On Appeal from the United States District Court for the Eastern District of Pennsylvania (Civil Action No. 04-1090) District Judge: Honorable Legrome D. Davis.
The opinion of the court was delivered by: Garth, Circuit Judge
Argued: Friday, May 27, 2005
Before: SCIRICA, Chief Judge, ALITO and GARTH, Circuit Judges
Alfred DiGiacomo was a member of the Teamsters Union and a participant in the Teamsters Pension Trust Fund of Philadelphia and Vicinity (the "Fund") (the appellee here). In computing DiGiacomo's accrued pension benefits, the Fund disregarded some 10.5 years of his service time rendered prior to the passage of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. In so doing, the Fund relied on certain break-in-service provisions in its governing pension plan, which explicitly permitted the Fund to exclude DiGiacomo's pre-ERISA service time accrued prior to his break-in-service, as defined in the plan. DiGiacomo thereupon brought this ERISA action against the Fund, alleging that it incorrectly computed his accrued benefits by refusing to aggregate his pre-break and post-break service time.
The District Court granted the Fund's motion to dismiss, holding that ERISA permitted the Fund to disregard DiGiacomo's service time preceding his break-in-service, which occurred before ERISA's effective date of January 1, 1976. We will reverse and remand to the District Court for further proceedings.
The material facts underlying this appeal are straightforward and uncontested. From 1960 to 1971, DiGiacomo earned a total of 10.5 years of benefit service for "covered employment," which is defined in the Teamsters Pension Plan of Philadelphia and Vicinity, Amended and Restated, effective June 1997 (the "Plan"), as "any employment in a bargaining unit in a capacity for which Employer Contributions on behalf of an Employee are payable to the Trust Fund in accordance with the terms of a collective bargaining agreement with the Union." For the next five years, between 1972 and 1977, DiGiacomo worked outside covered employment and did not return to covered employment until some time in 1978. Upon returning to covered employment in 1978, he earned approximately eighteen years of additional benefit service.
DiGiacomo applied to the Fund for pension benefits on February 4, 2000. The Fund Administrator approved his application on March 17, 2000, crediting him with the appropriate amount of service time for his post-1978 employment.*fn1 The Fund, however, determined that the benefit service DiGiacomo earned between 1960 and 1971 was forfeited pursuant to the express provisions of the Plan.*fn2 DiGiacomo had incurred a break-in-service, as defined in the Plan, upon leaving covered employment from 1972 to 1977. As a result, the Fund was not required under the express provisions of the Plan to aggregate DiGiacomo's years of service credited before he incurred the break-in-service (from 1972-1977) in determining his accrued pension benefit. See Plan Article I, Section S.3(a).*fn3
After appealing to the appropriate administrative tribunals, and thereby exhausting his administrative remedies, DiGiacomo filed the present action in federal court.*fn4
The question we have to decide is whether, for accrual of benefit purposes, ERISA prevents pension plans from denying credit for pre-ERISA service time accrued prior to a break-in-service. DiGiacomo argues that ERISA (under § 204) trumps the Plan's break-in-service provisions, thus requiring the Fund to aggregate his pre-break and post-break service in determining his accrued benefit. The Fund contends that ERISA does not override a pre-ERISA plan's break-in-service provisions, but rather permits the Fund (under § 203) to deny DiGiacomo credit for 10.5 years of his pre-break service. Whereas DiGiacomo relies on Section 204 of ERISA, 29 U.S.C. § 1054, which governs the accrual of benefits, the Fund relies on Section 203 of ERISA, 29 U.S.C. § 1053, which regulates vesting.*fn5
In deciding this appeal, we must therefore examine the relationship between the vesting (§ 203) and accrual of benefit (§ 204) provisions of ERISA. As discussed more fully below, Congress in enacting these provisions has left us with a conundrum: § 203 specifically includes language permitting plans or employers to disregard pre-ERISA service time rendered before a break-in-service with regard to vested benefits; § 204, by contrast, contains no such language with regard to accrued benefits. While this appeal involves the accrual of benefits, as distinct from vesting, the Fund nonetheless urges us to read the relevant language in § 203 (allowing the disregard of service time prior to ERISA and prior to a break-in-service for vesting purposes)into the text of § 204 (lacking similar language for accrual of benefit purposes).
We begin by observing that the Supreme Court, in Central Laborers' Pension Fund v. Heinz, 541 U.S. 739, 749 (2004), articulated the important distinction between vesting and accrual. Accrual, as the Supreme Court noted, is "the rate at which an employee earns benefits to put in his pension account." Id. (citing 29 U.S.C. § 1054). Vesting is "the process by which an employee's already-accrued pension account becomes irrevocably his property." Id. (citing 29 U.S.C. § 1053 and Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 366 n.10 (1980)). Vested benefits, then, are the "nonforfeitable" subcategory of accrued benefits. 29 U.S.C. § 1002(19).*fn6
ERISA § 204(b)(1)(D) provides for the accrual of benefits for pre-ERISA service based upon an employee's "years of participation" in a plan. 29 U.S.C. § 1054(b)(1)(D).*fn7 Moreover, § 204(b)(4) starts the clock for "participation" at "the earliest date on which the employee is a participant in the plan" and further notes that such participation is included in the "period of service required to be taken into account" under § 202(b).*fn8 As such, in calculating the credited service time for accrual purposes, the statute provides a cross-reference to § 202(b), which establishes the minimum participation standards concerning employee benefit rights. That subsection provides, with some exceptions, none of which are relevant here, "all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of subsection (a)(1) of this section." 29 U.S.C. § 1052(b)(1) (emphasis added).
Pursuant to the plain language of the statute, the Fund was required to credit DiGiacomo with "all years of service" in computing his accrued pension benefits, including his 10.5 years of pre-break service. Nothing in § 204 of ERISA allows the Fund to apply its ...