaintiffs argue that this provision requires payment of the age 67 benefit under Thiokol's
plan at age 65. This provision does state that payments begin at age 65, but does not specify
the amount. That is because the amount is otherwise controlled by ERISA. The Thiokol plan
does begin paying benefits at age 65--the age 65 benefits under the Thiokol plan. That
satisfies the statute.
Plaintiffs' last count fails on its face based on the foregoing holdings. Count IV
alleged that Thiokol's plan violates 29 U.S.C. § 1054(b)(1)(B), which provides:
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A defined benefit plan satisfies the requirements of this
paragraph of a particular plan year if under the plan the accrued
benefit payable at normal retirement age is equal to the normal
retirement benefit . . .
Building on our above construction of 29 U.S.C. § 1053, under Thiokol's plan we construe
29 U.S.C. § 1054(b)(1)(B) to read:
A defined benefit plan satisfies the requirements of this
paragraph of a particular plan year if under the plan the accrued
benefit payable at [age 65] is equal to [the benefit under the plan
commencing at age 65.]
We agree with the district court that sections 5.1(a), 6.2, and 4.2 of Thiokol's plan satisfy this
requirement.
Plaintiffs do not dispute that the substance of Thiokol's plan could satisfy ERISA with
only a change in terminology. Where the dictates of a statute regulating verbally defined
benefits can be satisfied by various terms, there is no rational basis for a court to read into
the statute a requirement of the use of specific words absent an express provision in the
statute governing terminology.
AFFIRMED.
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