United States District Court, W.D. Kentucky, Louisville
MEMORANDUM OPINION AND ORDER
JOHN G. HEYBURN, II, Senior District Judge.
This matter comes before the Court on motions arising from a remand by the Sixth Circuit Court of Appeals. Corley has filed a motion for summary judgment, and Defendants have filed a motion to dismiss Corley's complaint. In essence, the parties continue to dispute the lump sum amount due to Corley under his Commonwealth Industries Retirement Plan (the "Plan") in accordance with the Employee Retirement Income Security Act ("ERISA").
Several issues, both procedural and substantive, require the Court's attention. The Court has carefully reviewed the Sixth Circuit's opinion and has conducted several hearings with the parties to address various issues. The Court appreciates the assistance of counsel in helping to resolve these difficult issues. The Court will first set forth the exact circumstances which led us here and then address the parties' motions.
Nine retirees filed this putative class action against their former employer Commonwealth Industries, Inc., its cash balance pension Plan, and its Benefits Committee alleging underpayment in violation of ERISA. They argued that the Plan failed to include an early retirement subsidy in its benefits calculations.
The Pre-1998 Plan allowed early retirement for employees who had completed five years of service and reached the age of 55, with benefits payable in monthly payments. In 1998, Commonwealth converted its plan into a cash balance Plan and introduced an additional lump sum payment option. Under the Plan, an account's initial cash balance was the value of the benefits each participant had accrued. All of the original plaintiffs elected to take their benefits in the form of a lump sum payment. Corley received his payment on March 1, 2002, and he filed an administrative claim challenging the amount of it. After he lost his administrative claim and appeal, he and the other plaintiffs filed suit. They claimed that after Defendants converted the Plan to a cash balance plan, it failed to give beneficiaries the full value of their accrued benefits, specifically the value of the pre-amendment accrued early retirement subsidy. See Fallin v. Commonwealth Indus., Inc., 695 F.3d 512, 514 (6th Cir. 2012).
This Court granted Defendants' motion to dismiss eight of the plaintiffs' claims on statute of limitations grounds, leaving Corley as the sole Plaintiff. On December 3, 2008, this Court entered summary judgment in Defendants' favor, determining that the $135, 265.68 lump sum payment Corley received was properly calculated. The plaintiffs appealed.
On August 23, 2012, the Sixth Circuit affirmed the dismissal of the eight other plaintiffs' claims but vacated and remanded the dismissal of Corley's claim. See id. The Sixth Circuit found that the Benefits Committee's interpretation of the Plan's terms to not include an early retirement subsidy in Corley's lump sum payment was not arbitrary or capricious. See id. at 516. The Sixth Circuit found further support for this position in a regulation promulgated by the Treasury Department: "if a plan instead defines the early-retirement benefit as the present value of the normal retirement annuity benefit'-which is what this plan does-then it need not include the subsidy." Id. at 516 (citing 26 C.F.R. § 1.411(a)-11(a)(2)). The result, therefore, is that Corley was entitled to the present value of the normal retirement benefit for his lump sum payment. See id.
It then turned to Corley's claim that the Benefits Committee's calculation of his lump sum payment violated ERISA's anti-cutback rule, which provides that a plan amendment shall not decrease a participant's "accrued benefit." 29 U.S.C. § 1054(g). The Sixth Circuit ruled that Corley's subsidy was accrued due to his satisfaction of the 5-year service condition before the Pre-1998 Plan was amended and the 55-yr-old age condition afterward. Thus, the Plan could not reduce his benefits attributable to pre-amendment service. See Fallin, 695 F.3d at 517.
The only question remaining was whether Defendants had actually improperly reduced Corley's benefits. A necessary threshold question was how to characterize the benefit Corley selected. The Sixth Circuit remanded to this Court, stating:
On remand, the district court should consider whether the benefits payable to Corley under the relevant versions of the Plan constituted "an early retirement benefit" or "a retirement-type subsidy" which would be protected from elimination or reduction, or "an optional form of benefit" which would only be protected from elimination.
Id. Upon reviewing the mandate, this Court held an immediate conference on October 7, 2012. The Court remanded the matter to the Benefits Committee "for a full and fair review to comply with the ruling of the United States Court of Appeals" and removed the case from its docket pending further order. The Court's intention was that Corley's benefit claim resume again.
That is exactly what appears to have occurred. On October 25, 2012, the Benefits Committee met, considered the Sixth Circuit's opinion, and reviewed its benefit calculations. On November 5, Defendants' counsel e-mailed Corley's counsel the Benefits Committee's resolution denying any adjustment in his lump sum payment, as well as letter adopted by the resolution (the "Mercer letter") analyzing Corley's claim. The Mercer letter determined that Corley's benefits had not been impermissibly reduced in violation of ERISA's anti-cutback rule and attached supporting information, including a calculation of Corley's lump sum benefits. The e-mail also reiterated:
Under the Cash Balance Plan that Mr. Corley sued upon, he has sixty (60) days to appeal the Benefits Committee's decision for a full and fair hearing ...