The opinion of the court was delivered by: REVERCOMB
GEORGE H. REVERCOMB, UNITED STATES DISTRICT JUDGE.
The plaintiff in this case seeks a declaratory judgment that it owes the defendant only "accrued" benefits generated by a retirement savings plan to which the defendant belonged from 1977-1985. The defendant, which has counterclaimed, argues that it is entitled to more money than the accrued benefits earmarked by the plaintiff for distribution to Oglethorpe's employees because it paid a substantially larger sum into the plaintiff's coffers than the amount which had accrued to its employees by the time it withdrew from the plaintiff's plan.
Oglethorpe Power Corporation ("Oglethorpe") is a Georgia non-profit corporation owned by a consortium of 39 rural electric cooperatives located in Georgia. In January 1977, Oglethorpe contracted with an employee benefits consulting firm, the Hay Group, seeking a recommendation of an employee benefit plan for Oglethorpe's employees. The Hay Group recommended the National Rural Electric Cooperative Association, ("NRECA"), a national trade association of rural electric cooperatives, which sponsors a pension plan for its members called the Retirement and Security Program for Employees of National Rural Electric Corporations Association and its Member Systems (the "R&S Program" or "R&S"). Oglethorpe's Board of Directors authorized it to join R&S, and it joined R&S effective January 1, 1977.
Oglethorpe participated in the R&S Program for eight years, until, in January 1985, it communicated to R&S its intention to withdraw from the Program. At that time, Oglethorpe decided to create its own pension plan, known as the Oglethorpe Power Corporation Retirement Income Plan. By letter of February 27, 1985, Oglethorpe formally advised R&S that it was withdrawing from the Program effective December 31, 1984. Oglethorpe intended to withdraw its funds from the R&S Program and place the money in the Oglethorpe Plan. It appears from the stipulated facts and from Exhibit 35 that the Administrator of R&S advised Oglethorpe by letter of the steps required to withdraw on February 6, 1985, explaining to Oglethorpe (with what Oglethorpe argues was less than perfect clarity) the method which would be used to calculate the amount transferable from the R&S Program to the Oglethorpe Plan.
Oglethorpe contributed $ 2,194,570.90 to fund pension benefits for its employees. Although R&S paid approximately $ 64,000 in benefits to Oglethorpe workers during the eight years at issue, it has no continuing liability to Oglethorpe Plan participants.
II. The Rival Methods of Calculation.
It is plaintiff's position that Section 16 of the contract authorizes use of the Accrued Benefits Method since that method converts the accrued annuity benefit into a lump sum cash value, the aggregate of which would be the amount "held on behalf of Participants in the withdrawing System." R&S argues that this is a reasonable choice to make under Section 16, on the grounds that the approximately $ 1.5 million difference between what Oglethorpe has paid in and what it is entitled to receive back under the Accrued Benefits Method is authorized under ERISA, which allows plan administrators to transfer only enough assets to cover current accrued benefits. R&S further justifies payout using the Accrued Benefits Method on the grounds that Section 16 of the contract and consistent prior practice support its interpretation of the language "held on behalf of Participants" to mean accrued benefits, since the Accrued Benefits Method assumes that each employee is 100% vested in his accrued benefits. In effect, R&S is arguing that its duties as plan administrator under ERISA ought to focus on payments to employees, whose accrued benefits are protected under the Accrued Benefits Method, and that ERISA allows it to use any reasonable actuarial method which will protect employees.
Oglethorpe paid in to R&S at the "Entry Age Normal Method" level, which funds both current liabilities and pre-funds future liabilities. The pre-funding feature of the Entry Age Normal Method, acting in combination with the youthfulness of Oglethorpe's work force, created the large prepayment amount of $ 2,194,570. Using the Entry Age Normal Method led to larger initial contributions than might have resulted from other methods, but Oglethorpe explains its willingness to pay into R&S using that method on the grounds that it had the effect of stabilizing annual payments to a level percentage of payroll. The practical effect of using the Entry Age Normal Method was that Oglethorpe made higher payments in order to pre-fund projected future benefits as well as those currently accruing during its period of membership. During the time Oglethorpe belonged to the R&S Program, its employees received $ 64,251 in benefits. Because Oglethorpe's workforce was relatively young, there was a large difference between the Entry Age Normal Method and payments reflecting only the rate of current accrual, i.e., the funding equivalent of the Accrued Benefits Method. Under the latter method, contributions for a worker are lower at the beginning of a worker's career and steadily increase as the worker approaches retirement. Under the Entry Age Normal Method, by contrast, contributions remain relatively constant over a worker's career. Oglethorpe argues that even if the language of Section 16 quoted above could support using the Accrued Benefits Method, the clause is ambiguous, and use of the Accrued Benefits Method for withdrawal is inconsistent with the use of the rival Entry Age Normal Method in other parts of the R&S Program, most notably when paying into the Program.
Subsequent to the trial in this case the Supreme Court heard argument in Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989). Judgment in this case was withheld pending the decision in Firestone, because the issue before the Supreme Court was the standard of review to apply in reviewing denial of ERISA benefits. Firestone was decided on February 21st, 1989. The parties have had the opportunity to address the holding in Firestone as they believe it affects the standard of review in this case, and upon consideration of their arguments the Court has concluded that the actions of R&S are to be reviewed under the arbitrary and capricious standard.
The Supreme Court held in Firestone that the arbitrary and capricious standard should not be imported wholesale into ERISA, and found that a de novo standard should be applied to cases where a plan administrator has no discretion to interpret uncertain plan terms. 109 S. Ct. at 956. However, the Court also held that the arbitrary and capricious standard is the correct standard to apply when the contract grants interpretive discretion to the administrator. The Court stated that
consistent with established principles of trust law, we hold that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to ...