The opinion of the court was delivered by: Ludwig, J.
Ludwig, J. February 23, 2011
Defendants move to dismiss the complaint, Fed. R. Civ. P. 12(b)(6). The motion will be denied because the complaint appears to state claims for relief that are "plausible on [their] face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (U.S. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007)).
This is an ERISA action, 29 U.S.C. §§ 1001-1461. Jurisdiction is federal question. 28 U.S.C. § 1331; ERISA § 502(e)(1), 29 U.S.C. § 1132(e)(1).
Plaintiffs are Robert J. Zebrowski, Robert A. Woodruff, and Gregory Bialy, former executives of RohMax USA, Inc.*fn1 According to the complaint, defendant Evonik Degussa Corporation Administrative Committee wrongfully denied payment of their vested retirement benefits and violated its duties as administrator and fiduciary of the other two defendants Evonik Degussa Corporation Retirement Plan (pension plan) and Evonik Rohmax USA, Inc. Non-Qualified Pension Plan (top hat plan). Claims are made for monetary, equitable, and declaratory relief under the ERISA statute.
As to the claims of plaintiffs Woodruff and Bialy, the dismissal motion is based in part on non-exhaustion of administrative remedies. As to all plaintiffs, the motion asserts a failure to state a claim upon which relief can be granted. In deciding a Rule 12(b)(6) motion, the complaint's factual allegations are to be accepted as true and reasonable inferences are to be drawn in the pleader's favor. Umland v. PLANCO Fin. Servs., 542 F.3d 59, 64 (3d Cir. 2008).
Defendant Committee is the administrator and named fiduciary of both
the pension plan and the top hat plan and acts as statutory fiduciary
of the pension plan. ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A). Both
plans are defined benefit and also "pension benefit plans" within the
meaning of ERISA § 3(2), 29 U.S.C. § 1002(2); however, the top hat
plan, as its title suggests, provides post-retirement income for only
a limited number of senior executives such as plaintiffs.*fn2
The pension plan qualifies for favorable tax treatment
the Internal Revenue Code, 26 U.S.C. § 401; the top hat plan does
not.*fn3 Compl. ¶¶ 9, 10, 18.
Both plans produce a monthly benefit amount, which a participant may elect to receive in the form of a monthly annuity or a lump sum representing the monthly annuity's present value. Compl. ¶¶ 43, 56. The plans require payments to be actuarial equivalents. Id. ¶¶ 20, 43. The pension and top hat plans treat cost-of-living adjustments (COLAs) differently. For monthly benefits paid by an annuity, the pension plan originally added to the monthly benefit a COLA that was calculated and distributed annually. For lump sum benefits, the pension plan did not contain an actuarial equivalent for annual COLAs. In 2008, however, the pension plan was amended to include COLA benefits for both forms of payment.*fn4 Id. ¶¶ 21-23. Top hat participants may elect to receive a monthly annuity with the added benefit of an annual COLA or a lump sum without COLAs.
When plaintiff Zebrowski retired at age 60 on November 30, 2006, he elected lump sum payment of his retirement benefits under each plan. At that time, the pension plan included COLAs only if a participant elected a monthly annuity. Therefore, Zebrowski's pension plan lump sum did not include COLA benefits that would have accrued if he had elected a monthly annuity. Compl. ¶¶ 25, 26, 30. On December 30, 2008, about two years after he retired, the pension plan was amended to retroactively allow COLAs for lump sum payments of benefits earned before December 31, 2008. Id. ¶¶ 22-23, 39, 52; Schedule F to the 2008 restated pension plan, doc. no. 4-3 at 42. During the year following the amendment, plaintiffs Woodruff and Bialy also retired. They elected lump sum payment of their retirement benefits under each plan. When plaintiff Woodruff retired at age 62 on March 31, 2009 and plaintiff Bialy retired at age 62 on November 30, 2009, the pension plan allowed COLAs for lump sum payments. Id. ¶¶ 42, 48.
Using the formula set forth in the complaint, plaintiffs' top hat benefits amounted to "one-twelfth of (A minus B) x C," as specified in Section 7.2.2 of the plan document effective July 1, 1999. Compl. ¶¶ 14, 16, 19, 56. This translates as follows: "A" is the amount of all regular and bonus compensation paid in excess of Internal Revenue Code limits for qualified plans; "B" is the monthly amount of benefits payable under the tax-qualified pension plan; and "C" is "a factor measuring the number of years among the preceding ten years during which the participant occupied a certain career band, with a minimum of five years (60 months) required to receive 100% of the calculated benefits." Id. On December 30, 2008, the top hat formula was amended by adding the following at the end of factor "B": . . . provided that the Participant's Basic Amount of Early Retirement Pension shall reflect the relative value of the Participant's selected payment form under the Pension Plan.*fn5 Compl. ¶¶ 30, 53; 2008 restated top hat plan, Section 6.1(b)(ii), doc. no. 4-4 at 17.
Under the compensation structure outlined in the complaint, in both the 1999 and the restated 2008 top hat plans, "B" is the amount of benefits payable under the pension plan expressed in a monthly amount before the addition of COLAs. Compl. ¶¶ 19, 43-44, 56; Pls. br. at 11, doc. no. 10 ("the starting value of these monthly benefits would not reflect any COLA"). The complaint alleges that the Committee misinterpreted the 1999 top hat formula, improperly amended the 1999 plan document on December 30, 2008, and wrongly interpreted "B" to be an off-set of pension plan lump sum payments that included COLAs. Also, the Committee's "total retirement benefit" combined both plan amounts, which lowered the benefit amounts payable to plaintiffs. Compl. ¶¶ 26, 30, 37, 41, 48, 53. In other words, defendants incorrectly decided that the addition of COLAs to pension plan lump sums would reduce the corresponding top hat lump sums by the same amount. Id. This is the essence of the parties' dispute.*fn6
The complaint contends that in violation of ERISA's anti-cutback rule,*fn7 the restated 2008 top hat formula constructively amended the pension plan: "The amendment conditioned receipt of the lump sum Pension Plan benefit on non-receipt of a significant portion of [top hat plan] benefits and thus reduced the value of accrued and protected Pension Plan benefits." Compl. ¶¶ 53, 57.
The complaint continues. Plaintiff Zebrowski requested additional pension plan benefits to remedy the shortfall of COLAs in his lump sum payment. Compl. ¶¶ 25, 28, 31. Instead, the Committee decided he was overpaid his top hat lump sum by an amount equal to the shortfall on his pension plan lump sum. The Committee's calculation required Zebrowski to repay the top hat plan $461,775 in order to receive the same amount in COLA benefits from the pension plan. Zebrowski had exhausted all internal claims and appeal procedures to contest this computation before filing this action on February 8, 2010. Id. ¶¶ 25-32.
As to Woodruff and Bialy, the complaint alleges that they requested lump sum pension plan payments that included COLAs. Compl. ¶¶ 37-43, 51. The Committee agreed, but then reduced their top hat lump sums by an amount equal to their pension plan COLAs -- ...