United States Court of Appeals, Eleventh Circuit
United States Court of Appeals, Eleventh Circuit
3d 1077
63 USLW 2352, 18 Employee Benefits Cas. 2323
This is an appeal from a final decision of the district court granting summary
judgment to all defendants in this certified class action under the Employee
Retirement Income Security Act, 29 U.S.C. Sec. 1001 et seq. ("ERISA"). The
parties stipulated to all the facts in this case and agreed that disposition should
be by summary judgment. We affirm in part and reverse in part.I.
2
Plaintiff-appellant Robert Smith ("Smith") was an employee of defendantappellee America's First Credit Union ("the Credit Union") from January 18,
1971 to July 31, 1991. The Credit Union employs approximately 215 people,
among whom are members of the certified plaintiff class.
When Smith began his employment, the Credit Union maintained two
retirement plans: the Retirement Plan ("Pension Plan") and the Retirement
Savings Fund ("Savings Plan"). Smith alleges that in 1988, the Credit Union
created a third pension plan, known as the Rule of 90, which allowed
employees to retire with full benefits when the sum of their age plus years of
service equalled at least 90. The essence of Smith's complaint is that the Credit
Union is liable for retroactively amending each of these three plans in a manner
that reduced the participants' accrued benefits in violation of ERISA.2 In
addition, Smith asserts that Principal has a fiduciary relationship with the Credit
Union and is, therefore, also liable for the alleged ERISA violations.
The district court concluded that the Credit Union did not retroactively amend
the Pension and Savings Plans, and that the amendments thus did not reduce
the plaintiff's accrued benefits. Because the court found no illegal amendments,
the court entered summary judgment for Principal without reaching the issue of
Principal's fiduciary status. Moreover, the district court concluded that because
Smith would never become eligible for Rule of 90 benefits, he was an improper
class representative for the Rule of 90 Plan. Accordingly, the court "rescinded"
its certification of the Rule of 90 subclass and entered summary judgment for
defendants on Smith's individual Rule of 90 claim, without prejudice to the
claims of the unnamed members of the subclass.
We conclude that the trial court did not err in granting summary judgment on
Smith's claims pertaining to the Rule of 90 Plan, but did err in finding that the
amendments to the Pension and Savings Plans did not retroactively decrease
accrued benefits. In addition, we affirm the court's order granting summary
When Smith joined the Credit Union, the Pension Plan provided that normal
retirement age for Plan participants was 62.3 During an October 1989 meeting,
the Credit Union Board ("the Board") discussed and orally approved several
amendments to the Pension Plan, including one that would raise the retirement
age from 62 to 65; however, the meeting's minutes reflected no such action. In
October 1989, subsequent to this meeting, the Credit Union "posted and/or
distributed"4 a notice advising that it was changing the retirement age to 65 and
that in order to receive the maximum pension accrual, an employee would have
to work 35 years.5 In January 1990, the Credit Union "posted and/or
distributed" a second notice.6
On May 16, 1990, the Board met and, according to the minutes, the members
"reaffirmed" the Pension Plan amendments they recalled "approving" at the
October 1989 meeting. On February 1, 1991, a Credit Union officer signed a
restatement of the Pension Plan containing the amendments,7 but with an
effective date of February 1, 1990.
The district court concluded that while the Board did not "formally" amend the
Pension Plan until February 1, 1991, circumstantial evidence demonstrated that
"the amendments were effectively made in October 1989." Noting that the
Board made the amendments in October 1989 and notified employees by notice
in October 1989 and again in January 1990, the court reasoned that while the
Board formalized the amendments retroactively, it did not apply them
retroactively. We cannot agree.
10
11central policy goal of ERISA is to protect the interests of employees and their
A
beneficiaries in employee benefit plans. This goal would be undermined if we
permitted oral modifications of ERISA plans because employees would be unable to
rely on these plans if their expected retirement benefits could be radically affected
by funds dispersed to other employees pursuant to oral agreements.
12
Id. at 960 (citations omitted); see also National Companies Health Benefit Plan
v. St. Joseph's Hosp., 929 F.2d 1558, 1571 (11th Cir.1991); Alday v. Container
Corp. of America, 906 F.2d 660, 665 (11th Cir.1990), cert. denied, 498 U.S.
1026, 111 S.Ct. 675, 112 L.Ed.2d 668 (1991). Other circuits have adopted
similar rules. See, e.g., Schoonmaker v. Employee Sav. Plan of Amoco Corp.,
987 F.2d 410, 412 (7th Cir.1993); Miller v. Coastal Corp., 978 F.2d 622, 624
(10th Cir.1992), cert. denied sub nom. Miller v. Pension Plan for Employees of
Coastal Corp., --- U.S. ----, 113 S.Ct. 1586, 123 L.Ed.2d 152 (1993) ("An
employee benefit plan cannot be modified, however, by informal
communications regardless of whether those communications are oral or
written.") (citations omitted); Coleman v. Nationwide Life Ins. Co., 969 F.2d
54, 59 (4th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1051, 122 L.Ed.2d
359 (1993).
13
14
The difficulties are clearly illustrated in this case where the notices to the
employees did not, and perhaps, could not, completely or adequately explain
the modifications to the Pension Plan. Indeed, in February 1990, the time the
Credit Union would have the modifications retroactively apply, the employees
would have been unable to completely describe the plan's terms, specify its
benefits or coverage, or define eligibility requirements or limitations. The
notices the Board "posted and/or distributed" did not protect the interests of the
employees and their beneficiaries. For reasons such as these, we conclude that
informal written modifications cannot save oral amendments from the
requirements of ERISA.
15
can be implemented or applied only after the amendment has been appropriately
adopted in a formal, complete and written form. We find that in this case the
Credit Union did not formally adopt the amendments in written form until
February 1, 1991, and therefore, that Smith and the members of the Pension
Plan subclass are entitled to benefits accrued until that date under the terms that
existed before the amendments.
B. The Savings Plan
16
Until 1990, the terms of the Savings Plan required the Credit Union to make
contributions for all participants equal to 5% of compensation, and a
contribution of 10% for those who became participants prior to August 15,
1981. Smith became an active participant before August 15, 1981.
17
18
We recognize that in this case the December 21, 1989 notice provided a clear
statement of the change being made. However, the Board executed no formal
written change to the Plan until December 28, 1992. Therefore, for the same
reasons expressed in relation to the Pension Plan, we conclude that the Board's
approval of the informal modification, albeit in conjunction with sufficiently
explanatory written notices, did not satisfy ERISA's requirements. Accordingly,
Smith is entitled to benefits accrued until the day his employment terminated,
and members of the Savings Plan subclass are entitled to benefits accrued until
December 28, 1992, under the terms that existed before the amendment.
C. The Rule of 90
19
Administration, which had taken control of the Credit Union, terminated the
Rule of 90. 9
20
The district court concluded that the Credit Union adopted the Rule of 90 as an
informal ERISA plan. However, because Smith was age 44 with 20 years of
service at the time he left the Credit Union, the court concluded that he was not
then, nor would he ever become, eligible to receive benefits under the Rule of
90 Plan. The court therefore declared Smith an inappropriate class
representative and "rescinded" certification of the Rule of 90 subclass, entering
summary judgment against Smith on his individual Rule of 90 claim, without
prejudice to the unnamed members of the Rule of 90 subclass. We find no error
in the district court's holding in this regard and affirm the dismissal of this
claim.
D. Principal as Fiduciary
21
The district court did not address the issue of Principal's fiduciary status
because it granted summary judgment against Smith on all claims. Because
several of Smith's claims survive after appeal, we must now reach the merits of
the argument.
22
Based on Useden v. Acker, 947 F.2d 1563 (11th Cir.1991), cert. denied sub
nom. Useden v. Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, --U.S. ----, 113 S.Ct. 2927, 124 L.Ed.2d 678 (1993), we reject Smith's arguments
that Principal is a fiduciary because of its involvement in the attempted
amending of the Pension Plan. In Useden, this Court held that a law firm, which
had advised an ERISA-governed profit sharing plan and trust on numerous
facets of its activities, was not a fiduciary. Id. at 1577. The Court reached this
result even though the firm had allegedly drafted amendments to the plan on its
own initiative, id., and despite evidence suggesting that the firm knew or
should have known that certain plan activities violated ERISA principles, id. at
1569.
23
In Useden, this Court noted that in some situations, an advisor's influence may
become so great that it confers effective discretionary authority. Id. at 1578 n.
18. However, the Court rejected "a rule equating a law firm's advice in favor of
a transaction with the named fiduciaries' actual decision to enter the
transaction." Id. at 1578. The Court reasoned that imposition of fiduciary
liability in such cases might "deter consultants such as attorneys from assisting
plans." Id.
24
25
III.
26
For the foregoing reasons, we affirm the district court's order granting summary
judgment to defendants on Smith's claims pertaining to the Rule of 90 Plan, but
we reverse the district court's order granting summary judgment to defendants,
except Principal, on the Pension Plan and Savings Plan claims. We affirm the
order granting summary judgment to Principal on all claims. We remand this
case to the district court for further proceedings consistent with this opinion.
27
Under its contract with the Credit Union, Principal provides "regular" services
(which include annual reports of the value of the total fund, assistance with
Federal Reporting and Disclosure requirements, continuing assistance with
respect to legislative changes that might affect the plan, and assistance in plan
revisions), recordkeeping for non-retired participants, and actuarial service
The certified plaintiff class comprises three subclasses that conform to the three
plans Smith is challenging: (1) the Pension Plan subclass consists of all
participants in the Credit Union's Pension Plan during the period February 1990
to February 1991; (2) the Savings Plan subclass consists of current and former
employees of the Credit Union who were active participants in the Savings Plan
between January 1990 and December 1992; and (3) the Rule of 90 subclass is
composed of persons who were employees of the Credit Union between 1988
and 1991, and whose chronological age and years of service equalled 90 or
would have equalled 90 at any time prior to age 65
A participant's retirement benefits were based on the sum of 44% of his average
compensation up to the "integration level" (which was $550), plus 61% of
average compensation in excess of the integration level; and participants could
retire as early as age 55, subject to a reduction in benefits
The parties stipulated that the Credit Union "posted and/or distributed a notice
in the customary manner typically used to disseminate employee
communications and information to all employees."
The Pension Plan amendments include: (1) an increase in the normal retirement
age from 62 to 65, effective February 1, 1990; (2) a change in the calculation of
the benefit formula to 40% of average compensation up to the integration level,
plus 60% of average compensation in excess of the integration level, effective
February 1, 1990; (3) an increase in the integration level to the greater of
At the time of the termination, three employees had already retired under the
Rule, while a fourth, who was also eligible for immediate benefits, continued in
active employment. The Administration "grand-fathered in" the three who had
retired, but did so without providing for cost of living increases