Shaver v. Siemens Corp.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______________

Nos. 10-4147, 10-4279, 10-4791, 10-4792

______________

RONALD SHAVER; WILLIAM J. WHITNEY; JOE

FEDELE;

RALPH RIBERICH; ANTHONY P. KATZ, on behalf of

themselves

and others similarly situated,

v.

SIEMENS CORPORATION; SIEMENS WESTINGHOUSE

RETIREMENT

PLAN FOR UNION EMPLOYEES; SIEMENS

WESTINGHOUSE RETIREMENT PLAN,

Appellants in No. 10-4147

______________

RONALD SHAVER; WILLIAM J. WHITNEY; JOE

FEDELE;

RALPH RIBERICH; ANTHONY P. KATZ, on behalf of

themselves

and others similarly situated,

Appellants in No. 10-4279

v.

SIEMENS CORPORATION; SIEMENS WESTINGHOUSE

RETIREMENT

PLAN FOR UNION EMPLOYEES; SIEMENS

WESTINGHOUSE RETIREMENT PLAN

______________

RONALD SHAVER; WILLIAM J. WHITNEY; JOE

FEDELE;

RALPH RIBERICH; ANTHONY P. KATZ, on behalf of

themselves

and others similarly situated,

v.

SIEMENS CORPORATION; SIEMENS WESTINGHOUSE

RETIREMENT

PLAN FOR UNION EMPLOYEES; SIEMENS

WESTINGHOUSE RETIREMENT PLAN,

Appellants in No. 10-4791

______________

RONALD SHAVER; WILLIAM J. WHITNEY; JOE

FEDELE;

RALPH RIBERICH; ANTHONY P. KATZ, on behalf of

themselves

and others similarly situated,

Appellants in No. 10-4792

2

v.

SIEMENS CORPORATION; SIEMENS WESTINGHOUSE

RETIREMENT

PLAN FOR UNION EMPLOYEES; SIEMENS

WESTINGHOUSE RETIREMENT PLAN

______________

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civ. No. 2-02-01424)

District Judge: Honorable David Stewart Cercone

______________

Argued December 15, 2011

BEFORE: SLOVITER, VANASKIE, and GREENBERG,

Circuit Judges

(Filed: February 29, 2012)

______________

David B. Rodes (argued)

John T. Terney, III

Goldberg, Persky & White,

1030 Fifth Ave., Third Floor

Pittsburgh, PA 15219

William T. Payne

Stember, Feinstein, Doyle & Payne

1007 Mt. Royal Blvd.,

3

Pittsburgh, PA 15223

Attorneys for Appellees-Cross Appellants

Ronald Shaver, William Whitney,

Joe Fedele, Ralph Riberich,

and Anthony Katz, on behalf

of themselves and others similarly situated

Frederick W. Bode, III

Thomas H. May

Dickie, McCarney & Chilcote

Two PPG Place

Suite 400

Pittsburgh, PA 15222

David F. Dobbs

Dana L. Rust

Robert F. Holland

McGuire Woods

One James Center

901 East Cary Street

Richmond, VA 23219

Charles A. Rothfield (argued)

Michael B. Kimberly

Mayer Brown

1999 K Street, NW

Washington, DC 20006

Lauren R. Goldman

Mayer Brown

4

1675 Broadway

New York, NY 10019

Attorneys for Appellants-Cross Appellees

Siemens Corporation, Siemens

Westinghouse Retirement Plan for

Union Employees, and Siemens Westinghouse

Retirement Plan

Christopher J. Rillo

Schiff Hardin

One Market Street

Spear Street Tower, Suite 3200

San Francisco, CA 94105

Bradford P. Campbell

Suzanne M. Arpin

Diane M. Soubly

Schiff Hardin

1666 K Street, NW, Suite 300

Washington, DC 20006

Janet Jacobson

American Benefits Council

1501 M Street NW

Suite 600

Washington, DC 20005

Attorneys for Amici Curiae

American Benefits Council,

National Association of

5

Manufacturers, and

Chamber of Commerce of

the United States

______________

OPINION OF THE COURT

______________

GREENBERG, Circuit Judge.

I. INTRODUCTION

This matter comes on before this Court on four

consolidated appeals and cross-appeals from an order of the

District Court dated March 29, 2007, and entered on March 30,

2007, denying defendants’ motion for summary judgment and

granting in part and denying in part plaintiffs’ cross-motion for

summary judgment. See Shaver v. Siemens Corp., No.

2:02cv1424, 2007 WL 1006681 (W.D. Pa. Mar. 29, 2007).

Plaintiffs, now the appellees/cross-appellants in this appeal, 1

Ronald Shaver, William Whitney, Joe Fedele, Ralph Riberich,

and Anthony Katz, on behalf of themselves and others similarly

situated, brought this class action against defendants, now

appellants/cross-appellees, Siemens Corporation (“Siemens”),

appellees’ former employer, and its retirement plans, Siemens

Westinghouse Retirement Plan for Union Employees and

Siemens Westinghouse Retirement Plan, alleging that those

1

As a matter of convenience, we refer to plaintiffs simply as

“appellees.”

6

entities violated the Employee Retirement Income Security Act

of 1974 (“ERISA”) by refusing to provide appellees with

Permanent Job Separation pension benefits (“PJS benefits”)

when Siemens terminated their employment. Appellees’ action

has been partially successful in the District Court but remains

unresolved as to the rest of the case. For the reasons that follow,

we will reverse on one of Siemens’ appeals to the extent that the

District Court denied it summary judgment for we conclude that

Siemens was entitled to summary judgment on the entire case

with respect to all appellees, and we will remand the case to the

District Court for entry of judgment in favor of Siemens and its

retirement plans. Entry of the order on the remand will bring

this litigation to a close with respect to the substantive matters at

issue. 2

II. FACTUAL and PROCEDURAL HISTORY

On November 14, 1997, Westinghouse Electric

Corporation (“Westinghouse”) 3 agreed to sell its Power

Generation Business Unit (“PGBU”) to Siemens in a transaction

to be effectuated through an Asset Purchase Agreement

(“APA”). There was, however, a delay in the consummation of

the transaction, and Siemens and Westinghouse did not execute

2

It is possible that the District Court will need to enter orders on

some housekeeping matters such as the imposition of costs.

3

Subsequently, Westinghouse changed its name to CBS, Inc.,

and it is now known as Viacom, Inc.

7

the APA until approximately nine months later, on August 19,

1998. As the APA contemplated, Siemens hired all

Westinghouse PGBU employees who, on August 19, 1998, had

been working actively, were on vacation, or were on short-term

disability (“legacy employees”). Appellees are 227 legacy

employees who transferred employment from Westinghouse to

Siemens.

At the time that Siemens and Westinghouse executed the

APA, Westinghouse sponsored and maintained a defined benefit

pension plan for its employees, including the soon-to-be legacy

employees (the “Westinghouse Plan”). Under section 19 of the

Westinghouse Plan, employees who satisfied certain age and

service requirements, but did not qualify for normal retirement

benefits, and who were terminated by an “Employer, an

Affiliated Entity, or Excluded Unit because of job movement or

product line relocation or location closedown” were entitled to

PJS benefits. J.A. 292, 345. Stated succinctly, PJS benefits

provide for payment of an employee’s normal retirement benefit

without actuarial reduction prior to normal retirement age, an

additional monthly payment of $10.00 multiplied by the

employee’s years of credited service if the employee’s special

retirement date 4 was on or before January 1, 1995, and an

additional monthly payment of $100.00 if the employee had 25

years of eligibility service and his special retirement date was on

4

A plan participant’s special retirement date under section 19 of

the Westinghouse Plan is the first day of the month following

the month in which Westinghouse terminates the participant’s

employment due to job movement, product line relocation, or

location closedown.

8

or before January 1, 1995. See id. 345-50. As we later will

explain, it is highly significant that the Westinghouse Plan

defined an “Employer, Affiliated Entity, or Excluded Unit” as

Westinghouse or any Westinghouse subsidiary or joint venture

participating in the Westinghouse Plan. Id. 284, 288, 292. The

definition did not, however, include any future employer, here

Siemens, of Westinghouse employees.

The Westinghouse Plan also contained two critical

express limitations on the availability of PJS benefits: (1) a

provision providing that “in no event shall a Permanent Job

Separation occur if an Employee is offered continued

employment by . . . a successor employer,” and (2) a so-called

“sunset provision” providing that “[i]n no event shall a

Permanent Job Separation occur after August 31, 1998.” Id.

293. Thus, in the absence of an amendment of the

Westinghouse Plan, the plan would not provide for PJS benefits

to an employee offered employment by a successor to

Westinghouse, as happened here, or by reason of a separation

after August 31, 1998, as was also the case here.

The APA included many specific provisions governing

the pensions and benefits of the legacy employees, which, so far

as germane to this appeal, we explain in more detail below. At

its broadest, however, the APA required that Siemens establish a

defined benefit pension plan for the legacy employees “that

contain[ed] terms and conditions that are substantially identical

with respect to all substantive provisions to those of the

Westinghouse Pension Plan as in effect as of the Closing Date”

of the APA and that Siemens was to provide “compensation and

benefit plans and arrangements which in the aggregate are

9

comparable” to those of the Westinghouse Plan as of the closing

date. Id. 137-38. Thus, Westinghouse and Siemens

contemplated that the pension benefits for legacy employees

essentially would continue unabated after consummation of the

sale of the PGBU. There is, however, no suggestion in the APA

or in any other document elsewhere in the record that

Westinghouse and Siemens contemplated that the consummation

of the sale would result in enhancement of the legacy

employees’ pension benefits.

Although Westinghouse and Siemens did not execute the

APA until August 19, 1998, prior to that date they adopted an

amendment to the APA that provided that the closing date of the

APA, though only for the purpose of pensions and benefits,

would be September 1, 1998. 5 In the same amendment

5

The District Court found and the parties agree that Siemens

and Westinghouse amended the APA to alter the closing date for

pension and benefit purposes to September 1, 1998. In reality,

however, the amendment was more specific than that and

provided that “[a]ll references to ‘Closing Date’ in [s]ections

5.5(d), (e) and (h) shall be changed to September 1, 1998.” J.A.

154. In fact, however, there are provisions of the APA that deal

with pensions and benefits that are not within the sections

enumerated above. In particular, sections 5.5(a) and 2.3(a)

implicate pensions and benefits. In light of the parties’ long-

standing agreement as to the import of the amendment, however,

and for ease of reference, we insert September 1, 1998, as the

closing date for all APA provisions dealing with pensions and

benefits. We note, however, that the precise closing date of the

APA is potentially relevant only as to our discussion in section

10

Westinghouse and Siemens also amended the APA to provide

that Westinghouse would amend its pension plan to offer the

legacy employees, though only for benefit accrual purposes,

credit for service and compensation from August 19 through

August 31, 1998, even though Siemens would become their

employer as of August 19. In turn, Siemens agreed not to

terminate any legacy employee other than for cause prior to

September 1, 1998, and agreed that if it nevertheless did so it

would “reimburse [Westinghouse] for any actuarial pension loss

caused by any such termination.” Id. 156. Thereafter,

Westinghouse amended its plan to reflect this amendment to the

APA.

On October 29, 1998, Siemens adopted separate but

virtually identical defined benefit pension plans for union and

non-union employees, which were made effective retroactively

to September 1, 1998, the plans thereby becoming activated as

of the time the Westinghouse Plan no longer would give the

legacy employees credit for service and compensation.

Consequently, the consummation of the Westinghouse-Siemens

transaction left the legacy employees in the same position in

which they had been prior to the closing of the transaction with

regard to PJS benefits because under the Westinghouse Plan

V(B)(3)(b) of this opinion concerning whether the APA

contractually required Siemens to offer PJS benefits. We thus

only address the disparate closing dates in that section of our

decision and note that inserting August 19, 1998, as the closing

date of the APA into sections 5.5(a) and 2.3(a) does not alter the

outcome of this case.

11

separation from service after August 31, 1998, could not result

in a terminated employee being eligible for PJS benefits.

As we have indicated, notwithstanding the sale of the

PGBU to Siemens and the adoption of the Siemens Plans, after

execution of the APA and to this day, the Westinghouse Plan

has remained in existence and it continues to provide legacy

employees the pension benefits they accrued under the

Westinghouse Plan. Legacy employees who qualify for benefits

thus receive two pension payments: one from the Westinghouse

Plan for benefits accrued prior to September 1, 1998, and

another from a Siemens Plan for benefits accrued from

September 1, 1998 forward. 6

In 1999, Siemens closed certain PGBU facilities and

consequently terminated the employment of numerous legacy

employees, including the appellees in this case. Upon their

termination, 207 of the 227 appellees signed severance

agreements in which they released Siemens from liability and

promised not to sue it for any claims related to or arising out of

their employment or termination. In exchange for their signing

the agreement, Siemens paid the signatories varying amounts of

severance pay. Though the validity of the releases was a major

issue in the District Court, as will be seen we need not address

that issue on this appeal. Notwithstanding having executed

these releases, in March 2002 appellees submitted claims to the

6

As explained below, however, there are certain benefits which

are considered to have “accrued” for purposes of ERISA section

204(g) prior to September 1, 1998, for which Westinghouse is

no longer liable.

12

Siemens Plans for PJS benefits, but the Siemens Plans’

administrative committees denied those claims on the ground

that neither Plan provided for PJS benefits, an undoubtedly

correct decision so far as the terms of the Siemens Plans were

concerned.

On August 15, 2002, appellees filed a complaint in the

District Court against Siemens and the Siemens Plans, alleging

that those entities’ denial of their claims for PJS benefits

violated ERISA. The Court assigned the case to a Magistrate

Judge for pretrial proceedings in accordance with the Magistrate

Act, 28 U.S.C. § 636(b)(1)(A). Following discovery, the parties

filed cross-motions for summary judgment, which led to the

Magistrate Judge’s filing a report and recommendation on

December 13, 2005, with the District Court. After the parties

filed objections and responses, the Court entered the order

which is the subject of this appeal.

The Magistrate Judge recommended that the District

Court grant appellees’ motion as to the 20 class members who

had not signed releases (the “Non-Release Plaintiffs”) and grant

Siemens’ motion as to the 207 members who had signed releases

(the “Release Plaintiffs”). The Magistrate Judge concluded that

Siemens violated ERISA sections 208, 29 U.S.C. § 1058, and

204(g), 29 U.S.C. § 1054(g), a decision she based on two

theories which we address in detail below. The Magistrate

Judge determined, however, that Siemens had satisfied its initial

burden with respect to the Release Plaintiffs of proving the

waivers’ validity and further determined that appellees had

failed to provide evidence that they did not knowingly and

voluntarily execute the waivers. Consequently, the Magistrate

13

Judge recommended that the Court grant summary judgment in

Siemens’ favor with respect to the Release Plaintiffs. Thus, the

gravamen of the Magistrate Judge’s recommendation was that

Siemens wrongfully denied all appellees PJS benefits but to the

extent that appellees had waived their PJS claims by executing

the severance agreements including releases of their PJS claims

Siemens avoided liability.

The parties filed cross-objections and responses in the

District Court to the report and recommendation as both sides

were satisfied in part and dissatisfied in part with the report and

recommendation. On March 29, 2007, the Court granted

appellees’ summary judgment motion with respect to the Non-

Release Plaintiffs and denied summary judgment to Siemens as

to both classes of plaintiffs. Apparently adopting both of the

Magistrate Judge’s theories of liability, the Court determined

that Siemens violated ERISA in denying PJS benefits and that in

the absence of their signing releases all appellees would be

entitled to PJS benefits. The Court denied summary judgment to

appellees as to the Release Plaintiffs, as it concluded that a

determination of whether they knowingly and voluntarily

waived their right to bring their claims for PJS benefits required

a fact-intensive inquiry inappropriate for resolution on summary

judgment proceedings as there were material disputes of fact on

the waiver issue.

The District Court entered a final judgment pursuant to

Federal Rule of Civil Procedure 54(b) on October 15, 2010,

awarding the Non-Release Plaintiffs approximately $2 million in

damages but denying a claim they asserted for certain retiree

health and life insurance benefits that they contended should

14

accompany PJS benefits. 7 On October 15 the Court certified the

portion of its March 29, 2007 opinion and order denying

appellees’ motion for summary judgment as to the Release

Plaintiffs for interlocutory appeal pursuant to 28 U.S.C. §

1292(b). The Court also certified for interlocutory appeal

Siemens’ appeal from the Court’s denial of its motion for

summary judgment with respect to the Release Plaintiffs. The

Court characterized the issue for the proposed interlocutory

appeals as whether the Release Plaintiffs’ claim to PJS benefits

could be waived as a matter of law and, if so, what proof must

be presented to demonstrate that there had been a valid waiver.

Both appellees and Siemens petitioned in this Court for

permission to appeal, and on December 13, 2010, we granted

both petitions. These appeals followed. 8

III. JURISDICTION and STANDARD of REVIEW

The District Court had jurisdiction under 28 U.S.C. §

1331 and 29 U.S.C. § 1132(e) and (f). We have jurisdiction

7

Inasmuch as we determine that appellees are not entitled to the

PJS benefits we do not address their claim that they are entitled

to attendant health and life insurance benefits.

8

The parties filed four separate appeals but we have no need to

explain their procedural history in more detail as we have

consolidated them and our opinion in this consolidated case will

bring these appeals and this litigation in its entirety to a

substantive close.

15

over the parties’ cross-appeals of the District Court’s entry of

final judgment as to the Non-Release Plaintiffs pursuant to 28

U.S.C. § 1291 and over the interlocutory appeals with respect to

the Release Plaintiffs pursuant to 28 U.S.C. § 1292(b).

“We exercise plenary review of a district court’s order

granting or denying summary judgment, applying the same

standard as the district court . . . .” Tri-M Grp., LLC v. Sharp,

638 F.3d 406, 415 (3d Cir. 2011). We will affirm only if

“drawing all reasonable inferences in favor of the nonmoving

party, there is no genuine issue as to any material fact and . . .

the moving party is entitled to judgment as a matter of law.” Id.

(quoting Ruehl v. Viacom, Inc., 500 F.2d 375, 380 n.6 (3d Cir.

2007)). Because the District Court adopted in substance the

Magistrate Judge’s report and recommendation, with the

modifications we have set forth, in most respects effectively we

are reviewing the Magistrate Judge’s proposed disposition of the

case. We thus reference primarily the Magistrate Judge’s report

and recommendation rather than the opinion of the District

Court though to a degree we treat the documents

interchangeably.

IV. LEGAL BACKGROUND

Due to the complexity of this ERISA case, we think it

best to set forth the background legal framework that governs

this matter before we turn to a review of the District Court’s

disposition of this case. We start from the core principle that it

is well-established that “ERISA does not mandate the creation

16

of pension plans.” Dade v. North Am. Philips Corp., 68 F.3d

1558, 1561 (3d Cir. 1995). “Nor does ERISA mandate what

kind of benefits employers must provide if they choose to have

such a plan.” Lockheed Corp. v. Spink, 517 U.S. 882, 887, 116

S.Ct. 1783, 1788 (1996); see also Smith v. Contini, 205 F.3d

597, 602 (3d Cir. 2000) (“ERISA neither mandates the creation

of pension plans nor in general dictates the benefits to be

afforded once a plan is created.”). Instead, Congress enacted

ERISA to ensure that “if a worker has been promised a defined

pension benefit upon retirement — and if he has fulfilled

whatever conditions are required to obtain a vested benefit — he

will actually receive it.” Spink, 517 U.S. at 887, 116 S.Ct. at

1788 (internal quotation marks omitted). Thus, “[o]nly the plan

itself can create an entitlement to benefits.” Bellas v. CBS, Inc.,

221 F.3d 517, 522 (3d Cir. 2000). “Accordingly, we are

required to enforce the [p]lan as written unless we find a

provision of ERISA that contains a contrary directive.” Dade,

68 F.3d at 1562; see also Smith, 205 F.3d at 602 (same). 9

By their plain terms, the Siemens Plans do not provide

for PJS benefits. The Magistrate Judge found, however, that

ERISA sections 208 and 204(g) controlled the transactions that

led to the creation of the Siemens Plans and that by reason of

9

In point of fact, since Congress originally adopted ERISA it has

from time to time amended the statute to limit plan sponsors’

power to determine the ERISA benefits and collective

bargaining agreements sometimes also address plans’ benefits.

But the basic principle that the employer determines the benefits

remains.

17

those sections appellees are entitled to PJS benefits. We thus

turn to those provisions.

ERISA section 208 provides, in relevant part:

A pension plan may not merge or consolidate

with, or transfer its assets or liabilities to, any

other plan after September 2, 1974, unless each

participant in the plan would (if the plan then

terminated) receive a benefit immediately after

the merger, consolidation, or transfer which is

equal to or greater than the benefit he would have

been entitled to receive immediately before the

merger, consolidation, or transfer (if the plan had

then terminated).

29 U.S.C. § 1058. In Gillis v. Hoechst Celanese Corp., 4 F.3d

1137, 1150 (3d Cir. 1993), then-Judge Alito summarized in his

concurring opinion the operation of section 208:

[Section 208 and its Internal Revenue

Code counterpart, 26 U.S.C. § 414(l)10] require us

10

“When Title I of ERISA was enacted to impose substantive

legal requirements on employee pension plans (including the

anti-cutback rule), Title II of ERISA amended the Internal

Revenue Code to condition the eligibility of pension plans for

preferential tax treatment on compliance with many of the Title I

requirements.” Central Laborers’ Pension Fund v. Heinz, 541

U.S. 739, 746, 124 S.Ct. 2230, 2236-37 (2004). “The result was

a ‘curious duplicate structure’ with nearly verbatim replication

in the Internal Revenue Code of whole sections of text from

18

to compare (a) the benefits, if any, that the

[participants] would have received if the

[original] [p]lan had terminated just before the

[merger or transfer] . . . with (b) the benefits, if

any, that the [participants] would have received if

the [successor] [p]lan had terminated just after the

[merger or] transfer.

In order to determine the benefits that the

[participants] would have received upon

termination of the plans at these two points in

time, it is necessary to look to Section 4044 of

ERISA, 29 U.S.C. § 1344, which prescribes the

order in which the assets of a single-employer

defined benefit plan are allocated among

participants and beneficiaries at termination. The

effect of all of these provisions — 26 U.S.C. §

414(l) and 29 U.S.C. §§ 1058 and 1344 — when

read together [is] to require that any allocation of

assets to the [participants’] early retirement

benefits that would have occurred upon

termination of the [original] [p]lan just before the

[merger or] transfer not exceed the allocation of

Title I of ERISA.” Id., 124 S.Ct. at 2237. Section 208 is

replicated in 26 U.S.C. § 414(l) and section 204(g) in 26 U.S.C.

§ 411(d)(6). When interpreting ERISA, we thus take guidance

from the parallel provisions of the Internal Revenue Code, along

with Treasury regulations and Revenue Rulings implementing

and interpreting those provisions. See Gillis, 4 F.3d at 1144.

19

assets to those benefits that would have occurred

upon termination of the [successor] [p]lan just

after the [merger or] transfer.

Id. Thus, section 208 essentially requires that a plan participant

receive no less benefits upon a hypothetical termination of the

successor plan just following the merger or transfer of assets or

liabilities than the participant would have received upon a

hypothetical termination of his or her original plan just prior to

the merger or transfer.

Section 204(g), known as the anti-cutback rule, “prohibits

an employer from decreasing or eliminating a participant’s

accrued benefits by plan amendment.” Bellas, 221 F.3d at 522.

Thus, section 204(g) follows the principles of section 208 in

protecting plan participants. In the case of a defined benefit

plan, ERISA defines, in a somewhat circular fashion, an

“accrued benefit” as a participant’s “accrued benefit determined

under the plan and . . . expressed in the form of an annual

benefit commencing at normal retirement age.” 29 U.S.C. §

1002(23)(A). Because early retirement benefits by definition

commence prior to normal retirement age, those benefits were

not considered “accrued” under ERISA prior to 1984. See

Bellas, 221 F.3d at 523 n.2 (citing Bencivenga v. Western Pa.

Teamsters and Emp’rs Pension Fund, 763 F.2d 574, 577 (3d Cir.

1985)). In 1984, however, Congress amended section 204(g)

and extended the protection it afforded to early retirement

benefits and retirement-type subsidies. See Retirement Equity

Act of 1984, Pub. L. No. 98-397, § 301(a)(2), 98 Stat. 1426,

1450-51. As amended, section 204(g) now provides:

20

(g) Decrease of accrued benefits through

amendment of plan

(1) The accrued benefit of a participant

under a plan may not be decreased by an

amendment of the plan, other than an

amendment described in section

1082(d)(2) or 1441 of this title.

(2) For purposes of paragraph (1), a plan

amendment which has the effect of –

(A) eliminating or reducing an

early retirement benefit or a

retirement-type subsidy (as defined

in regulations), or

(B) eliminating an optional form of

benefit,

with respect to benefits attributable

to service before the amendment

shall be treated as reducing accrued

benefits. In the case of a

retirement-type subsidy, the

preceding sentence shall apply only

with respect to a participant who

satisfies (either before or after the

amendment) the preamendment

conditions for the subsidy.

21

29 U.S.C. § 1054(g).

Although section 204(g) prohibits cutback of accrued

benefits by plan amendment, a determination under section 208

of a participant’s pension and benefits entitlement on a

hypothetical termination basis requires that a court also consider

section 204(g) because a plan termination is regarded as an

“amendment” for the purposes of section 204(g). See Gillis, 4

F.3d at 1145. As Judge Alito observed in his concurring opinion

in Gillis, “[w]hile neither [s]ection 204(g) of ERISA nor

[s]ection 414(l) of the Internal Revenue Code expressly states

that a termination must be regarded as an amendment for these

purposes,” the Internal Revenue Service has concluded in a

Revenue Ruling that plan terminations are subject to the

provisions of section 204(g). Id. at 1150 (Alito, J., concurring)

(citing Revenue Ruling 85-6). Furthermore, the Treasury

regulations implementing the Internal Revenue Code

counterpart to ERISA section 204(g), 26 U.S.C. § 411, provide

that “[t]he prohibition against the reduction or elimination of

section 411(d)(6) protected benefits already accrued applies to

plan mergers, spinoffs, transfers, and transactions amending or

having the effect of amending a plan or plans to transfer plan

benefits.” 26 C.F.R. § 1.411(d)-4, A-2(a)(3)(i). 11

11

As we observed in Dade, “the legislative history of the 1984

amendments indicates that Congress intended early retirement

benefits to have the same protection in a plan termination that

they would have in an amendment.” 68 F.3d at 1563 n.2 (citing,

e.g., S. Rep. No. 98-575, at 31, reprinted in 1984 U.S.C.C.A.N.

2547, 2577) (“Terminated Plans: The bill does not provide an

exception to the prohibition against reduction of benefits or

22

Those Treasury regulations apply with equal force to

section 204(g). 29 U.S.C. § 1202(c) (“Regulations proscribed

by the Secretary of the Treasury under sections 410(a), 411, and

412 of Title 26 . . . shall also apply to [their ERISA

counterparts].”); see also Heinz, 541 U.S. at 746-47, 124 S.Ct. at

2237 (observing that section 411 regulations are applicable to

section 204(g)). Accordingly, a plan participant’s benefits

protected by section 204(g) under a plan amendment must be

preserved and funded upon a hypothetical termination under

section 208 and thus not decreased or eliminated by virtue of a

plan merger or a transfer of assets or liabilities.

The present case is unusual in that we already have had

occasion to consider whether section 204(g) protects the precise

benefits at issue here. In Bellas, a former employee brought suit

against Westinghouse, by then CBS, and the Westinghouse

Pension Plan, contending that certain amendments to the plan

that narrowed the class of persons eligible for PJS benefits and

enacted the sunset provision present also in the Westinghouse

Plan at issue in this case violated ERISA section 204(g). 221

F.3d at 520-21. On interlocutory appeal, we considered whether

the PJS benefits constituted an early retirement benefit or

retirement-type subsidy protected by section 204(g). Id. at 518.

At that time, the Treasury had not, as section 204(g)

elimination of benefits options in the case of a terminated plan.

Accordingly, a plan is not to be considered to have satisfied all

of its liabilities to participants and beneficiaries until it has

provided for the payment of contingent liabilities with respect to

a participant who, after the date of the termination of a plan,

meets the requirements for a subsidized benefit.”).

23

contemplated that it would do, promulgated regulations defining

these terms. Id. at 524.

We first noted that “[b]ecause the $10.00 multiplied by

[c]redited [s]ervice and the additional $100.00 benefit do not

continue beyond normal retirement age, they cannot properly be

considered a retirement-type subsidy as contemplated by section

204(g),” and thus “could be the subject of amendment or

elimination without violating section 204(g).” Id. at 536 n.17.12

Turning to the early payment of unreduced normal retirement

benefits, we concluded that the portion of the PJS benefits that

continues beyond normal retirement age and “that is equal to the

actuarially reduced normal retirement benefit, constitutes an

early retirement benefit protected by section 204(g) but is not a

retirement-type subsidy,” and that the value of the PJS benefits

that continue beyond normal retirement age “over and above the

actuarially reduced value” is a retirement-type subsidy protected

by section 204(g). Id. at 538. 13 We further determined that

12

The district court in Bellas did not separately address this

portion of the PJS benefits in its opinion nor do the parties here

separately address these benefits in their briefs. The distinction

is of no consequence in the case at bar, however, as our holding

applies to all facets of the PJS benefits.

13

In 2006, the Secretary of the Treasury enacted regulations

defining these and other relevant terms for ERISA. Those

regulations define “early retirement benefit” and “retirement-

type subsidy” in the same manner as we did in Bellas. See 26

C.F.R. § 1.411(d)-3(g)(6)(i) (“The term early retirement benefit

means the right, under the terms of the plan, to commence

24

those benefits “are accrued upon their creation rather than upon

the occurrence of the unpredictable contingent event [i.e., the

plan shutdown].” Id. at 532. We accordingly held that section

204(g) protects the PJS benefits from cutback and therefore

affirmed the district court’s conclusion that Westinghouse

violated section 204(g) through enactment of the amendments.

Id. at 540. We also point out that, as we discuss at length below,

in Bellas we invalidated the sunset provision as to

Westinghouse.

V. ANALYSIS 14

distribution of a retirement-type benefit at a particular date after

severance from employment with the employer and before

normal retirement age.”); 26 C.F.R. § 1.411(d)-3(g)(6)(iii) (“The

term retirement-type benefit means (A) [t]he payment of a

distribution alternative with respect to an accrued benefit; or (B)

[t]he payment of any other benefit under a defined benefit plan .

. . that is permitted to be in a qualified pension plan, continues

after retirement, and is not an ancillary benefit.”); 26 C.F.R. §

1.411(d)-3(g)(6)(iv) (“The term retirement-type subsidy means

the excess, if any, of the actuarial present value of a retirement-

type benefit over the actuarial present value of the accrued

benefit commencing at normal retirement age or at actual

commencement date, if later, with both such actuarial present

values determined as of the date the retirement-type benefit

commences.”).

14

At the outset of our analysis, we note that the Court of Appeals

25

As we have already noted, the Magistrate Judge reached

her conclusion that ERISA required Siemens to offer PJS

benefits on the basis of two independent theories. First, the

Magistrate Judge determined that Siemens created an ERISA

“transition” plan for the legacy employees through the extension

of the Westinghouse Plan from August 19 to August 31, 1998.

See Shaver, 2007 WL 1006681, at *21-23. The Magistrate

Judge concluded that adoption of the Siemens Plans functioned

as an amendment of the ERISA “transition” plan and the

amendment eliminated the legacy employees’ PJS benefits in

violation of section 204(g). See id., at *24-27.

Second, the Magistrate Judge determined that

Westinghouse transferred to Siemens through the APA a portion

of Westinghouse Plan’s liabilities, thereby triggering the

for the Eleventh Circuit in a not precedential opinion has

weighed in on the Westinghouse-Siemens transaction in a

factually-indistinguishable case and determined that the legacy

employees are not entitled to PJS benefits. See McCay v.

Siemens Corp., 247 F. App’x 172 (11th Cir. 2007). In

accordance with our practice, however, we do not rely on that

opinion as it is not precedential. We nevertheless make

reference to McCay because we think that it is important to note

that Siemens does not contend that principles of claim or issue

preclusion compel us to follow that case and thus we do not

address that possibility. In this regard, we point out that not

precedential opinions no less than precedential opinions can

have preclusive effect.

26

applicability of section 208. See id., at *20. The Magistrate

Judge appeared to conclude that independently of section

204(g), section 208 required that the Siemens Plans “provide

equal or greater benefits” than those of the Westinghouse Plan.

See id., at *27. Turning to section 204(g), the Magistrate Judge

concluded also that in light of our holding in Bellas that PJS

benefits under the Westinghouse Plan are protected from

cutback, section 204(g) also required that Siemens offer PJS

benefits. Id., at *27-28.

We first consider whether Siemens established an ERISA

“transition” plan, the less complex of the two theories. We then

proceed to the hyper-complicated question of the applicability of

ERISA sections 208 and 204(g).

A. AN ERISA TRANSITION PLAN

ERISA applies to “any employee benefit plan if it is

established or maintained . . . by any employer engaged in

commerce . . . .” 29 U.S.C. § 1003(a). Surprisingly, however,

ERISA does not define the term “plan.” In the absence of a

congressional definition, we have “adopted the test developed in

Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982) (en

banc), to determine whether informal written or oral

communications . . . constitute a plan.” Smith v. Hartford Ins.

Grp., 6 F.3d 131, 136 (3d Cir. 1993) (citing Deibler v. United

Food & Commercial Workers’ Local Union 23, 973 F.2d 206,

209 (3d Cir. 1992); Henglein v. Informal Plan For Plant

Shutdown Benefits, 974 F.2d 391, 399-400 (3d Cir. 1992)).

Under Donovan, an ERISA plan “is established if from the

surrounding circumstances a reasonable person can ascertain the

27

intended benefits, a class of beneficiaries, the source of

financing, and procedures for receiving benefits.” 688 F.2d at

1373. Looking to these factors, the Magistrate Judge concluded

that Siemens adopted an ERISA “transition” plan for the

thirteen-day period from August 19 to August 31, 1998, by

virtue of Westinghouse’s extension of its pension plan to cover

the legacy employees during that time.

Siemens challenges this conclusion on multiple grounds.

It contends that ERISA plans are permanent or at least long-term

programs and that the patently temporary nature of the thirteen-

day extension precludes it from being classified as an ERISA

plan. Appellants’ br. at 53-54. Siemens also contends that even

if a temporary extension of one ERISA plan could qualify as the

establishment of a second and distinct ERISA plan,

Westinghouse — not Siemens — was the plan sponsor and

administrator during the thirteen-day period. Id. at 54-55. In

this vein, Siemens points to the facts that Westinghouse was

liable for any benefits that came due to a beneficiary under the

plan during the thirteen-day period and Siemens’ only obligation

with respect to that period was to reimburse Westinghouse for

any actuarial pension losses caused by Siemens’ termination of a

legacy employee without cause during that time. Id. at 56.

For the thirteen-day period at issue, a reasonable person

could have ascertained the benefits under the Westinghouse

Plan, identified the beneficiaries, the source of financing, and

procedures for receiving benefits. We thus concur with the

Magistrate Judge and, by extension with the District Court, that

there was an ERISA plan in place from August 19 to August 31,

1998, for the legacy employees. The critical question, however,

28

is not whether there was a sponsor maintaining an ERISA plan

during the thirteen-day period; it is whether Siemens

“established or maintained” that plan, 29 U.S.C. § 1003(a), i.e.,

whether, in ERISA parlance, Siemens was the “plan sponsor,”

see 29 U.S.C. § 1002(16)(B).

The District Court found that Siemens maintained the

plan because it determined that Siemens had administrative and

financial responsibilities with respect to the plan during the

thirteen-day period. But in reaching this conclusion, the Court

relied solely on the fact that Siemens was obligated to reimburse

Westinghouse for any actuarial pension loss that Siemens’

termination of a legacy employee caused during the period. We,

however, are satisfied that, contrary to the District Court’s

conclusion, Siemens’ duty to reimburse Westinghouse for any

losses that Siemens caused by termination of a legacy employee

from August 19 to August 31, 1998, demonstrates quite clearly

that Siemens was not responsible for the pension obligations that

came due during this time period under the Westinghouse Plan.

In fact, there is no factual dispute that at all times of the

Westinghouse Plan’s existence, including the thirteen-day

period, Westinghouse has been and is currently responsible for

the maintenance, administration, and funding of its plan.

Siemens’ singular promise of reimbursement to Westinghouse in

the event that Siemens terminated a legacy employee describes

the entirety of Siemens’ obligations in relation to the

Westinghouse Plan from August 19 to August 31, 1998, and

plainly does not constitute the administrative undertaking that an

ERISA plan requires. After all, an obligation to make payments

to a plan sponsor cannot possibly be equated with the

obligations attendant to establishing or maintaining a plan.

29

On this issue, we take instruction from the Supreme

Court’s seminal ERISA opinion in Fort Halifax Packing Co. v.

Coyne, 482 U.S. 1, 107 S.Ct. 2211 (1987), in which the Court

considered an ERISA preemption claim. Under ERISA, any

state law that “relate[s] to any employee benefit plan described

in [section] 1003(a)” is preempted. 29 U.S.C. § 1144(a). In

Fort Halifax, the Court considered whether ERISA preempted a

Maine statute requiring employers to provide a one-time

severance payment to employees in the event of a plant closing.

482 U.S. at 4-5, 107 S.Ct. at 2213-14. The Court concluded that

ERISA did not preempt the Maine statute because it was not an

ERISA “plan,” and in this regard stated:

The requirement of a one-time, lump-sum

payment triggered by a single event requires no

administrative scheme whatsoever to meet the

employer’s obligation. The employer assumes no

responsibility to pay benefits on a regular basis,

and thus faces no periodic demands on its assets

that create a need for financial coordination and

control. Rather, the employer’s obligation is

predicated on the occurrence of a single

contingency that may never materialize. The

employer may well never have to pay the

severance benefits. To the extent that the

obligation to do so arises, satisfaction of that duty

involves making a single set of payments to

employees at the time the plant closes. To do

little more than write a check hardly constitutes

the operation of a benefit plan. Once this single

30

event is over, the employer has no further

responsibility. The theoretical possibility of a

one-time obligation in the future simply creates

no need for an ongoing administrative program

for processing claims and paying benefits.

Id. at 12, 107 S.Ct. at 2218 (emphasis in original). Fort Halifax

thus makes clear that the payment of benefits “do[es] not

implicate ERISA unless [it] require[s] the establishment and

maintenance of a separate and ongoing administrative scheme.”

Angst v. Mack Trucks, Inc., 969 F.2d 1530, 1538 (3d Cir.

1992); see also Kulinski v. Medtronic Bio-Medicus Inc., 21 F.3d

254, 257 (8th Cir. 1994) (“The pivotal inquiry is whether the

plan requires the establishment of a separate, ongoing

administrative scheme to administer the plan’s benefits.”).

To contrast with the simplicity of the single payment that

the statute that the Court considered in Fort Halifax required, the

Court provided substantial guidance on what constitutes an

ERISA “administrative scheme,” an obligation that goes far

beyond making a single payment. The Court elaborated:

An employer that makes a commitment

systematically to pay certain benefits undertakes a

host of obligations, such as determining the

eligibility of claimants, calculating benefit levels,

making disbursements, monitoring the availability

of funds for benefit payments, and keeping

appropriate records in order to comply with

applicable reporting requirements.

31

482 U.S. at 9, 107 S.Ct. at 2216. Thus, an ERISA

administrative scheme “may arise where the employer, to

determine the employee’s eligibility for and level of benefits,

must analyze each employee’s particular circumstances in light

of the appropriate criteria.” Kulinski, 21 F.3d at 257; Bogue v.

Ampex Corp., 976 F.2d 1319, 1323 (9th Cir. 1992) (An ERISA

“administrative scheme” is one in which “the circumstances of

each employee’s termination [are] analyzed in light of [certain]

criteria.”) (internal quotation marks and citation omitted).

Factors relevant to determining whether an employer’s

undertakings have created an ERISA plan also include whether

the “undertaking requires managerial discretion, that is, whether

the undertaking could not be fulfilled without ongoing,

particularized, administrative, analysis of each case” and

whether “a reasonable employee would perceive an ongoing

commitment by the employer to provide some employee

benefits.” Kosakow v. New Rochelle Radiology Assocs., 274

F.3d 706, 737 (2d Cir. 2001) (internal quotation marks and

citation omitted). On the other hand, “[s]imple or mechanical

determinations do not necessarily require the establishment of

such an administrative scheme.” Kulinski, 21 F.3d at 257.

The narrow scope of Siemens’ obligations with respect to

the thirteen-day period when considered against the

“administrative scheme” analysis of Fort Halifax makes it quite

clear that Siemens did not establish or maintain the ERISA plan

that was in place from August 19 to August 31, 1998.

Westinghouse — not Siemens — determined a plan participant’s

eligibility for benefits arising under the Westinghouse Plan from

August 19 to August 31, 1998, and Westinghouse calculated the

quantum of those benefits and disbursed the funds due to the

32

participants in that period. Further, Westinghouse funded the

plan during that time and engaged in the extensive financial

monitoring and record-keeping that the plan required.

In contrast, during the thirteen-day period Siemens had

only the contingent, discrete obligation to reimburse

Westinghouse Plan in the event Siemens terminated a legacy

employee without cause prior to September 1, 1998, and the

terminated employees, if any, were merely a subset of the

entirety of the legacy employees. That contingent financial

burden — which notably Siemens never incurred as it did not

terminate any legacy employee prior to September 1 — was

“predicated on the occurrence of a single contingency that may

never [and in this case did not] materialize.” See Fort Halifax,

468 U.S. at 12, 107 S.Ct. at 2218. Siemens’ contingent

obligation to reimburse Westinghouse after the fact did not

require Siemens to make any administrative determination, see

id., much less require it to analyze the legacy employees’

particular circumstances and eligibility for benefits. While

contingent or one-time pension or benefit obligations that

require an administrative undertaking for their effectuation may,

in some circumstances, constitute an ERISA plan, see Pane v.

RCA Corp., 868 F.2d 631, 633-35 (3d Cir. 1989), in this case

Siemens’ contingent, one-time obligation to reimburse

Westinghouse did not.

Although we are unaware of any earlier case in which we

have considered an arrangement quite like the one here, in

which after a successor employer employed legacy employees

the original employer continued to offer for a brief period the

legacy employees benefit credit for service and compensation,

33

we find additional guidance from our decision in Angst. In that

case, we considered whether a company’s offer of a one-time,

lump-sum $75,000 severance payment and a one-year extension

of benefits under its pension plan pursuant to a “buyout plan”

aimed at encouraging senior employees to leave their

employment voluntarily constituted an ERISA plan. 969 F.2d at

1532-33. We concluded that in light of Fort Halifax the $75,000

payment was not an ERISA plan because the arrangement

“would require no ongoing administrative scheme.” Id. at 1538.

We further determined that because the one-year extension of

benefits was administered pursuant to a benefits plan that was

already in existence and the extension “did not require the

creation of a new administrative scheme, and did not materially

alter an existing administrative scheme,” that facet of the buyout

plan similarly did not implicate ERISA. Id. at 1539. As in

Angst, here the extension of the already-extant Westinghouse

Plan for thirteen days did not require Siemens to create a

separate, new administrative scheme. Nor did that extension

alter the Westinghouse Plan’s existing administrative scheme; it

merely added a contingent step subsequent to the operation of

the plan.

Although we conclude that Siemens did not establish an

ERISA “transition” plan by virtue of the thirteen-day

arrangement from August 19 to August 31, 1998, because that

arrangement did not require Siemens to perform the

administrative undertaking that is the hallmark of an ERISA

plan, we note that the short duration of the arrangement likewise

counsels against finding that, if there had been any plan, it was

Siemens that established the plan. We have made clear that

“[t]he crucial factor in determining whether a ‘plan’ has been

34

established is whether [the employer has expressed an intention]

to provide benefits on a regular and long-term basis.’” Deibler,

973 F.2d at 209 (quoting Wickman v. Northwestern Nat’l Ins.

Co., 908 F.2d 1077, 1083 (1st Cir. 1990)). Consistent with this

pronouncement, the relevant Treasury regulations provide:

The term ‘plan’ implies a permanent as

distinguished from a temporary program. Thus . .

. the abandonment of the plan for any reason other

than business necessity within a few years after it

has taken effect will be evidence that the plan

from its inception was not a bona fide program for

the exclusive benefit of employees in general.

26 C.F.R. § 1.401-1(b)(2) (emphasis added); see also 26 C.F.R.

§ 1.401-1(b)(1)(i) (“A pension plan within the meaning of

section 401(a) is a plan established and maintained by an

employer primarily to provide systematically for the payment of

definitely determinable benefits to his employees over a period

of years, usually for life, after retirement.”). Although we

cannot draw a bright temporal line dividing ERISA plans from

short-term, discrete benefit arrangements that do not implicate

ERISA, we are confident that the thirteen-day arrangement here

is of the latter type.

We note finally on the “transition” plan issue that

Siemens’ status as the legacy employees’ actual employer during

the thirteen-day window does not preclude us from concluding

that Westinghouse maintained an ERISA plan for those persons

during that time. ERISA defines an employee pension benefit

plan as one “established or maintained by an employer or by an

35

employee organization, or by both.” 29 U.S.C. § 1002(2)(A).

Under ERISA, however, “[t]he term ‘employer’ means any

person acting directly as an employer, or indirectly in the

interest of an employer, in relation to an employee benefit plan.”

29 U.S.C. § 1002(5) (emphasis added). ERISA thus recognizes

that entities other than the participant’s employer may establish

or maintain an ERISA plan. See also Curtiss-Wright Corp. v.

Schoonejongen, 514 U.S. 73, 78, 115 S.Ct. 1223, 1228 (1995)

(“Employers or other plan sponsors are generally free under

ERISA, for any reason at any time, to adopt, modify, or

terminate welfare plans.”) (emphasis added). Here,

Westinghouse acted “indirectly in the interest of an employer

[i.e., Siemens], in relation to an employee benefit plan” for the

thirteen-day period. 29 U.S.C. § 1002(5). The circumstance

that the beneficiaries of the Westinghouse Plan during that time

period included persons whom Siemens then employed does not

thereby make Siemens a co-sponsor of the plan when in reality

Siemens neither funded nor administered the plan.

In short, although there was an ERISA plan in place for

legacy employees from August 19 to August 31, 1998, that plan

was the Westinghouse Plan, which Westinghouse sponsored,

funded, operated and administered. We thus conclude that

Siemens did not establish an ERISA “transition” plan.

Consequently, Siemens did not provide PJS benefits to its

employees during that time, and its later adoption of the

Siemens Plans, which lacked PJS benefits, could not constitute

an “amendment” of a “transition” plan in violation of section

204(g), as Siemens had not established any plan to amend.

Therefore, we reject the Magistrate Judge’s first theory

supporting Siemens’ liability because she founded that theory on

36

the incorrect conclusion that Siemens created an ERISA

“transition” plan containing PJS benefits for the period from

August 19 to August 31, 1998.

B. A TRANSFER OF LIABILITIES UNDER SECTION 208

We now turn to the Magistrate Judge’s second theory

supporting her belief that Siemens would be liable in the

absence of the releases. She predicated this conclusion on her

belief that Westinghouse through the APA transferred a portion

of the Westinghouse Plan’s liabilities to the Siemens Plans and

thus we now turn our attention to section 208. In considering

this second theory we first address the applicability of section

208, which applies where a plan “merge[s] or consolidate[s]

with, or transfer[s] its assets or liabilities to” another plan. 29

U.S.C. § 1058. Though appellees concede that the APA did not

provide for a plan consolidation, merger, or a transfer of plan

assets, they contend that section 208 applies because the APA

provided for the Westinghouse Plan to transfer liabilities to the

Siemens Plans. The District Court accepted this argument.

Section 208 does not set forth explicitly the

circumstances in which there is a transfer of liabilities, nor do

ERISA’s other provisions provide a definition of the term. We

are not, however, without guidance on this point as the

corresponding Treasury Regulation states:

A ‘transfer of assets or liabilities’ occurs when

there is a diminution of assets or liabilities with

respect to one plan and the acquisition of these

assets or the assumption of these liabilities by

37

another plan. For example, the shifting of assets

or liabilities pursuant to a reciprocity agreement

between two plans in which one plan assumes

liabilities of another plan is a transfer of assets or

liabilities.

26 C.F.R. § 1.414(l)-1(b)(3). To determine whether there has

been a transfer of plan liabilities within this definition in this

case, we turn to the APA.

1. RELEVANT PROVISIONS OF THE APA

At its broadest, the APA provided in paragraph 5.5(a)(ii)

that

Notwithstanding the more specific

provisions set forth in this Section 5.5, [Siemens]

shall provide compensation and benefit plans and

arrangements which in the aggregate are

comparable . . . to the compensation, Plans and

Benefit Arrangements in effect for [the legacy

employees] on [September 1, 1998] for a period

of not less than two years following [September 1,

1998].

J.A. 137 (emphasis added). 15 Paragraph 5.5(d)(i)

15

Siemens points out that in a certification required by the APA

it was stated that Siemens’ benefits were “in the aggregate

comparable” to those provided by Westinghouse. Appellants’

br. at 11. That fact, however, is not material to our disposition

38

provided in more precise terms that Siemens

shall establish a defined benefit pension plan

intended to qualify under Section 401(a) of the

Code for the benefit of [the legacy employees]

(the ‘Purchaser Pension Plan’) that contains terms

and conditions that are substantially identical with

respect to all substantive provisions to those of

the Westinghouse Pension Plan as in effect as of

[September 1, 1998] . . . and that credits

compensation . . . and service for purposes of

eligibility (including early retirement eligibility

and any early retirement supplemental benefit),

and vesting which was credited under the

[Westinghouse] Pension Plan, provided, however,

that the [Siemens] Pension Plan will include

provisions which are consistent with (ii) through

(iv) below and will be administered . . . so that the

aggregate of the benefits under the

[Westinghouse] Pension Plan and the [Siemens]

Pension Plan are the same with respect to [the

legacy employees] as if the . . . [e]mployees

continued employment with [Westinghouse or one

of its sold subsidiaries].

Id. at 138 (emphasis omitted and added). 16

of this case.

16

Notably, there is some discord between the requirement in

paragraph 5.5(a)(ii) that Siemens provide benefits “which in the

39

The Magistrate Judge found that “the contractual

obligation to provide substantially identical benefits to the

transferring employees can be construed to be a transfer of

[p]lan liability.” Shaver, 2007 WL 1006682, at *19. While

paragraph 5.5(d)(i) may suggest that the parties intended to

impose liabilities on Siemens, Siemens’ contractual promise to

provide substantially identical benefits surely does not constitute

an assumption of Westinghouse Plan’s liabilities, as an

agreement to provide benefits is discrete from an agreement to

assume another employer’s obligation to provide benefits.

Indeed, as we have noted already, after September 1, 1998, the

Westinghouse Plan remained in existence and continued to

provide legacy employees with benefits that they accrued prior

to that date. We therefore consider the more specific provisions

of the APA, which require close examination.

aggregate are comparable” to the benefits of the Westinghouse

Plan and the requirement in paragraph 5.5(d)(i) that Siemens

provide “substantially identical benefits” to the legacy

employees as it would seem to be obvious that benefits could be

“comparable” without being “substantially identical.” While not

a critical matter in light of the more detailed provisions of the

APA, we believe that to the extent that the requirements are

inconsistent the former takes precedence over the latter because

paragraph 5.5(a)(ii) states that Siemens shall provide

“comparable” benefits “[n]otwithstanding the more specific

provisions set forth in . . . Section 5.5.” See Black’s Law

Dictionary 1168 (9th ed. 2009) (defining “notwithstanding” as

“[d]espite; in spite of”).

40

Section 2.3 of the APA provides, in relevant part:

(a) Assumed Liabilities. Upon the terms

and subject to the conditions of this Agreement . .

. , [Siemens] hereby agrees to assume, effective as

of [September 1, 1998], and agrees to pay,

perform and discharge when due all of the

following Liabilities of [Westinghouse] (except

Excluded Liabilities) arising out of, relating to or

otherwise in respect of the Acquired Assets, the

Business or the operations of the Business before,

on or after [September 1, 1998] (collectively, the

‘Assumed Liabilities’):

...

(vii) all liabilities arising under or

in connection with any Plan or Benefit

Arrangement;

...

(b) Excluded Liabilities. Any provision of

this Agreement to the contrary notwithstanding . .

. , the following liabilities (the ‘Excluded

Liabilities’) of [Westinghouse] and [its] Sold

Subsidiaries are excluded and shall not be

assumed or discharged by [Siemens]:

...

(x) any Liabilities with respect to

Plans and Benefit Arrangements retained

by [Westinghouse] under Section 5.5; and

(xi) any other Liabilities not

assumed by [Siemens] pursuant to the

provisions of Section 2.3(a).

41

J.A. 133-35 (some emphasis added).

Under paragraph 2.3(a)(viii), Siemens assumed “[a]ll

[l]iabilities arising under or in connection with any Plan or

Benefit Arrangement.” The APA defines “Plan” as:

any plan, program, agreement or arrangement,

whether or not written, that is or was an

‘employee benefit plan’ as such term is defined in

Section 3(3) of ERISA, whether or not subject to

ERISA and whether or not maintained in the U.S.,

and (a) which is maintained by [Westinghouse] or

[its] Sold Subsidiaries, (b) to which

[Westinghouse] or [its] Sold Subsidiaries

contribute or fund or provide benefits; or (c)

which provides or promises benefits to any person

who performs or who has performed services for

[Westinghouse] or [its] Sold Subsidiaries and

because of those services is or has been (i) a

participant therein or (ii) entitled to benefits

thereunder.

Id. 127. The Westinghouse Plan is a “plan” within the meaning

of paragraph 2.3(a)(viii). Accordingly, Siemens assumed all of

Westinghouse Plan’s liabilities except those which

Westinghouse retained under section 5.5.

In relevant part, section 5.5 provided that the

“[Westinghouse] Pension Plan shall retain liability with respect

to [the legacy employees] for their accrued benefit calculated as

42

of [September 1, 1998], subject to [certain adjustments].” Id.

138-39. Paragraph 5.5(d)(iv), however, qualifies

Westinghouse’s retention of accrued-benefit liability by stating:

[Siemens] Pension Plan shall be solely

responsible for (and the [Westinghouse] Pension

Plan shall not provide for) (A) any early

retirement supplement that becomes payable with

respect to a [legacy employee] retiring after

[September 1, 1998] that is the result of a

‘Pension Event’ as defined in subsection (v)[17] . .

. , (B) any benefits pursuant to Section 19 [the

PJS provision] of the [Westinghouse] Pension

Plan and the corresponding provision of the

[Siemens] Pension Plan, in excess of the benefits

that would otherwise be payable if those sections

17

Paragraph 5.5(d)(v) in turn defined a “Pension Event” as

encompassing “(A) a Disposition, (B) a closing of a plant or

plants by [Siemens] or a reduction in the number of [legacy

employees] employed by [Siemens] and its Affiliates as a result

of action requiring the filing of a notice under the Worker

Adjustment and Retraining Notification Act . . . , or (C) any

action of [Siemens] or its Affiliates that provides an incentive to

[legacy employees] to terminate or retire prior to their Normal

Retirement Date.” J.A. 140. Relatedly, paragraph 5.5(d)(v)

stated that Siemens “shall indemnify [Westinghouse] for any

actuarial losses . . . with respect to the [Westinghouse] Pension

Plan resulting from [any early retirements triggered by the

enumerated Pension Events].” Id.

43

did not apply, with respect to a [legacy employee]

who retires or terminates employment with

[Siemens] and its Affiliates after [September 1,

1998], and (C) any other early retirement subsidy

or supplement with respect to [legacy employees]

that is not described in [Section 5 of the

Westinghouse Pension Plan].

Id. 139-40. The additional provisions of section 5.5 added by

amendment to the APA delineate further Siemens’ and

Westinghouse’s respective scopes of liability from August 19 to

August 31, 1998; however, they do not alter the pre-existing

provisions of section 5.5 recited above.

Taken together, paragraphs 2.3(a)(viii), 5.5(d)(iii), and

5.5(d)(iv) demonstrate that Siemens assumed a portion of

Westinghouse Plan’s pension obligations. Specifically, after

adoption of the APA, Siemens was and is liable for the early

retirement supplements that come due because of a “Pension

Event,” for any PJS benefits payable under the Westinghouse

Plan with respect to a legacy employee who retires after

September 1, 1998, 18 and any other early retirement subsidy or

18

Of course, the liability for PJS benefits was dependent on such

benefits being due, and as we explain later the APA did not

impose liability for PJS benefits for job separations after August

31, 1998. Plainly, in the complex APA Westinghouse was

covering itself on this point as paragraph 5.5(d)(iv) made

Siemens liable only for “any” PJS benefits after September 1,

1998, language that readily accommodates a situation in which

there are no such benefits. Moreover, the sunset provision that

44

supplement besides that provided for in section 5 of the

Westinghouse Plan. 19 In this regard, the Westinghouse Plan’s

liabilities have been diminished, thus triggering the applicability

of section 208.

Siemens presents an array of arguments that it contends

precludes a finding that the APA provided for the Westinghouse

Plan to transfer liabilities to the Siemens Plans in accordance

with section 208. It contends that because paragraph 5.5(d)(iv)

“addressed only a tiny subset of retirement benefits offered by

Westinghouse — those providing special early retirement for

certain employees who retired prior to age 62 — that are not

claimed by [appellees] here and are not at issue in this case,” any

liabilities transferred for those benefits are irrelevant.

Appellants’ br. at 47. In a somewhat contradictory argument,

Siemens contends that even if Westinghouse transferred some

obligations to Siemens, “the contingent and inchoate

responsibility for PJS benefits and early retirement supplements

. . . [are] not ‘liabilities’ within the meaning of [s]ection 208.”

was in existence when the APA was executed, though as we will

explain we later invalidated, made it clear that there could not be

PJS benefits for job terminations after September 1, 1998.

19

One example of such an early retirement supplement for which

Westinghouse is apparently no longer responsible lies in section

20 of the Westinghouse Plan, which provides for a “Special

Early Retirement Supplement,” based on age and years of

service, to be paid as a monthly pension until the employee

reaches sixty-two years of age. J.A. 351.

45

Id. at 50. Finally, Siemens contends that the APA could not

have provided for a transfer to Siemens of a portion of

Westinghouse Plan’s liabilities because a transfer of liabilities

without a transfer of equivalent assets “would leave both plans

out of compliance with statutory and regulatory requirements.”20

Id. at 41. These contentions are unconvincing.

Though the events here differ from the ordinary scenario

that triggers the applicability of section 208, we can find nothing

within section 208 or the applicable Treasury regulations

indicating that only a transfer of all of a plan’s assets or

liabilities will activate that provision. Indeed, 26 C.F.R. §

1.414(l)-1(b)(3) defines a transfer of liabilities as “a diminution

of . . . liabilities,” not a total elimination of liabilities. See

Black’s Law Dictionary 524 (9th ed. 2009) (Diminution means

“[t]he act or process of decreasing, lessening, or taking away.”).

Furthermore, as shown above, Siemens assumed liability for

any PJS benefits that became payable under the Westinghouse

Plan for an employee who was terminated after September 1,

1998. 21

20

This argument is remarkable because it seems to be predicated

on the principle that parties could not do anything illegal

because to do so would be illegal. Oh that this would be so. On

the other hand, though unlikely, it might mean that in a case of

ambiguity the scope of a party’s undertakings should be

measured in such a way that they are lawful.

21

As we explain below, Siemens’ assumption of this liability

was effectively hollow, as an employee who Siemens terminated

would not be eligible for PJS benefits under the Westinghouse

46

Siemens’ contention that responsibility for PJS benefits

and other early retirement benefits do not constitute liabilities

within the meaning of section 208 is likewise unavailing. As we

have indicated, section 208 does not define liabilities. In the

Senate Report to the 1984 amendments, however, Congress

made clear its view that contingent or otherwise putative

obligations constitute “liabilities” on a plan termination basis

under ERISA. See S. Rep. No. 98-575, at 31, 1984

U.S.C.C.A.N. at 2577 (“[A] plan is not to be considered to have

satisfied all of its liabilities to participants and beneficiaries until

it has provided for the payment of contingent liabilities with

respect to a participant who, after the date of the termination of

a plan, meets the requirements for a subsidized benefit.”)

(emphasis added); see also Gillis, 4 F.3d at 1147 (treating

liability for early retirement benefits as “liabilities” under

section 208).

Finally on this point, we note that section 208 applies

when a pension plan “transfer[s] its assets or liabilities” to

another plan, 29 U.S.C. § 1058 (emphasis added), and thus

plainly does not require a transfer of assets to trigger its

provisions. The question of whether Westinghouse’s transfer of

liabilities without a concomitant transfer of assets rendered the

Westinghouse Plan and Siemens Plans non-compliant under

ERISA is not the issue before us on appeal.

Inasmuch as we have concluded that Westinghouse

Plan. Nevertheless, Siemens could seek to cover itself on this

point.

47

transferred liabilities to the Siemens Plans within the meaning of

section 208, we turn to the distinct question of what effect, if

any, that transfer had on Siemens’ obligation, vel non, to

provide PJS benefits. As noted, the Magistrate Judge appeared

to conclude that, without regard for section 204(g), because

Westinghouse transferred liabilities to Siemens, section 208

required that the Siemens Plans “provide equal or greater

benefits,” including PJS benefits, to the benefits of the

Westinghouse Plan. See Shaver, 2007 WL 1006681, at *27.

The Magistrate Judge also determined that section 208 triggered

section 204(g), which required Siemens to offer PJS benefits.

We review each of these conclusions in turn.

2. THE REQUIREMENTS OF SECTION 208

As we described above, section 208 guarantees that if a

pension plan consolidates with another plan or transfers its

assets or liabilities to another plan, the benefits to which plan

participants are entitled will not be reduced and the actual value

of those benefits will not be diminished. See Bigger v. Am.

Commercial Lines, 862 F.2d 1341, 1344 (8th Cir. 1988)

(Section 208 “establishes a ‘rule of benefit equivalence.’ The

value of the benefit before and after the [transaction triggering

section 208] must be equal.”) (citing 26 C.F.R. § 1.414(l)-1(n)).

In the House Report to section 208, Congress explained the

effect of section 208 and the hypothetical termination analysis it

requires:

Under the bill as passed by the House, a plan must

provide protection to participants in the case of a

merger of the plan with another plan or the

48

transfer of assets or liabilities from a plan. The

value of benefits to the participant and the extent

to which the benefits have been funded is to be

protected by comparing what the participant's

benefit would be if the plan had terminated

immediately before the merger and what the

participant's benefits would be under the merged

plan had the merged plan been terminated just

after the merger. The postmerger termination

benefit may not be less than the premerger

termination benefit.

H.R. Rep. No. 93-1280, at 385 (1974) (Conf. Rep.), reprinted in

1974 U.S.C.C.A.N. 5038, 5163.

Most often, section 208 is implicated in cases of plan

mergers or so-called “spinoff” plans, in which one plan splits

into two or more plans, see 26 C.F.R. § 1.414(l)-1(b)(4). See,

e.g., Bigger, 862 F.2d at 1344 (Section 208 “provides a specific

standard that employers can rely upon in allocating assets to

spunoff plans.”). In these circumstances, “[s]ection 208

essentially requires the employer to contemplate a hypothetical

plan termination, take a ‘snapshot’ of the benefits each

participant of the plan would receive in the event of a

termination, and then provide the aggregate present value of

these benefits to the spun-off plan.” Systems Council EM-3 v.

AT&T Corp., 159 F.3d 1376, 1380 (D.C. Cir. 1998).

There is, however, no basis to hold that the APA

contemplated the creation of a spinoff plan. The Westinghouse

Plan retained liability for the majority of the legacy employees’

49

accrued benefits, and Siemens is not responsible for those

benefits. The Treasury regulation counterpart to section 208

provides, however, that “[a]ny transfer of assets or liabilities

will for purposes of section 414(l) be considered as a

combination of separate mergers and spinoffs . . . .” 26 C.F.R. §

1.414(l)-1(o). “First, the transfer is treated as a spin-off of a

new plan . . . [and] [a]ssets are therefore to be allocated to

participants’ benefits on a termination basis.” Stephen R. Bruce,

Pension Claims: Rights and Obligations 511 (2d ed. 1993).

“Second, the transfer of these assets and the associated benefit

liabilities to the second plan is treated as a merger of the spun-

off plan and the second plan.” Id. Thus, as in the case of a plan

spinoff or merger, to ascertain whether and to what extent

Siemens was obligated to provide appellees PJS benefits we

necessarily must determine the extent to which the legacy

employees would have been entitled to those benefits upon a

hypothetical termination of the Westinghouse Plan prior to

Westinghouse’s transfer of its liability for those benefits. Cf.

Brillinger v. Gen. Elec. Co., 130 F.3d 61, 63 (2d Cir. 1997)

(“[S]ection [208] deals with the level of post-merger benefits,

and in dealing with this issue resort must be had to those parts of

the termination provisions which deal with the analogous

subject — i.e. the level of benefits following termination.”). As

we explained previously, that determination necessarily entails

reference to section 204(g), which protects accrued benefits,

including early retirement benefits and retirement-type

subsidies, in the event of a plan amendment or a plan

termination.

This is all to say that section 208 is more nuanced than

the Magistrate Judge recognized. The section does not, as the

50

Magistrate Judge determined, impose a blanket requirement that

Siemens adopt verbatim the Westinghouse Plan (or a more

generous pension plan). Rather, it protects appellees’ accrued

benefits with those benefits determined as of a hypothetical

termination of the Westinghouse Plan just prior to the transfer of

liabilities. 22 Whatever else may be said about this case, the

determination of those benefits so far as the Westinghouse Plan

by its terms provided for them is not complicated.

3. THE LEGACY EMPLOYEES’ ENTITLEMENT ON

22

Reference to the corresponding Treasury regulation governing

section 208 transactions bears the point out. That regulation

provides that in the case of a plan spinoff,

the requirements of section 414(l) will be satisfied

if (i) [a]ll of the accrued benefits of each

participant are allocated to only one of the spun

off plans, and (ii) [t]he value of the assets

allocated to each of the spun off plans is not less

than the sum of the present value of the benefits

on a termination basis in the plan before the

spinoff for all participants in that spun off plan.

26 C.F.R. § 1.414(l)-1(n)(1). In the case of a merger of two

ERISA plans, “[i]f the sum of the assets of all plans is not less

than the sum of the present values of the accrued benefit

(whether or not vested) of all plans, the requirements of section

414(l) will be satisfied by merely combining the assets and

preserving each participant’s accrued benefits.” 26 C.F.R. §

1.414(l)-1(e)(1).

51

A TERMINATION BASIS

At this stage of our opinion and before we turn to the

required hypothetical termination analysis we have described

above, we address our description of PJS benefits in Bellas for it

is obvious that our characterization of the benefits in that case

clouded the disposition of this case in the District Court. For the

purposes of section 204(g), early retirement benefits and

retirement-type subsidies are considered accrued benefits and

therefore section 204(g) protects them from cutback. See 29

U.S.C. § 1054(g). Section 204(g)(2) states, however, that “[i]n

the case of a retirement-type subsidy, [section 204(g)(1)’s

protection] shall apply only with respect to a participant who

satisfies (either before or after the amendment) the

preamendment conditions for the subsidy.” 29 U.S.C. §

1054(g)(2). Section 204(g) does not provide that same explicit

qualifier on the protection of early retirement benefits. As

noted, in Bellas we conceptually bifurcated the PJS benefits,

holding that the portion of the Westinghouse PJS benefits that is

“equal to the actuarially reduced normal retirement benefit” is

an early retirement benefit, while any benefits paid in excess of

the actuarially reduced value constitutes a retirement-type

subsidy. 221 F.3d at 538. We further concluded that PJS

benefits are accrued upon their creation — not upon the

happening of the contingent event (i.e., the job separation) —

and that section 204(g) accordingly protects those benefits from

cutback. Id. at 532. Relying on Bellas’s division of PJS

benefits into an early retirement subsidy and a retirement-type

subsidy and section 204(g)(2)’s provision regarding satisfaction

of preamendment conditions as to retirement-type subsidies, the

Magistrate Judge determined that appellees were required to

52

establish that they would have been eligible for the PJS benefits

under the terms of the Westinghouse Plan upon a hypothetical

termination of that plan as to the portion of those benefits

constituting a retirement-type subsidy but they were not required

to do so as to that portion constituting an early retirement

benefit. See Shaver, 2007 WL 100681, at *20. But the

Magistrate Judge predicated her approach on a misreading of

section 204(g).

We recognize that, regrettably, section 204(g)(2) is

ambiguous, and in isolation its explicit statement that section

204(g) protects retirement-type subsidies from cutback for a

participant who satisfies, preamendment or postamendment, the

preamendment conditions placed upon the subsidy could be read

to mean that that qualifier does not apply to early retirement

benefits, particularly in view of the circumstance that section

204(g)(2)(A) addresses both “an early retirement benefit or a

retirement-type subsidy.” Thus, it might be thought that section

204(g) protects from cutback a participant’s early retirement

benefit even if the participant does not at the time of plan

amendment (or in this case plan termination) and cannot in the

future satisfy the conditions for that benefit. We have made

clear, however, that “the [Retirement Equity Act of 1984] does

not override the conditions originally imposed by the [p]lan

which defined the early retirement benefits when they were

created.” Dade, 68 F.3d at 1562. Describing the import of

section 204(g), we explained that “the fact that [amendments

eliminating or reducing early retirement benefits or retirement-

type subsidies] will now be ‘treated as reducing accrued

benefits’ does not mean that Congress intends to foreclose

employers from circumscribing the availability of such optional

53

benefits when they are being created.” Ashenbaugh v. Crucible

Inc., 854 F.2d 1516, 1527 (3d Cir. 1988).

As is evident from our foregoing explanation, especially

our case law, “ERISA [section] 204(g) can protect an

entitlement to benefits, but it cannot create an entitlement to

benefits when no entitlement exists under the terms of the

[p]lan.” Hein v. FDIC, 88 F.3d 210, 217 (3d Cir. 1996)

(emphasis added). Indeed, notwithstanding our conceptual

division of PJS benefits in Bellas, in that case we assumed that

section 204(g) protects early retirement benefits, along with

retirement-type subsidies, only to the extent a plan participant

satisfied or could satisfy the preamendment conditions placed

upon the early retirement benefit. We stated:

After 1984, a plan sponsor could eliminate

prospectively an early retirement benefit by

amendment, but under section 204(g) the

amendment could not adversely affect that portion

of an early retirement benefit that already had

accrued to a plan participant who satisfied the

pre-amendment conditions for the benefit either

before or after the amendment. See 29 U.S.C. §

1054(g); Dade, 68 F.3d at 1562. Thus, if the 1994

Westinghouse Plan amendments reduced or

eliminated early retirement benefits or retirement-

type subsidies, the amendments would have had

to allow employees who remained employed by

CBS after the amendments to ‘grow into’ the

benefit. See id. at 1562.

54

221 F.3d at 524 (emphasis added); see also Bruce, Pension

Claims 185 (“When an early retirement benefit, a retirement-

type subsidy, or a benefit option is protected against reduction or

elimination, the protection is for the benefits that would be

provided under the benefit option based on the accrued benefits

up to the date of change, assuming that the participant has met

or later meets any special eligibility (or vesting) requirement for

the benefit.”) (emphasis partially omitted and partially added).

The legislative history to section 204(g) is consistent with

our precedent and reveals Congress’ intent that section 204(g)

protect only those benefits — whether classified as early

retirement benefits or retirement-type subsidies — for which a

participant meets the plan requirements. The Senate Report

states, in relevant part:

The bill generally protects the accrual of

benefits with respect to participants who have met

the requirements for a benefit as of the time a plan

is amended and participants who subsequently

meet the preamendment requirements. The bill

does not, however, prevent the reduction of a

subsidy in the case of a participant who, at the

time of separation from service (whether before or

after the plan amendment), has not met the

preamendment requirements.

...

Accordingly, the bill makes it clear that the

prohibition against reduction of a benefit subsidy

(the excess of the value of a benefit over the

actuarial equivalent of the normal retirement

55

benefit) applies to a participant only if the

participant meets the conditions imposed by the

plan on the availability of the subsidy. If the

protection is afforded, an employee’s accrued

benefit is not to be less than the protected level or

the accrued benefit determined under the plan

without regard to the protection, whichever is

greater. For example, if a plan is amended to

eliminate a subsidized early retirement benefit for

employees who have completed 30 years of

service, then the plan would not be required to

provide the subsidy to an employee who never

completes 30 years of service and it would not be

required to provide benefits to such an employee

before the normal retirement age.

S. Rep. No. 98-575, at 28, 1984 U.S.C.C.A.N. at 2574

(emphasis added). The provision of benefits to an employee

“before the normal retirement age” apart from the “subsidy” is,

of course, an early retirement benefit as we defined that term in

Bellas. See 221 F.3d at 538 (“[The] portion paid that is equal to

the actuarially reduced normal retirement benefit[] constitutes an

early retirement benefit.”). It is thus apparent that despite

section 204(g)’s focus on satisfaction of preamendment

conditions for retirement-type subsidies, Congress assumed in

passing section 204(g) that the provision only would protect

early retirement benefits to the extent that an employee satisfied

or can satisfy the plan conditions for the benefit.

If there was any question as to the proper interpretation

of section 204(g), the Treasury regulation implementing the

56

Internal Revenue Code counterpart to section 204(g), 26 U.S.C.

§ 411, surely answers that question. As noted, Treasury

regulations implementing the Internal Revenue Code version of

the anti-cutback rule apply with equal force to section 204(g).

See 29 U.S.C. § 1202(c). The implementing regulation to

section 411 provides:

Except as provided in this section, a plan is

treated as decreasing an accrued benefit if it is

amended to eliminate or reduce a section

411(d)(6)(B) benefit as defined in paragraph

(g)(15) of this section. This paragraph (b)(1)

applies to participants who satisfy (either before

or after the plan amendment) the preamendment

conditions for a section 411(d)(6)(B) protected

benefit.

26 C.F.R. § 1.411(d)-3(b)(1)(i) (emphasis added). In turn, a

section 411(d)(6)(B) protected benefit is defined as “the portion

of an early retirement benefit, retirement-type subsidy, or an

optional form of benefit attributable to benefits accrued before

the applicable amendment date.” 26 C.F.R. § 1.411(d)-3(g)(15)

(emphasis added). Accordingly, an early retirement benefit is

considered accrued for purposes of section 411, and thus for

purposes of section 204(g), only where the plan participant at

some point satisfies the preamendment conditions for the

benefit.

In sum, we find that section 204(g) does not protect from

cutback an early retirement benefit for a plan participant who

has not satisfied and never can satisfy the conditions for

57

receiving the benefits that are subject to the cutback. Indeed,

were we to conclude otherwise our opinion would have the

bizarre result that it would treat section 204(g) as protecting the

benefits of a plan participant from cutback in circumstances in

which the participant never will be eligible for those benefits.

Thus, our opinion would extend section 204(g)’s protection on

paper only to a set of phantom benefits which never actually will

vest for the participant, or, result, directly contrary to our

opinions in Ashenbaugh, Dade, and Hein, in going further in

creating an entitlement under section 204(g) where none

otherwise would exist under the terms of the plan. The first

result is unreasonable and the second is contrary to well-

established ERISA principles. See Spink, 517 U.S. at 887, 116

S.Ct. at 1788 (ERISA guarantees that “if a worker has been

promised a defined pension benefit upon retirement — and if he

has fulfilled whatever conditions are required to obtain a vested

benefit — he will actually receive it.”) (emphasis added)

(internal quotation marks and citation omitted); Firestone Tire

and Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S.Ct. 948, 956

(1989) (ERISA was enacted “to protect contractually defined

benefits.”) (internal quotation marks and citation omitted)

(emphasis added).

(a) Appellees did not and could not satisfy

the conditions for PJS benefits.

Inasmuch as we have determined that we must analyze

appellees’ entitlement to PJS benefits upon the basis of a

hypothetical termination of the plans as to the entire portion of

PJS benefits, we finally turn to the crux of this segment of our

opinion and consider whether appellees would have been

58

entitled to PJS benefits upon a hypothetical termination of the

Westinghouse Plan just prior to the transfer of liabilities. In

relevant part, the Westinghouse Plan provides that:

For periods on or after January 1, 1997 and before

September 1, 1998, a Permanent Job Separation

means solely the termination of the employment

of an Employee with an Employer, Affiliated

Entity, or Excluded Unit because of job

movement or product line relocation, or location

closedown, as those terms are defined below.

J.A. 292. The Plan defines “Employer, Affiliated Entity, or

Excluded Unit” as Westinghouse or any Westinghouse

subsidiary or joint venture participating in the Westinghouse

Plan. Id. 284, 288, 292. The Plan, however, contains the

additional express limitation that “in no event shall a Permanent

Job Separation occur if an Employee is offered continued

employment by . . . a successor employer.” Id. 293.

If the Westinghouse Plan had been terminated just prior

to transferring a portion of its liabilities under the APA on

September 1, 1998, appellees plainly would not have been

eligible for PJS benefits. As of that date, appellees were

Westinghouse employees who were “offered continued

employment by . . . a successor employer,” namely, Siemens.

Nevertheless, as noted previously, under section 204(g) a plan

participant need not satisfy at the time of a plan’s termination

the conditions placed on an early retirement benefit or

retirement-type subsidy. If following the transfer of liabilities

appellees potentially could have been eligible for the

59

Westinghouse Plan’s PJS benefits in the future, section 204(g)

would have protected those benefits, and appellees’ benefits

upon a hypothetical termination of the Westinghouse Plan prior

to the transfer of liabilities thus would have included PJS

benefits. Accordingly, section 208 would have protected

appellees’ PJS benefits from elimination or reduction by virtue

of the Siemens-Westinghouse transaction. Here, however, the

bar to entitlement that would have existed in a pretransfer

situation remains. Appellees did not after the transfer of

liabilities become eligible nor will they ever be eligible for PJS

benefits under the Westinghouse Plan for the same reason they

were not eligible for those benefits just prior to Westinghouse’s

transfer of liabilities — they were offered continued

employment by Siemens. Accordingly, section 204(g) did not

protect appellees’ PJS benefits from cutback and thus appellees’

benefits upon a hypothetical termination of the Westinghouse

Plan just prior to the transfer of liabilities would not have

included PJS benefits.

Notwithstanding this seemingly insurmountable obstacle

to appellees’ claim, the Magistrate Judge concluded that the

successor-employer limitation on PJS benefits was not fatal to

appellees’ claim, as she stated that “Gillis held that satisfaction

of pre-amendment conditions does not have to occur until

separation from service [and] as in Gillis, no separation from

service occurred until Siemens terminated the transferred

employees.” Shaver, 2007 WL 1006681, at *28. The

Magistrate Judge did not, however, proceed to analyze whether

appellees would have satisfied the conditions for PJS benefits

upon Siemens’ termination of appellees. Rather, she concluded

that “the APA extends the PJS benefits by contractual

60

agreement,” such that the prohibitive language in the

Westinghouse Plan did not bar appellees’ claim. Id. These

conclusions plainly were wrong.

In Gillis, Hoechst Corporation sold a division of its

business and transferred all assets and liabilities of its ERISA

plan attributable to that division to American Mirrex. 4 F.3d at

1140. There was, in other words, a plan spinoff. The American

Mirrex Plan provided that employees of that division who

transferred to American Mirrex were to “receive the same early

retirement benefits subject to the same conditions as [the

Hoechst Retirement Plan].” Id. at 1149 (Alito, J., concurring).

Plaintiffs were transferred employees who, at the time of

transfer, had not met the age and years-of-service requirements

to qualify for early retirement benefits under the Hoechst Plan.

Id. at 1143. Plaintiffs sued Hoechst and its pension plans,

alleging that Hoechst’s failure to transfer sufficient assets to

American Mirrex to fund plaintiffs’ early retirement benefits

violated section 208. Id. They contended that notwithstanding

their insufficient age and years-of-service at the time they

transferred employment to American Mirrex they could qualify

for the early retirement benefits provided under the Hoechst

Plan through their subsequent service with American Mirrex,

and that Hoechst’s contrary interpretation of its plan amounted

to an amendment of the plan in violation of section 204(g). Id.

at 1144. Hoechst countered that it was not required to credit

service with American Mirrex and because plaintiffs could not

satisfy the conditions for receiving those benefits section 204(g)

did not protect them from cutback. Id. at 1144.

Finding scant guidance in the text of section 204(g), we

61

turned to pertinent Internal Revenue Service Rulings to resolve

the case. Id. at 1144-45. Based on a Revenue Ruling that

concluded that under section 204(g) an employee could satisfy

following a plan termination the plan’s age and years-of-service

pretermination conditions for early retirement benefits and that

those benefits thus had to be funded before residual assets could

revert to the employer, we determined that had Hoechst

continued to employ the plaintiffs after terminating its plan the

plaintiffs still would have been able to qualify for the early

retirement benefits at some future date and Hoechst would have

had to have allowed the employees to “grow into” those

benefits. Id. at 1145-46. Relying on a further Revenue Ruling

that determined that a “separation from service” does not occur

upon an employee’s transfer to a successor employer, we

concluded that because the plaintiffs continued in the same job

for a successor employer, they could continue to accumulate

years of service under the Hoechst Plan through their subsequent

employment with American Mirrex and potentially satisfy the

age and years-of-service requirements for the early retirement

benefit. Id. at 1144-47. Accordingly, we held that section 208

required that Hoechst transfer sufficient assets to American

Mirrex to fund the early retirement benefits. Id. at 1147.

Gillis confirmed that satisfaction of benefit conditions

can occur after a plan termination or amendment. It is equally

clear from that case, however, that a plan participant

nevertheless must, at some point, meet all of the conditions

placed upon those benefits to receive them. Appellees contend

that the Magistrate Judge correctly found their claims viable

under Gillis notwithstanding the absence of any analysis of

appellees’ eligibility because under Gillis “transferred

62

employees may treat service for a successor employer as service

for the plan sponsor for the purpose of qualifying for early

retirement benefits.” Appellees’ br. at 9. But this statement is

not correct for Gillis does not stand for the broad proposition

that service with a successor employer may be treated as service

for the plan sponsor to the end that all conditions the plan

sponsor places upon retirement benefits are obviated.

We concluded in Gillis that employees who continue in

the same job for a successor employer that has assumed the

assets and liabilities of the original employer’s plan may work

towards satisfying the age and years-of-service requirements of

the original employer’s plan while working for the successor

employer. 4 F.3d at 1147. But in Gillis, there was no bar to the

plaintiffs’ eligibility for the benefits under the Hoechst Plan

other than their inadequate age and years of service at the time

they ceased employment for Hoechst and plaintiffs could meet

those requirements with the progression of time. Here,

however, we do not have a plan spinoff, and age and years-of-

service requirements are not the impediments to appellees’ PJS

benefits eligibility under the Westinghouse Plan. Rather, the

“successor employer” provision of the Westinghouse Plan is an

explicit bar to eligibility that, quite aside from the sunset

provision in the Westinghouse Plan, forever disqualifies

appellees from receiving PJS benefits under that plan and is a

prohibition that the passage of time cannot cure.

Notwithstanding the timing of appellees’ “separation from

service,” appellees became ineligible for PJS benefits upon

being offered continued employment by Siemens. Stated

another way, appellees could not fulfill the conditions required

to obtain the PJS benefits as one of those conditions was that a

63

successor employer not offer a plan participant continued

employment and that is precisely what happened here.

Accordingly, we are at a total loss as to how, as appellees urge

that we do, we can circumvent this explicit condition of the

Westinghouse Plan by somehow treating appellees’ service with

Siemens as uninterrupted service with Westinghouse and,

directly contrary to the terms of the Westinghouse Plan, ignore

appellees’ employment by Siemens. We decline to engage in

such judicial alchemy.

Though our result does not depend on this point, we note

also that upon termination by Siemens appellees faced the

additional bar to PJS eligibility that “solely” a termination by

Westinghouse, a Westinghouse subsidiary, or a joint venture

participating in the Westinghouse Plan allowed for PJS benefits

under the Westinghouse Plan. J.A. 292. Siemens is not a

Westinghouse subsidiary nor is it a joint venture participating in

the Westinghouse Plan.

Once before, in Gritzer v. CBS, Inc., 275 F.3d 291, 293-

94 (3d Cir. 2002), we considered whether termination by a

successor employer entitles former Westinghouse employees to

PJS benefits under the Westinghouse Plan. In that case, the

plaintiffs were former Westinghouse employees who had

transferred employment to Industrial Ceramics, Inc.,

(“Ceramics”) upon Westinghouse’s sale of a facility to

Ceramics. Id. at 293. Section 14(f)(1) of the relevant

Westinghouse Plan provided that the plan managers “may . . .

and to the extent they consider advisable, treat service with [a

successor company] as service with [Westinghouse] for

purposes of [vesting and eligibility for pensions and benefits].”

64

Id. at 297. Pursuant to the sale, Ceramics and Westinghouse

also executed a Reciprocal Service Agreement (“RSA”)

providing that Westinghouse would grant to transferred

employees “service credit for their service with [Ceramics] for

the purposes of pension eligibility under any applicable

[Westinghouse] pension plan in which the employe[e]s may

have been participating, but not for purposes of pension benefit

accrual thereunder.” Id. at 293. Ceramics later closed the

facility, and the plaintiffs sued Westinghouse, by then, CBS for

PJS benefits. Id. at 294.

We observed that the Westinghouse Plan requires that the

“Employer” terminate an employee for purposes of PJS

eligibility and that “‘Employer’ means simply Westinghouse.”

Id. at 297. We concluded that, “any other successor company . .

. does not qualify as an ‘Employer’ under the express terms of

the Plan,” and that this fact was a “seemingly fatal flaw” in the

plaintiffs’ argument because a termination by Ceramics was

plainly not a qualifying termination under the PJS benefits

provision. Id. We then rejected the plaintiffs’ contention that

“Westinghouse, by extending some benefits under the Plan

through its RSA with Ceramics, automatically or necessarily by

virtue of [section] 14(F)(1) extended [PJS] benefits,” id. at 298,

and we thus held that the plaintiffs could not qualify for PJS

benefits, id. at 298-99.

As was true with respect to a successor employer to

Westinghouse in Gritzer, Siemens’ termination of appellees was

not a termination that triggered a possible claim for the PJS

benefits provision under the Westinghouse Plan. This fact

serves as an additional and independent bar to appellees’

65

eligibility under the Westinghouse Plan apart from the successor

employer provision. It is important to recognize that appellees’

ineligibility for PJS benefits is not rooted in the sunset provision

of the Westinghouse Plan that we struck down in Bellas, and

that congruently the invalidation of the sunset provision cannot

possibly make the appellees eligible for PJS benefits from the

Westinghouse Plan or thus eligible for benefits under the

Siemens Plans. Rather, with or without the sunset provision,

there simply is no escape from the conclusion that appellees

could not satisfy the requisite conditions for receiving PJS

benefits under the Westinghouse Plan. Moreover, appellees do

not challenge the validity of these other requisite conditions.

Accordingly, because appellees could not satisfy at the

time of a hypothetical termination of the Westinghouse Plan nor

could they have satisfied at a later date the conditions for

receiving PJS benefits under the Westinghouse Plan, section

204(g) did not protect those benefits upon a hypothetical

termination of the Westinghouse Plan. Thus, appellees’ benefits

upon a hypothetical termination of the Westinghouse Plan just

prior to the transfer of liabilities would not have included PJS

benefits. Furthermore, upon a hypothetical termination of the

Siemens Plans just following the transfer of liabilities,

appellees’ benefits also would not have included PJS benefits.

Hence, appellees would have received no less upon a

hypothetical termination of the Siemens’ Plans following the

transfer of liabilities than they would have received upon a

hypothetical termination of the Westinghouse Plan just prior to

the transfer of liabilities. Consequently, Siemens’ omission of a

provision for PJS benefits and appellees’ consequent lack of

entitlement to PJS benefits upon a hypothetical termination of

66

Siemens Plans just following the transfer of liabilities did not

diminish appellees’ benefits and neither section 208 nor section

204(g) required that Siemens provide appellees with PJS

benefits.

(b) The APA did not contractually require

Siemens to offer PJS benefits.

But the Magistrate Judge had more arrows in her quiver

than sections 208 and 204(g) because she found alternatively

that appellees were not required to meet the terms of the

Westinghouse Plan because “the APA extends the PJS benefits

by contractual agreement.” Shaver, 2007 WL 1006681, at *28.

In theory, such an agreement could have supported her

recommendation. Appellees understandably rely heavily on this

contractual theory as they contend that the APA provision

requiring Siemens to adopt a pension plan for the legacy

employees “that contains terms and conditions that are

substantially identical with respect to all substantive provisions

to those of the Westinghouse Pension Plan as in effect as of

[September 1, 1998],” J.A. 138, contractually bound Siemens to

provide PJS benefits to appellees apart from any specific ERISA

provision. At oral argument in support of this contention

appellees brought to our attention the Court of Appeals for the

Fifth Circuit’s recent decision in Evans v. Sterling Chemicals

Inc., 660 F.3d 862 (5th Cir. 2011).

But before considering Evans and the rest of the details

of appellees’ argument that the APA required Siemens to

provide for PJS benefits for legacy employees terminated after

August 31, 1998, it is useful to make an overview of the

67

argument. When Siemens entered into the APA it knew of the

sunset, successor employer, and termination of employment by

Westinghouse 23 provisions of the Westinghouse Plan. Thus, if it

had contractually obligated itself to extend PJS benefits to the

legacy employees it would have been engaging in a rare, indeed

inexplicable act of corporate benevolence as it would have been

lifting three preexisting bars to the legacy employees advancing

PJS claims after that date. It is, of course, perfectly obvious that

Siemens had the exact opposite intent as it unmistakably

revealed by contracting for the closing date for the purpose of

pensions and benefits of the APA to be September 1, 1998. By

the use of that date Siemens ensured that it would not become

the employer for ERISA purposes until after the sunset

provision had eliminated the legacy employees’ potential claims

for PJS benefits. 24

Having completed our overview we now address Evans.

23

By referencing Westinghouse we are including its subsidiaries

and participating joint ventures in accordance with the

Westinghouse Plan.

24

Lest it be thought that we are ascribing to Siemens a

motivation that it did not have in adopting the September 1,

1998 closing date we refer to an internal Siemens memorandum

dated August 12, 1998, that indicated that among the advantages

of having Siemens “lease” Westinghouse employees until

August 31, 1998, Siemens “would not need to even include

Section 19 (PJS) in new pension plan, as it would have expired

before employees joined Siemens.” J.A. 477.

68

In Evans, Cytec Industries, Inc., sold a portion of its business to

Sterling Fibers, Inc., and pursuant to that sale, a number of

Cytec employees continued employment with Sterling and

became participants in Sterling’s benefit plans. 25 Id. at 864-65.

Section 5.05(f) of the asset purchase agreement required

Sterling to provide postretirement medical and life insurance

benefits to employees who continued employment with Sterling

on a level at least equal to that of the Cytec Plan and required

that Sterling obtain the written consent of Cytec prior to

reducing benefits. Id. at 865. Sterling’s Plan, however, did not

include the relevant consent provision, and, in fact, provided

that Sterling could amend the plan at any time by action of the

plan committee. Id. Some years after the transaction, Sterling

entered bankruptcy, and during the course of those proceedings,

the bankruptcy court approved Sterling’s “rejection” of the

purchase agreement as an executory contract. Id. at 866. Soon

thereafter, Sterling raised the transferred employees’ benefit

premiums beyond the premiums that the Cytec Plan had set

without Cytec’s written consent. Id. at 866-67. The employees

sued Sterling, claiming that section 5.05(f) constituted a valid

amendment to the Sterling Plan but not an executory contract,

and thus it could not be rejected during the bankruptcy

proceedings. Id. at 868.

Relying on its holding in a similar case, Halliburton Co.

25

There were three related companies all including the name

“Cytec” and it is unclear which one or whether they all made the

sale to Sterling. The point, however, is not significant and as a

matter of convenience we refer to one of the companies, Cytec

Industries, as the vendor.

69

Benefits Committee v. Graves, 463 F.3d 360 (5th Cir. 2006), the

court of appeals determined that section 5.05(f) of the asset

purchase agreement constituted a valid amendment under

ERISA of Sterling’s benefit plan and that Sterling thus was

required to abide by the terms of that provision. 660 F.3d at

874. In this regard, the court concluded that although the asset

purchase agreement was extrinsic to the Sterling Plan and the

provision itself was not included within the plan, the agreement

constituted a valid plan amendment because the agreement was

in writing, contained a provision directed to an ERISA plan, and

the purchase agreement otherwise satisfied the formal procedure

required for a plan amendment under the Sterling Plan. Id. at

871-72.

Appellees’ reliance on Evans is misplaced. What

appellees fail to recognize is that even if we were to conclude

that the APA constituted a valid plan amendment of the Siemens

Plans (a remarkable conclusion as they were not so incidentally

non-extant as of the APA’s execution) or that the APA

otherwise defined Siemens’ ERISA obligations, there is no

provision within the APA requiring that Siemens provide PJS

benefits to appellees, and, as we have indicated, it has not done

so. Thus, Westinghouse and Siemens simply did not make an

agreement providing for the extension of PJS benefits to the

legacy employees.

In relevant part, paragraph 5.5(d)(iv) of the APA

provides that Siemens “shall be solely responsible for . . . any

benefits pursuant to Section 19 [the PJS provision] of the

[Westinghouse] Pension Plan and the corresponding provision

of the Siemens Pension Plan” with respect to legacy employees

70

after September 1, 1998, J.A. 139-40, but we already have

concluded that appellees are not entitled to PJS benefits under

section 19 of the Westinghouse Pension Plan. Although

paragraph 5.5(d)(iv) may assume that Siemens would enact a

corresponding PJS benefits provision, it does not require

Siemens to do so and thus differs from the purchase agreement

provisions at issue in Evans and Halliburton. 26 Cf. Evans, 660

F.3d at 865 (“[Sterling] shall continue to provide postretirement

medical and life insurance benefits for such [qualifying]

Acquired Employee[s] that are no less favorable to such

Acquired Employee[s] than those benefits provided by [Cytec]

under the [Cytec benefit plans] . . . and [Sterling] shall not

26

Siemens argues that the APA contains language referencing a

corresponding PJS benefit provision in the Siemens Plans

because that language was drafted at a time when the parties

believed that the transaction would close before the effective

date of the sunset provision in the Westinghouse Plan. Under

that belief that ultimately proved to be mistaken with respect to

pensions and benefits, Siemens represents now that, to be in

conformity with the Westinghouse Plan, it did intend to provide

PJS benefits under its plans to the legacy employees from the

date of closing through August 31, 1998, and the portion of

paragraph 5.5(d)(iv) that implies that Siemens would provide

PJS benefits is a vestige of that belief. Thus, Siemens views the

language as contractually obsolete. While the long delay in

completing the PGBU transaction suggests that Siemens’

contention may be true, our conclusion regarding the import of

the APA does not mean that we are accepting Siemens’

representation for the reason of the mention of PJS benefits in

the APA.

71

reduce the level of such benefits without the prior written

consent of [Cytec] . . . .”); Halliburton, 463 F.3d at 365

(“[Halliburton] shall . . . take all corporation action necessary to:

(i) maintain with respect to eligible participants . . . the

[acquired company’s] retiree medical plan, except to the extent

that any modifications thereto are consistent with changes in the

medical plans provided by [Halliburton] and its subsidiaries for

similarly situated active employees . . . .”).

Appellees’ invocation of paragraph 5.5(d)(i) is likewise

unavailing. That provision required that Siemens “establish a

defined benefit pension plan . . . that contains terms and

conditions that are substantially identical with respect to all

substantive provisions to those of the Westinghouse Pension

Plan as in effect as of [September 1, 1998].” J.A. 138 (emphasis

added). We already have noted that paragraph 5.5(a)(ii), which

requires Siemens to “provide compensation and benefit plans

and arrangements which in the aggregate are comparable . . . to

the compensation, Plans and Benefit Arrangements,” of the

Westinghouse Plan, id. 137 (emphasis added), supersedes

paragraph 5.5(d)(i) to the extent they set forth disparate

standards governing Siemens’ pension obligations. As we

observed previously, the amendment to the APA that changed

the closing date to September 1, 1998, for pension and benefit

purposes did not specifically include section 5.5(a), and the

closing date for purposes of section 5.5(a) thus technically

remained August 19, 1998. On that date, the Westinghouse Plan

included the sunset provision, which provided that “[i]n no

event shall a Permanent Job Separation occur after August 31,

1998.” Id. 293. Thus, even if we contorted section 5.5(a)’s “in

the aggregate comparable” standard to require adherence to all

72

terms of the Westinghouse Plan, including the PJS benefits

provision, section 5.5(a) would have required that Siemens offer

PJS benefits to the legacy employees only through August 31,

1998. As the parties agree that Siemens did not terminate a

legacy employee prior to September 1, 1998, Siemens’ failure to

offer PJS benefits from August 19, 1998 to August 31, 1998, did

not deprive any legacy employee of benefits to which they were

entitled.

If we focus on paragraph 5.5(d)(i), as appellees urge, the

closing date of the APA for that paragraph was changed to

September 1, 1998. As of September 1, 1998, the Westinghouse

Plan still included the sunset provision. As complicated as this

case might be, on this point the English language meaning of the

Westinghouse Plan could not be clearer. Accordingly, even if

we were to conclude that the APA constituted an amendment of

the Siemens Plans or otherwise imposed upon Siemens pension

obligations independent of any specific ERISA provision

requiring that Siemens provide PJS benefits, paragraph 5.5(d)(i)

of the APA did not require Siemens to provide PJS benefits to

the legacy employees, because section 5.5(d) defines Siemens’

pension obligations in relation to the Westinghouse Pension

Plan as of September 1, 1998, and as of September 1, 1998, a

permanent job separation could not occur under the

Westinghouse Plan by virtue of the sunset provision. 27

27

On September 9, 1998, Westinghouse retroactively amended

its plan to provide, among other things, a new date by which PJS

benefits would be eliminated under the sunset provision. See

J.A. 107 (Joint Statement of Undisputed Facts). The September

9 amendment, which was retroactively effective as of August

73

Appellees nonetheless urge that because we held in

Bellas that the sunset provision was an illegal cutback under

ERISA, Westinghouse’s liability for PJS benefits extending past

August 31, 1998 existed “as a matter of law” at the time of the

APA’s execution. Appellees’ br. at 13. They contend that the

sunset provision thus could not have limited Siemens’ promise

to provide substantially identical benefits. But as we have

explained the legacy employees are not entitled to PJS benefits

from Siemens without regard to the sunset provision and thus

the invalidation of the sunset provision is of no help to them. In

any event, we do not agree with appellees’ expansive view of

31, 1998, provided that “[i]n no event shall a Permanent Job

Separation occur after April 30, 2000.” J.A. 466 (Amendment

to the Westinghouse Plan). The parties agree that Siemens did

not participate in Westinghouse’s decision to enact this

amendment, see J.A. 107, and appellees do not contend that

Westinghouse’s independent amendment of its plan bound

Siemens. Nevertheless, we observe that although the September

9 amendment was retroactively effective to August 31, 1998,

and paragraph 5.5(d)(i) provided that Siemens would offer a

pension plan substantively identical to the Westinghouse Plan as

of September 1, 1998, Westinghouse’s unilateral retroactive

amendment to its plan more than a week after September 1,

1998, did not alter Siemens’ contractual undertaking in

paragraph 5.5(d)(i) of the APA. By the plain terms of the

Westinghouse Plan as they existed on September 1, 1998, the

date Siemens was required to reference under paragraph

5.5(d)(i), PJS benefits were no longer available under the

Westinghouse Plan by virtue of the original sunset provision,

which eliminated those benefits following August 31, 1998.

74

the effect of Bellas on this point.

We recognize that nearly one year after the execution of

the APA, the District Court for the Western District of

Pennsylvania held that the sunset provision violated section

204(g), see Bellas v. CBS, Inc., 73 F. Supp. 2d 500 (W.D. Pa.

1999), and one year later we affirmed that disposition, see

Bellas, 221 F.3d at 517. We grant that at the time of the APA’s

execution, Westinghouse was nonetheless legally obligated

under ERISA to allow for a permanent job separation to take

place following August 31, 1998, notwithstanding the

Westinghouse Plan’s plain language to the contrary which

neither we nor the district court yet had struck down. The terms

of the Westinghouse Plan, however, did not obligate

Westinghouse to provide PJS benefits after August 31, 1998,

and it is the terms of the Westinghouse Plan measured as of

September 1, 1998 — not Westinghouse’s underlying ERISA

obligations — that Siemens promised effectively to match in the

APA. See J.A. 138 (“substantially identical with respect to all

substantive provisions to those of the Westinghouse Pension

Plan as in effect of [September 1, 1998]”). Considering that

those terms had not yet been called into question by Bellas, we

find that our holding in that case cannot alter the plain language

of the APA.

Fundamentally, the APA is a contract. A basic principle

of contract construction is that we must interpret and enforce

unambiguous agreements according to their terms. See

McDowell v. Philadelphia Hous. Auth., 423 F.3d 233, 238 (3d

Cir. 2005); Morais v. Central Beverage Corp. Union Emps.’

Supplemental Retirement Plan, 167 F.3d 709, 712 (1st Cir.

75

1999) (“[C]ontracts containing unambiguous language must be

construed according to their plain and natural meaning[.]”)

(quoting Smart v. Gillette Co. Long-Term Disability Plan, 70

F.3d 173, 178 (1st Cir. 1995)). 28 In no uncertain terms, Siemens

agreed to provide benefits “substantially identical to” those

provided under the Westinghouse Plan as of September 1, 1998,

and the Westinghouse Plan did not provide PJS benefits for

employees terminated after August 31, 1998, even putting aside

the fact that it did not ever require Westinghouse to pay benefits

to employees terminated by a successor employer. Our later

invalidation of the sunset provision as to Westinghouse could

not change the parameters of Siemens’ contractual undertaking

either with respect to the termination date of the separations for

PJS eligibility or with respect to the entity terminating the

employment, i.e., a Westinghouse employer. Nor, of course,

could it change the Westinghouse Plan’s provision that there

would not be a permanent job separation of an employee offered

continued employment by a successor employer.

In short, there are three separate reasons why appellees

are not entitled to PJS benefits from Siemens: (1) the sunset

28

Because the APA is a contract that “potentially affects rights

protected by [ERISA] . . . [it] is likely subject to interpretation in

accordance with tenets of federal common law.” Smart, 70 F.3d

at 178 (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56,

107 S.Ct. 1549, 1557 (1987)); cf. Morais, 167 F.3d at 711 (“[I]t

is well settled that federal common law applies both to interpret

the provisions of an ERISA benefit plan and to resolve ‘[i]ssues

of relinquishment of rights and waiver’ when such side

agreements affect the benefits provided by an ERISA plan.”).

76

provision cut-off date of August 31, 1998; (2) the provision that

the terminating employer had to be a Westinghouse affiliate; and

(3) the provision that there would not be a permanent job

separation if a successor employer offered employment to a

terminated employee. If somehow in a way beyond our

conception the APA could be deemed to have been modified by

our invalidation of the sunset provision in Bellas, the remaining

two bars nevertheless would remain in place to the end that

appellees could not obtain PJS benefits from Siemens. Thus, as

complicated as this case seems to be in the end the result that we

must reach is quite clear.

VI. SUMMARY

In summary, we hold that appellees are not entitled to

PJS benefits from Siemens. First, we conclude that Siemens did

not adopt the Westinghouse Pension Plan as an ERISA

“transition” plan from August 19 to August 31, 1998, and thus

did not violate section 204(g) when it adopted the Siemens

Plans, which lacked PJS benefits. Second, we conclude that

because appellees had not satisfied the conditions for PJS

benefits upon a hypothetical termination just prior to

Westinghouse’s transfer of liabilities to Siemens and could not

satisfy in the future the conditions for those benefits, sections

204(g) and 208 did not protect those benefits from cutback and

appellees’ benefits would not have included PJS benefits upon

Westinghouse Plan’s hypothetical termination. Consequently,

Siemens’ omission of PJS benefits from its Plans and appellees’

resulting lack of entitlement to PJS benefits under Siemens

77

Plans upon a hypothetical termination basis just following the

transfer of liabilities did not diminish appellees’ benefits in

violation of section 208. Finally, we conclude that Siemens did

not obligate itself in the APA to provide PJS benefits to the

legacy employees. Finding no ERISA provision that requires

otherwise, we must enforce the Siemens Plans as written, and

beyond any reasonable dispute those Plans do not entitle

appellees to PJS benefits.

VII. CONCLUSION

For the foregoing reasons, we will reverse the District

Court’s March 30, 2007 order to the extent that it denied

Siemens’ summary judgment and granted appellees summary

judgment. Because we conclude that none of the appellees are

entitled to PJS benefits from Siemens, we need not reach the

questions certified for interlocutory appeal regarding the validity

of the Release Plaintiffs’ waivers as they did not have any PJS

benefits to waive and we thus dismiss the certified interlocutory

appeals. We likewise need not address appellees’ related

contention that the District Court erred in denying appellees’

claim that they were entitled to retiree medical and life insurance

benefits that they contended must accompany PJS benefits as

there are no PJS benefits to accompany and we will dismiss the

appeal relating to that issue. In sum, Siemens is entitled to

summary judgment as to both the Release and the Non-Release

Plaintiffs, i.e., all appellees, and we therefore will remand the

case to the District Court to enter summary judgment for

Siemens and for the Siemens Plans. The entry of that order will

terminate this litigation on the substantive matters in issue.

78