The opinion of the court was delivered by: PARKER
Barrington D. Parker, District Judge:
This matter comes before the Court on the parties' cross motions for summary judgment on the question of whether the defendants, the Teamsters Local 639 - Employers Health and Pension Trust ("Trust") and its Trustees, violated their fiduciary duty to Huston Goins, a now-deceased beneficiary of the disability Pension Plan ("Plan") administered by the Trust.
The plaintiff is Lyda Belle Goins, the surviving spouse of Huston Goins, and the executor of his estate. She charges that the defendants acted in an arbitrary and capricious manner in amending the Plan's criteria for monthly disability benefits, which deprived her deceased husband of disability coverage. She brings this action on behalf of her husband's estate and on behalf of other similarly situated individuals.
The first count of the complaint alleges that the defendants have violated section 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1) and section 302(c)(5) of the Labor Management Relations Act ("Taft-Hartley Act"), 29 U.S.C. § 186(c)(5).
For the reasons set forth below, the Court determines that the plaintiff is entitled to summary judgment on this count.
The material facts in this case are undisputed. In 1953, Huston Goins began work as a machinist for the Virginia Concrete Company in Springfield, Virginia. He became a participant in the Plan in 1972. At that time, the Plan afforded a number of employee benefits, including a monthly disability pension. Article V of the Plan stated that:
an Employee shall be eligible for a disability benefit when he is a Participant in the Trust at the time of disability; has completed 5 continuous consecutive years of participation in the Trust ; has been totally disabled for at least 6 months; has submitted proof of disability and has been judged by the Trustees to be totally and permanently disabled.
Ex. A at 13-14, attached to Declaration of Simone Ornold (Vice President, Carday Associates, Trust Administrator), filed July 25, 1984.
It is undisputed that an actuarial valuation of the Plan provided the initial impetus for the new credited service requirement. The Minnesota Mutual Life Insurance Company, the Trust's actuary, prepared this valuation report as of January 1, 1977, and submitted it to the Trustees. According to the report, "disability experience under this plan has proven to be much heavier than we expected. . . . Moreover, it appears that this high level of disability incidence has been present in prior years also.
We have changed our disability rate assumption to reflect the higher rates." Ex. C at 13-14, Ornold Dec. In the transmittal letter of June 9, 1977, the actuary expressed concern about the current Plan's "provisions [for] full benefits to short-service employees." Id. Nevertheless, the actuary did not recommend any changes in the pension eligibility requirements.
Next, the record reflects that the Trustees adopted the credited service amendment, in addition to other changes, at a special meeting held on March 9, 1978. Ex. C, Connors Dec. The purpose of the meeting was to consider revisions to the Plan, and submit a final Plan to the Internal Revenue Service. Consultants from the Martin E. Segal Company attended the meeting. The Trustees hired the consultants to assist them in revising the Plan. At the meeting, the company's representatives brought the increased requirement of credited service to the attention of the Trustees, and stated that the new criteria made the Plan's disability requirements commensurate with those of other plans. Id. at 2.
Although the Trustees did not issue a contemporaneous statement describing the purpose of the amendment, the minutes of the meeting, coupled with the actuarial report, show that the amendment was in part approved as a cost-saving measure. The Trustees were concerned that disability benefits in general were more expensive than they had originally anticipated, and they were informed that the credited service requirements of other pension plans were more stringent. In addition, the defendants have also suggested that the amendment was designed to bring disability benefits in line with retirement benefits, which could only be awarded after a minimum of ten years of service. Connors Dec. at para. 9.
The record also shows that the Trustees firmly intended the amendment to become effective three months after its adoption, without regard to the number of years of credited service already obtained by a pension applicant when the amendment was adopted. They have acknowledged that they did not calculate the number of individuals, like Mr. Goins, who had obtained at least five years of service under the terms of the previous plan. Defendants' (Trust and Trustees) Answers to Plaintiff's First Set of Interrogatories, No. 19, filed March 2, 1984. Nor did they specifically consider the alternative of excluding such individuals from the reach of the amendment. Id., Interrogatory No. 9.
On July 3, 1980, two years after the Plan was amended, Mr. Goins applied for a disability pension benefit. At that time, he had accumulated 7.4 years of credited service. One month later, the Trustees denied his application solely because he had not accumulated ten years of credited service. It is undisputed that Mr. Goins was disabled within the meaning of the Plan and would have received benefits under the credited service provisions of the previous plan.
Although the Trustees declared that Goins was ineligible for monthly disability benefits, they awarded him a lump sum benefit of $622. He immediately pursued an appeal of the denial of monthly benefits, which was rejected on September 22, 1980. He died on September 19, 1983, and this litigation ensued on September 22, 1983.
The legal standard for review of the Trustees' denial of benefits to Mr. Goins is whether their action is "arbitrary and capricious" within the meaning of section 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1) and section 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5). As this Circuit has stated:
trustees [are permitted] broad discretion to choose among rational alternatives in setting eligibility standards for beneficiaries . . . [but] there are substantive limitations on the range of eligibility rules trustees may devise to govern benefit entitlement.
Saunders v. Teamsters Local 639, Employees Pension Trust, 215 U.S. App. D.C. 103, 667 F.2d 146, 148 (D.C. Cir. 1981) (interpreting 29 U.S.C. § 186(c)). In short, these eligibility criteria "must be justified by some rational nexus with the fund's purpose." Id.
The specific issue presented for the Court's consideration in this case is a narrow one: whether it was unreasonable for the Trustees' to apply the disability amendment to all participants in the Plan, without regard to whether they had already satisfied the credited service requirement of the previous Plan. The question is not whether the rule is per se arbitrary or unreasonable. See Saunders, 667 F.2d at 149; Lavella v. Boyle, 144 U.S. App. D.C. 35, 444 F.2d 910, 912 (D.C. Cir.), cert. denied, 404 U.S. 850, 30 L. Ed. 2d 89, 92 S. Ct. 84 (1971). Nor need the Court address whether the Trustees could have applied the rule to Plan participants who had achieved five years of credited service, if they had explained their reasons for applying the rule in this fashion. Instead, the Court need only examine whether Mr. Goins had an interest in the receipt of disability benefits under the Plan which was deserving of ...