The opinion of the court was delivered by: WEBER
Plaintiffs have brought an action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. to recover pension benefits they claim defendant is wrongfully withholding. Defendant
admits withholding the full amounts in question, but responds that ERISA does not prohibit its actions. Both sides have moved for summary judgment. At the outset, we find this case well-suited for summary judgment. The parties have agreed to the relevant facts by stipulation, which presents us with one question: whether defendant's refusal to pay these pension benefits constitutes a "forfeiture" in violation of ERISA.
Plaintiffs are 25 former management employees of U.S. Steel Corporation who worked for various lengths of time in the company's Venezuelan mining subsidiary, Orinoco Mining Company ("Orinoco"). The evidence indicates that those employees received salaries and benefits similar to those of their counterparts in other foreign counties and the United States. In addition, according to Venezuelan law, all workers in Venezuela are entitled to certain benefits in excess of what might be considered typical compensation in the United States. Two such benefits are payments for "cesantia" and "antiguedades." Roughly translated, the terms mean "unemployment aid" and "payment for years of service," respectively (referred to collectively as "severance benefits"). These severance benefits consisted of a month's salary multiplied by total years of service, paid in lump sum to all employees upon separation from the company. See Defendant's Appendix to Motion for Summary Judgment, Exhibit F. U.S. Steel Corporation was the sole contributor to the trust from which payments were drawn. The company ultimately paid about $4,000,000 in severance benefits to its Orinoco employees pursuant to Venezuelan law. Several plaintiffs received lump sum payments of more than $200,000. See Plaintiffs' Appendix to Motion for Summary Judgment at 17 and 20.
In 1974, Venezuela took steps to nationalize Orinoco Mining Company. U.S. Steel agreed to provide technical assistance to the new state-owned company during the transition. Following this transition, U.S. Steel would have no part in ownership or management of the new company. Anticipating the resulting transfer or retirement of all employees in Venezuela, U.S. Steel offered them a plan providing for various options in receiving severance benefits. See id. at 21-24. The choice of lump sum payments -- the choice made by plaintiffs -- triggered a provision in the company's pension plan that lies at the heart of this dispute. Section 3.9(a) of the plan provided that severance benefits would be deducted, or set off, from the non-contributory pension U.S. Steel employees normally would receive. Some plaintiffs who received large severance payments complain that defendant's recovery by setoff will preclude them from collecting any non-contributory benefits until the mid-1990's.
The parties do not dispute the existence or the effect of the pension plan provision authorizing defendant to set off severance benefits against pension payments. Copies of the 1976 and 1977 U.S. Steel pension plan filed with the court both provide in section 3.9(a) that:
If any participant is or shall become entitled to or shall be paid any discharge, liquidation or dismissal or severance allowance or payment of similar kind . . . under any policy of any of the Employing Companies . . . or by reason of any law, then the total amount of such severance allowance paid or payable to him shall be deducted from or charged against the amount determined in accordance with paragraphs 3.3(b), (c) and (d) and paragraphs 3.4 and 3.5 [these paragraphs contain the Plan's formula for calculating the amount of pension payments.]
The parties have stipulated that section 3.9(a) applied at all relevant times and that "plaintiffs were aware that any pension ultimately received from the Plan would be calculated including a deduction for any antiguedades and cesantia received from [Orinoco] in accordance with the published policies of [Orinoco] and the Non-Contributory Pension Rules of the Plan." Stipulation, paragraphs 10 and 12. The remaining question is whether this deduction is permissible under ERISA.
II. THE SUPREME COURT'S CONSTRUCTION OF 29 U.S.C. § 1053.
Plaintiffs bring their action under 29 U.S.C. § 1132(a) which authorizes civil enforcement of claims for pension benefits.
They contend that defendant's refusal to pay their vested benefits constitutes a forfeiture in violation of 29 U.S.C. § 1053. Section 1053 states simply that "Each pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age."
The United States Supreme Court faced this issue in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 68 L. Ed. 2d 402, 101 S. Ct. 1895 (1981), which we have no doubt controls our decision in this case. The chief difference between Alessi and the case at bar is the type of income set off against pension benefits. In Alessi, the set off involved workers' compensation. We must determine by the same analysis whether ERISA prohibits this setoff which stems from Venezuelan labor law.
The plaintiffs in Alessi were retired employees who had obtained workers' compensation awards. The administrators of their pension plan reduced their retirement benefits by the amount of this compensation. The retirees argued that they were being denied vested benefits in violation of 29 U.S.C. § 1053. In defining the issue at stake, the Court made a fundamental distinction which we believe controls the case at bar. Section 1053 unmistakably protects an employee's right to his vested pension benefits. On the other hand, ERISA exerts little control over the content of the benefits themselves. The parties to the pension plan are responsible for deciding the actual benefits available under the plan. As the Court stated in Alessi :
The statutory definition of "nonforfeitable" assures that an employee's claim to the protected benefit is legally enforceable, but it does not guarantee a particular amount or a method for calculating the benefit. As we explained last Term, "it is the claim to the benefit, rather than the benefit itself, that must be 'unconditional' and 'legally enforceable against the plan. '"
451 U.S. at 512 (quoting Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 372-73, 64 L. Ed. 2d 354, 100 S. Ct. 1723 (1980)). The Court thus held that it is permissible under ERISA for a pension plan to set off workers' compensation against expected retirement benefits. In so doing, the Court established that ...