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Bauer v. Bancorp

March 25, 2003


On Appeal From the United States District Court For the District of New Jersey (D.C. No. 00-cv-03230) District Judge: Honorable Garrett E. Brown, Jr.

Before: Becker, Chief Judge, McKEE and Hill Circuit Judges.

The opinion of the court was delivered by: Hill, Circuit Judge


Argued: November 4, 2002


Appellant John Bauer appeals from the district court order granting summary judgment for appellee Summit Bancorp (Summit) and denying his cross-motion for summary judgment on his claim (Count One) that Summit's Retirement Plan (Plan) violates the Employment Retirement Income Security Act of 1974 (ERISA), as amended, 29 U.S.C. 1001 et seq. because it excludes hourly employees. Based upon the following discussion, we affirm the judgment of the district court.


A. Facts

The material facts are undisputed. Bauer worked as a Summit sales representative for approximately eighteen and one-half years, from May 9, 1977, until November 6, 1995. He was compensated on an hourly basis, apparently to accommodate his schedule as a firefighter. Thereafter, for approximately 3.667 years, from November 7, 1995, until July 15, 1999, Bauer was compensated by Summit on a salaried basis. Neither party disputes that in each of the years that Bauer was employed, he completed at least 1,000 hours of service per year.

In 1999, after twenty-two years of employment with Summit, Bauer retired. He applied for his retirement benefits under the Plan. Summit's benefit administrators advised him that he was eligible to receive retirement benefits based upon only his 3.667 years of service as a salaried employee. Although his eighteen-plus years as an hourly employee were not counted in computing retirement benefits for the years he was ineligible to participate in the Plan as an hourly employee, they were counted in satisfying the Plan's five-year vesting period for the years he was eligible to participate in the Plan as a salaried employee. See Part I.B. infra.

B. The Plan

The Plan was first implemented in 1980. It was amended and restated in 1994 and again in 1997. The portions of the Plan pertinent to this appeal remain in substance unchanged over the years. See notes 4, 5 infra. They can be described in terms of the number of credited years of service as an employee in computing benefits, minimum participation/eligibility requirements, and minimum vesting standards.

"Employee" is defined in Section 1.19 of the Plan as "any person who is employed by an Employer who is compensated by a weekly, monthly or annual salary, regardless of the number of hours worked . . . ." (Emphasis added.). Benefits are calculated based upon a participant's years of service. Years of service are defined in Section 1.40 of the Plan to mean "a year or fraction of a year . . . during which a Participant is or was an Employee of the Company or a corporation or branch acquired by the Company . . . ." (Emphasis added.). A year of service is earned "for each calendar year in which [an Employee] is paid or entitled to payment for 1,000 hours by the Corporation."

An eligibility computation period is used to establish an employee's entitlement to participate in a qualified plan. Section 2.01 of the Plan, regarding minimum participation/eligibility standards, states:

2.01 Eligibility Requirements.

An Employee who was a Participant in the Prior Plan on June 30, 1997, shall continue his participation thereafter if he continues to be employed by an Employer. Any other Employee shall commence participation in the Plan on the first day of the month following the latest of:

(a) his 21st birthday;

(b) his completion of one Year of Service; or

(c) the date his Employer adopts the Plan.

Each Employee shall automatically become a Participant immediately upon becoming eligible in accordance with the foregoing requirements, and shall continue as a Participant for as long as he is an Employee . . . .

The second basic computation period is the vesting computation period. It is used to determine what portion of an employee's benefit is non-forfeitable at a given point in time. Section 7.01 of the Plan required that after five years of service, an employee was 100% vested:

7.01 Vested Percentage of Accrued Benefit.

Upon termination of his employment for any reason other than Retirement, a Participant shall be entitled to the following vested percentage of his accrued benefit:

Years of Service Vested Percentage Less than 5 0%

5 or more 100%

The Plan in this appeal is what has commonly been referred to over the last thirty years as a "salaried-only plan." Such a plan covers salaried employees of Summit and its subsidiaries, who are age 21 and above, and, who have completed one year of service. By its terms, Summit hourly employees are not eligible to participate in the Plan. As stated, years of service as an ...

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