The opinion of the court was delivered by: Hon. Gerald E. Rosen
OPINION AND ORDER REGARDING CROSS-MOTIONS FOR SUMMARY JUDGMENT
At a session of said Court, held in the U.S. Courthouse, Detroit, Michigan on March 31, 2010
PRESENT: Honorable Gerald E. Rosen Chief Judge, United States District Court
Plaintiffs Mac A. Fleming, Gail A. Meisel, John M. Pesta, and Ernest L. Torske are retired former employees of the Defendant Brotherhood of the Maintenance of Way (the "Brotherhood") who receive pension benefits under the Defendant Brotherhood of the Maintenance of Way Employes Division Pension Plan (the "Plan").*fn1 In June of 2007 - after each of the Plaintiffs had retired and was drawing pension benefits from the Defendant Plan - the Defendant Brotherhood, as plan administrator, adopted a new interpretation of certain Plan terms and applied this new construction retroactively to recalculate Plaintiffs' pension benefits, resulting in reduced monthly payments to Plaintiffs going forward. What is more, the Defendant Brotherhood began to withhold additional amounts from Plaintiffs' monthly benefit payments, in order to recoup alleged overpayments made to Plaintiffs prior to June of 2007. In response, Plaintiffs brought the present suit in April of 2008, asserting two claims arising under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.: (i) a claim under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), to recover benefits allegedly owed under the terms of the Plan, and (ii) a claim that the Defendant Brotherhood allegedly breached various fiduciary duties owed to the Plaintiff plan participants under § 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1).*fn2
Presently pending before the Court are cross-motions filed by Plaintiffs and Defendants, in which each side seeks an award of summary judgment in its favor on Counts I and II of the complaint. In support of their motion, Plaintiffs argue (i) that the plan administrator's recent reinterpretation of Plan terms is arbitrary and capricious, particularly in light of the construction the plan administrator previously gave to these terms when initially calculating Plaintiffs' pension benefits; and (ii) that the Defendant Brotherhood, as plan administrator, breached a fiduciary duty owed to Plaintiffs by reducing Plaintiffs' accrued pension benefits in violation of ERISA's "anti-cutback" provision, 29 U.S.C. § 1054(g). For their part, Defendants argue that the plan administrator's reinterpretation of Plan terms was reasonable and faithful to the language of the Plan, and that the Brotherhood acted in accordance with ERISA and the terms of the Plan in applying this reinterpretation to recalculate Plaintiffs' pension benefits and seek recoupment of past overpayments.
These cross-motions have been fully briefed by the parties. Having reviewed the parties' motions, briefs, and accompanying exhibits, as well as the administrative record submitted separately by the parties, the Court finds that the relevant allegations, facts, and legal arguments are adequately presented in these written submissions, and that oral argument would not aid the decisional process. Accordingly, the Court will decide the parties' cross-motions "on the briefs." See Local Rule 7.1(e)(2), U.S. District Court, Eastern District of Michigan. This opinion and order sets forth the Court's rulings on these motions.
Plaintiffs Mac Fleming, Gail Meisel, John Pesta and Ernest Torske are all retired former employees of the Defendant Brotherhood,*fn3 with retirement dates spanning from November of 2001 to October of 2006. Since their retirement, Plaintiffs have received pension benefits under the Defendant Plan. The Defendant Brotherhood is the plan administrator of the Plan.
A. The Relevant Terms of the Plan
The claims in this case arise from the Defendant Brotherhood's decision in June of 2007 to reinterpret certain terms of the Plan, resulting in the reduction of Plaintiffs' monthly pension benefits and the withholding of additional amounts from these payments in order to recoup alleged overpayments made in reliance on the prior, purportedly mistaken construction of the Plan. Accordingly, the Court turns first to the Plan provisions that bear upon the calculation of Plaintiffs' pension benefits.
The Plan defines a number of terms that factor into the computation of pension benefits. First, it defines an "Accrued Benefit" as "the amount determined in accordance with Section 5.1" of the Plan. (Defendants' Motion, Ex. A, Plan at § 1.1.) Next, "Compensation" is defined as "the Employee's basic earnings, paid by the Employer for a Plan Year which is exclusive of overtime, bonuses, and other extraordinary compensation." (Id. at § 1.9.) The Plan further defines "Final Average Monthly Compensation" as "the average monthly rate of pay determined by dividing by thirty-six (36) the sum of the Employee's Compensation during the thirty-six (36) highest paid consecutive calendar months during the ten (10) year period preceding his termination." (Id. at § 1.15.) Finally, a "Plan Year" is defined as "[t]he twelve (12) month period commencing on January 1 of each year and ending the following December 31." (Id. at § 1.29.)
As noted, the Plan's definition of an "Accrued Benefit" references § 5.1 of the Plan, and this section, in turn, states that an "Accrued Benefit means the Normal Retirement Pension payable at Normal Retirement Date determined pursuant to Section 6.2." (Id. at § 5.1.) This latter section provides that "the monthly amount of the Normal Retirement Pension shall be equal to . . . [o]ne-twelfth (1/12th) of one and one-half percent (1-1/2%) of Final Average Monthly Compensation times Months of Benefit Service (computed to the nearest penny)." (Id. at § 6.2.)
One of the four Plaintiffs, Gail Meisel, elected early retirement, and the calculation of early retirement benefits is governed by Section 7 of the Plan. First, this portion of the Plan provides that "[t]he monthly amount of the Early Retirement Pension shall be equal to the Accrued Benefit" that applies to normal retirees. (Id. at § 7.2.) Next, following a July 1, 2002 amendment to the Plan's early retirement provisions, the Plan provides:
Payment of Benefits. Payment of an Early Retirement Pension shall commence as of the Participant's Normal Retirement Date. However, if a Participant who qualifies for Early Retirement terminates his employment with the Employer after July 1, 2002 and requests the Committee to authorize the commencement of his Early Retirement Pension as of the first day of the month coincident with or next following his early retirement, or as of the first day of any subsequent month which precedes his Normal Retirement Date, his pension shall commence as of the beginning of the month so requested ("Requested Early Retirement Date"), but the amount thereof shall be reduced to provide the greater of: (a) his Accrued Benefit actuarially reduced using the actuarial assumptions specified in Appendix A; or (b) reduced by three per cent (3%) for each complete Plan Year between the Participant's Normal Retirement Date and his Requested Early Retirement Date. (Defendants' Motion, Ex. B, 7/1/2002 Early Retirement Amendments at 1-2 (amending § 7.3 of the Plan).)
Finally, the Plan includes some more general provisions that are relevant to the claims in this case. First, the Plan prohibits the Defendant Brotherhood from "amend[ing] this Plan [to] reduc[e] any Participant's Accrued Benefit," unless such an amendment is permitted under a separate provision triggered by the Brotherhood's "substantial financial hardship." (Defendants' Motion, Ex. A, Plan at §§ 5.2(a), 9.5.) Similarly, another Plan provision states that "[n]o amendment to the Plan (including a change in the actuarial basis for determining optional or early retirement benefits) shall be effective to the extent that it has the effect of decreasing a Participant's Accrued Benefit." (Id. at § 13.1.)
B. The Initial Calculation of Plaintiffs' Pension Benefits Under the Plan
As noted, the four remaining Plaintiffs in this case retired between November of 2001 and October of 2006. In each case, their pension benefits were calculated under the above-quoted terms of the Plan. The principal point of dispute in this case is whether the so-called "final vacation pay" received by these four individuals upon their retirement should be considered part of their "compensation" within the meaning of the Plan, such that their pension benefits should be calculated based on an increased level of "compensation" that includes this lump-sum payment for vacation time that these individuals had accrued but not used at the time of their retirement.
As explained in the affidavit of Plaintiff Gail Meisel, employees of the Defendant Brotherhood earn paid vacation in one year that they may then use during the following year. (See Plaintiffs' Motion, Ex. 10, Meisel Aff. at ¶ 8.)*fn4 Upon retirement, then, an employee may have two categories of earned but unused vacation: (i) vacation earned the previous year but not used prior to the employee's retirement date, and (ii) vacation earned in the current year that would have been available for use the following year, but for the employee's retirement. (See id. at ¶ 8.) Meisel states without contradiction in her affidavit that "[t]he Brotherhood's longstanding practice has been to pay the retiring employee for all of [his or her] unused earned vacation in the employee's final paycheck." (Id. at ¶ 8.) The question becomes, then, whether this lump-sum amount of "final vacation pay" in an employee's final paycheck ...