Carte v. American Electric Power Service Corporation

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

Troy A. Carte, ef al.,

Plaintiffs, Case No. 2:21-cv-5651

Vv. Judge Michael H. Watson

American Electric Power Service Magistrate Judge Vascura

Corporation, et al.,

Defendants.

OPINION AND ORDER

American Electric Power Service Corporation (“AEP”) and American

Electric Power System Retirement Plan (“Plan,” collectively “Defendants”) move

to dismiss the Complaint. ECF No. 5. For the following reasons, the motion is

GRANTED.

I. BACKGROUND

Troy A. Carte , James M. Jones, William C. Robinson, and Walter W.

Raub, II (collectively “Plaintiffs”) assert various claims under the Employee

Retirement Income Security Act of 1974 (“ERISA”). See generally Compl., ECF

No. 1. The Court will briefly outline the relevant ERISA provisions before

explaining the facts underlying this case.

A. ERISA Overview

ERISA outlines two general categories of retirement plans: defined

contribution plans and defined benefits plans. See Lonecke v. Citigroup Pension

Plan, 584 F.3d 457, 461-63 (2d Cir. 2009) (explaining these two “basic types” of

plans) (citations omitted). Defined contribution plans “guarantee only that the

employer will contribute a certain amount” to the employees account, but provide

no guarantee as to the account's value. Lonecke, 584 F.3d at 461 (cleaned up).

Both employees and employers may contribute to the fund, but “the employer's

contribution is fixed” and each participant is “entitled to whatever assets are

dedicated to his individual account.” Hughes Aircraft Co. v. Jacobson, 525 U.S.

432, 439 (1999) (internal quotation marks and citations omitted).

In contrast, defined benefit plans “generally provide benefits based on the

years of service and salary levels of employees and guarantee a fixed periodic

payment from retirement to death.” Smith v. CommonSpirit Health, 37 F.4th

1160, 1162 (6th Cir. 2022). These plans consist of a “general pool of assets

rather than individual dedicated accounts.” Hughes Aircraft Co., 525 U.S. at 439.

Participants have no right to a particular asset in the pool but instead to a

“defined level of benefits.” Lonecke, 584 F.3d at 462 (citation omitted).

This “defined level of benefits” is known as an “accrued benefit.” /d. For

defined benefit plans, the accrued benefit is “expressed in the form of an annual

benefit commencing at normal retirement age.” 29 U.S.C. § 1002(23)(A). In

defined contribution plans, the accrued benefit means “the balance of the

individual’s account.” 29 U.S.C. § 1002(23)(B).

The types of plans also differ in who bears the risk of investment

performance. Lonecke, 584 F.3d at 462. For defined contribution plans, the

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employee bears the risk, id., but in defined benefit plans, the employer “typically

bears the entire investment risk” and must “cover any underfunding as the result

of a shortfall that may occur from the plan’s investments.” Hughes Aircraft Co.,

525 U.S. at 439 (citation omitted).

Nearly forty years ago, companies began using a new type of plan called

the “cash balance plan.” Campbell v. BankBoston, N.A., 327 F.3d 1, 7 (1st Cir.

2003) (“The first cash balance plan was adopted in 1985.”). This plan is

sometimes called a hybrid because it contains features of both defined

contribution and defined benefit plans. Lonecke, 584 F.3d at 462 (citation

omitted). For example, cash balance plans “create a benefit structure that

simulates that of defined contribution plans, but employers do not deposit funds

in actual individual accounts, and employers, not employees, bear the market

risks.” /d. (internal quotation marks and citations omitted). In spite of this hybrid

nature, cash balance plans are classified as defined benefits plans. Drutis v.

Rand McNally & Co., 499 F.3d 608, 612 (6th Cir. 2007). Because it is a defined

benefits plan, the “accrued benefit” for a cash balance plan is “expressed in the

form of an annual benefit commencing at normal retirement age.” 29 U.S.C.

§ 1002(23)(A).

Although touted as easier for laypersons to understand, cash balance

plans operate by creating a hypothetical account for an employee and then

crediting that hypothetical account with certain “credits.” Lonecke, 584 F.3d at

462-63. The Sixth Circuit has explained this process as follows:

Case No. 21-cv-5651 Page 3 of 23

Cash balance plans . . . define benefits by reference to a hypothetical

account periodically credited with assumed contributions as well as

interest credits. Contribution credits are hypothetical contributions an

employer makes, usually expressed as a percentage of wages or

salary, and interest credits are modeled earnings linked to an outside

index such as the one-year Treasury bill rate.

Nolan v. Detroit Edison Co., 991 F.3d 697, 701 (6th Cir. 2021).

In the 1990s, “many employers began converting their defined benefit

plans from traditional into cash balance plans.” /d. at 701 (citing Edward A.

Zelinsky, The Cash Balance Controversy, 19 Va. Tax Rev. 683, 705, 713 (Spring

2000) (“Zelinksy Paper’)). Among other challenges, this transition can create a

“wear-away” period, which refers to a period when “an employee continues to

work at a company but does not receive additional benefits for those additional

years of service.” Nolan, 991 F.3d at 701 (internal quotation and citation

omitted). The Nolan Court summarized the cause of the “wear- away” period as

follows:

[Wear-away] happens when the cash balance benefit never exceeds

the already-earned annuity benefit under the traditional formula. After

the cash balance conversion, the employee’s actual pension

entitlement does not grow until her hypothetical account balance

under the cash balance methodology equals (“wears-away”) and

begins to exceed the value of the benefit she had earned previously

under the traditional pension formula. It can take years for the cash

balance benefit to catch up to the traditional plan benefit. And it

inevitably takes longer for the cash balance benefit of older workers

with longer terms of service to catch up to their traditional benefit

because they have amassed a larger benefit under the traditional plan

than younger employees with shorter terms of service.

Id. (cleaned up).

Case No. 21-cv-5651 Page 4 of 23

ERISA also requires plan administrators to provide notice about plans to

participants. See 29 U.S.C. §§ 1022; 1024; 1054(h).

B. Facts’

With this legal framework in mind, the Court turns to the facts of this case.

The Complaint lacks clarity and substance, but the Court believes the following

represents a fair reading of Plaintiffs’ allegations.

AEP employed Plaintiffs from before 2001 through at least 2018. Compl.

q1 1-4, ECF No. 1. Prior to 2001, AEP provided a traditional defined benefit plan

for employees. /d. 7 11. Effective January 1,2001, AEP adopted an amendment

to the Plan that converted the Plan into a cash-balance plan. /d. ¥ 12.

The Amendment had “Grandfathered Benefits” for those employees who

were participating in the Plan as of December 31, 2000, and a few certain other

employees (“Grandfathered Participants”). /d. | 13. A Grandfathered Participant

would continue to accrue benefits under the pre-2001 formula until December 31,

2010. /d. After January 1, 2011, participants could not continue to accrue

benefits under the pre-2001 formula. /d. 14. Although Plaintiffs do not use the

“wear away” language used by the Sixth Circuit and other courts, Plaintiffs

appear to allege that, starting January 1, 2011, they entered a “wear-away”

period. /d. [J 15-16. Apparently due to this wear-away period, Plaintiffs

experienced no or low benefits accrual after January 1, 2011. /d. However,

1 The Court accepts Plaintiffs’ factual allegations as true for purposes of Defendants’

motion.

Case No. 21-cv-5651 Page 5 of 23

Plaintiffs also allege that their post-2010 benefits fluctuated with interest rates

and that this fluctuation “caused or exacerbated” the cessation or reduction of

benefit accrual. /d. [{] 17-18.

Finally, Plaintiffs allege that Defendants provided them with a Summary

Plan Description (“SPD”). /d. But, they allege that the SPD did not adequately

inform them “that they were likely to receive no net benefit accruals for a

substantial period.” /d. { 21.

ll. ©STANDARD OF REVIEW

In response to this Court's prior order, the parties thoroughly briefed the

appropriate standard of review in this case. See ECF Nos. 25, 27, & 28. Upon

review of the parties’ briefs and its own consideration, the Court agrees that it

should review the issues in this case de novo, rather than affording deference to

prior administrative determinations. See, e.g., Daft v. Advest, Inc., 658 F.3d 583,

594 (6th Cir. 2011) abrogated on other grounds by Hardt v. Reliance Standard

Life Ins. Co., 560 U.S. 242, (2010) (explaining that a plan administrator's legal

determinations should be reviewed de novo). Further, although Plaintiffs

submitted their claims to the administrative process, and the Court takes judicial

notice of those related documents attached to the Complaint, the Court

concludes it does not need to conduct a thorough review of the claims and

appeals process. See Nolan, 991 F.3d 697 (reviewing similar claims that had

been submitted to the administrative process without referencing the

Case No. 21-cv-5651 Page 6 of 23

administrator's determinations in the analysis). Accordingly, the Court will

proceed under a traditional Rule 12(b)(6) framework.

A claim survives a motion to dismiss under Rule 12(b)(6) if it “contain[s]

sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “The plausibility standard is

not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility

that a defendant has acted unlawfully.” /d. (quoting Twombly, 550 U.S. at 556).

This standard “calls for enough fact to raise a reasonable expectation that

discovery will reveal evidence of [unlawful conduct].” Twombly, 550 U.S. at 556.

A pleading’s “[flactual allegations must be enough to raise a right to relief above

the speculative level, on the assumption that all the allegations in the [pleading]

are true (even if doubtful in fact).” /d. at 555 (internal citations omitted). At the

motion to dismiss stage, a district court must “construe the complaint in the light

most favorable to the plaintiff, accept its allegations as true, and draw all

reasonable inferences in favor of the plaintiff.”. Wamer v. Univ. of Toledo, 27

F.4th 461, 466 (6th Cir. 2022) (internal quotation marks and citations omitted).

However, the non-moving party must provide “more than labels and conclusions,

and a formulaic recitation of the elements of a cause of action will not do.”

Twombly, 550 U.S. at 555.

Case No. 21-cv-5651 Page 7 of 23

lll. ANALYSIS

Plaintiffs assert the following claims on an individual and class-wide basis:

(1) age discrimination under ERISA and the Age Discrimination in Employment

Act (“ADEA”); (2) backloading, in violation of § 204(b)(1) of ERISA; (3) insufficient

notice, in violation of § 204(h) of ERISA; (4) breach of fiduciary duty in violation of

§ 404(a) of ERISA; and (5) withholding of documents, in violation of

§ 502(c)(1)(B) of ERISA. Compl. ff] 49-64, ECF No. 1. Defendants move to

dismiss all claims. ECF No. 5.

In their response, Plaintiffs expressly abandon their claims for breach of

fiduciary duty and withholding of documents. Resp. 12, ECF No. 24.

Accordingly, those claims are DISMISSED WITHOUT PREJUDICE.

A. Statute of Limitations

Defendants argue that the age discrimination, backloading, and insufficient

notice claims should be dismissed as barred by the statute of limitations. See

Mot. 14-18, ECF No. 5.

The statute of limitations is an affirmative defense, see Federal Rule of

Civil Procedure 8(c), and a plaintiff generally has no duty to plead facts negating

an affirmative defense in order to state a valid claim. Cataldo v. U.S. Steel Corp.,

676 F.3d 542, 547 (6th Cir. 2012). For this reason, a motion under Rule 12(b)(6),

which considers only the allegations in the complaint, is “generally an

inappropriate vehicle for dismissing a claim based upon the statute of limitations.”

Id. However, dismissal under Rule 12(b)(6) on the basis of a statute of

Case No. 21-cv-5651 Page 8 of 23

limitations defense may be appropriate when “allegations in the complaint

affirmatively show that the claim is time-barred.” /d.

This case fits into the general rule that it is inappropriate to dismiss based

on a statute of limitations. Suppose the Court adopted Defendants’ proposed

limitations periods of two years for claim one and six years for claims two and

three. See Mot. 14-18, ECF No. 5. Suppose further that the Court agreed with

Defendants that each of those claims accrued, at the latest, at the time Plaintiffs

received the SPD. /d. Even with these Defendant-friendly assumptions, the

Complaint does not supply the necessary factual allegations to determine

whether the limitation periods have expired. The only factual allegation related to

the timing of the SPD is as follows:

In connection with implementing the Amendment, Defendants

provided Plaintiffs and the Class with a summary plan description that

included materially misleading, unreasonably optimistic illustrative

projections of future cash balance accruals.

Compl. J 22, ECF No. 1.

This allegation does not inform the Court of when Defendants provided the

SPD, what delivery method they used, or when Plaintiffs received the SPD.

Similarly, a review of the SPD itself does not clearly indicate when it was created,

or mailed to participants, or any similar information that would indicate a date at

which time the Court could consider Plaintiffs to have received the SPD. See

generally SPD, Motion, Exhibit A, ECF No. 5-1. Of course, the Court suspects

that, because the Plan was amended in 2001, the SPD dates from around that

Case No. 21-cv-5651 Page 9 of 23

time. However, if the Court used that suspicion to dismiss based on the statute

of limitations, it would be construing the Complaint in a light most favorable to

Defendants, not Plaintiffs, which is impermissible at this stage. See Wamer v.

Univ. of Toledo, 27 F.4th at 466 (internal quotation marks and citations omitted).

So, the Court will not dismiss Plaintiffs’ claims as untimely. In any event, as

explained below, the Court finds that dismissal of Plaintiffs’ claims is appropriate

for other reasons.

B. Merits of the Claims

1. Age Discrimination

Plaintiffs allege that the Plan discriminated against them on the basis of

age, in violation of section 204(b)(1)(H)(i) of ERISA and section 4(i)(1)(A) of the

ADEA. These statutes mirror each other and “should be interpreted to have an

identical meaning.” Hurlic v. S. California Gas Co., 539 F.3d 1024, 1036 (9th Cir.

2008) (citations omitted); see also 29 U.S.C. §§ 1054(b)(1)(H); 623(i)(1). So,

although the Court will refer primarily to ERISA’s statutory provisions and cases

interpreting the same, the following analysis applies with equal weight to

Plaintiffs’ claim under the ADEA. See Hurlic, 539 F.3d at 1036 (“Because we

have held that the Plan does not violate ERISA § 204(b)(1)(H)(i), it follows that

the Plan does not violate ADEA § 4(i)(1)(A).”).2

2 Defendants also argue the ADEA claim should be dismissed for failure to exhaust

administrative remedies. Failure to exhaust administrative remedies is a procedural

requirement and affirmative defense, and, therefore, the “defendant bears the burden of

pleading and proving this failure.” See, e.g., Lockhart v. Holiday Inn Exp. Southwind,

531 F. App'x 544, 547 (6th Cir. 2013) (internal quotation marks and citations omitted).

Case No. 21-cv-5651 Page 10 of 23

From reading the parties’ briefs, it seems the primary issue is whether, for

purposes of ERISA’s anti-age-discrimination provision, “benefit accrual” and “net

benefit accrual” mean the same thing. According to Plaintiffs, this is an issue of

first impression. To clarify, ERISA’s anti-age discrimination provision reads as

follows:

[A] defined benefit plan [e.g., a cash benefit plan] shall be treated as

not satisfying the requirements of this paragraph if, under the plan, an

employee’s benefit accrual is ceased, or the rate of an employee's

benefit accrual is reduced, because of the attainment of any age.

29 U.S.C. § 1054(b)(1)(H)(i) (emphasis added). The Sixth Circuit has already

explained that, in the context of this statute, “benefit accrual” “refers to the

employer’s contribution to a plan, and therefore any difference in output as a

result of time and compound interest does not violate” ERISA’s anti-age-

discrimination provision. Drutis, 499 F.3d at 614.

Plaintiffs do not meaningfully dispute this statement of the law. Instead,

Plaintiffs argue for an expansion of the rule. Specifically, they posit that when, as

here, Plaintiffs are subject to a wear-away period and, because of that wear-

away period, their “net benefit accrual” is reduced or ceased, that should be the

basis of an age discrimination claim under ERISA. There are several issues

preventing the success of this claim.

Based on the circumstances of this case, the Court sees no reason to depart from the

general rule that it is inappropriate to dismiss claims based on an affirmative defense at

the pleadings stage.

Case No. 21-cv-5651 Page 11 of 23

First, Plaintiffs do not define what they mean by “net benefit accrual.” That

is, except for their insistence that the Court must include the “offset” in the

benefits accrual calculus, Plaintiffs do not explain what numbers, percentages,

ratios, or other figures a court should use to discern what a particular plaintiffs

“net benefits accrual” is. Further, the Court is unconvinced that “net benefit

accrual” is actually meaningfully different from how others have viewed age-

discrimination claims in the context of wear-away periods. See, e.g., Nolan, 991

F.3d at 701 (explaining that the wear-away period can lead to a violation of

ERISA’s anti-age discrimination provision and outlining one option to avoid the

same); see also Zelinsky Paper at 743—48 (positing that the wear-away period

violates ERISA’s anti-age-discrimination provision); see also Tomlinson v. El

Paso Corp., 653 F.3d 1281, 1286-89 (10th Cir. 2011) (considering an age

discrimination claim on similar facts and finding no violation of the parallel ADEA

provision).

In any event, even assuming that the Court adopted the “net benefits

accrual” rule, it would be unable to discern whether the Complaint plausibly

states an age discrimination claim under that “net benefits accrual,” or any other,

theory. The Complaint is long on conclusions and legalese but short on

specifics. Plaintiffs allege generally that each participant experienced a

“cessation or reduction of benefits” (wear-away period), the length of which was

“positively correlated to the participants’ age.” Compl. J] 50-51, ECF No. 1.

They go on to broadly allege that the “net benefit accrual of each Plaintiff . . .

Case No. 21-cv-5651 Page 12 of 23

would have been greater if he or she had been younger.” /d. 52. The

Complaint provides no details on what any named Plaintiffs’ “net benefit accrual”

was, what it would have been if named Plaintiffs had been younger, or what any

younger participants’ “net benefits accrual” was. See generally id. Similarly,

although Plaintiffs generally allege that the benefits “fluctuated” with Treasury Bill

interest rates, Plaintiffs provide no specific factual allegations about what the

interest rates were, or how their benefits declined or increased as a result. /d. at

{1 17-20.

Of course, at the pleadings stage, a plaintiff is not expected to know the

potentially relevant facts of her case. Here, however, Plaintiffs failed to include

many factual details that were in their control. For example, named Plaintiffs are

surely aware of their own pension account information and, by extension, what

contributions were made, how interest rates impacted their benefits, and any

other factors relevant to calculating the “net benefit accrual” for a particular

Plaintiff. Further, the Plan includes information about how contributions were

calculated for participants of different ages and years of service. See, e.g., Plan

Art. IV, ECF No. 5-2. Plaintiffs could, at a minimum, have provided calculations

for a hypothetical younger participant to show how a younger participant would

have a higher “net benefit accruals” over the relevant time period. With such

calculations—even in the absence of discovery about any actua/ younger

participants—the Court might have been able to discern whether Plaintiffs have

plausibly alleged a claim under their legal theory.

Case No. 21-cv-5651 Page 13 of 23

With the current Complaint, Plaintiffs are asking the Court to embrace a

“new,” vaguely-defined legal rule and apply it to broad, conclusory allegations.

The Court declines to do so. Accordingly, the age discrimination claim is

DISMISSED WITHOUT PREJUDICE.

2. Backloading

“Backloading’ refers to the disfavored practice of accruing the majority of

benefits in the last years before retirement. See Lonecke, 584 F.3d at 464; 29

U.S.C. § 1054(b). To prevent backloading, ERISA outlines various alternative

accrual tests, only one of which is implicated in this case: the 133 1/3 percent

test. See 29 U.S.C. § 1054(b). Pursuant to the 133 1/3 percent test, the rate of

benefit accrual in any future year may not be more than one-third greater than

the rate in the current year. Lonecke, 584 F.3d at 464 (citing 29 U.S.C.

§ 1054(b)(1)(B)).

Plaintiffs argue that the Plan violates the 133 1/3 percent test because they

received “no benefit accrual during the initial post-2010 years, and potentially

receiv[ed] benefit accruals in later years.” Compl. | 55, ECF No. 1. Of course, if

a participant received no benefit accrual in one year, any subsequent benefit

accrual would violate the 133 1/3 percent test. So, Plaintiffs argue, the Plan

violates the test.

Defendants respond by pointing to the “plan amendment provision” of

ERISA, 29 U.S.C. § 1054(b)(1)(B)(i).. Under that provision, “once there is an

amendment to the prior plan, only the new plan formula is relevant when

Case No. 21-cv-5651 Page 14 of 23

ascertaining if the plan satisfies the 133—1/3 percent rule.” Tomlinson, 653 F.3d

at 1290 (cleaned up). That is, the amendment is treated as if it were “in effect for

all other plan years.” 29 U.S.C. § 1054(b)(1)(B)(i). So, Defendants argue, the

Court should only consider the cash balance plan and, if considering only that

plan, there is no violation.

Plaintiffs urge the Court not to apply the “plan amendment provision,” citing

to Revenue Ruling 2008-7. Revenue Ruling 2008-7 interprets 26 C.F.R.

§ 1.411(b)-1(a), which provides:

A defined benefit plan may provide that accrued benefits for

participants are determined under more than one plan formula. In

such a case, the accrued benefits under all such formulas must be

aggregated in order to determine whether or not the accrued benefits

under the plan for participants satisfy one of the alternative methods.

Plaintiffs argues that Revenue Ruling 2008-7 is dispositive in their favor, and

suggest the ruling deserves Auer deference.

Plaintiffs’ argument fails. By Revenue Ruling 2008-7’s own terms, it does

not apply to the Plan. Specifically, the Ruling explains that a “moratorium plan,”

as defined in Notice 2007-6, is not treated “as failing to satisfy the accrual rules”

(e.g., the 133 1/3 percent test). Tomlinson, 653 F.3d at 1291 (quoting Revenue

Ruling 2008-7).

Notice 2007-6 defines “moratorium plans’ as those for which no

determination letters were issued due to a moratorium on such letters between

1999 and 2007. Defendants amended the Plan in 2001 and applied for a

Case No. 21-cv-5651 Page 15 of 23

determination letter in 2002° but did not receive a determination letter until 2008.

So, the Plan is a “moratorium plan,” and Revenue Ruling 2008-7 does not apply

to it.*

So, pursuant to the “plan amendment provision,” the appropriate

consideration is whether, if the Amendment had been in effect for all other plan

years, the Plan would have violated the 133 1/3 percent test (or in some other

way violate the accrual rules). 29 U.S.C. § 1054(b)(1)(B)(i). There are no factual

allegations in the Complaint to support such a claim, and, therefore, this claim is

DISMISSED WITHOUT PREJUDICE.

3. Insufficient Notice

Plaintiffs bring claims for insufficient notice under Sections 204(h) and

102(a) or ERISA. Each of those statutes place notice requirements on plan

administrators. See 29 U.S.C. §§ 1022; 1054(h). Section 102(a), which applies

to all plans, requires administrators to supply an SPD to participants that is

“written in a manner calculated to be understood by the average plan participant.”

29 U.S.C. § 1022(a). Those SPDs may not have the “the effect [of] misleading,

misinforming or failing to inform participants.” 29 C.F.R. § 2520.102-2. Further,

“fa]ny description of exception, limitations, reductions, and other restrictions of

3 Compl. Ex. E at PAGEID # 56, ECF No. 1-1.

4 Because Revenue Ruling 2008-7’s own terms explain that it does not apply to the

Plan, the level of deference the Ruling might be due in another circumstance is

irrelevant. See Tomlinson, 653 F.3d at 1291-92 (“But plaintiffs may not pick and choose

which portions of the Revenue Ruling should be credited; the scope of our deference to

an agency's interpretation of its own regulations is, absent Congressional intent to the

contrary, coterminous with the scope the agency intends.” (citation omitted)).

Case No. 21-cv-5651 Page 16 of 23

plan benefits shall not be minimized, rendered obscure or otherwise made to

appear unimportant.” /d. “The advantages and disadvantages of the plan shall

be presented without either exaggerating the benefits or minimizing the

limitations.” /d.

As to notice of plan amendments, ERISA § 204(h) provides:

[A plan] may not be amended so as to provide for a significant

reduction in the rate of future benefit accrual, unless, after adoption of

the plan amendment and not less than 15 days before the effective

date of the plan amendment, the plan administrator provides a written

notice, setting forth the plan amendment and its effective date, to...

each participant in the plan. °

As interpreted, this means that “notice is required when an amendment is

‘reasonably expected to change the amount of the future annual benefit

commencing at normal retirement age.” Lonecke, 584 F.3d at 466 (quoting 63

Fed. Reg. 68,678, 68,680 (Dec. 14, 1998)). What constitutes a “significant

reduction” is “based on reasonable expectations taking into account the relevant

facts and circumstances at the time the amendment is adopted.” /d. (internal

quotation marks and citations omitted). The notice may contain “a summary of

the amendment, rather than the text of the amendment, if the summary is written

in a manner calculated to be understood by the average plan participant.” /d.

(internal quotation marks and citations omitted).

5 This is interpreting the version of 29 U.S.C. § 1054(h) that was effective at the relevant

times for this case. See Pub. L. No. 107-16, § 659(b), 115 Stat. 38, 139-41 (2001);

Lonecke, 584 F.3d at 466, n. 5.

Case No. 21-cv-5651 Page 17 of 23

In support of their insufficient notice claims, Plaintiffs provide the following

allegations related to notice in their “factual background” portion of the

Complaint:

20. The Plan’s administrator did not reasonably inform Plaintiffs and

the Class of the risk to their future benefit accruals attendant on

declining interest rates.

21. The Plan’s administrator did not reasonably inform Plaintiffs and

the Class that they were likely to receive no net benefit accruals for a

substantial period, even as other employees received substantial

benefit accruals for similar work.

22. In connection with implementing the Amendment, Defendants

provided Plaintiffs and the Class with a summary plan description that

included materially misleading, unreasonably optimistic illustrative

projections of future cash balance accruals.

Compl. J] 20-22, ECF No. 1. Based on these factual allegations, Plaintiffs’

insufficient notice claim is comprised of the following four paragraphs:

57. The averments of Paragraphs 1 through 56 of this Complaint are

incorporated herein by reference.

58. Because the offset of accrued Grandfathered Benefits against

cash balance benefit accruals resulted in participants with substantial

accrued Grandfathered Benefits receiving no benefit accruals during

post-2010 years of service, the Amendment provided for a significant

reduction in the rate of future benefit accrual.

59. The Plan’s administrator failed to provide participants advance

written notice of the text of the Amendment or a summary of its likely

effects, in violation of § 204(h) of ERISA, 29 U.S.C. § 1054(h) and of

Treas. Reg. § 1.411(d)}-6, 29 CFR § 1.411(d)}-6.

60. The Plan’s administrator also failed to provide participants

summary plan descriptions and summaries of material modifications

which would reasonably apprise them of their rights under the Plan,

in violation of §§ 102(a) and 104(b) of ERISA, 29 U.S.C. §§ 1022(a),

1024(b).

Case No. 21-cv-5651 Page 18 of 23

Id. Tf 57-60.

There are several issues with Plaintiffs’ insufficient notice claims. First, in

both the Complaint and the response brief, Plaintiffs fail to clarify whether their

factual allegations, such as they are, support claims for insufficient notice under

Section 102(a), 204(h), or both. For example, although the Complaint references

both statutes, the response focuses almost entirely on a section 102(a) analysis,

with only passing references to 204(h). Compl. J] 22, 58, ECF No. 1; Resp. 9-

12, ECF No. 24. Of course, one SPD could violate both statutes, but it would not

automatically do so for the same reasons. That is, 102(a) and its accompanying

regulations, which apply to all plans, provide specific guidance for what notice

materials must do. In contrast, 204(h), which applies to amendments, and its

related guidance is full of “reasonable” or “significant” language, which is

necessarily a more flexible standard. So, although an SPD that fails to satisfy

102(a) would likely also fail under 204(h), that is not necessarily the case. And

here, Plaintiff has only provided arguments related to Section 102(a); it is not the

Court's duty to take Plaintiffs’ arguments for section 102(a) and, on its own, read

the case law to see if they apply equally to 204(h).

Plaintiffs’ broad factual allegations are the next, and more serious,

problem. In their response brief, Plaintiffs rely on a recent Sixth Circuit case in

which the court found that an SPD can fail to meet Section 102(a)’s requirements

if it contains misleading or overly optimistic information—anzd if it fails to disclose

important possible negative outcomes. Nolan, 991 F.3d at 711-715. Notably,

Case No. 21-cv-5651 Page 19 of 23

the Nolan Court relied on specific quotes from its notice material, as well as

charts, projections, and dollar amounts. /d. Similarly, the Nolan Court was able

to identify what specific pieces of information the plaintiff alleged the

administrator failed to disclose. /d. at 711-16.

In contrast, here, Plaintiffs have entirely failed to provide any specific

factual support for their claim that the SPD was insufficient, or, as the regulations

instruct, that the SPD was “misleading, misinforming,” or minimizing of

disadvantages. 29 C.F.R. § 2520.102-2. The only factual allegations about the

deficient notice that Plaintiffs provide is that the notice “did not reasonably inform”

about risks associated with interest rates and a possible risk of a period of no or

low benefit accrual. /d. J] 20-21. However, unlike the kinds of actually specific

information the Sixth Circuit relied on in Nolan (e.g., quotations and allegedly

misleading charts or projections), Plaintiffs here provide only broad, generalized

complaints. Indeed, they have provided little more than “labels and conclusions,”

mixed with a bit of statutory language, and that “will not do.” Twombly, 550 U.S.

at 555.° Accordingly, Plaintiffs have failed to state a claim for insufficient notice

under any of the statutes.

The Court recognizes that it can be difficult to plead a negative. However,

a careful review of Nolan shows that citing to specific statements, projections,

6 The Court does not suggest that a Rule 9(b) heightened pleading standard should

apply to such claims. Instead, the Court is merely applying the traditional 12(b)(6),

Iqbal/Twombly standard.

Case No. 21-cv-5651 Page 20 of 23

examples, etc. can demonstrate that an ERISA defendant “did not explain in

plain English . . . that employees transferring to the cash balance plan would not

actually receive any new benefits if the benefit accrued under the new plan did

not catch up to their frozen traditional plan benefit.” Nolan, 991 F.3d at 711-15.

That is, these sorts of specific references to the notice materials allowed the

Nolan Court to determine whether the materials had “the effect to misleading,

misinforming or failing to inform participants,” or whether the limitations or

disadvantages of the plan are minimized. 29 C.F.R. § 2520.102-2; Nolan, 991,

F.3d at 711-15.’ Those sorts of specific citations may not be the only way to

allege an insufficient notice claim. However, a plaintiff certainly cannot prevail by

expecting the Court to examine the SPD on its own to figure out what is, or is not,

deficient with it. See InterRoyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir.

1989) (noting that, even at summary judgment, the Court is not “obligated to

wade through and search the entire record for some specific facts that might

support the nonmoving party’s claim”). That is particularly true where, as here,

Plaintiffs did not even attach the SPD to the Complaint.®

The Court also recognizes that Plaintiffs do provide some further details

about the SPD in their response brief. Resp. 8-12, ECF No. 24. For example,

7 Similarly, in the context of a plan-amendment-insufficient-notice claim, these specific

citations would enable the Court to determine whether the SPD was “written in a

manner calculated to be understood by the average plan participant.” Lonecke, 584

F.3d at 466.

8 Granted, Defendants provided the Court with a copy of the SPD as an attachment to

their motion.

Case No. 21-cv-5651 Page 21 of 23

they offer allegations of misleading language in the SPD and allege that the SPD

was untimely in addition to being substantively insufficient. /d. However,

allegations in a response brief are not properly before the Court and, therefore,

are not considered. See, e.g., Drinkard v. Tenn.Dep’t of Children’s Servs., No.

2:08-CV-005, 2008 WL 2609166, at *5 (E.D. Tenn. June 26, 2008) (“[T]he

allegations in plaintiffs’ response briefs have not been properly placed before the

court and have not been considered.”); Knowles v. Chase Home Fin., LLC, No.

111CV01051JDBEGB, 2012 WL 13018539, at *9 (W.D. Tenn. Aug. 2, 2012) (“A

party may not amend its complaint by submitting additional allegations in

response to a Rule 12(b)(6) motion to dismiss.” (collecting cases)); see also

Thomason v. Nachtrieb, 888 F.2d 1202, 1205 (7th Cir. 1989) (observing, that

although the plaintiff might have had a valid ERISA claim, it “is a basic principle

that the complaint may not be amended by the briefs in opposition to a motion to

dismiss”); but see Brown v. LaSalle Nw. Nat. Bank, 148 F.R.D. 584, 586 n.3

(N.D. Ill. 1993) (recognizing disagreement with Thomason).

Finally, the Complaint also references Section 104(b) of ERISA. Compl.

q 60, ECF No. 1. Plaintiffs do not discuss this claim at all in the response.

Among other things, Section 104(b) provides various timing requirements for

SPDs, and requires that the administrator make certain documents available

upon request. See 29 U.S.C. § 1024(b). Plaintiffs have already withdrawn their

claim for withholding of documents. As to any possible claims related to timing,

as explained in the discussion of statute of limitations, the Complaint lacks

Case No. 21-cv-5651 Page 22 of 23

specific allegations about the timing of the SPD. So, they fail to plausibly state a

claim of relief under Section 104(b).

Accordingly, Plaintiffs’ insufficient notice claims are DISMISSED

WITHOUT PREJUDICE.

IV. CONCLUSION

For these reasons, Defendants’ motion is GRANTED. Plaintiffs’ claims are

DISMISSED WITHOUT PREJUDICE. The Clerk is DIRECTED to close the

case.

IT IS SO ORDERED. MLon

MICHAEL H. WATSON, JUDGE

UNITED STATES DISTRICT COURT

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