noting the arbitrary and capricious standard is “functionally equivalent to the abuse of discretion standard”
How later courts described this case
- noting the arbitrary and capricious standard is “functionally equivalent to the abuse of discretion standard”
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 1:20-cv-11486-GAO
VIVIAN TSENG, BRADLEY IRWIN, LISA FLYNN, ROBERT MCMILLEN, DANIEL
DILLON, DAVID LUKIEWSKI, ANDREW STANIAR, WILLIAM HEWINS, THOMAS
CALLAHAN, MAURA WRIGHT, PAULA WILLIAMS, JUDITH GETTIG, and JUDY CARR,
Plaintiffs,
v.
WELCH FOODS INC., A COOPERATIVE, and THE PENSION RESTORATION PLAN
COMMITTEE OF WELCH FOODS INC.,
Defendants.
OPINION AND ORDER
October 17, 2023
O’TOOLE, D.J.
This suit arises from an allegedly impermissible alteration of Welch Foods Inc.’s
(“Welch”) Pension Restoration Plan (the “Plan”). The Plan is a so-called “top-hat” retirement
benefits plan for certain Welch executives selected by the company’s board of directors. The Plan
was established by Welch and is administered by the company’s Pension Restoration Plan
Committee (the “PRP Committee”).
In August 2019, Welch reduced the Plan’s benefit accrual interest rate from 9.5 percent,
which had been the interest rate since the Plan’s inception in 1997, to 4 percent. The change in
interest rate consequently diluted the annual benefits provided under the Plan. In some
circumstances, the rate change might cause a participant’s retirement account to be exhausted
earlier than anticipated when the prior rate prevailed. The plaintiffs challenged the interest rate
change through an available administrative appeals process. During that process, the PRP
Committee, as the Plan Administrator, upheld the interest rate change, and the plaintiffs thereafter
commenced this action under the Employee Retirement Income Security Act (“ERISA”) §
502(a)(1)(B), claiming that the change resulted in an unlawful denial of benefits. The plaintiffs
contend that the reduction of the interest rate violated the terms of the Plan—which they assert is
a “lifetime benefit” plan—and ask this Court to overturn the interest rate change and enforce the
terms of the Plan as originally established. Pending are the parties’ cross-motions for summary
judgment (dkt. nos. 79 & 83).
A “top-hat” plan is an unfunded plan for the benefit of a select group of highly compensated
management executives. Under the Plan, each participant has a “Target Benefit” that is
individually calculated based on the participant’s age and salary.
Sections 2.02 and 2.03 of the Plan describe how the Target Benefit is calculated.
(Administrative R. at 1 § 2.02, 2.03 (dkt. no. 43-1).) Section 2.04 of the Plan describes the manner
in which the participants’ accounts are managed. Each participant’s account is (i) determined as
of the participant’s retirement date in accordance with Sections 2.04(a) and 2.04(b), (ii) credited
with interest after retirement in accordance with Section 2.04(c), and (iii) reduced by benefit
payments made in accordance with Section 2.04(d). (Id. § 2.04.) Specifically, Section 2.04(c)
provides:
Each Plan Year prior to full payment of the Participant’s Target Benefit, or if
earlier, the date on which the Participant’s Account is reduced to zero, the
Participant’s Account will be increased annually by an interest credit. The interest
credit will be calculated on a Participant’s Account using an interest rate as
determined annually by the Plan Administrator with assistance of the Actuary.
(Id.)
Section 2.06 of the Plan further provides that benefit payments will stop when a
participant’s account balance is zero:
Notwithstanding any other provision of this Plan, in no event will the amount of
any payment made to a Participant exceed the amount credited to the Participant’s
Account as determined under Section 2.04. In the event that a Participant’s Account
is reduced to zero, the Participant will not be entitled to any further benefits under
this Plan.
(Id. § 2.06.)
The parties disagree as to the applicable standard of review for the present summary
judgment motions. The Court agrees with the defendants that the arbitrary and capricious standard
of review applies because the Plan grants the administrator discretion to interpret the Plan. (See
Order, July 6, 2023 (dkt. no. 75) (quoting Niebauer v. Crane & Co., 783 F.3d 914, 923 (1st Cir.
2015)); see also Vendura v. Boxer, 845 F.3d 477, 482 (1st Cir. 2017) (noting the arbitrary and
capricious standard is “functionally equivalent to the abuse of discretion standard”).)
The resolution of this issue essentially resolves the parties’ dispute. Section 2.04(c)
explicitly authorizes an annual review of the interest rate to be applied:
The interest credit will be calculated on a Participant’s Account using an interest
rate as determined annually by the Plan Administrator with assistance of the
Actuary.
(Administrative R. at 1 § 2.04(c).)
The fact that the rate was not adjusted for many years does not establish that the rate could
not, under the Plan documents, ever be adjusted. The Plan plainly provides otherwise. Adjusting
the annual accrual to a more conservative 4 percent, though disadvantageous to the participants,
was a decision plainly authorized by the explicit language of the Plan.
The PRP Committee did not abuse its discretion by relying on the unambiguous terms of
the Plan in altering the interest rate of the Plan. Accordingly, the Court grants the defendants’
motion for summary judgment on Count I.
In Count II of the complaint, the plaintiffs plead an estoppel argument in the alternative.
The First Circuit has stated that it has “not yet had occasion” to recognize equitable estoppel claims
under ERISA § 502(a)(3)(B). Guerra-Delgado v. Popular, Inc., 774 F.3d 776, 782 (1st Cir. 2014).
In this case, however, there is no reason to consider whether the Plan Administrator should be
estopped from doing what the Plan explicitly authorized. Accordingly, the Court grants the
defendants’ motion for summary judgment as to Count II as well.
For the foregoing reasons, the defendants’ motion for summary judgment (dkt. no. 79) is
GRANTED. Correspondingly, the plaintiffs’ motion for summary judgment (dkt. no. 83) is
DENIED. Judgment shall enter in favor of the defendants.
It is SO ORDERED.
/s/ George A. O’Toole, Jr.
United States District Judge