United States Court of Appeals
For the First Circuit
No. 07-1777
THOMAS D. GILLIS,
Plaintiff, Appellant,
v.
SPX CORPORATION INDIVIDUAL ACCOUNT RETIREMENT PLAN
AND SPX RETIREMENT ADMINISTRATIVE COMMITTEE,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Lynch, Circuit Judge,
Campbell and Stahl, Senior Circuit Judges.
Lawrence P. Murray with whom Evelyn A. Haralampu and Burns &
Levison LLP were on brief for appellant.
Paul M. Smith with whom Ross B. Bricker, Andrew A. Jacobson,
Andrew W. Vail, and Jenner & Block LLP were on brief for
appellees.
December 19, 2007
STAHL, Senior Circuit Judge. This Employee Retirement
Income Security Act ("ERISA") dispute reaches us following the
district court's entry of summary judgment in favor of the SPX
Corporation Individual Account Retirement Plan ("SPX"). The plan
participant, Thomas Gillis, appeals the district court's grant of
summary judgment and raises two essential objections. First,
Gillis argues that the district court erred because he was
entitled, under the language of the retirement plan, to receive a
higher pension payout than the plan administrator granted. Second,
Gillis argues that the district court erred by failing to find that
his future accrued pension benefits were cut back without proper
notice. Because we find neither argument persuasive, we affirm the
district court's grant of summary judgment.
I. BACKGROUND
Thomas Gillis was a long-term employee of the General
Signal Corporation ("GSX"), and participated in its traditional
defined benefits pension plan. While employed by GSX, Gillis
qualified for the early retirement subsidy offered under the GSX
pension plan because he had attained the age of 55 and had at least
five years of continuous employment. GSX was acquired by SPX
Corporation in 1998, and former GSX employees, including Gillis,
were transitioned to the SPX pension plan, which ultimately was
comprised of three separate cash balance benefit options.
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When SPX acquired GSX, it initially offered two cash
balance pension plans to its employees. The first, the GSX Accrued
Benefit, merely captured the value of the employee's already-
accrued benefit under the previous GSX pension plan. This benefit
did not allow for any future accruals and is not at issue on
appeal. The second, the SPX Accrued Benefit, converted the value
of the employee's already-accrued benefit under the previous GSX
pension plan into an opening account balance, and then added
principal and interest to that account balance as the employee
accrued them during the course of his employment with SPX.
Therefore, because both the GSX Accrued Benefit and the SPX Accrued
Benefit had an opening account balance equivalent to the amount
already accrued by the employee under the previous GSX pension
plan, the two benefits began with the exact same balance, an amount
identical to the employee's accrued pension under the previous GSX
pension plan. Importantly, in Gillis's case, this means that both
the GSX Accrued Benefit and the SPX Accrued Benefit included the
early retirement subsidy that Gillis had already earned while
employed by GSX.
Shortly after SPX acquired GSX, SPX discovered that the
two available benefit options could short-change a small sub-group
of employees who, under the previous GSX plan, had been working
toward achieving their early retirement subsidy, but who, at the
time the plans merged, had not yet reached age 55. To address this
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concern, SPX created a third retirement plan option, called the
Transition Benefit. An employee was eligible for the benefit if,
by January 1, 1999, he was at least 45 years old and had completed
at least five years of continuous service with the company. Gillis
was among this group of eligible employees.1 In the disclosure
form given to employees, SPX explained that the purpose of the
Transition Benefit was to "provide[] you with a better benefit if
you retire early from SPX." The disclosure form also explained
that those who had already qualified for an early retirement
subsidy before the merger of the plans, like Gillis, would receive
a higher payout under the regular cash balance account than under
the Transition Benefit because "your opening account balance
already included the value of your early retirement benefit."2
1
However, as we discuss later, though Gillis was technically
eligible for calculation of this benefit, the Transition Benefit
was designed for those former GSX employees who had not yet accrued
the early retirement subsidy. Gillis, who had already accrued the
subsidy, was thus not an intended beneficiary.
2
The entire paragraph regarding employees in Gillis's position
read:
If you were in the Corporate Plan on December 31,
1998 and were at least age 55 with five years of
service on that date, your regular cash balance
account could be better than the transition
benefit. This is because your opening account
balance already included the value of your early
retirement benefit. However, if you were in the
Hourly Plan on December 31, 1998, your opening
account balance was the value of your normal
retirement benefit. No matter which group you were
in, you will get the better of the regular or the
transition benefit.
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Under its pension plan, SPX guaranteed that: (1) an
employee's already accrued benefit under the previous GSX pension
plan would not be reduced; and (2) upon retirement, the plan
administrator would calculate an employee's potential benefit under
each of the three SPX plan options, and grant the employee the
highest of the three payment amounts.
When Gillis elected to retire early, in 2002, at age 59,
the plan administrator calculated his potential payout under each
benefit and concluded that the GSX Accrued Benefit would yield a
$413,445.24 lump sum payout; the SPX Accrued Benefit, a $471,147.90
payout; and the Transition Benefit, a $451,569.24 payout.
Therefore, because the SPX pension plan guaranteed that employees
would receive the highest of the three benefit amounts, SPX
informed Gillis that he was entitled to the $471,147.90 lump sum
payout under the SPX Accrued Benefit.
Gillis appealed the plan administrator's calculations,
alleging that he would receive the greatest payout under the
Transition Benefit, which he claimed the plan administrator had
miscalculated. He asserted that the Transition Benefit should be
calculated by giving him an opening account balance equivalent to
the total amount he accrued under the previous GSX pension plan,
which included his previously-earned early retirement subsidy, and
then be increased based on accrued interest and credits, plus the
additional early retirement subsidy offered by the Transition
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Benefit. The plan administrator rejected this calculation because
it double-counted the early retirement subsidy.
Gillis appealed the plan administrator's final
determination to the district court, arguing primarily that the
alleged miscalculation of the Transition Benefit amounted to an
illegal cutback of Gillis's already accrued benefit, in violation
of ERISA § 204(g)(1), 29 U.S.C. § 1054(g)(1). Further, Gillis
argued that this illegal cutback amounted to prohibited age
discrimination, in violation of ERISA § 204(b)(1)(G), 29 U.S.C. §
1054(b)(1)(G), because only employees over the age of 55 had earned
early retirement subsidies, meaning the alleged improper
subtraction of that subsidy, under the Transition Benefit
calculation, affected only those workers over age 55.3
Before the district court, both Gillis and SPX moved for
summary judgment on all counts. The court granted SPX's motion,
concluding that SPX's calculation of Gillis's pension payout did
not violate ERISA's prohibition on the cutback of previously
accrued retirement benefits, because "the choice between the GSX
Accrued Benefit and the SPX Accrued Benefit ensured that Gillis
would receive at least as great a benefit after the merger and
amendment as he was entitled to beforehand." Because it found no
3
Gillis brought several other claims against SPX as well,
including violation of ERISA's merger provisions, failure to timely
respond to document requests, and breach of fiduciary duty, none of
which he raises on appeal.
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violation of the anti-cutback provision, the district court also
rejected Gillis's claim that the alleged cutback resulted from age
discrimination. Finally, the district court granted summary
judgment to SPX as to Gillis's other claims, and on appeal he does
not further pursue these claims.
Gillis also put forth a separate claim before the
district court, which he now presses on appeal. In a supplemental
memorandum, submitted with leave of the district court after the
close of the summary judgment record, Gillis argued that SPX
illegally cut back his future accrued benefit without proper
notice, in violation of ERISA § 204(h), 29 U.S.C. § 1054(h). He
asserted that he would have accrued a greater total pension payout
under the previous GSX pension plan than he did under any of the
three benefits offered by SPX after the merger of the plans. To
support this allegation, Gillis attached to his supplemental
memorandum an affidavit from an actuary that purported to show that
Gillis would have earned a greater pension under the previous GSX
plan than he did under any of the three SPX benefits. The district
court, in its summary judgment decision, did not address this
additional argument head-on. Gillis now raises it on appeal, while
SPX vigorously contests both the merits of the claim and whether
the issue is properly before this court, given the manner in which
Gillis presented it to the district court.
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II. DISCUSSION
A. Standard of Review
This court reviews a district court's grant of summary
judgment de novo, see Lennon v. Rubin, 166 F.3d 6, 8 (1st Cir.
1999), and the district court "generally reviews an ERISA plan
administrator's benefits determinations de novo," Wright v. R.R.
Donnelley & Sons Co. Group Benefits Plan, 402 F.3d 67, 74 (1st Cir.
2005). However, where, as in this case, the "ERISA plan grants the
plan administrator discretionary authority in the determination of
eligibility for benefits," the district court must uphold the plan
administrator's decision "unless it is 'arbitrary, capricious, or
an abuse of discretion.'" Id. (quoting Doyle v. Paul Revere Life
Ins. Co., 144 F.3d 181, 183 (1st Cir. 1998)). This court has noted
that, in this context, the district court's "arbitrary and
capricious standard is functionally equivalent to the abuse of
discretion standard." Id. at n.3; see also Janeiro v. Urological
Surgery Prof'l Ass'n, 457 F.3d 130, 139 (1st Cir. 2006).
Therefore, in this case, though we review the district court's
decision de novo, we will only reverse if we find the plan
administrator's determination to constitute an abuse of discretion.
B. Improper Cutback of Already Accrued Benefit?
Except in certain limited situations not presented here,
ERISA prohibits an employer from reducing a plan participant's
already accrued benefit by amending the plan. See ERISA §
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204(g)(1); 29 U.S.C. § 1054(g)(1) ("The accrued benefit of a
participant under a plan may not be decreased by an amendment of
the plan."). This prohibition applies to both the participant's
basic accrued benefit and to any early retirement benefit or
"retirement-type subsidy." ERISA § 204(g)(2)(A); 29 U.S.C. §
1054(g)(2)(A).
Having carefully reviewed the lengthy record in this
case, we conclude that the district court correctly determined that
the plan administrator did not abuse its discretion in determining
that Gillis's already accrued early retirement benefit was not
improperly cut back. As the district court noted, Gillis would
like to have his Transition Benefit calculated to include both the
amount accrued under his previous GSX pension, which indisputably
included his early retirement benefit, plus the early retirement
subsidy granted by the Transition Benefit. This would plainly
amount to a double-counting of the early retirement subsidy.
Gillis is not entitled to such a double-counting under the terms of
the pension plan. In addition, he was clearly informed, in
writing, that the Transition Benefit was adopted to address the
unusual situation of former GSX employees who had not yet accrued
the early retirement subsidy while employed by GSX, because they
had not yet reached the age of 55. Gillis was not part of this
group, as he had already accrued his early retirement benefit.
Therefore, while the plan administrator was correct to provide a
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calculation of Gillis's hypothetical payout under the Transition
Benefit, because he technically qualified for it, it was not an
abuse of discretion for the plan administrator to calculate that
hypothetical payout so as to avoid a double-counting windfall that
would have given Gillis two early retirement subsidies. Indeed,
such a calculation is in keeping with the stated purpose of the
Transition Benefit, and with SPX's written disclosure to Gillis.
Because we conclude that Gillis's already accrued early
retirement subsidy was not improperly cut back, we necessarily also
reject his claim that any improper cutback was the result of age
discrimination in violation of ERISA § 204(b)(1)(G).
C. Improper Cutback of Future Accrued Benefits?
Under ERISA, a plan administrator is not permitted to
amend a plan so as to significantly reduce the rate of future
benefit accrual unless it provides notice to the plan participants.
See ERISA § 204(h)(1); 29 U.S.C. § 1054(h)(1)(1998). The ERISA
regulation in effect in 1998, at the time of the merger of the GSX
and SPX pension plans, required the plan administrator to
"provide[] a written notice, setting forth the plan amendment and
its effective date."4 Id.
4
In his appellate brief, Gillis incorrectly cites to a later
amended version of this regulation, which requires a more robust
form of notice: "[N]otice . . . shall be written in a manner
calculated to be understood by the average plan participant and
shall provide sufficient information . . . to allow applicable
individuals to understand the effect of the plan amendment." 29
U.S.C. § 1054(h)(2)(2006). This notice requirement was not in
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Gillis argues that the district court erred by failing to
compare the amount he would have accrued under the previous GSX
pension plan at normal retirement age with the same amount
calculated at normal retirement age under the SPX plan. To support
his argument, he relies on an affidavit from an actuary that he
submitted to the district court, which he claims shows that the
lump sum payout under the previous GSX plan would have been eleven
percent greater than that under the SPX plan.
As a preliminary matter, SPX objects that Gillis's claim
of a cutback of his future benefit accrual without notice is not
properly before this court, because he raised it only in a
memorandum of law submitted to the district court after the close
of the summary judgment record. While that is so, it is also true
that Gillis sought and received leave from the court to file the
memorandum. However, it is not at all clear that the memorandum
Gillis actually filed comported with his stated ground for seeking
to file the document.5 While we have serious concerns as to
effect at the time Gillis was transitioned from the GSX to the SPX
plan.
5
Gillis sought leave of the court to file the memorandum after
the summary judgment record had closed, stating that "the principal
purpose of [the memo] is to inform the Court of recent changes in
the pension law that have a direct and significant bearing on this
case." Instead, in the memorandum actually filed, Gillis discussed
briefly the newly enacted Pension Protection Act of 2006, and
largely focused the memo on his new claim that SPX violated the
ERISA prohibition on cutbacks of future benefit accruals without
proper notice. In addition, for the first time, he attached to the
memo an affidavit from an actuary which detailed the amount that
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whether Gillis properly preserved this issue below, we need not
decide that question definitively because, in any event, his claim
fails on the merits.6
In order to show a violation of ERISA § 204(h)(1), the
regulations require a plan participant to show that "it is
reasonably expected that the amendment will reduce the amount of
the future annual benefit commencing at normal retirement age." 26
C.F.R. § 54.4980F-1, Q&A-6(b) (emphasis added). In other words,
Gillis was required to submit credible evidence to the district
court demonstrating that the amount he would have accrued under the
previous GSX pension plan, calculated as of the age of 65, was more
than the amount he would have accrued under the SPX plan, again
assuming a retirement age of 65. In his memorandum submitted to
the district court, Gillis simply did not provide this information.
First, in the body of his memorandum, he provided the court only
with accrued benefit amounts under the SPX plan as of the date of
his actual retirement, rather than a projected calculation of his
accrued benefit as of retirement at age 65. Second, the actuarial
Gillis would have earned had he remained under the previous GSX
pension plan until his normal retirement date. The affidavit
neither calculated Gillis's pension amount under the SPX plan, had
he remained until his normal retirement date, nor did it compare
such a number to the amount Gillis purportedly would have earned
under the GSX pension plan.
6
For the same reason, we also do not reach GSX's argument that
§ 204(h) does not apply in this situation because the changes in
accrual resulted from a merger of the GSX and SPX plans, rather
than an amendment of the GSX plan.
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affidavit he attached to the memo calculated only the amount Gillis
purportedly would have earned as of age 65 under the GSX plan. It
offered no calculation of the projected accrued benefit under the
SPX plan as of age 65, nor did it compare that number with the
equivalent figure under the previous GSX plan.
Therefore, even if this argument were properly raised
below, Gillis failed to provide evidence to the district court upon
which it could conclude that Gillis would have earned more, as of
his normal retirement age, under the previous GSX plan than under
the SPX plan. Gillis's suggestion on appeal that the district
court should have somehow made this comparison itself, without
Gillis's providing the court with the relevant argumentation and
data, betrays a misapprehension of our adversarial system and the
burden he carried as a plaintiff opposing summary judgment before
the district court.7 See, e.g., Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249-50 (1986) ("[T]here is no issue unless there is
sufficient evidence favoring the nonmoving party for a jury to
return a verdict for that party. If the evidence is merely
colorable, or is not significantly probative, summary judgment may
7
Gillis's attempt to present such data to this court on
appeal, contained in Exhibit A of his appellate brief, is too
little, too late. The Federal Rules of Appellate Procedure make
clear that the record on appeal consists only of those items filed
in the district court, plus the transcript of proceedings, and a
certified copy of the docket. See Fed. R. App. P. 10(a); see also
Lorelei Corp. v. County of Guadalupe, 940 F.2d 717, 721 n.4 (1st
Cir. 1991) (excluding from record on appeal several documents
appended for the first time to party's appellate brief).
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be granted.") (internal citations omitted); Siegal v. Am. Honda
Motor Co., 921 F.2d 15, 17 (1st Cir. 1990) ("Appellant cannot
prevail against the motion for summary judgment . . . unless she
has demonstrated to the district court . . . that there is no
element essential to her cause of action which is not at least
trialworthy."). Therefore, we find no error in the district
court's decision on this point.8
III. CONCLUSION
For the foregoing reasons, we affirm the district court's
grant of summary judgment in favor of appellee SPX.
8
Having concluded that Gillis's two claims on appeal both
fail, and that the plan administrator did not abuse its discretion
in calculating his lump sum pension disbursement, we also deny
Gillis's request for attorneys' fees and costs, under Cottrill v.
Sparrow, Johnson & Ursillio, Inc., 100 F.3d 220, 225 (1st Cir.
1996).
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