which an employee has at least one thousand (1,000) hours of service." (See § 1.46 of the 1984 plans).
24. For vesting purposes, the relevant twelve (12) consecutive month period is the plan year. (See plans at § 1.46).
25. The plan year begins on March 1 and ends on the last day of February. (See plans at § 1.34).
26. On February 26, 1985, Dr. Ferrara's employment with APAA terminated.
27. Dr. Ferrara worked at least 1,000 hours for APAA in each of the following time periods: August 1, 1982 through February 28, 1983; March 1, 1983 through February 29, 1984; and March 1, 1984 through February 26, 1985.
28. When Dr. Ferrara's employment came to an end, he requested payment of one hundred percent (100%) of the benefits under the plans.
29. APAA has refused to pay one hundred percent (100%) of the benefits claimed by Dr. Ferrara, contending that Dr. Ferrara failed to complete three (3) years of service under the plans.
After trial the parties agreed to reopen the case and stipulate to the following additional facts:
30. The funds at issue in this action are solely and entirely employer contributions to the plan.
31. During the years in question, the amount of employer contributions made to the accounts of Dr. James Esler, Plan Administrator, was the maximum annual contribution permitted by law (i.e. $ 30,000.00 per annum).
32. The fund in the accounts of plaintiff, Dr. Frank Ferrara, have been frozen pending the resolution of this dispute; there has been no distribution of those funds to any plan participant.
As outlined in the stipulated findings of fact, plaintiff seeks to recover one hundred percent (100%) of benefits the APAA allegedly owes him under their pension and profit sharing plans. Plaintiff argues that in failing to pay the claimed benefits, APAA breached the employment agreement, the pension and profit sharing plans, and violated ERISA.
Plaintiff brings this action under 29 U.S.C. § 1132(a)(1)(B)(1982). That provision allows, inter alia, a suit to recover benefits due under an employee benefit plan. We must first determine the appropriate standard of review in § 1132(a)(1)(B) actions challenging denials of benefits based on plan interpretations.
In Firestone Tire and Rubber Co. v. Richard Bruch, 489 U.S. 101, 57 U.S.L.W. 4194, 4198, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989) the Supreme Court held that we should review benefit plan denials under a de novo standard "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." If the plan provides the administrator with the requisite discretionary authority, we must review his decision under the arbitrary and capricious standard. Thus, the plaintiff will recover only if he can show that the denial of benefits was either a "clear error" or was "irrational." Shiffler v. Equitable Life Assurance Society of the United States, 838 F.2d 78, 83 (3d Cir. 1988). However, if the benefit plan gives discretion to an administrator who is operating under a possible conflict of interest, we must weigh that conflict as a factor in determining whether the administrator abused his discretion. Bruch, 489 U.S. 101 at 115, 109 S. Ct. 948 at 956-57.
The 1984 APAA plans at § 6.2 provide that "the Plan Administrator shall administer the Plan in accordance with its terms and shall have the power to determine all questions arising in connection with the administration, interpretation, and application of the Plan." Under Bruch, we find this language clearly gives the plan administrator sufficient discretionary authority in interpreting plan language such that we must apply the "arbitrary and capricious" standard of review. As Bruch instructs, in evaluating the question of the administrator's potential conflict of interest, we note that the APAA plan administrator is Dr. James W. Esler, a physician with the APAA and a participant in both plans. The provisions of the plan do not suggest, however, that Dr. Esler operated under a significant conflict of interest. The pension plan provides that forfeitures shall not increase the benefits of any member; instead, forfeitures shall be applied in the following year to reduce the employer's contributions. (See 1984 pension plan at § 3.3). Plaintiff has not shown that Dr. Esler is the employer or that he indirectly would benefit from the reduction in the employer's contributions.
The profit sharing plan provides that forfeitures shall be allocated among the participants' accounts. (See 1984 profits sharing plan at § 3.4). The profit sharing plan further provides, however, that if a participant has already received the maximum amount allowable by law, the excess shall be distributed among the remaining participants. In the instant matter, Dr. Esler received the IRS maximum ($ 30,000) and could not benefit from the forfeiture. Thus, we do not find that Dr. Esler rendered his decision under any significant conflict of interest.
Plaintiff and defendant agree that because plaintiff commenced employment in 1982, for purposes of determining plaintiff's eligibility under the plan, we should look to the 1976 plans. Both parties also agree that because the plan administrator made his decision after 1984, for purposes of determining plaintiff's vesting rights, we should look to the 1984 plans.
In pertinent part, the 1976 plans provide as follows:
All employees are eligible [for participation in the plan] and each shall be entitled to become Participants of this Plan after satisfying the following requirements:
The Employee has completed 1,000 Hours of Service in the employment of the Employer within twelve (12) consecutive months commencing with the date on which the Employee shall first perform an Hour of Service for the Employer.(2.2)