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February 14, 1991


The opinion of the court was delivered by: Lechner, District Judge.

                        TABLE OF CONTENTS
FACTS ...................................................  982
        A.  The Stevens Salaried Plan ...................  982
        B.  Salaried Plan Management Prior to the
              Restructuring .............................  983
        C.  Plan Restructuring and Reversion ............  984
        D.  The Window ..................................  987
DISCUSSION ..............................................  990
        A.  The Restructuring and Reversion .............  991
              1.  Basis for Remedy Claimed by Lynch .....  991
              2.  The Restructuring and Reversion
                    — ERISA's Exclusive Benefit
                    Rule and Provisions on Fiduciary
                    Duties ..............................  992
                  a.  Benefits Protected Under ERISA ....  992
                  b.  Plan Terminations Under ERISA
                        and ERISA's Exclusive Benefit
                        Rule and Fiduciary Duty
                        Provisions ......................  993
                  c.  Transfers of Plan Assets Under
                        ERISA and ERISA's Exclusive
                        Benefit Rule and Fiduciary Duty
                        Provisions ......................  996
              3.  Funding of Accrued Benefits for
                    Salaried Plan Participants and the
                    Implementation of the Restructuring
                    and Reversion .......................  999
                  a.  Funding for Benefits for Future
                        Service .........................  999
                  b.  Funding of Benefits Accrued
                        through 26 June 1985 ............ 1001
                  c.  Funding for the Window ............ 1003
                  d.  Funding for the Increase in
                        Salaried Plan Benefits .......... 1003
                  e.  Funding for Early Retirement
                        Subsidies ....................... 1004
              4.  The Management of the Salaried Plan
                    and ERISA's Exclusive Benefit Rule
                    and Fiduciary Duty Provisions ....... 1007
                  a.  The Management Practices of
                        Stevens with Respect to the
                        Salaried Plan and ERISA's
                        Exclusive Benefit Rule and
                        Fiduciary Duty Provisions ....... 1007
                  b.  Management of the Salaried Plan by
                        Stevens and the Allegation of
                        Fraud ........................... 1008
                  c.  Use of Investment Managers and
                        ERISA's Exclusive Benefit Rule .. 1009
                  d.  Increase in the Actuarial
                        Assumptions and ERISA's
                        Exclusive Benefit Rule and
                        Fiduciary Duty Provisions ....... 1009
                  e.  Stevens' Alleged Use of
                        Salaried Plan Assets for the
                        Benefit of the Hourly Plan and
                        ERISA's Exclusive Benefit Rule
                        and Fiduciary Duty Provisions ... 1010
                  f.  Stevens' Alleged Use of Retiree
                        Plan Assets for the Benefit of
                        the Salaried Plan and ERISA's
                        Exclusive Benefit Rule and
                        Fiduciary Duty Provisions ....... 1012

                  g.  The Propriety of "Speculative"
                        Investments and ERISA ........... 1012
                  h.  Segregation of Salaried Plan
                        Assets and ERISA ................ 1013
              5.  Notice to Salaried Plan Participants
                    of the Restructuring of the
                    Salaried Plan and ERISA ............. 1014
        B.  The Window .................................. 1016
CONCLUSION .............................................. 1020


Plaintiff Joseph P. Lynch ("Lynch"), a former employee of defendant J.P. Stevens & Co., Inc. ("Stevens"), brought this action against defendants Stevens, Thomas C. Durst ("Durst") and the J.P. Stevens & Co., Inc. Pension Committee (the "Pension Committee") (Stevens, Durst and the Pension Committee are collectively referred to as the "Defendants," and Lynch and the Defendants are collectively referred to as the "Parties"). Jurisdiction is alleged pursuant to the Age Discrimination in Employment Act of 1967 (the "ADEA"), 29 U.S.C. § 624(a), and the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.

Lynch filed his complaint (the "Complaint") on 29 June 1988. While the Complaint states three counts, the actions of the Defendants alleged therein are described throughout the Complaint and may be grouped into six categories. First, Lynch alleges the Defendants violated various provisions of ERISA in restructuring the Salaried Employees Retirement Salaried Plan (the "Salaried Plan") of which Lynch was a participant and in recapturing $112 million in assets deemed surplus. Second, Lynch alleges the early retirement incentive offered to corporate area employees (the "Window") who elected to retire by a designated date violated the ADEA. Third, Lynch alleges he was improperly denied Window benefits because he was in fact a corporate area employee. Fourth, Lynch alleges he was terminated from employment and not offered an alternative position within Stevens in violation of the ADEA and the Stevens personnel policy. Fifth, Lynch alleges the current Salaried Plan (the "On-Going Plan") has been inadequately funded since the restructuring and recapture. Finally, Lynch alleges the Defendants failed to provide him with information regarding the Window in violation of the procedural provisions of ERISA.

Lynch seeks as relief reinstatement to his former position at Stevens, back pay and benefits, and "compensatory and punitive damages for emotional stress, humiliation, and breach of expressed and implied contract." Complaint at 15-16. Lynch also apparently seeks injunctive relief "[t]hat [Stevens] salaried employees pension plan be fully funded" and attorneys' fees. Complaint at 15-16.*fn1


Lynch was employed by Stevens on 1 April 1972 and was terminated on 15 January 1988 from a position as Administrative Manager for the International Division. Lynch Cert., ¶ 2. He was fifty-nine years old at the time of his discharge. Id.

A.  The Stevens Salaried Plan

Stevens established the Salaried Plan effective 1 January 1948. Defendants' Memorandum at 9; Opposition at 1. The Salaried Plan is a defined benefit pension plan for the benefit of eligible salaried employees. Defendants' Memorandum at 9; Opposition at 2. As such, the Salaried Plan provides fixed benefits to participants based on a benefit formula set forth in the Salaried Plan. See 1983 Plan at 10-25.*fn4 In general, pension benefits are calculated based on each participant's compensation and period of covered employment with Stevens. Id. Pension benefits accrue during each participant's period of covered employment and become vested, or nonforfeitable, after ten years of accrual (or after five years of accrual effective 1 January 1989), and are generally paid in monthly installments upon normal retirement at age 65 or upon early retirement at age 55. Id.; Anderson Cert., ¶ 14. The Salaried Plan provides that all accrued benefits become vested upon its termination. 1983 Plan at 44.

Stevens is the sole contributor to the Salaried Plan. 1983 Plan at 34; Retiree Plan at 34; On-Going Plan at 34; Complaint at 8. Contributions by Stevens are determined based on actuarial calculations of the amount necessary to fund the obligations of the Salaried Plan. Id. From 1948 to the present, actuarial services for the Salaried Plan have been provided by George B. Buck Consulting Actuaries, Inc. ("Buck"). Anderson Cert., ¶ 7. As actuary, Buck is responsible for estimating the present value of future benefits to be paid by the Salaried Plan and for calculating the yearly contribution by Stevens based on a funding method which allocates to the current year a portion of the difference between the present value of future benefits and the current value of assets. Anderson Cert., ¶ 4.

Because the Salaried Plan provides defined benefits to participants and because Stevens is its sole contributor, Stevens bears the risk of the Salaried Plan's actual investment experience relative to actuarial predictions. Id. at ¶ 16. If the actuarial predictions for investment returns are lower than actual experience in a given year, Stevens is then required to make larger contributions to the Salaried Plan in subsequent years. Id. If, on the other hand, actuarial predictions prove too high, Stevens is permitted to decrease its contributions in subsequent years. Id. The funding method for the Salaried Plan and its investment earnings affect only the amount Stevens is required to contribute to the Plan. Id.

The Salaried Plan also provides for the establishment of the Pension Committee by the Board of Directors to serve as "named fiduciary." 1983 Plan at 38-41; Retiree Plan at 38-41; On-Going Plan at 38-41. The Pension Committee has the authority under the Salaried Plan to administer the Salaried Plan in all respects with the exception of those functions ascribed to the Investment Committee, including the setting of interest rates to be used for actuarial calculations and the determination of eligibility for participation in the Salaried Plan. Id. The Salaried Plan provides the Pension Committee shall be entitled to rely on information furnished by the actuary (Buck), and states: "[A]ll actions so taken or permitted shall be conclusive upon all persons having or claiming to have any interest in or under the [Salaried] Plan." Id.

The Salaried Plan permits its modification or amendment if such modification or amendment does not deprive a participant of benefits to which the participant is entitled or make it possible for Salaried Plan assets to be used for purposes other than for the exclusive benefit of participants before plan liabilities have been satisfied. 1983 Plan at 42; Retiree Plan at 42; On-Going Plan at 42; Complaint at 9. The Salaried Plan also authorizes its merger and consolidation with other plans and the transfer of its assets to other plans if the benefits provided to a participant prior to such merger, consolidation or transfer are equal to or greater than "the benefit [the participant] would have been entitled to receive immediately before the merger, consolidation, or transfer if the Plan had then terminated." 1983 Plan at 42-43; Retiree Plan at 42-43; On-Going Plan at 42-43 (emphasis added).

The Salaried Plan contains an "exclusive benefit" provision, which provides:

    [E]xcept as otherwise hereinafter provided, no
  part of the corpus or income of the funds shall be
  used for, or diverted to, purposes other than for
  the exclusive benefit of Members . . . prior to
  the satisfaction of all liabilities. . . .

1983 Plan at 35-36; Retiree Plan at 35-36; On-Going Plan at 35-36. Finally, the Salaried Plan permits its termination and provides that upon termination, "any funds not required to satisfy all liabilities of the Plan for benefits because of erroneous actual computation or otherwise shall be returned to [Stevens]." 1983 Plan at 44; Retiree Plan at 44; On-Going Plan at 44 (emphasis added).

  B.  Salaried Plan Management Prior to the

In order to increase investment returns, the Investment Committee approved an investment management structure in 1981 whereby all assets of the Salaried Plan and other Stevens retirement plans were placed in a master trust (the "Master Trust"). Zerrenner Dep. at 26; Investment Manager Restructure at 1. The Northern Trust Company ("Northern Trust") was appointed trustee of the Master Trust effective 1 October 1981. See Master Trust; Holt Cert., ¶ 1; Opposition at 1.

The Master Trust consisted of a single commingled fund in which a number of participating retirement plans of Stevens were deemed to have proportionate interests. Master Trust at 2-1; Holt Cert., ¶ 2. The retirement plans which were included in the Master Trust were the Salaried Plan, the Hourly Employees' Salaried Plan of J.P. Stevens & Co., Inc. (the "Hourly Plan") and other plans for the salaried and hourly employees of the Stevens subsidiaries Foote & Davies, Inc. and Ruralist Press, Inc. (the "Subsidiary Plans"). Id.

Under the terms of the Master Trust, responsibility for day-to-day investment decisions was held by the Operating Investment Committee, an adjunct to the Investment Committee, and by investment managers, or outside investment firms with expertise in various types of investments. See Investment Manager Restructure; Zerrenner Dep. at 21, 26; Opposition at 2. In addition, Northern Trust had discretion to invest certain assets. Master Trust, Arts. VII-VIII. Investments made following the creation of the Master Trust included the purchase of Stevens stock. Zerrenner Dep. at 57-58.

C. Plan Restructuring and Reversion

Stevens became aware in 1982 that the Salaried Plan was substantially overfunded. Zerrenner Dep. at 49-50; 17 August 1982 Zerrenner Memo. to W. Stevens et al. The overfunding was caused by higher than expected yields on Salaried Plan investments and by a contribution level by Stevens which had been based on conservative actuarial methods and assumptions. Zerrenner Dep. at 86; Restructuring Proposal at 1.

In order to attempt to decrease the amount of the surplus, the actuarial assumption for interest rates was gradually increased in 1983 from seven percent to nine percent, with a corresponding increase in the assumption for future pay liability. Zerrenner Dep. at 63; Defendants' Memorandum at 16.*fn5 In addition, the funding method was changed from the aggregate method, the most conservative funding method, to the projected unit method, the least conservative method. Zerrenner Dep. at 64-66; 17 August 1982 Zerrenner Memo. to W. Stevens et al.*fn6 Under the projected unit method, future pay increases were carried as a liability by Stevens. Zerrenner Dep. at 66. These changes in actuarial methods decreased contributions by Stevens to the Salaried Plan for 1983 and 1984. Zerrenner Dep. at 121. The changes, however, had no effect on the level of benefits to be distributed under the Salaried Plan as a defined benefits plan. Anderson Cert., ¶ 16; Zerrenner Dep. at 67.

Because the Salaried Plan continued to be overfunded in spite of these changes, the Stevens Board of Directors began consideration toward the end of 1983 of a proposal to restructure the Salaried Plan so as to recapture excess assets. Zerrenner Dep. at 105-06. On 17 April 1984, a formal proposal was submitted to the Board of Directors to restructure the Salaried Plan. Zerrenner Dep. at 106; Restructuring Proposal.*fn7 On the same date, the Stevens Board of Directors adopted a resolution providing for the restructuring of the Salaried Plan and for the recapture of excess assets by Stevens (the "17 April 1984 Board Resolution"). 17 April 1984 Board Minutes; Zerrenner Dep. at 106.

The 17 April 1984 Board Resolution provided for the division of the Salaried Plan into two plans, one for active employees (the On-Going Plan) and one for retired employees (the Retiree Plan). 17 April 1984 Board Minutes. It also provided for the allocation of assets needed to fund obligations of the On-Going Plan to that Plan and for the allocation of all remaining assets to the Retiree Plan. Id. It then provided for the termination of the Retiree Plan upon the purchase of lifetime annuities for Retiree Plan participants. It further stated: "All active employees shall be fully vested in their benefits accrued as of June 1, 1984." Id. It provided for the subsequent recapture of assets remaining in the Retiree Plan after the purchase of the annuities. Id. Finally, it provided for an increase in benefits, including a two percent increase in benefits under the Retiree Plan for each full year of retirement commencing 1 April 1980 and a special contribution to the savings plans of On-Going Plan participants of 2% of gross pay for three years. Id. It conditioned its implementation on successful accomplishment of the restructuring of the Salaried Plan and authorized the Executive Committee of the Board of Directors to set the implementation date. Id.

The Executive Committee of the Board of Directors adopted a resolution on 21 May 1984 (the "21 May 1984 Board Resolution") which made the termination of the Retiree Plan effective 1 July 1984 and which provided: "[A]ll active employees shall be fully vested in their benefits accrued as of July 1, 1984 under the [Salaried] Plan as referred to in the Resolutions." See 21 May 1984 Executive Committee Resolution.

Stevens publicized its plan for the restructuring and reversion with Salaried Plan participants prior to and upon completion of its implementation. Stevens issued a press release on 17 April 1984 announcing its plan to restructure the Salaried Plan into two plans and to recover more than $50 million in excess assets following the restructuring. See Press Release. On 18 May 1984, Stevens circulated a letter to Salaried Plan participants, informing them:

    Stevens intends to divide the current plan into
  two plans — one for retired employees and one for
  our active employees. . . . After the necessary
  regulatory agencies are notified . . . and more
  than enough money is set aside to meet all of the
  current pension commitments, there will be
  substantial excess assets that [Stevens] can use to
  help achieve its long-range goals.

18 May 1984 Stevens Letters to Participants. Finally, Stevens printed a Notice to Interested Parties, which counsel for Stevens states was sent to Salaried Plan participants, stating:

  This plan is going to be amended and split into
  two plans: One for active employees . . . and one
  for retired employees. . . . The plan for retired
  employees will then be technically "terminated."
  This technical "termination" will have no effect
  on the payment of benefits. A Notice of Intent to
  Terminate will be filed with the [PBGC] on April
  9, 1984 and the proposed date of termination is
  May 1, 1984. The Plan Administrator believes that
  the plan assets under the retired employees plan
  will be adequate to provide for all vested
  benefits for participants under the plan.

Notice to Interested Parties; Defendants' Memorandum at 23-24.

Northern Trust purchased annuities to cover the benefit obligations of the Retiree and On-Going Plans with respect to benefits accrued as of 1 July 1984 by making a one-time payment of $124.9 million to the Mutual Life Insurance Company of New York ("MONY"). Hardy Cert., ¶ 4; Anderson Cert., ¶ 10. The annuity contracts unconditionally and irrevocably guaranteed payment by MONY of benefits accrued through 1 July 1984. Hardy Cert., ¶¶ 2-3; Anderson Cert., ¶ 10. In addition, the annuity contracts guaranteed payment of early retirement benefits for employees who met the age (fifty-five years old) and service requirements for eligibility as of 30 June 1984. Hardy Cert., ¶ 8; Anderson Cert., ¶ 21.

Participants in the On-Going Plan, including Lynch, were issued certificates reflecting the amount of benefits accrued through 30 June 1984 and payable on retirement. Hardy Cert., ¶ 7. Because Lynch had met the eligibility requirements for early retirement benefits as of 30 June 1984, the annuity contract for the On-Going Plan guaranteed him payment of normal retirement benefits of $412.39 a month or an early retirement benefit, depending on his date of retirement. Id.; Deferred Annuitant Certificate.

Northern Trust purchased "participating" annuity contracts for both the On-Going and Retiree Plans, whereby it paid to MONY an additional $8.6 million above a designated "trigger point" from which it was entitled to withdraw funds. Hardy Cert., ¶¶ 2-3, 4, 6; Anderson Cert., ¶ 25. The participating annuity contracts permitted Northern Trust to participate in investment gains as long as aggregate funds did not decline below the trigger point. Hardy Cert., ¶ 5. If the value of the assets fell below the trigger point, the contract automatically converted to a traditional, nonparticipating annuity. Id.; Anderson Cert., ¶ 25.

On 1 June 1984, Stevens sought the approval of the IRS for the division of the Salaried Plan into the Retiree Plan and the On-Going Plan by filing a Form 5310 Notice of Transfer of Assets and Liabilities. 1 June 1984 Stevens Letter to IRS. Stevens advised the IRS the division of the Salaried Plan would take place on 1 July 1984, and indicated 1 July 1984 where Form 5310 requested the "date of merger, consolidation or transfer." Id.

Stevens also wrote to the PBGC on 19 June 1984 to advise it Stevens was dividing its Salaried Plan into a plan for active employees (the On-Going Plan) and a plan for retirees (the Retiree Plan) effective 1 July 1984. 19 June 1984 Notice to PBGC. Stevens further advised the PBGC it was dividing up current Salaried Plan assets between the two plans in sufficient amounts to cover benefits under the two plans. It stated that also effective 1 July 1984 it was terminating the Retiree Plan and recapturing from it excess assets. Id. It stated benefits accrued as of 1 July 1984 under the On-Going Plan would become vested, and those benefits as well as benefits under the Retiree Plan would be annuitized. Id.

Because all assets of the various Stevens retirement plans were commingled under the Master Trust, Northern Trust segregated Salaried Plan assets in a separate account within the Master Trust (the "Salaried Plan Account") in April 1985 to facilitate the restructuring. Holt Cert., ¶¶ 14, 15.

On 25 April 1985, the PBGC issued a Notice of Sufficiency to Stevens advising Stevens it had determined Salaried Plan assets were sufficient "as of [the] proposed date of distribution to discharge when due all obligations of the [Salaried] Plan with respect to guaranteed benefits." See Notice of Sufficiency. The PBGC designated as the date of termination 1 July 1984. Id. Also on 25 April 1985, the PBGC approved use by Stevens of participating annuity contracts to cover Retiree and On-Going Plan liabilities accrued through 30 June 1984. 25 April 1985 PBGC Letter to Stevens.

On 25 June 1985, the IRS notified Stevens it had determined termination of the Retiree Plan did not adversely affect qualification of the Retiree Plan for tax-exempt status. See 25 June 1985 IRS Letter to Stevens. The IRS further advised Stevens it was required to continue filing the Form 5500 for the Retiree Plan until all Retiree Plan assets were distributed. Id.

The restructuring of the Salaried Plan into two plans and the subsequent termination of the Retirees Plan (the "spinoff and termination") was implemented in June 1985 after all the requisite agency approvals were received. Anderson Cert., ¶ 18. Stevens recaptured approximately $112 million in excess assets on 27 June 1985. See 26 June 1985 Northern Trust Letter to Stevens. Northern Trust distributed the excess assets to Stevens in cash and Stevens stock. Holt Cert., ¶ 17. In addition, Northern Trust established two new accounts in the Master Trust, one for the Retiree Plan (the "Retiree Plan Account") and the other for the On-Going Plan (the "On-Going Plan Account"). Holt Cert., ¶ 16. Assets from the Salaried Plan account were distributed pro rata to those two accounts. Id.

On 27 June 1985, Stevens issued letters to Salaried Plan participants informing them the restructuring and recapture of assets was approved by the PBGC. See 27 June 1985 Stevens Letters to Participants. The letters also informed Salaried Plan participants some recaptured assets would be used to increase their benefits and the payment of such increases would commence in August 1985. Id.

Because the spin-off and termination were effective 1 July 1984, "the status of benefits [under the On-Going Plan accrued through 1 July 1984] was `frozen' as of that date and the respective rights and obligations determined accordingly." Anderson Cert., ¶ 18. The annuity contract purchased for the On-Going Plan satisfied liabilities accrued as of 30 June 1984. Benefits under the On-Going Plan, including early retirement benefits for employees who retired after 1 July 1984, began to accrue only as of 1 July 1984. Anderson Cert., ¶¶ 10, 12, 20-21. The On-Going Plan carried future liability in the amount of $29 million following the reversion. Zerrenner Dep. at 319.

Because the Retiree Plan was terminated effective 1 July 1984, it did not accrue any benefits or accept any members after that date. Anderson Cert., ¶ 20. Stevens continues to file annually a Form 5500 with the IRS for the Retiree Plan pursuant to IRS instructions because it has not distributed all benefits payable under the Retiree Plan. Anderson Cert., ¶ 23; 25 June 1985 IRS letter to Stevens.

Stevens issued plan documents for the Retiree Plan and for the On-Going Plan. Defendants' Memorandum at 18. The plan documents for the On-Going Plan give its effective date as 1 July 1984 and describe it as "a continuation, revision and modification of the Plan first effective January 1, 1948." On-Going Plan at 1. They further state:

    As of July 1, 1984, the former Plan was split
  into two plans, (1) the Retired Employees
  Retirement Salaried Plan of J.P. Stevens & Co.,
  Inc. and Subsidiaries, designed to cover all
  Members under the former Plan who were retired as
  of June 30, 1984, and (2) this Plan, designed to
  cover all other Members of the former Plan.

Id. at 1.

The plan documents for the Retiree Plan also give its effective date as 1 July 1984. Retiree Plan at 1. The Retiree Plan provides:

    As of July 1, 1984, the former Plan was split
  into two plans, (1) this Plan, designed to cover
  all Members under the former Plan who were retired
  as of June 30, 1984, and (2) the Retirement
  Salaried Plan of J.P. Stevens & Co., Inc. and
  Subsidiaries, designed to cover all other Members
  of the former Plan. This Plan shall be frozen and
  admit no new members and shall exist only to pay
  out benefits to its Members as of July 1, 1984.

Id. at 1.

D. The Window

Beginning in 1983, Stevens attempted to increase its profitability by abandoning less profitable areas of its business. Durst Cert., ¶ 6. Stevens closed several of its plants in 1984 and 1985. Durst Cert., ¶ 7. With these divestitures, Stevens decreased in size by approximately forty percent. Durst Cert., ¶ 8. Corporate staff, i.e., staff who serviced the company as a whole, were not affected by the divestitures. Durst Cert., ¶¶ 8, 17. Senior managers therefore agreed at a February 1986 meeting to make a reduction in corporate staff proportionate to the non-corporate reductions resulting from the 1984 and 1985 divestitures by using a voluntary retirement incentive (the Window). Durst Cert., ¶ 9.

Corporate staff were identified using a functional approach whereby staff were deemed corporate if they performed services for Stevens as a whole. Durst Cert., ¶ 17; Zerrenner Dep. at 176. Thus, certain presidents of divisions who were performing corporate services at the time the Window was offered were deemed eligible, including Irwin Gusman and W.W. Stasney. Id. In addition, because it was decided to offer the Window to all corporate employees who met the age guidelines, offerees included some corporate employees who were not performing surplus functions. Zerrenner Dep. at 177-78.

Members of the International Division, of which Lynch was a member, were not offered the Window. The International Division was regarded not as a corporate area but as a division, in that its financial results were reported individually, it submitted its own profit and loss reports and it had its own division president. Id. The divisions of Stevens were held individually accountable for their financial results and division presidents were responsible for cost-cutting decisions, including the decision to terminate staff. Durst Cert., ¶ 18; Zerrenner Dep. at 171. The unprofitability of the divisions or their need to reduce staff were not considered in devising eligibility criteria for the Window. Id.

By April 1986, it was determined the Window would be offered to all staff designated as "corporate" who were eligible for retirement. Durst Cert., ¶ 21. It was decided that corporate employees who would be required to retire in 1986 in any event because of their age, including Paul Nipper, would be included, and it was decided not to impose a salary limit on eligible corporate staff. Id. A "five plus five" program with an eligible age of fifty years old was agreed to, whereby each participant would receive an additional five years of credited service and age under the pension benefits formula of the On-Going Plan. Id. In addition, participants between the ages of 59 and 62 would receive an additional $500 a month under the Window. Id.

The Stevens Board of Directors gave its authorization for the Window at a 15 May 1986 meeting. Durst Cert., ¶ 22. The Stevens Board of Directors ratified the Window as an amendment to the On-Going Plan by unanimous written consent on 21 January 1987. Durst Cert., ¶ 24; 21 January 1987 Board Resolution. The 21 January 1987 Board Resolution made the Window amendment effective 19 May 1986. 21 January 1987 Board Resolution.

On 19 May 1986, after receiving authorization for the Window by the Board of Directors, Stevens sent a letter announcing the Window to eligible corporate staff along with an election form. See 19 May 1986, Stevens Letter to Window Offerees. The letter stated the Window was available to corporate employees aged 50 by year-end and older with at least one year of service who decided between 19 May 1986, when the letter was issued, and 30 June 1986 to retire. Id. The letter described the Window benefits, and stated:

    If you elect to take early retirement during the
  Window period, your most likely retirement date
  will be August 1, 1986. . . . If you elect to
  retire as of August 1, 1986, the Company may
  request that you stay for a few months to complete
  special assignments. However, there will be very
  few of these exceptions and only with the approval
  of the Chairman's office.


In the end, seventy-seven corporate employees out of approximately two hundred and twenty offerees elected the Window. Durst Cert., ¶ 29; Defendants' Memorandum at 28. Stevens retained fifteen to twenty Window participants beyond the 1 August 1986 designated retirement date in order to complete work in progress. Durst Cert., ¶ 31. Given the number of acceptances, Buck determined the value of benefits under the Window to be $2,526,603. Durst Cert., ¶ 30.

Lynch was terminated on 15 January 1988 from his position at Stevens as Administrative Manager for the International Division. Lynch Cert., ¶ 2. Lynch's supervisor told him on 5 January 1988 that although he received a $10,000 job performance bonus during 1987, Stevens eliminated his job. Id.

On 11 January 1988, apparently after being notified of his pension benefits, Lynch wrote to Linda Harris ("Harris"), the personnel manager of Stevens, to express disappointment at not receiving Window benefits and to request consideration for the benefits. 11 January 1988 Lynch Letter to Harris. Harris responded to Lynch on 27 January 1988 to advise him he would not be offered the Window because the Window had been offered to corporate employees only for retirements which occurred prior to 30 June 1986. 27 January 1988 Harris Letter to Lynch. In addition, the Pension Committee considered the request of Lynch and determined on 9 March 1988 to deny him Window benefits because he was ineligible when the benefits were originally offered and because he had not elected to retire by 1 July 1986, the date the Window period expired. Durst Cert., ¶ 32; 9 March 1988 Salaried Committee Minutes.

On 29 January 1988, Lynch filed the Charge of Discrimination with the EEOC. See Charge of Discrimination. He stated in the Charge of Discrimination:

    I have been denied the opportunity of accepting
  [the Stevens] Early Retirement Package extended to
  corporate employees, and my position has been
  terminated effective January 15, 1988. The
  respondent based its denial of early retirement on
  my alleged non-corporate status. I believe I have
  been discriminated against because of my age (59
  1/2) in violation of the Federal Age
  Discrimination in Employment Act of 1967, as

Id. Lynch states the "EEOC did not make any findings" with respect to his Charge of Discrimination. Lynch Answers to Interrogatories at 2.

In support of their Motion, as it relates to the restructuring of the Salaried Plan and the recapture of assets deemed surplus, the Defendants argue the restructuring and recapture were effected in accordance with the provisions of the Salaried Plan and of ERISA. They further argue the recapture was legal because all accrued benefits through the effective date of the restructuring had been met by the purchase of the annuities.

In opposition to the Motion, Lynch asserts the restructuring and recapture of excess assets violated ERISA because Lynch was not given adequate notice of the restructuring prior to its implementation. Lynch also contends the restructuring and reversion violated ERISA because Salaried Plan liabilities in the form of benefits for future service, early retirement benefits, the increase in benefits approved by the Board of Directors when they approved the restructuring and reversion, and benefits accrued through the date of actual implementation of the restructuring were not satisfied by the annuities. Lynch further contends the recapture constituted the use of Salaried Plan assets for purposes other than for the exclusive benefit of participants in violation of the "exclusive benefit rule" of ERISA, 29 U.S.C. § 1103(c). Finally, Lynch contends the implementation of the restructuring and reversion constituted a breach of the fiduciary duties of the Defendants under ERISA.

In support of their Motion, as it relates to the Window, the Defendants argue the Window does not violate the ADEA because while it makes distinctions based on age, it is exempted from challenge under the ADEA by 29 U.S.C. § 623(f)(2) as a bona fide benefits plan. The Defendants also assert Lynch was denied Window benefits because he was not eligible under the terms of the Window as an employee of the International Division and because he missed the application deadline for Window benefits.

In opposition to the Motion as it relates to the Window, Lynch variously argues the Window is not a bona fide pension plan within the meaning of § 623(f)(2) because it discriminates against employees who are not senior management employees and because it was targeted against employees over the age of fifty, or employees in the class protected by the ADEA. He also challenges the bona fides of the Window on the ground that several high level non-corporate area managers were offered the Window and permitted to work past the retirement date mandated under the Window as exceptions to its terms. With respect to the denial to him of Window benefits, Lynch asserts he should have been offered Window benefits because he was eligible as a corporate area employee.


To prevail on a motion for summary judgment, the moving party must establish "there is no genuine issue as to any material fact and that [it] is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The district court's task is to determine whether disputed issues of fact exist, but the court cannot resolve factual disputes in a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986). All evidence submitted must be viewed in a light most favorable to the party opposing the motion. See Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). See also Todaro v. Bowman, 872 F.2d 43, 46 (3d Cir. 1989); Joseph v. Hess Oil, 867 F.2d 179, 182 (3d Cir. 1989).

Although the summary judgment hurdle is a difficult one to overcome, it is by no means insurmountable. As the Supreme Court has stated, once the party seeking summary judgment has pointed out to the court the absence of a fact issue,

  its opponent must do more than simply show that
  there is some metaphysical doubt as to the
  material facts. . . . In the language of the Rule,
  the non-moving party must come forward with
  `specific facts showing that there is a
  genuine issue for trial.' . . . Where the record
  taken as a whole could not lead a rational trier of
  fact to find for the non-moving party, there is no
  `genuine issue for trial.'

Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1356 (emphasis in original, citations and footnotes omitted).

The court elaborated on the standard in Anderson: "If the evidence [submitted by a party opposing summary judgment] is merely colorable . . . or is not significantly probative . . . summary judgment may be granted." 477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted). The Supreme Court went on to note in Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986): "One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and we think it should be interpreted in a way that allows it to accomplish this purpose." Id. at 323-24, 106 S.Ct. at 2553 (footnote omitted). Thus, once a case has been made in support of summary judgment, the party opposing the motion has the affirmative burden of coming forward with specific facts evidencing the need for trial. See Fed.R.Civ.P. 56(e). See also Aronow Roofing Co. v. Gilbane Bldg. Co., 902 F.2d 1127, 1128 (3d Cir. 1990) ("summary judgment will be granted where the non-moving party fails to `establish the existence' of an element essential to the case.").

A. The Restructuring and Reversion

1. Basis for Remedy Claimed by Lynch

Lynch contends a common law right of action for equitable restitution exists under ERISA and entitles him to demand restoration of the reversion to the On-Going Plan. Opposition at 66-68 (citing, among other cases, Plucinski v. I.A.M. Nat. Pension Fund, 875 F.2d 1052, 1056-58 (3d Cir. 1989); Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters & Employers Pension Fund, 847 F.2d 113, 120-22 (3d Cir. 1988), cert. denied, 488 U.S. 1041, 109 S.Ct. 865, 102 L.Ed.2d 989 (1989); Van Orman v. American Ins. Co., 680 F.2d 301, 311-314 (3d Cir. 1982); Murphy v. Heppenstall Co., 635 F.2d 233, 237-39 (3d Cir. 1980), cert. denied, 454 U.S. 1142, 102 S.Ct. 999, 71 L.Ed.2d 293 (1982)). Lynch then argues:

  Stevens should, therefore be, ordered to restore
  its illegal profits plus a 9 percent (9%) assumed
  investment rate of return on top of such restored
  figure since such figure was used as an actuarial
  assumption. This equitable restitution, however,
  only provides for restoration of ill-gotten gains
  and the disgorgement of such profits. The Court
  should also fashion a remedy of punitive damages
  in order ...

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