Jаmes F. DADE; Jerome A. Budde, Jr., Individually and as the Class Representatives of all Persons Similarly Situated, Appellants, v. NORTH AMERICAN PHILIPS CORPORATION, as a Corporate Entity and as Plan Administrator of the Co-Defendant Pension Plan; Philips Electronics North American Corporation; the North American Philips Corporation Pension Plan for Salaried Employees.
No. 94-5546
United States Court of Appeals, Third Circuit.
Argued June 13, 1995. Decided Nov. 1, 1995.
Sur Petition for Rehearing Dec. 27, 1995
1558
While I agree that the Second Circuit did overrule Phelisna‘s holding regarding the burden of proof in Zhang, I feel it important to note that it did so only on the grounds of deference to administrative interpretation, not because it found the district court‘s statu-tory analysis in Phelisna to be inherently flawed. Indeed, the Zhang v. Slattery opin-ion explicitly agrees with the conclusion in Phelisna that there is “no express statutory provision allocating the burden of proving ‘entry.‘” Zhang v. Slattery, 55 F.3d at 756 (citation omitted). The Second Circuit over-ruled Phelisna‘s ultimate cоnclusion only on the grounds that the agency‘s interpretation of the statute was “reasonable” and thus entitled to deference under Chevron, U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 845, 104 S.Ct. 2778, 2783, 81 L.Ed.2d 694 (1984). Zhang v. Slattery, 55 F.3d at 756. The majority follows the Sec-ond Circuit‘s reasoning to reach the same conclusion.
I disagree with the majority because I do not find the BIA‘s statutory interpretation reasonable and thus determine it need not be accorded dеference. Id. at 845, 104 S.Ct. at 2783 (explaining deference accorded to agen-cy only if the interpretation “reasonable“).
The BIA‘s interpretation of section 291 would require the petitioners to bear the burden of proving that they were not being observed by the government, observation be-ing a form of official restraint. See In re Pierre, 14 I & N Dec. at 469. Because observation can “takе the form of surveil-lance, unbeknownst to the alien,” id., the alien would be required to prove something she does not know. Indeed, in this case, the ship was originally under Coast Guard sur-veillance prior to being lost again, and it is inconceivable that any of its passengers were aware of this at the time. I think it is unreasonable, impossible and inequitable to call upon the pаssengers aboard “Golden Venture” to prove they had not been under such surveillance and therefore conclude that the BIA erred in determining that the bur-den of proof regarding freedom from official restraint lies with the aliens.
IV.
For the foregoing reasons, I would affirm the district court‘s decision.
Before: SLOVITER, Chief Judge, BECKER, STAPLETON, MANSMANN, GREENBERG, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, LEWIS, McKEE, and SAROKIN, Circuit Judges.
SUR PETITION FOR REHEARING
Dec. 27, 1995
The petition for rehearing filed by apрel-lees having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied. Judge Sarokin would have granted rehearing in banc for the reasons set forth in his dis-senting opinion.
Michael J. Dell (argued), Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, New York City, for Appellees.
Fredric S. Singerman and Christopher A. Weals, Seyfarth, Shaw, Fairweather & Ger-aldson, Washington, D.C., for Amicus Curiae Chamber of Commerce of the United States of America (Stephen A. Bokat, Rоbin S. Con-rad, and Mona C. Zeiberg, National Chamber Litigation Center, Inc., Washington, D.C., of counsel).
John M. Vine and Jay T. Smith, Covington & Burling, Washington, D.C., for Amicus Cu-riae the ERISA Industry Committee.
Before: STAPLETON, McKEE and SEITZ, Circuit Judges.
OPINION OF THE COURT
STAPLETON, Circuit Judge:
The issue presented is whether § 204(g) of the Employee Retirement Income Security Act (“ERISA“),
I.
This dispute arises in connection with Phil-ips’ sale of the assets of its Magnavox Elec-tronic Systems Company (“Magnavox“) divi-sion to MESC Electronics Systems, Inc. (“MESCESI“). The relevant facts are not in dispute. Plaintiffs were employed by Mag-navox on October 22, 1993, when the sale closed. Until the sale, plaintiffs participated in the Philips Electronics North America Corporation Pension Plan for Salaried Em-ployees (the “Philips Plan” or the “Plan“).
Under the terms of the Plan, sixty-five is the normal retirement age. However, partic-ipants who are at least fifty-five years old can elect to retire earlier. Such early retir-ees receive benefits reduced by 0.3% for each month their retirement precedes the normal retirement age. Under the Plan‘s “Rule of 85,” early retirement benefits will not be reduced if the sum of the participant‘s age and years of eligible service at retirement is at least eighty-five. The Plan defines eligible service as service with Philips, an affiliate of Philips, or any other company that has adopted the Plan.
Philips notified the plaintiffs of the im-pending sale of Magnavox and of the sale‘s effects on their retirement benefits. After the sale, Philips would remain the sponsor of the Plan and there would be no transfer of Plan assets or liabilities. While the plaintiffs would cease to be Philips’ employees at the time of the closing, they would retain their rights under the Plan. Moreover, the Plan would be amended in two respects. All par-ticipants’ accrued retirement benefits would become 100% vested when the sale closed and Magnavox employees continuing with MESCESI would be entitled to credit for up to one year of additional service with MES-CESI towards the Philips Plan‘s Rule of 85 requirements. No credit would be given for any subsequent service with MESCESI.
After the sale, the plaintiffs continued to work for MESCESI in the same jobs they held with Magnavox. They did not satisfy the Rule of 85 requirements when the sale closed, nor could they do so even with credit for an additional year of service with MES-CESI. Plaintiff Budde‘s age and eligible service summed to eighty-five, but he was not yet fifty-five years old, and would not turn fifty-five by October 1994. Plaintiff Dade did not have sufficient eligible service.
II.
The district court had jurisdiction un-der
III.
Plaintiffs’ complaint asserts that both ERISA and the terms of the Plan require Philips to give plaintiffs credit for all of their service with MESCESI for the purpose of satisfying the Rule of 85. The district court was correct in holding that neither ERISA nor the terms of the Plan require that Philips give this credit.
A. The Plan
While plaintiffs insist that Philips breached the Plan, their supporting argu-ment before us rests squarely on two provi-sions of the Plan that incorporate the “appli-cable law“: Section 4.2.3, which requires the Plan to give credit for service with a succes-sor employer “to the extent required by law,” and Section 13.4, which authorizes amend-ments to the Plan in order to “comply with any other provision of applicable law.” Sinсe the “applicable law” to which plaintiffs point is § 204(g) of ERISA, it necessarily follows that the sole issue presented in this appeal is whether § 204(g) requires credit for the plaintiffs’ service with MESCESI. It is nev-ertheless important to view the statutory is-sue in the context of the provisions of the Plan.
The unambiguous terms of the Plan do not require Rule of 85 credit for service with MESCESI. Section 5.7 of the Plan sets out the terms for early retirement subsidies. A participant‘s right to an early retirement subsidy is based on the participant‘s age and years of “Eligibility Service.” “Eligibility Service” is defined as the “number of years and months of employees’ Periods of Ser-vice.” “Period of Service” is in turn defined as the period running from an employee‘s “Employment Commencement Date” (de-fined in Section 1.2.25 as the day on which he performs his first hour of paid work for an Employer or Affiliate) through an applicable “Severance Date.” Finally, “Severance Date” is defined for relevant purposes as the “earliest of: the date on which an employee quits, retires, is discharged or dies; or the first anniversary of the first date of a period in which an employee remains absent from service (with or without pay) with an Em-ployer or Affiliate for any [other] reason.” Plan § 1.2.53 (A. 57). The Plan defines “Employer” as Philips or any other entity that has adopted the Plan with the approval of the Pension Committee, § 1.2.24 (A. 45), and “Affiliate” as an entity owned by or part of the controlled group of an Employer. § 1.2.3 (A. 38). MESCESI has not adopted the Plan and is nоt an affiliate of Philips.
Section 4.2.3 expressly excludes from the definition of “Period of Service” time spent working for any entity that is not yet or is no longer an Employer or Affiliate:
In no event shall a Period of Service in-clude any period of service with a corpora-tion or other entity (a) prior to the date it became an Employer (or the date it bе-came an Affiliate, if earlier) or (b) after it ceases to be an Employer or Affiliate ex-cept to the extent required by law, or to the extent determined by the Pension Committee in its discretion exercised in a manner that does not discriminate in favor of highly paid employees.
(A. 73.) Since the parties agree that the Pension Committee did not exercise its dis-сretion to credit service with MESCESI af-ter the first year, we turn to the effect of § 204(g) of ERISA.
B. The Requirements of ERISA
ERISA does not mandate the cre-ation of pension plans. Nor, with exceptions not here relevant, does it dictate the benefits to be afforded once a decision is made to create one. Hlinka v. Bethlehem Steel Corp., 863 F.2d 279, 283 (3d Cir.1988); see also H.R.Rep. No. 807, 93d Cong., 2d Sess., reprinted in
Section 204(g) of ERISA prohibits an employer from decreasing a participant‘s ac-crued benefits by plan amendment. Prior to 1984, no protection was given to early retire-ment benefits because they were not consid-ered to be accrued benefits. Bencivenga v. Western Pa. Teamsters and Employers Pen-sion Fund, 763 F.2d 574, 577 (3d Cir.1985). In 1984, however, Congress amended ERISA § 204(g) to provide protection for early re-tirement benefits. Retirement Equity Act of 1984 (“REA“), Pub.L. No. 98-397, § 301(a)(2), 98 Stat. 1450-51. Section 204(g) as amended provides in relevant part:
(1) The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan
....
(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) ... with respect to benefits attributable to ser-vice before the amendment shall be treated as reducing accrued benefits. In the case of a retirement-type subsidy, the preceding sentencе shall apply only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy....1
After 1984, a plan sponsor could prospective-ly eliminate an early retirement benefit by amendment, but under § 204(g) the amend-ment could not adversely affect the early retirement benefit of a plan participant who satisfied the pre-amendment conditions for the benefit either before or after the amend-ment. Thus, if Philips had adopted such an amendment, it would have had to allow those employees who remained in its employ after the amendment to “grow into” the benefit by providing post-amendment service to Philips or an affiliate of Philips.
Section 204(g) is not аpplicable under the facts of this case because there has been no amendment of the Plan that reduced a bene-fit, accrued or otherwise. The only amend-ment to the Plan was one increasing the early retirement benefit by expanding the universe of participants who could qualify for it. While plaintiffs insist that Philips’ stated position, denying early retirement benefits to Dade, Budde and the others is “tantamount to an amendment of the plan,” Appellants’ brief at 19, that is simply not the case. Phil-ips’ stated position was nothing more than an accurate recounting of the Plan‘s terms. The denial resulted from the fact that plaintiffs could not satisfy the preamendment, pre-sale conditions for the Rule of 85 retirement-type subsidy as originally written.
In arguing that § 204(g) requires Philips to credit plaintiffs for service with MESCESI, plaintiffs ignore the fact that the REA does not override the conditions origi-nally imposed by the Plan which defined the early retirement benefits when they were created. As this court has explained, “the fact that [amendments reducing early retire-ment benefits] will now be ‘treated as reduc-ing accrued benefits’ does not mean that Congress intends to foreclose employers from circumscribing the availability of such optional benefits when they are being creat-ed.” Ashenbaugh, 854 F.2d at 1527. “Con-gress‘s chief purpose in enacting [ERISA] was to ensure that workers receive promised pension benefits upon retirement,” Hoover v. Cumberland, Maryland Area Teamsters Pension Fund, 756 F.2d 977, 985 (3d Cir.1985) (emphasis added). Thus, Congress sought “to protect contractually defined ben-efits.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S.Ct. 948, 955 (1989) (emphasis add-ed). The early retirement benefits plaintiffs seek were neither promised nor contractual-ly defined.
The facts of Gillis were similar to those of the present case in some respects: both cases involved the sale of a business by the plan sponsor, both plans offered similar Rule of 85 early retirement benefits, the plaintiffs in both cases had not satisfied the Rule of 85 at the time of the sales, and both plans only credited service with the plan sponsor. Id. at 1140, 1143. Gillis, however, differs mate-rially from the present case. In Gillis, the original plan sponsor transfеrred all of the plan‘s liabilities and assets to the purchaser. In the vernacular of the trade, there was a plan spin-off. Moreover, the purchaser agreed to provide all of the same early re-tirement benefits as the previous plan. There was no dispute about whether the plaintiffs, following the spin-off, would be entitled to credit for service with thе new employer. They would be. Id. at 1149 (Alito, J., concurring).
The issue in Gillis was whether the origi-nal plan sponsor had transferred sufficient assets to satisfy the requirements of § 208. Gillis, 4 F.3d at 1143. Section 208 provides:
A pension plan may not merge or consol-idate with, or transfer its assets or liabili-ties to, any other plan ..., unless each participant in the plan would (if the plan then terminated) receive a benefit immedi-ately after the merger, сonsolidation, 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)....2
Accordingly, application of § 208 to the facts in Gillis required the court to deter-mine what benefits the participants would have received in a termination at two points in time. This necessarily implicated § 204(g) since a termination of the plan would have had the same effect as an amendment elimi-nating all benefits. The cоurt held that the combined effect of §§ 208 and 204(g) in the context of a plan spin-off like that before it was to require the transfer of an amount of assets that would include sufficient funding for the early retirement benefits for those who would qualify after the transfer by ser-vice to the new employer.
Section 208 is not relevant here because this case does not involve a plan spin-off. Section 204(g) is not applicable here because this case does not involve anything that can fairly be considered a plan amendment elimi-nating or reducing an early retirement bene-fit. With the exception of the amendment enhancing the early retirement benefit, the Philips Plan was precisely the same before and after the sale. The holding in Gillis is, accordingly, inapposite here.
While we acknowledge that portions of the opinion of the court in Gillis can plausibly be read as inconsistent with the conclusion that we here reach, we do not so read them. In any case, we are required to harmonize the holding of Gillis with the holdings of our prior opinions that a sponsoring employer,
The result that we here rеach is consistent with that reached in Hunger v. AB, et al., 12 F.3d 118 (8th Cir.1993), on virtually identical facts.
IV.
The judgment of the district court will be affirmed.
WALTER K. STAPLETON
UNITED STATES CIRCUIT JUDGE