DiGiacomo v. Teamsters Pension

Opinions of the United

2005 Decisions States Court of Appeals

for the Third Circuit

8-24-2005

DiGiacomo v. Teamsters Pension

Precedential or Non-Precedential: Precedential

Docket No. 04-3510

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

__________

No. 04-3510

__________

ALFRED DIGIACOMO,

Appellant,

v.

TEAMSTERS PENSION TRUST FUND

OF PHILADELPHIA AND VICINITY,

Appellee.

__________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(Civil Action No. 04-1090)

District Judge: Honorable Legrome D. Davis

__________

Argued: Friday, May 27, 2005

___________

Before: SCIRICA, Chief Judge, ALITO and

GARTH, Circuit Judges

(Opinion Filed: August 24, 2005)

__________

OPINION OF THE COURT

__________

DORIS J. DABROWSKI, ESQ. (Argued)

1500 Walnut Street, Suite 900

Philadelphia, PA 19102

Attorney for Appellant

Alfred DiGiacomo

SUSAN A. MURRAY, ESQ. (Argued)

Freedman & Lorry, P.C.

400 Market Street, Suite 900

Philadelphia, PA 19106

Attorney for Appellee

Teamsters Pension Trust Fund

of Philadelphia and Vicinity

Garth, Circuit Judge:

Alfred DiGiacomo was a member of the Teamsters

Union and a participant in the Teamsters Pension Trust Fund of

Philadelphia and Vicinity (the “Fund”) (the appellee here). In

computing DiGiacomo’s accrued pension benefits, the Fund

disregarded some 10.5 years of his service time rendered prior

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to the passage of the Employee Retirement Income Security Act

of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. In so doing, the

Fund relied on certain break-in-service provisions in its

governing pension plan, which explicitly permitted the Fund to

exclude DiGiacomo’s pre-ERISA service time accrued prior to

his break-in-service, as defined in the plan. DiGiacomo

thereupon brought this ERISA action against the Fund, alleging

that it incorrectly computed his accrued benefits by refusing to

aggregate his pre-break and post-break service time.

The District Court granted the Fund’s motion to dismiss,

holding that ERISA permitted the Fund to disregard

DiGiacomo’s service time preceding his break-in-service, which

occurred before ERISA’s effective date of January 1, 1976. We

will reverse and remand to the District Court for further

proceedings.

I.

The material facts underlying this appeal are

straightforward and uncontested. From 1960 to 1971,

DiGiacomo earned a total of 10.5 years of benefit service for

“covered employment,” which is defined in the Teamsters

Pension Plan of Philadelphia and Vicinity, Amended and

Restated, effective June 1997 (the “Plan”), as “any employment

in a bargaining unit in a capacity for which Employer

Contributions on behalf of an Employee are payable to the Trust

Fund in accordance with the terms of a collective bargaining

-3-

agreement with the Union.” For the next five years, between

1972 and 1977, DiGiacomo worked outside covered

employment and did not return to covered employment until

some time in 1978. Upon returning to covered employment in

1978, he earned approximately eighteen years of additional

benefit service.

DiGiacomo applied to the Fund for pension benefits on

February 4, 2000. The Fund Administrator approved his

application on March 17, 2000, crediting him with the

appropriate amount of service time for his post-1978

employment.1 The Fund, however, determined that the benefit

service DiGiacomo earned between 1960 and 1971 was forfeited

pursuant to the express provisions of the Plan.2 DiGiacomo had

incurred a break-in-service, as defined in the Plan, upon leaving

covered employment from 1972 to 1977. As a result, the Fund

was not required under the express provisions of the Plan to

aggregate DiGiacomo’s years of service credited before he

incurred the break-in-service (from 1972-1977) in determining

1

The record reveals that the Fund credited DiGiacomo with

18 years of vesting service and 16.8 years of contributory benefit

service. On April 24, 2003, the Fund adjusted the credits to 20 years

of vesting service and 18.81 years of benefit service.

2

In his appellate brief, DiGiacomo asserts that “the Fund

credited him with 10.5 years of service for purposes of accrual and

vesting.” App. Br. at 2. On this appeal, we decide only the issue

presented to us – whether the 10.5 years of pre-break service must be

included in the calculation of DiGiacomo’s accrued benefit.

-4-

his accrued pension benefit. See Plan Article I, Section S.3(a).3

After appealing to the appropriate administrative

tribunals, and thereby exhausting his administrative remedies,

DiGiacomo filed the present action in federal court.4

II.

The question we have to decide is whether, for accrual of

benefit purposes, ERISA prevents pension plans from denying

3

The Plan provided, in pertinent part:

3. Years of Benefit Service shall be aggregated, except in the

following situations:

(a) Benefit Service credited before an Employee’s

most recent Break in Service shall be forfeited.

Plan, Article I, Section S.3(a).

4

The District Court had subject matter jurisdiction over this

case pursuant to § 502(e) of ERISA, 29 U.S.C. § 1132(e). We have

jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.

As this Court is reviewing the District Court’s grant of a Rule

12(b)(6) motion to dismiss for failure to state a claim, the standard of

review is plenary. Unger v. Nat’l Residents Matching Program, 928

F.2d 1392, 1394 (3d Cir. 1991). In addition, all facts alleged in the

complaint and all reasonable inferences that can be drawn from them

must be accepted as true. Markowitz v. Northeast Land Co., 906 F.2d

100, 103 (3d Cir. 1990).

-5-

credit for pre-ERISA service time accrued prior to a break-in-

service. DiGiacomo argues that ERISA (under § 204) trumps

the Plan’s break-in-service provisions, thus requiring the Fund

to aggregate his pre-break and post-break service in determining

his accrued benefit. The Fund contends that ERISA does not

override a pre-ERISA plan’s break-in-service provisions, but

rather permits the Fund (under § 203) to deny DiGiacomo credit

for 10.5 years of his pre-break service. Whereas DiGiacomo

relies on Section 204 of ERISA, 29 U.S.C. § 1054, which

governs the accrual of benefits, the Fund relies on Section 203

of ERISA, 29 U.S.C. § 1053, which regulates vesting.5

In deciding this appeal, we must therefore examine the

relationship between the vesting (§ 203) and accrual of benefit

(§ 204) provisions of ERISA. As discussed more fully below,

Congress in enacting these provisions has left us with a

conundrum: § 203 specifically includes language permitting

plans or employers to disregard pre-ERISA service time

rendered before a break-in-service with regard to vested

benefits; § 204, by contrast, contains no such language with

regard to accrued benefits. While this appeal involves the

accrual of benefits, as distinct from vesting, the Fund

nonetheless urges us to read the relevant language in § 203

5

For ease of reference, throughout this opinion we will refer

to the vesting provision of ERISA as § 203 rather than 29 U.S.C. §

1053, and to the accrual provision of ERISA as § 204 rather than 29

U.S.C. § 1054.

-6-

(allowing the disregard of service time prior to ERISA and prior

to a break-in-service for vesting purposes) into the text of § 204

(lacking similar language for accrual of benefit purposes).

A.

We begin by observing that the Supreme Court, in

Central Laborers’ Pension Fund v. Heinz, 541 U.S. 739, 749

(2004), articulated the important distinction between vesting and

accrual. Accrual, as the Supreme Court noted, is “the rate at

which an employee earns benefits to put in his pension account.”

Id. (citing 29 U.S.C. § 1054). Vesting is “the process by which

an employee’s already-accrued pension account becomes

irrevocably his property.” Id. (citing 29 U.S.C. § 1053 and

Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359,

366 n.10 (1980)). Vested benefits, then, are the “nonforfeitable”

subcategory of accrued benefits. 29 U.S.C. § 1002(19).6

6

29 U.S.C. § 1002(19) provides:

The term “nonforfeitable” when used with respect to a

pension benefit or right means a claim obtained by a

participant or his beneficiary to that part of an immediate or

deferred benefit under a pension plan which arises from the

participant’s service, which is unconditional, and which is

legally enforceable against the plan . . . .

Id.

-7-

ERISA § 204(b)(1)(D) provides for the accrual of

benefits for pre-ERISA service based upon an employee’s

“years of participation” in a plan. 29 U.S.C. § 1054(b)(1)(D).7

Moreover, § 204(b)(4) starts the clock for “participation” at “the

earliest date on which the employee is a participant in the plan”

and further notes that such participation is included in the

“period of service required to be taken into account” under §

202(b).8 As such, in calculating the credited service time for

7

This subsection states:

Subparagraphs (A), (B), and (C) shall not apply with respect

to years of participation before the first plan year to which this

section applies but a defined benefit plan satisfies the

requirements of this subparagraph with respect to such years

of participation only if the accrued benefit of any participant

with respect to such years of participation is not less than the

greater of--

(i) his accrued benefit determined under the plan, as in effect

from time to time prior to September 2, 1974, or

(ii) an accrued benefit which is not less than one-half of the

accrued benefit to which such participant would have been

entitled if subparagraph (A), (B), or (C) applied with respect

to such years of participation.

29 U.S.C. § 1054(b)(1)(D).

8

Section 202(b) is cross-referenced in § 204(b)(4)(A), where

it is referred to as § 1052(b), as follows:

For purposes of determining an employee’s accrued benefit,

-8-

accrual purposes, the statute provides a cross-reference to §

202(b), which establishes the minimum participation standards

concerning employee benefit rights. That subsection provides,

with some exceptions, none of which are relevant here, “all

years of service with the employer or employers maintaining the

plan shall be taken into account in computing the period of

service for purposes of subsection (a)(1) of this section.” 29

U.S.C. § 1052(b)(1) (emphasis added).

Pursuant to the plain language of the statute, the Fund

was required to credit DiGiacomo with “all years of service” in

computing his accrued pension benefits, including his 10.5 years

of pre-break service. Nothing in § 204 of ERISA allows the

Fund to apply its break-in-service provisions to the calculation

of accrued benefits.

As noted, ERISA treats breaks-in-service differently for

vesting purposes. ERISA § 203(b) explicitly allows pension

the term “year of participation” means a period of service

(beginning at the earliest date on which the employee is a

participant in the plan and which is included in a period of

service required to be taken into account under section

1052(b) of this title, determined without regard to section

1052(b)(5) of this title) as determined under regulations

prescribed by the Secretary which provide for the calculation

of such period on any reasonable and consistent basis.

29 U.S.C. § 1054(b)(4)(A).

-9-

plans to apply break-in-service provisions to the calculation of

vested benefits arising from pre-ERISA service:

(1) In computing the period of service under the plan for

purposes of determining the nonforfeitable percentage

under subsection (a)(2) of this section, all of an

employee’s years of service with the employer or

employers maintaining the plan shall be taken into

account, except that the following may be disregarded: .

..

(F) years of service before this part first applies to the

plan if such service would have been disregarded under

the rules of the plan with regard to breaks in service, as

in effect on the applicable date . . . .

29 U.S.C. § 1053(b)(1)(F) (emphasis added).

Were § 203 applicable here, the Fund would thus have

express statutory warrant to disregard DiGiacomo’s pre-break

service time. As it is, however, ERISA § 204 is the applicable

statute, and significantly, it contains no exclusion paralleling

that of § 203, 29 U.S.C. § 1053(b)(1)(F), i.e., permitting an

exclusion for years of service before ERISA, followed by a

break-in-service before ERISA.9

9

In arguing that § 204 is irrelevant to this appeal, we suggest

that Judge Alito has oversimplified the interplay between the vesting

-10-

We now proceed to examine whether this difference in

statutory language means, as DiGiacomo contends, that

Congress intended to treat accrued and vested benefits

differently respecting breaks-in-service.

B.

We are not a tabula rasa in approaching this question.

While we have never expressly held that Congress intended to

treat vesting and accrual of benefits the same with respect to

breaks-in-service, we have affirmed, without opinion, a district

court decision that has so held. See Haas & Cass v. Boeing Co.,

Civ. A. No. 90-7414, 1992 WL 221335, at *4-*7 (E.D. Pa. Sept.

4, 1992), aff’d without opinion, 993 F.2d 877 (3d Cir. 1993).

Such an affirmance, however, has no precedential value. See

(§ 203) and the accrual of benefit (§ 204) provisions. He assumes

that the loss of vesting credit for certain years of service necessarily

and unequivocally entails the loss of accrued benefit credit for those

same years of service. However, § 203(b)(1)(F) does not say that a

break-in-service leads to forfeiture of all previously accrued benefits.

Rather, the statutory scheme is somewhat more complex, providing

that all “years of service” prior to the break-in-service can be

disregarded in calculating the relevant period of service for vesting

purposes. To borrow Judge Alito’s helpful analogy, see dissenting

opinion at 2, DiGiacomo’s 10.5 years of accrued benefit credit might

be equated to chalk marks beside the employee’s name, but they are

not necessarily erased merely because related marks in a separate

category for vested benefit credits have been lost due to a break-in-

service.

-11-

Third Circuit Internal Operating Procedure § 5.7 (July 2002)

(explaining that only our published opinions have precedential

value).

We have also issued one precedential opinion addressing

a similar issue. In Tanzillo v. Local Union 617, International

Brotherhood of Teamsters, 769 F.2d 140 (3d Cir. 1985), we held

that “ERISA . . . explicitly recognizes break-in-service forfeiture

of . . . credits which had been accrued prior to the effective date

of ERISA, if such break-in-service forfeiture is provided for in

the applicable plan document.” Id. at 145. In Tanzillo, though,

we never dealt with § 204, but rather we relied exclusively on §

203 – the vesting section – in upholding a plan’s break-in-

service rules. Id. at 144-45. For this reason, Tanzillo is not

controlling here.

Accordingly, we have yet to address and answer, in a

precedential opinion, the question that DiGiacomo has brought

before us. That is not the case outside this Circuit – two of our

sister Courts of Appeals have already specifically examined and

analyzed the issue, reaching contrary conclusions. Compare

McDonald v. Pension Plan of the NYSA-ILA Pension Trust

Fund, 320 F.3d 151, 153 (2d Cir. 2003) (holding that ERISA §

204 trumps a plan’s break-in-service provisions that purport to

limit the accrual of benefits arising from pre-ERISA

employment) with Jones v. UOP, 16 F.3d 141, 143 (7th Cir.

1994) (refusing “to treat vesting and accrual of benefits

differently with respect to breaks in service” and denying credit

-12-

for pre-ERISA break-in-service time).10 As such, the

asymmetrical treatment of breaks-in-service in the statutory

language of ERISA §§ 203 and 204, although explainable as the

difference between vesting and accrual of benefits, has led to a

division of two of our sister Courts of Appeals in their

respective holdings. Not surprisingly, then, it has also led to a

division in this Court, in which our dissenting colleague Judge

Alito has concluded that § 203 should control this appeal. In

this respect, Judge Alito has aligned himself with the result

reached by the Seventh Circuit. See Jones, infra.

While we admit that this question is a close and difficult

one, we hold, in accord with the Second Circuit, that the

question posed at the outset of this opinion – “whether, for

accrual of benefit purposes, ERISA prevents pension plans from

denying credit for pre-ERISA service time accrued prior to a

break-in-service” – is best answered by looking to the plain and

unambiguous text of the benefit accrual section of ERISA (§

204), as Congress has written it. Our answer is thus “yes,” as

that section requires that “all years of service” must be taken

into account in calculating an employee’s (DiGiacomo’s)

accrued benefit.

10

See also Redmond v. Burlington N. R.R. Co. Pension Plan,

821 F.2d 461, 466-67 (8th Cir. 1987).

-13-

1.

In Jones v. UOP, the Seventh Circuit declined to treat

vesting and accrual of benefits differently with respect to

breaks-in-service, thus reading into § 204 (accrual of benefits)

the exclusion clause of § 203 (vesting). 16 F.3d at 143 (Posner,

J.). The Jones facts resemble those in this appeal in all essential

respects, with one possibly significant exception, having to do

with the likelihood of double recovery. See note 12 infra. Jones

began service with UOP in 1949. He left work in 1960, returned

to work in 1961, and continued working until retirement in

1985. UOP amended its plan (referred to in the opinion as the

1940 plan) in 1968 to base its benefits upon “credited past

service.” “Service” was defined as “an Employee’s last

continuous period of employment with the Employer.” Id. at

142. By the time Jones retired, UOP had become a wholly-

owned subsidiary of Signal Company, and the UOP plan merged

into the Signal Plan, which carried forward the same benefit

structure. Id. at 142-143.

When Jones retired he was apparently entitled to two

benefits: the much larger benefit based on the then-current

Signal Plan, including all relevant years of service under the

predecessor plan (the UOP plan), and a much smaller

supplemental benefit attributable solely to his eleven years of

service from 1949 to 1960 under the former UOP plan. The

latter benefit, which had vested, consisted of Jones’ employee

contributions plus interest to his date of retirement. At issue in

-14-

the case was whether Jones was entitled to credited service for

the eleven years of employment from 1949 to 1960 so as to

increase the benefits to which he would be entitled under the

successor plan (the Signal Plan). From a purely contractual

standpoint, he was clearly not entitled to credit for that service

under the plan’s break-in-service provisions.

The Seventh Circuit began its analysis by observing that

the only two cases to have considered the issue at that point read

the exception for breaks-in-service found in § 203 as though the

same language appeared in § 204, but that they did so without

any analysis. Id. at 143 (citing Redmond v. Burlington N. R.R.

Co. Pension Plan, 821 F.2d 461 (8th Cir. 1987); Jameson v.

Bethlehem Steel Corp., 634 F. Supp. 688 (E.D. Pa. 1986), aff'd

without opinion, 802 F.2d 447 (3d Cir. 1986), cert. denied, 479

U.S. 1089 (1987)).11 The Seventh Circuit noted that “it would

be perilous to assume from the absence of an express reference

to breaks in service that section 204(b)(1)(D) was intended to

override them.” Id. This is particularly so, the court opined,

given that the “purpose of section 204 is to prevent the employer

from defeating the vesting section, which immediately precedes

it in the statute, by backloading benefits (that is, making benefits

accrue very slowly until the employee is near retirement age).”

Id. (citing Jeffrey D. Mamorsky, Employee Benefits Handbook

§ 18.16 (3d ed. 1992)). Inasmuch as “backloading” is a distinct

11

Jameson, like Haas & Cass, supra, is not a precedential

opinion in this Circuit. See 3d Cir. IOP § 5.7.

-15-

problem from breaks-in-service, the Seventh Circuit concluded

that, notwithstanding the absence of explicit statutory exclusion

for pre-ERISA break-in-service provisions, “there is no

indication that Congress in dealing expressly with the former

problem in section 204(b)(1)(D) meant for the latter problem to

be treated differently under section 204 than under section 203.”

Id. at 144.12

12

The Seventh Circuit initially took the view that the fact that

Jones’ rights (for the eleven years of service from 1949 to 1960) had

vested under the 1940 plan was insignificant to the calculation

concerning the credited service under the Signal Plan. But the fact

that Jones was effectively seeking “double credits” for 1949 to 1960

played some part in Judge Posner’s decision, although the extent of

its significance is unclear:

[Jones] is seeking, in effect, double credits for 1949 to

1960--the credit that he has already used to obtain a pension

benefit under the 1940 plan and credit for the same years

toward the pension he earned under the Signal Plan. There is

nothing to suggest that section 204 was intended to confer

such a windfall. That section should be read together with

section 203 to protect the employee against efforts to

circumvent section 203's vesting rules, rather than to defeat

break in service provisions in plans adopted before ERISA

was. There were no such efforts here.

Jones, 16 F.3d at 144. Here, of course, there is no issue concerning

double credits or the likelihood of a windfall in favor of the

beneficiary.

We note that in McClain v. Retail Food Employers Joint

Pension Plan, 413 F.3d 582 (7th Cir. 2005), the Seventh Circuit

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2.

In McDonald v. Pension Plan of the NYSA-ILA Pension

Trust Fund, the Second Circuit parted from the Seventh Circuit,

declining to treat vesting and accrual of benefits the same with

respect to breaks-in-service. 320 F.3d at 159. McDonald, like

this case, involved a suit by a retiree who had suffered a break-

in-service under a pension plan’s pre-ERISA break-in-service

rules. He alleged that the plan’s calculation of accrued years of

service violated ERISA. The Second Circuit, focusing solely

upon the statutory language, concluded that § 204(b) is

unambiguous: “had Congress intended to permit pre-ERISA

break-in-service provisions to apply when calculating accrued

benefits, it could have done so.” Id. (citing ERISA §

203(b)(1)(F), 29 U.S.C. § 1053(b)(1)(F)). The court thus

refused to look beyond the plain text of the statute, in holding

that, under §§ 204(b) and 202(b), pre-ERISA break-in-service

provisions, which would disregard or deny credit for such

service, do not apply when calculating accrued benefits.13

recently reaffirmed its holding in Jones.

13

Hoover v. Bank of America Corp., 286 F. Supp. 2d 1326

(M.D. Fla. 2003), has expressly followed McDonald. Id. at 1344

(finding the Second Circuit’s decision in McDonald “more faithful to

the canons of statutory construction and thus more persuasive”).

-17-

C.

In Arthur Andersen LLP v. United States, 125 S. Ct. 2129

(2005), the Supreme Court, although construing a different

statute, employed the same principle we do today – “we must

simply interpret the statute as written.” Id. at 2135. Reading

ERISA § 204 as it is written, we are persuaded that our position

and that of the Second Circuit is more consistent with

established canons of statutory construction than the Seventh

Circuit’s position.

Two canons of statutory construction particularly inform

our analysis. The first is that a court must begin with the

language of the statute. See Barnhart v. Sigmon Coal Co., 534

U.S. 438, 450 (2002) (citations omitted). “Absent a clearly

expressed legislative intention to the contrary, that language

must ordinarily be regarded as conclusive.” Consumer Prod.

Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980).

With respect to the question presented here, the statutory

language is unambiguous. ERISA § 204 establishes permissible

accrual practices for pension plans. It makes no provision for

break-in-service rules. Nor does it provide for disregarding pre-

ERISA break-in-service time in calculating an employee’s

pension. Where Congress wanted to provide for break-in-

service provisions in ERISA, it did so explicitly, as illustrated by

§ 203.

-18-

In view of Congress’s failure to include a section in §

204 for accrued benefits which parallels the section found in §

203 for vesting, we rely on a second canon of statutory

construction: “[I]t is generally presumed that Congress acts

intentionally and purposely when it includes particular language

in one section of a statute but omits it in another.” BFP v.

Resolution Trust Corp., 511 U.S. 531, 537 (1994) (quoting

Chicago v. Envtl. Defense Fund, 511 U.S. 328, 338 (1994)). We

are satisfied that none of the Fund’s arguments are strong

enough to overcome this presumption.

The Fund relies, as it must, on outside interpretive

sources – i.e., related statutory terms, applicable regulations, and

relevant legislative history – in arguing that Congress intended

to treat vesting and accrual of benefits the same with respect to

breaks-in- service. The problem with such reliance, however, is

that these sources are ambiguous at best, and therefore fail to

evince clearly a congressional intent to give effect to break-in-

service rules precluding an employee from receiving certain

accrued benefits. In these circumstances, we venture no further

than the statutory language in deciphering congressional intent.14

14

Because, as we have stated, our decision is grounded in the

plain and unambiguous text of § 204, we see no reason to further

address secondary sources. For an exhaustive analysis of these

sources, concluding that they demonstrate Congress’s intent to treat

vesting and accrual differently with regard to breaks-in-service, see

McDonald v. Pension Plan of NYSA-ILA Pension Trust Fund, 153 F.

Supp. 2d 268 (S.D.N.Y. 2001). For an analysis of some of the same

-19-

As the Second Circuit noted, “ERISA is a complicated enough

statute without the courts soldering new sections onto it.”

McDonald, 320 F.3d at 159.

Finally, we cannot say that the difference in language

enacted by Congress respecting vesting and accrual of benefits

is “so bizarre that Congress could not have intended it.”

Demarest v. Manspeaker, 498 U.S. 184, 191 (1991) (internal

quotation and citation omitted). Congress reasonably may have

concluded, when it comes to the problem of vesting, that an

employee, before he becomes entitled to pension or retirement

benefits, should serve his employer continuously for the

designated vesting period without departures or breaks-in-

service. It is not clear to us that the same principle holds true for

the accrual of an employee’s benefits. Once an employee has

become vested, Congress, by its explicit expression, has

determined that all the benefits whenever accumulated by that

employee, regardless of any discontinuity in service, should be

included in his retirement rights. Such disparate treatment of

vesting on the one hand and accrual on the other is neither

irrational nor arbitrary, but could very well reflect Congress’s

motive in maximizing employee benefits once entitlement

through vesting has been achieved. We have interpreted

Congress’s intent to that effect.

sources reaching the opposite conclusion, see Haas & Cass v. Boeing

Co., Civ. A. No. 90-7414, 1992 WL 221335 (E.D. Pa. Sept. 4, 1992).

-20-

We recognize that there might also be sound policy

reasons for reaching the Jones result, and the result advocated

by Judge Alito. However, such reasons do not, in our view,

overcome the plain language of the statute. Change in

legislation is a task for Congress, and if our interpretation of

what Congress has said so plainly is now disfavored, it is for

Congress to cure. We do not sit here as a policy-making or

legislative body.

III.

Accordingly, we will reverse the judgment of the District

Court dated July 29, 2004, and we will remand to the District

Court for further proceedings consistent with this opinion.

ALITO, Circuit Judge, dissenting:

I agree that the relevant provisions of ERISA speak in

unambiguous terms, but I disagree with the majority about what

they say. In my view, the majority misreads § 204 by equating

the accrual of benefits with an unconditional right to receive

benefits, even though benefits become unconditional through

vesting, not accrual. Under the minimum vesting standards in

§ 203, the Plan was plainly allowed to treat benefits accrued

prior to 1972 as forfeitable upon a break in service. Since I

believe the plain text of the statute requires us to affirm the

District Court’s decision, I respectfully dissent.

-21-

I.

The majority quotes at length from ERISA §§ 202 and

204, but these sections of the Act are largely irrelevant to the

appeal. DiGiacomo admits that the Fund properly credited him

with accrued benefits. An exhibit attached to his complaint

indicates that he accrued benefits pursuant to the terms of the

Plan at a steady rate for each year of service prior to 1972. App.

at 16. The notice also indicates, however, that these accrued

benefits were “lost” as a result of his “break in service” that

year. Id. Since DiGiacomo does not challenge the Fund’s

interpretation of the Plan, the only question we must decide is

whether the Fund could deny him benefits that accrued before

ERISA applied to the Plan and that were forfeited under the

terms of the Plan then in effect.

ERISA clearly answers this question in the affirmative.

Section 203 provides that “for purposes of determining the

nonforfeitable percentage” of an employee’s “accrued benefit,”

a plan may permissibly disregard “years of service before this

part first applies to the plan if such service would have been

disregarded under the rules of the plan with regard to breaks in

service, as in effect on the applicable date.” 29 U.S.C.

§ 1053(a)(2), (b)(1)(F). The Plan in effect in 1972 was thus

entitled to treat all benefits DiGiacomo had accrued prior to his

break as “forfeitable” – that is, as conditional only. See ERISA

§ 3(19), 29 U.S.C. § 1002(19).

-22-

The Plan did just that. Although it provided for benefit

accrual in each year of service, see App. at 20, it also provided

that a break in service would result in the loss of prior vesting

credit. See id. at 19. When DiGiacomo left covered

employment in 1972, his benefits accordingly became

forfeitable under § 203(b)(1)(F). Since the Plan further

provided that accrued benefits would be forfeited upon a break

in service, see App. at 20, DiGiacomo’s departure from covered

employment simultaneously resulted in the forfeitability and

forfeiture of his benefits.15

Observing that ERISA’s minimum standards for vesting

and accrual differ, the majority concludes that “the Fund was

required to credit DiGiacomo with ‘all years of service’ in

computing his accrued pension benefits.” Maj. Op. at [[9]].

The majority seems to assume that ERISA also required the Plan

to include all of his accrued benefits in the calculation of his

15

The convergence of the conditions that led to the

forfeitability and forfeiture of DiGiacomo’s benefits illustrates why

§ 204 makes no mention of breaks in service. The majority ponders

this omission, but a close reading of the statute reveals that § 203’s

break-in-service provisions would be superfluous in § 204. The loss

of vesting credit as a result of a break in service under § 203(b)(1)(F)

leaves a participant’s pre-break accrued benefits forfeitable under the

terms of his plan, but nothing in ERISA prevents a plan from making

the break itself a forfeiture event. If a plan’s pre-ERISA break-in-

service provisions may disregard vesting credit earned prior to

ERISA’s effective date, it necessarily follows that the plan may call

for the forfeiture of accrued benefits protected by that vesting credit.

-23-

pension, but ERISA says nothing of the kind. As the Supreme

Court explained in Central Laborers’ Pension Fund v. Heinz,

accrual is simply “the rate at which an employee earns benefits

to put in his pension account.” 541 U.S. 739, 749 (2004).

Accrued benefits, in other words, are like chalk marks beside the

employee’s name. They are conditional rights that do not

become “irrevocably his property” until they vest. Id. Only then

do they become “legally enforceable against the plan.” ERISA

§ 3(19), 29 U.S.C. § 1002(19). Prior to vesting, accrued

benefits can be, and in this case were, forfeited under the terms

of a participant’s plan.

DiGiacomo alleges that he became a fully vested

participant after returning to covered employment,16 but nothing

in the Plan entitled him to restoration of his forfeited accrued

16

Although the complaint does not mention it, DiGiacomo’s

appellate brief appears to claim that some or all of his benefits had

vested even prior to the break in service. See DiGiacomo’s Br. at 16.

This claim, if true, would not affect the analysis above. Regardless

of how they were characterized under the 1972 version of the Plan,

DiGiacomo’s pre-break benefits were clearly “forfeitable” within the

meaning of ERISA, since the Plan provided for their forfeiture if a

break in service occurred. More to the point, ERISA did not require

the Plan to treat them as nonforfeitable. Under § 203(b)(1)(F), the

Plan could treat them as forfeitable if they accrued before ERISA

applied to the Plan and were so treated under the version of the Plan

then in effect. Because they were treated as forfeitable by the Plan in

1972, they could be forfeited upon the occurrence of any condition set

forth therein, including a break in service.

-24-

benefits. ERISA certainly does not require their restoration. To

the contrary, § 203 recognizes the enforceability of pre-ERISA

break-in-service provisions as applied to benefits accrued prior

to the Act’s effective date. See Tanzillo v. Local Union 617,

Int’l Bhd. of Teamsters, 769 F.2d 140, 145 (3d Cir. 1985).

Under the Fund’s unchallenged interpretation of the Plan,

DiGiacomo was permanently stripped of any accrued benefits

when his break in service occurred.

DiGiacomo’s authorities to the contrary are unpersuasive.

The Second Circuit in McDonald v. Pension Plan of the NYSA-

ILA Pension Trust Fund concluded that the plain text of §§ 202

and 204 required a plan to provide for benefit accrual in every

year of an employee’s participation. See 320 F.3d 151, 156-57

(2d Cir. 2003); cf. 29 C.F.R. § 2530.210(a)(2) (requiring

qualified plans to take into account “all years of

participation . . . for purposes of section 204”). This conclusion

simply begs the question. The question is not whether benefits

must accrue in every year of participation but whether benefits

accrued in years prior to ERISA’s effective date may be

forfeited under break-in-service provisions then in effect. The

answer supplied by § 203(b)(1)(F) is clearly affirmative.

II.

-25-

Although I agree that the Court’s inquiry should begin

and end with the statute’s plain text, I note that the legislative

history of §§ 203 and 204 confirms my interpretation. The

reports on the embryonic legislation usually do not discuss

accrual or, when they do, discuss it only under the rubric of

vesting. See, e.g., S. Rep. No. 93-383, 1974 U.S.C.C.A.N.

4890, 4929, 4935-36; H.R. Conf. Rep. No. 93-1280, 1974

U.S.C.C.A.N. 5038, 5049, 5054-57; cf. S. Rep. No. 93-383,

1974 U.S.C.C.A.N. at 4890 (explaining, without reference to the

concept of accrual, that the legislation was designed “to make

sure that those who do participate in [retirement] plans do not

lose their benefits as a result of unduly restrictive forfeiture

provisions”); H.R. Rep. No. 93-807, 1974 U.S.C.C.A.N. 4670,

4671 (same).

Congress evidently understood accrual as simply the

handmaiden to vesting. As the Senate report on S. 1179

explains, “[i]t is necessary to provide a statutory definition of an

‘accrued benefit’ because, unless this is a defined amount,

vesting of an ‘accrued benefit’ in whatever form is specified by

the plan has little, if any, meaning.” S. Rep. No. 93-383, 1974

U.S.C.C.A.N. at 4935; see also H.R. Conf. Rep. No. 93-1280,

1974 U.S.C.C.A.N. at 5055 (explaining that accrual standards

are necessary to “limit the extent of ‘back-loading’ permitted

under the plan”); Jones v. UOP, 16 F.3d 141, 143-44 (7th Cir.

1994) (same); 1 Jeffrey D. Mamorsky, Employee Benefits

Handbook § 17:36 (2004) (“The minimum vesting standards of

the Code would be rendered meaningless if the plan sponsor

-26-

were free to backload the plan . . . because a mandated large

percentage of nothing is still nothing.”).

This history confirms that § 204 was not designed to

afford any right to a guaranteed retirement benefit apart from the

Act’s minimum vesting standards. Under those minimum

vesting standards, the Plan was entitled to treat DiGiacomo’s

benefits as forfeitable because they accrued before ERISA

applied to the Plan and because they were so treated under the

terms of the Plan then in effect. See § 203(b)(1)(F). Having

permissibly deemed them forfeitable, the Plan could, and did,

call for their forfeiture.

III.

Because ERISA provides DiGiacomo no right to receive

the benefits that were forfeited under the Plan’s break-in-service

provisions in effect at the time the benefits accrued, his

complaint fails to state a claim on which relief can be granted.

The District Court correctly granted the Fund’s motion to

dismiss it. The majority errs in reversing that decision, and I

respectfully dissent.

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