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Hein v. F.D.I.C.

June 28, 1996

JOHN M. HEIN; MERLENE HEIN

v.

FEDERAL DEPOSIT INSURANCE CORPORATION; BURTON MCNEIL, ACTING AS HOWARD SAVINGS BANK PENSION PLAN ADMINISTRATOR AND HOWARD SAVINGS BANK PENSION PLAN;

BURTON MCNEIL AND THE RETIREMENT PLAN OF THE HOWARD SAVINGS BANK,

APPELLANTS.



On Appeal from the United States District Court for the District of New Jersey

(D.C. Civil Action No. 93-cv-02418)

Before: BECKER, ROTH and LEWIS, Circuit Judges

ROTH, Circuit Judge

Argued December 12, 1995

(Opinion Filed June 28, 1996)

OPINION OF THE COURT

The question presented in this appeal is whether Section(s) 204(g) of the Employee Retirement Income Security Act ("ERISA") allows an individual to qualify for unreduced early retirement benefits despite the fact that he does not qualify for such benefits under the plain language of the relevant company retirement plan. John Hein worked for The Howard Savings Bank ("Bank") for thirty-seven years. Shortly before Hein planned to take early retirement, the Bank was taken over by the Federal Deposit Insurance Corporation ("FDIC") as receiver in bankruptcy. On October 2, 1992, the FDIC sold the Bank's corporate assets to successor First Fidelity but retained control of the Bank's corporate pension plan ("Plan"). Appellees John and Merlene Hein contend that ERISA Section(s) 204(g) requires the corporate pension plan and its administrator to count John Hein's service with the successor corporation so that Hein can "grow into" the unreduced early retirement benefits provided by the pension plan.

The district court ruled that, pursuant to ERISA Section(s) 204(g) and the "same desk rule" enunciated in Gillis v. Hoechst Celanese Corp., 4 F.3d 1137 (3d Cir. 1993), cert. denied, ___ U.S. ___, 114 S. Ct. 1369 (1994), and cert. denied, ___ U.S. ___, 114 S. Ct. 1540, the Plan was required to credit Hein with time served with the successor corporation. Relying on our more recent and factually applicable decision in Dade v. North American Philips Corp., 68 F.3d 1558 (3d Cir. 1995), we will reverse and remand this case to the district court to enter judgment for appellants.

This issue was presented to the district court on cross-motions for summary judgment. The district court had jurisdiction pursuant to 28 U.S.C. Section(s) 1331 and 29 U.S.C. Section(s) 1132(e). We have jurisdiction over the final order of the district court pursuant to 28 U.S.C. Section(s) 1291.

I.

John Hein became an employee of the predecessor of The Howard Savings Bank on September 19, 1955, and soon thereafter became a participant in the Bank's employee pension benefit plan. See Retirement Plan of Howard Savings Bank (revised Dec. 1, 1985); App. Vol. I at 22. Section V of the Plan offered an early retirement option. App. Vol. I at 36-37. Normally, individuals exercising this early retirement option receive benefits reduced actuarially to account for a longer anticipated payment period. Those individuals who met criteria stated in the Plan, however, were entitled to "unreduced early retirement benefits." These benefits included a subsidy from the Bank so that from the date of early retirement a retiree would receive benefit payments equivalent to those which he would have received had he postponed retirement until age sixty-five.

According to the Plan, unreduced early retirement benefits were available to any Plan member who attained any combination of the ages and the years of Vesting Service, combinations set forth below on his Actual Retirement Date:

Age on Actual Vesting Service on Retirement Date Actual Retirement Date

55 35 56 34 57 33 58 32 59 31 60 30 61 29 62 20 63 20 64 20 *fn1 App. Vol. I at 37.

In the spring of 1992, Hein requested and received from the Plan administrator an estimate of his monthly benefit in the event he retired on January 1, 1993. On October 2, 1992, the FDIC was appointed receiver for the Bank. The FDIC issued a notice to all Bank employees informing them that their employment with the Bank was terminated. At that time, Hein was fifty-four years old with thirty-seven years of service at the Bank. That same day, the FDIC and the First Fidelity National Bank, N.A., entered into a Purchase and Assumption Agreement whereby First Fidelity agreed to assume certain assets and liabilities of The Howard Savings Bank. The Plan was not included as part of the assets and liabilities assumed by First Fidelity. The Plan remained with the FDIC, in its receivership capacity. Burton McNeil, an FDIC employee, was named Plan Administrator.

First Fidelity continued to operate all branches of The Howard Savings Bank without interruption, and Hein continued to work in the same position with First Fidelity that he held with The Howard Savings Bank before the takeover.

On December 31, 1992, Hein retired from First Fidelity. In January 1993, he requested the unreduced early retirement benefits that he claimed were due him under the Plan. In February 1993, his request was denied, and he was awarded reduced retirement payments of approximately one third the amount he would receive with the unreduced early retirement benefit. *fn2 McNeil denied Hein's administrative appeal, and Hein filed suit in the district court against the FDIC, the Plan, and Burton McNeil.

Hein claims *fn3 that he was entitled under ERISA to unreduced early retirement benefits (Count I). He also raises a promissory estoppel claim (Counts II and III), alleging that his reliance in making retirement decisions upon the Plan actuary's estimated benefit calculation and upon the Summary Plan Description ("SPD") estopped defendants from denying him unreduced early retirement benefits. Furthermore, Hein claimed that defendants breached their fiduciary duties (Counts IV, V, and VI). These claims were presented to the district court on motions and cross-motions for summary judgment.

The district court ruled for Hein on Count I of his complaint and awarded him unreduced early retirement benefits. The district court found that Hein never qualified for unreduced early retirement benefits under the express terms of the Plan because he did not reach age fiftyfive while employed by the Bank. Nevertheless, the district court granted Hein unreduced early retirement benefits pursuant to ERISA 204(g). 29 U.S.C. Section(s) 1054(g) (1994). The district court relied on our decision in Gillis v. Hoechst Celanese Corp., 4 F.3d 1137 (3d Cir. 1993), cert. denied, ___ U.S. ___, 114 S. Ct. 1369 (1994), and cert. denied, ___ U.S. ___, 114 S. Ct. 1540, which interpreted Section(s) 204(g) as allowing years of service accumulated while working for a new employer to be counted towards qualifying for early retirement benefits under the original employer's retirement plan. Id. at 1147-48. The district court applied this "same desk rule" and held that Hein should be permitted to "grow into" the Plan's unreduced early retirement benefits. Because Hein turned fifty-five while working in the same position at First Fidelity that he had held at the Bank, the court reasoned that he had fulfilled the Plan requirements and was entitled to unreduced early retirement benefits.

The court did not reach Hein's promissory estoppel or fiduciary duties claims and did not address any of the claims against the FDIC. *fn4 In a subsequent ruling, the district court awarded counsel fees and court costs totaling $70,353.83 to the Heins' attorneys, pursuant to 29 U.S.C. Section(s) 1132(g)(1). McNeil and the Plan appealed.

II.

Appellants contend that the district court erred as a matter of law in its application of ERISA Section(s) 204(g) to Hein's pension claim. Our review of the district court's order granting summary judgment is plenary. Wheeler v. Towanda Area School Dist., 950 F.2d 128, 129 (3d Cir. 1991); Public Interest Research Group of N.J. v. Powell Duffryn Terminals, Inc., 913 F.2d 64, 71 (3d Cir. 1990), cert. denied, 498 U.S. 1109 (1991). We apply the same test that the district court should have applied initially. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038 (1977).

We have often remarked on ERISA's broad scope and far-ranging effect. See, e.g., Northeast Dept. ILGWU Health and Welfare Fund v. Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147, 162 (3d Cir. 1985) ("ERISA is a comprehensive benefit scheme designed to protect employees enrolled in pension and benefit plans."). Nevertheless, ERISA neither mandates the creation of pension plans nor dictates the benefits to be afforded once a plan is created. Dade v. North American Philips Corp., 68 F.3d at 1561 (citing Hlinka v. Bethlehem Steel Corp., 863 F.2d 279, 283 (3d Cir. 1988); H.R.Rep. No. 807, 93d Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 4670, 4677)). Only the words of the Plan itself can create an entitlement to benefits. Consequently, "we are required to enforce the Plan as written unless we can find a provision of ERISA that contains a contrary directive." Id. at 1562.

Our inquiry, therefore, begins with the words of the Plan itself. In relation to early retirement options, the Plan provides:

(5)(a) Any Member, . . . may retire on the first day of any calendar month in which he attains his fifty-fifth (55th) birthday and ten (10) Years of Service herein termed "Early Retirement Date."

(b) If a Member retires on his Early Retirement Date, . . .

(ii) payments of Retirement Income shall commence, at the option of the Member, either (x) on his Normal Retirement Date (in which event he will receive the amount of Retirement Annuity Benefits and/or Retirement Benefits which have accrued to his Early Retirement Date) or (y) on the first day of any month coinciding with or following his Early Retirement Date (in which event he will receive [actuarially reduced benefits]); provided, however, the foregoing reduction in benefits shall not be made if the Member has attained any combination of the ages and the years of Vesting Service, combinations set forth below on his Actual Retirement Date:

Plan Section(s) V(5); App. Vol. 1 at 36-37 (emphasis added). The colon is followed by the chart of ages and years of service set forth earlier in this opinion.

The district court found that:

Under the plain language of the Plan itself, Mr. Hein does not qualify for unreduced benefits because he did not reach one of the specific qualifying combinations of age and years of service. The table set forth in the Plan is not offered as an illustration of the qualifying combinations, but rather as an exhaustive list of those combinations. Under the language of the Plan itself, Mr. Hein did not qualify for unreduced retirement benefits.

Hein v. FDIC, No. 93-2418, slip op. at 8 (D.N.J. Sep. 13, 1994). Our analysis of the relevant Plan provisions confirms the district court's ...


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