[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
JUNE 28, 2007
No. 06-12117
THOMAS K. KAHN
________________________
CLERK
D. C. Docket No. 04-00562-CV-PT-M
WENDELL F. GILLEY, an individual
and as class representative,
Plaintiff-Appellee,
versus
MONSANTO COMPANY, INC., a corporation,
MONSANTO COMPANY SALARIED EMPLOYEES’
PENSION PLAN,
EMPLOYEE BENEFITS PLAN COMMITTEE,
PHARMACIA CORPORATION, a corporation,
Defendants-Appellants,
MONSANTO COMPANY EMPLOYEE BENEFITS
EXECUTIVE COMMITTEE,
Defendant.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(June 28, 2007)
Before CARNES, PRYOR and FARRIS,* Circuit Judges.
CARNES, Circuit Judge:
Throughout his judicial career Holmes relished challenging cases. While on
Massachusetts’ highest court he confessed to a friend that although none of the
cases he had handled that year had been of universal interest, “there is always the
pleasure of unraveling a difficulty.”1 A decade and a half later, while on the
Supreme Court, he told the same friend that he had few cases of general interest
that term, but “[t]here is always the fun of untying a knot and trying to do it in
good compact form.”2 It is a pity that Holmes did not live to see ERISA cases.
I.
Wendell Gilley was employed by Monsanto Company, Inc. from August 31,
1972 through February 16, 1982 at its Sand Mountain textile plant in Northeast
Alabama. Monsanto closed the plant in March of 1981, but Gilley remained on
the payroll in layoff status until February 1982 when he was finally let go.
*
Honorable Jerome Farris, United States Circuit Judge for the Ninth Circuit, sitting by
designation.
1
1 Oliver Wendell Holmes, Jr., Feb. 23, 1890 Letter to Frederick Pollack, in The
Holmes-Pollack Letters: The Correspondence of Mr. Justice Holmes and Sir Frederick Pollock
1874 – 1932 32, 33 (Mark DeWolfe, ed., Harvard Univ. Press 2d prtg. 1941).
2
1 Oliver Wendell Holmes, Jr., May 25, 1906 Letter to Frederick Pollack, in The
Holmes-Pollack Letters, supra note 1, at 123, 124.
2
Although the period of his employment was under nine-and-a-half years, Gilley
claims that with the overtime that he worked in 1972, he acquired the necessary
ten years of “Vested Service” to merit pension benefits.
Under Monsanto’s Salaried Employees’ Pension Plan, certain employees are
entitled to benefits if they are able to meet the vesting requirements of the plan.
Although Monsanto has amended its pension plan several times over the years, all
relevant versions of the plan set out the same basic vesting requirements: (1) an
eligible employee must reach retirement age, and (2) the employee must acquire at
least ten years of “Vested Service.” An employee earns a year of Vested Service
when he completes 1,000 “Hours of Service,” defined as all hours of employment
for which an employee is directly or indirectly compensated, during that year. The
manner in which Hours of Service are calculated has varied as Monsanto has
amended its pension plan.
When Gilley began work at Monsanto, the 1971 Plan was in effect. The
pension plan was amended in 1976 to comply with the requirements of the
Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seq.,
which went into effect, for our purposes, in 1976.3 According to Monsanto, both
3
The majority of ERISA became effective January 1, 1975, but for all pension plans in
existence as of January 1, 1974, of which the Plan here was one, the participation and vesting
standards of ERISA became applicable on the first day of the plan year beginning after December
3
the 1971 Plan and the 1976 post-amendment Plan utilized the “Elapsed Time
Method” to calculate Vested Service for pension purposes. Under this method, an
employee is credited with the hours that result from dividing the total number of
calendar days of employment, including weekends and holidays, by 365 and then
multiplying that number by 2,080 (the total hours in a “Standard Work Year”
based on a forty-hour work week). In other words, an employee’s Hours of
Service are determined based on the fraction of the year he is employed, multiplied
by the Standard Work Year—if an individual is employed for 176 days out of the
year, he would be entitled to 1,002 Hours of Service or one year of Vested
Service.
Sometime between 1979 and 1981, the Plan Committee decided to change
the way Hours of Service are determined, adopting the “95-Hour Rule” and
incorporating it into the amendments to the 1981 Plan. Under this calculation
method, the provider credits all employees with ninety-five Hours of Service for
each two-week period they are employed, regardless of the actual hours worked.
The 95-Hour Rule expressly excludes additional credit for overtime hours,
embodying the assumption that the fifteen extra Hours of Service credited on a bi-
weekly basis (assuming a 40-hour week or 80 hours every two weeks) is a fair way
31, 1975, effectively 1976. See 29 U.S.C. § 1061(b)(2).
4
to cover any overtime hours worked. In addition to adopting the 95-Hour Rule,
the 1981 Plan stated that an employee’s benefit rights are to be determined
according to the pension plan in effect at the time that the employee separates
from Monsanto.
Believing that he had acquired ten years of Vested Service, even though he
had only worked for Monsanto for nine full years and part of two other years
(1972 and 1982), Gilley applied for pension benefits in 2001. Monsanto denied
his request, because it concluded that Gilley’s Vested Service fell short of the
requisite ten years. Gilley filed an administrative appeal, and the Monsanto Plan
Committee denied his petition. It applied the 1981 Plan and the 95-Hour Rule to
determine that Gilley was only entitled to 9.594 years of Vested Service.
Gilley filed suit claiming that Monsanto had: (1) arbitrarily and
capriciously denied his claim for benefits, in violation of ERISA § 502, 29 U.S.C.
§ 1132; (2) made oral and written assurances that all employees hired at the Sand
Mountain plant after September 1972 were vested and, therefore, is equitably
estopped from denying Gilley benefits now under ERISA § 502; (3) intentionally
closed the Sand Mountain Plant right before the employees would reach the ten-
year mark, in violation of ERISA § 510, 29 U.S.C. § 1140; (4) amended the Plan
to retroactively reduce or eliminate the amount of accrued Hours of Service in
5
violation of ERISA § 204(g)(1), 29 U.S.C. § 1054(g)(1); and (5) breached its
fiduciary duty by failing to act in the best interest of plan participants, in violation
of ERISA § 404, 29 U.S.C. § 1104. Monsanto filed a motion to dismiss, arguing
that the 1981 Plan governed the determination of Gilley’s credit, and that under
the plan Gilley lacked the requisite ten years of Vested Service. The district court
denied the motion to dismiss.
Gilley then filed an amended complaint, specifically restating all of his
claims under the “equitable relief” section of ERISA, § 502(a)(3), 29 U.S.C. §
1132(a)(3), and adding a claim under § 502(c), 29 U.S.C. § 1132(c), and § 510, 29
U.S.C. § 1140, asserting that Monsanto had interfered with his attempts to attain
benefits by refusing to provide him with requested documents. The amended
complaint alleged that the 95-Hour Rule should not be applied because, according
to Gilley, it is less favorable to him than the 1976 Plan’s method of calculating
Hours of Service.
Monsanto filed a motion for summary judgment, asserting that ERISA §
502(a)(3), 29 U.S.C. § 1132(a)(3), only permits equitable relief and does not apply
when a party is seeking purely legal relief, as Monsanto claimed Gilley was
6
doing.4 Additionally, Monsanto restated its argument that Gilley cannot prove the
ten years of Vesting Service necessary to merit benefits. It put before the court
Social Security records indicating that Gilley had earned a total of $2,149.68 in
1972, and other records showing that in 1972 his base salary had been $420
monthly, or $5,040 annually. Gilley argued that the $420 figure actually included
overtime pay and that his monthly base salary was really only $390, which would
have been $4,680 annually.
Based on all of those records, Monsanto argued that even if the district court
calculated Hours of Service based on the actual hours Gilley worked, Gilley still
was not entitled to a pension. Using the $2,149.68 figure, a $420 monthly base
salary, and the 2,080 hour “Standard Work Year” set out in the 1981 Plan,
Monsanto asserted that Gilley could have actually worked only 887.2 hours in
1972 (if all hours were compensated equally), well short of the 1,000 hours
4
Monsanto contends that Gilley cannot properly make out an equitable claim under
ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), because he is actually seeking legal relief which can
only be granted under § 502(a)(1)(b), 29 U.S.C. § 1132(a)(1)(b). Our disposition of this appeal
does not require us to decide the nature of the relief Gilley is seeking, and it is not a question that
goes to the existence of subject matter jurisdiction. See Blue Cross & Blue Shield of Ala. v.
Sanders, 138 F.3d 1347, 1352 (11th Cir. 1998) (noting that subject matter jurisdiction exists even
if the remedy sought under § 502(a)(3) is legal in nature, because a finding that the relief sought
is legal in nature “‘does not negate the existence of federal subject matter jurisdiction, but rather
indicates that [the plaintiff] may have failed to state’ a claim upon which relief can be granted”
(quoting Health Cost Controls v. Skinner, 44 F.3d 535, 537–38 (7th Cir. 1995))).
7
needed. Monsanto also pointed out that because the $2,149.68 salary Gilley
earned in 1972 included compensation for some overtime and holiday hours,
which would have been paid at a premium rate, Gilley’s actual hours worked
would be much less. What’s more, even if Gilley’s claimed $390 monthly salary
figure and the resulting $4,680 annual salary figure are accepted, the maximum it
appears Gilley could have worked in 1973 based on the Social Security records is
955.41 hours (assuming all hours were compensated at the same hourly wage).
Still, the district court denied Monsanto’s motion, finding that a trial was
warranted based on the “closeness of the vesting issue.”
A two-day bench trial was conducted solely to decide the number of Hours
of Service credit Gilley was entitled to receive for his employment in 1972. After
trial, the district court ordered Gilley to submit an “itemized, succinct list showing
exactly how [he] . . . would arrive at a minimum of 1,000 [H]ours of [S]ervice in
1972.” In response, Gilley offered three “equivalencies,” claiming that each
showed he was entitled to benefits. ERISA gives a plan the option of using
equivalencies in order to simplify the record keeping and calculation burdens
associated with determining Hours of Service, 29 C.F.R. § 2530.200b-3(a). A list
of equivalencies from which a plan may choose is contained in the regulation, id. §
2530.200b-3(d), (e).
8
The district court accepted two of the three equivalencies that Gilley
suggested. One of those two calculates Hours of Service based on “Hours
Worked” under 29 C.F.R. § 2530.200b–3(d)(1), granting 1,000 Hours of Service if
870 hours are worked. The other calculates Hours of Service based on “Regular
Time Hours” under 29 C.F.R. § 2530.200b–3(d)(2), granting 1,000 Hours of
Service if 750 “Regular Time Hours” are worked. The parties dispute whether
Gilley would be entitled to a pension under either or both of the two equivalencies
the district court adopted. The math involved with both equivalencies is dense,
enough so that during oral argument counsel had difficulty answering some of our
questions about the numbers and formulas used during the trial.
The more fundamental point that Monsanto stressed, however, is that the
Plan never included either of the two equivalencies that the district court used at
Gilley’s urging. Instead, the 1981 Plan included the 95-Hour Rule, another
equivalency permitted by ERISA. See 29 C.F.R. § 2530.200b-3(e)(1)(iii). We
will spare the reader the details of how the 95-Hour Rule plays out in Gilley’s
circumstances, except to say that everyone agrees that under it Gilley would not be
entitled to a pension.
In its findings of fact and conclusions of law, the district court refused to
apply the 95-Hour Rule set out in the 1981 Plan. Its reasoning was that “later
9
amendments to the Plan should not have an effect on the 1972 calculations if they
impact adversely on plaintiff’s entitlement.” Even though the two equivalencies
that were more favorable to Gilley had never been part of the Plan, the district
court justified their use on the grounds that Monsanto had not kept adequate
records of the hours Gilley worked in 1972. It said that Gilley was entitled to the
“benefit of the doubt” because Monsanto had failed to keep adequate records from
that year. Applying the two equivalencies that Gilley preferred, the court
determined that he did have the requisite Hours of Service to receive a full year of
credit for 1972, giving him ten years of Vested Service which entitled him to a
pension. Throughout its reasoning, the court applied a “heightened arbitrary and
capricious” standard of deference, because it concluded that the Plan Committee
had a conflict of interest in making benefit decisions.
The court’s judgment ordered Monsanto to pay Gilley his past due pension
benefits, “plus appropriate interest,” and to pay additional retirement benefits as
they accrue in the future. Monsanto filed a motion to alter or amend the district
court’s judgment, asserting multiple mathematical and legal errors in the
application of the two equivalencies the district court used. After the court denied
that motion, Monsanto filed this appeal.
10
II.
We initially had some doubt about our jurisdiction to decide this appeal
because, while the district court ordered Monsanto to pay “appropriate interest” on
the award of past benefits, it did not specify the rate of interest or the date from
which the interest would be calculated. We were concerned that the judgment
might not be final under 28 U.S.C. § 1291 for purposes of appellate review.
The district court’s failure to set an interest rate for calculating prejudgment
interest might have been a problem for the purpose of our jurisdiction if the
judgment had no injunctive aspects. See SEC v. Carrillo, 325 F.3d 1268, 1272–73
(11th Cir. 2003) (per curiam) (noting that “if the judgment amount, the
prejudgment interest rate, or the date from which prejudgment interest accrues is
unclear, the calculation of prejudgment interest is no longer a ministerial act and
the court’s order is not final”); but see Moon v. Am. Home Assurance Co., 888
F.2d 86, 89–90 (11th Cir. 1989) (addressing the merits but remanding the case
back to the district court for clarification on the questions of whether prejudgment
interest was intended and the rate at which any such interest should be calculated).
However, the judgment here does include injunctive relief, because it requires
Monsanto to continue to pay pension benefits as they accrue in the future. Under
28 U.S.C. § 1292(a)(1), we have jurisdiction over orders granting injunctive relief.
11
The district court’s judgment here is injunctive enough in nature to give us
jurisdiction over the appeal.
III.
On the merits, both sides agree that Gilley must have ten years of credit to
be entitled to a pension, and they agree that he earned at least nine years of credit
for his work at the plant from 1973 to 1982. Their disagreement is about whether
Gilley gets a full year of credit for 1972, his first year on the job, when he actually
worked only four months for Monsanto. If Gilley is credited with a full year for
working those four months, he gets a pension.
The district court’s conclusion that Gilley should be treated as having
worked a full year in 1972 was based on its belief that instead of the 95-Hour Rule
in the 1981 Plan, the Hours Worked or Regular Time Hours equivalencies, which
Gilley proposed, should be used. The parties disagree about whether Gilley is
entitled to a pension even if those two equivalencies are used, but they do agree
that he is not entitled to a pension under the 1981 Plan’s 95-Hour Rule. The
question that determines the issues we address in this appeal is whether the 95-
Hour Rule is the equivalency that should be applied.
A.
The parties think that the answer to that question might depend on the
12
standard of deference applicable to the Plan Committee’s decision to deny Gilley
pension benefits. Monsanto argues that the arbitrary and capricious standard
applies, while Gilley thinks the district court was correct to apply a heightened
arbitrary and capricious standard. Given the nature of the issue on which this case
turns, we doubt that the standard of deference makes any difference. To the extent
that it does, however, the proper standard is arbitrary and capricious.
ERISA does not explicitly establish the standard of review to be applied to a
plan administrator’s decision. Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 109, 109 S. Ct. 948, 953 (1989). Following the Supreme Court’s direction,
however, we have adopted three different standards to guide us: (1) de novo
review applies where the plan administrator has been given no discretion in
deciding claims; (2) arbitrary and capricious review applies where the plan
administrator has discretion in deciding claims and does not suffer from a conflict
of interest; and (3) heightened arbitrary and capricious review applies where the
plan administrator has discretion but suffers from a conflict of interest. HCA
Health Servs. of Ga., Inc. v. Employers Health Ins. Co., 240 F.3d 982, 993 (11th
Cir. 2001). For purposes of that third standard, a conflict of interest exists when a
provider has to pay benefit claims out of its own assets, making it directly
advantageous to the provider for the claims to be denied. These three standards
13
have been broadly applied to both the administrator’s interpretation of plan
provisions as well as the administrator’s decision to grant or deny benefits.
Williams v. Bellsouth Telecomms., Inc., 373 F.3d 1132, 1135 n.3 (11th Cir. 2004);
Paramore v. Delta Air Lines, Inc., 129 F.3d 1446, 1451 (11th Cir. 1997).
Our circuit law is clear that no conflict of interest exists where benefits are
paid from a trust that is funded through periodic contributions so that the provider
incurs no immediate expense as a result of paying benefits. See Buckley v. Metro.
Life, 115 F.3d 936, 939–40 (11th Cir. 1997). Only when benefits are paid from a
provider’s assets, so that benefit decisions have a direct and immediate impact on
the provider’s profit margin, does the heightened standard come into play. See
Williams, 373 F.3d at 1135.
In this case, the Plan gave the Plan Committee discretion to make benefits
decisions. The record clearly establishes that benefits were paid out of a non-
reversionary trust instead of from Monsanto’s own assets. In Buckley, we
specifically considered the standard of deference to be applied when benefits are
paid out of a trust funded by periodic, non-reversionary contributions. 115 F.3d at
939. We held that where the company neither incurs a direct expense in paying
benefits nor directly profits from denying or discontinuing benefits, there is no
conflict of interest. Id. at 939–40. That holding has been reiterated in subsequent
14
cases. See, e.g., Turner v. Delta Family-Care Disability & Survivorship Plan, 291
F.3d 1270, 1273 (11th Cir. 2002) (per curiam) (a non-reversionary, periodic trust
“eradicates any alleged conflict of interest so that the arbitrary or capricious
standard of review applies”). The fact that the company is responsible for
replenishing the funds of the trust is not enough to create a conflict of interest. Id.
For these reasons, the district court erred in applying the heightened
arbitrary and capricious standard. To the extent that a deference standard applies,
the ordinary arbitrary and capricious standard is the one.
B.
The district court also erred in forcing on the Plan two equivalencies that
the Plan had never adopted. The court based its substitution of the equivalencies,
Gilley favored for the one in the Plan on its view that Monsanto had failed to keep
adequate records of the hours Gilley worked in 1972. We have some doubts about
whether a court generally can impose on a plan equivalencies that the plan did not
choose simply because of the absence of adequate records.
We have no doubt, however, that a plan cannot be forced to use an
equivalency that is different from the one the plan chose simply because it or the
company did not keep adequate records for ERISA purposes before there was any
ERISA. The year we are talking about is 1972, and ERISA was not enacted until
15
September of 1974 (with an effective date, for our purposes, of January 1, 1976,
see 29 U.S.C. § 1061(b)(2)). Only after the time for doing so had passed did the
Plan and the company learn that it would be necessary to make and keep the
records. Companies and pension plan managers are not required to be clairvoyant.
Instead, when it comes to pre-enactment years, ERISA requires only that
plans do the best they can with the records they have, and it permits plans to
choose an equivalency from those set out in the regulations. 29 C.F.R. §
2530.200b-3(b), (d), (e). This is how the relevant regulation reads:
If accessible records are insufficient to make an
approximation of the number of pre-effective date hours
of service for a particular employee . . . the plan may
make a reasonable estimate of the hours of service
completed by such employee . . . . A plan may use any of
the equivalencies permitted under this section, or the
elapsed time method of crediting service . . . to determine
hours of service completed . . . .
Id. § 2530.200b–3(b). That is exactly what the Plan did in this case. It chose the
95-Hour Rule and applied the rule to the vagaries of Gilley’s 1972 work history.
As the regulation we have quoted shows, ERISA permitted it to do so. The statute
and regulations leave the choice of equivalencies to plans, not to courts. The
district court should not have overridden the Plan’s choice and applied an
equivalency that was not in the Plan. See id. § 2530.200b–3(c)(1) (“Any
16
equivalency used by a plan must be set forth in the document under which the plan
is maintained.” (emphasis added)).
C.
In addition to substituting its own preferred equivalencies because of the
lack of adequate records of Gilley’s work hours in 1972, the district court also
rejected the 95-Hour Rule because it was adopted after 1972. The record is
unclear exactly when the 95-Hour Rule was adopted, but it was sometime between
1979 and January 1, 1981. The district court thought the fact that the rule was not
adopted until sometime during that period foreclosed its use because, in the court’s
words, “later amendments to the Plan should not have an effect on the 1972
calculations if they impact adversely on plaintiff’s entitlement.”
First, it is important to recognize that there is no way Gilley could have
accumulated the requisite ten years of Vested Service, under any calculation
method, by the time Monsanto adopted the 95-Hour rule. On January 1, 1981,
Gilley could have accumulated, at most, nine years of Vested Service credit. Even
if he is given a full year of credit for 1972, he would still only have acquired nine
years by the beginning of 1981. All of Gilley’s arguments that he earned ten years
of Vested Service count hours he worked in 1981 after the Plan was amended to
put the 95-Hour Rule in place. This fact is critical to our analysis of whether the
17
adoption of the 95-Hour Rule and its application to Gilley violated ERISA.
Gilley takes the district court’s determination that later amendments cannot
adversely impact a plaintiff’s entitlement and runs with it, casting it in terms of
ERISA’s “anti-cutback” rule. ERISA § 204(g), 29 U.S.C. § 1054(g)(1). One of
the purposes of ERISA is to protect pension rights by ensuring “that if a worker
has been promised a defined pension benefit upon retirement—and if he has
fulfilled whatever conditions are required to obtain a vested benefit—he actually
will receive it.” Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359,
375, 100 S. Ct. 1723, 1733 (1980). To further that purpose, the “anti-cutback”
rule provides that “[t]he accrued benefit of a participant under a plan may not be
decreased by an amendment of the plan.” ERISA § 204(g), 29 U.S.C. §
1054(g)(1). By its own terms, what the rule forbids is cutbacks on “accrued
benefits.” There is a difference between “accrued benefits” and “vested benefits.”
The Supreme Court has explained that benefit accrual is “the rate at which
an employee earns benefits to put in his pension account,” while benefit vesting
refers to the point at which a participant’s pension rights become nonforfeitable
“by virtue of his having fulfilled age and length of service requirements.” Central
Laborers’ Pension Fund v. Heinz, 541 U.S. 739, 749, 124 S. Ct. 2230, 2238
(2004). A participant is fully vested when he has a nonforfeitable right to his total
18
accrued benefit. In other words, benefit accrual affects the size of the pension,
while benefit vesting determines whether a pension will be paid at all. See
Stewart v. Nat’l Shopmen Pension Fund, 730 F.2d 1552, 1561–62 (D.C. Cir. 1984)
(noting that “‘vesting’ governs when an employee has a right to a pension;
‘accrued benefit’ is used in calculating the amount of the benefit to which the
employee is entitled”); Silvernail v. Ameritech Pension Plan, 439 F.3d 355, 359
(7th Cir. 2006) (“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.’” (quoting
Hoover v. Cumberland, Md., Area Teamsters Pension Fund, 756 F.2d 977, 983–84
(3d Cir. 1985))).
The Plan amendment adopting the 95-Hour Rule affected Gilley’s ability to
vest before he had vested, but it did not reduce the amount of his accrued benefit
or the rate at which he was accruing benefits. Throughout Gilley’s employment
the Plan provided that an employee had to reach the retirement age and have
accumulated the requisite ten years of Vested Service before he was entitled to a
pension. The amendment adopting the 95-Hour Rule, which occurred during
Gilley’s employment, did not affect the rate at which he accrued benefits, although
it did alter the method for calculating Vested Service, which in turn determined
19
whether he received a pension. The ERISA § 204(g) anti-cutback provision does
not apply to changes in vesting requirements.
There is another provision, however, that does. Section 203 of ERISA
provides that a plan amendment changing the vesting schedule shall be treated as
not satisfying the requirements of ERISA:
if the nonforfeitable percentage of the accrued benefit derived from
employer contributions (determined as of the later of the date such
amendment is adopted, or the date such amendment becomes
effective) of any employee who is a participant in the plan is less than
such nonforfeitable percentage computed under the plan without
regard to such amendment,
unless the employee is given the option of electing the pre-amendment plan.
ERISA § 203(4)(c)(1)(A); 29 U.S.C. § 1053(4)(c)(1)(A). Although Monsanto
argues that the amendment introducing the 95-Hour Rule did not change the
vesting schedule, some courts have concluded that changes in the way vesting is
determined can amount to an alteration of the vesting schedule. See, e.g., Fentron
Indus., Inc. v. Nat’l Shopmen Pension Fund, 674 F.2d 1300, 1306 (9th Cir. 1982)
(noting that the cancellation of past service credits, which diminished the pension
credits of otherwise vested participants, was a vesting schedule amendment). We
will assume for present purposes that those courts are correct and that the Plan
amendment we are discussing did change the Plan’s vesting schedule.
20
Even making that assumption, there still was no violation of ERISA § 203,
because the plain language of the provision limits its scope to benefits that are
nonforfeitable (“if the nonforfeitable percentage . . . such nonforfeitable
percentage”) at the time the amendment is adopted or becomes effective
(“determined as of the later of the date such amendment is adopted, or the date
such amendment becomes effective”). ERISA § 203(4)(c)(1)(A); 29 U.S.C. §
1053(4)(c)(1)(A). When the 95-Hour Rule amendment became effective on or
before January 1, 1981, and when it was adopted sometime on or before that date,
Gilley was not entitled to any benefits, because he could not have earned ten years
of Vested Service until after that date. Because Gilley was not vested at the time
the amendment was adopted or became effective, ERISA § 203 does not help him.
It follows that the district court erred in concluding that the Plan amendment
adopting the 95-Hour Rule could not be applied to Gilley because it came after he
had started earning credit toward his pension.
D.
To the district court’s reasons for not allowing the 95-Hour Rule, Gilley
adds some more of his own. Among them is his assertion that he was never
properly notified of the amendment. We decline to consider that contention
because it was raised for the first time in this appeal. FDIC v. Verex Assurance,
21
Inc., 3 F.3d 391, 395 (11th Cir. 1993) (“By well settled convention, appellate
courts generally will not consider an issue or theory that was not raised in the
district court.”). Gilley also appears to argue that the amendment discriminates
against him, an argument which is difficult to follow and unpersuasive in any
event.
Finally, Gilley raises a host of arguments, both before us now and in earlier
proceedings, about why he is equitably entitled to a pension notwithstanding his
inability to satisfy the vesting requirements under the 95-Hour Rule. The district
court did not reach any of these arguments and we decline to take the first swing at
them. Some may require factual development, while all of them may benefit from
two-tier consideration. All of them the district court should deal with as it deems
appropriate on remand.
IV.
The judgment of the district court is VACATED and the case is
REMANDED for further proceedings consistent with this opinion.
22
Gilley v. Monsanto Co. Employee Benefits Executive Committee
Court: Court of Appeals for the Eleventh Circuit
Date filed: 2007-06-28
Citations: 490 F.3d 848
Copy CitationsCombined Opinion