Unambiguous plan terms defeat estoppel claim regarding service credit computation

Despite its repeated written assurances to an employee that years of service with other employers would be included in his credited service for his pension benefit amount, an employer was not equitably estopped under ERISA §502(a)(3) from ultimately calculating the pension benefit based only on years of service with the employer, the U.S. Court of Appeals in Boston (CA-1) has ruled. The court determined that the plan’s rules regarding crediting years of service were unambiguous. Ambiguity in plan terms is required to support an ERISA estoppel claim.

Background

A bank employee received repeated written assurances from his benefits department that his pension benefit would be calculated based on over 20 years of service, although he had worked for the bank less than half that time. (According to the employee, these assurances were meant as an inducement to him to return to banking after years of working for other employers.) One written statement estimated he would receive about $2,371 in monthly pension benefits. When he actually retired, however, he was told he had accrued only seven years of service and would receive about $570 per month in benefits.
The retiree filed suit, alleging federal common law estoppel claims; denial of benefits under ERISA §502(a)(1)(B); and a Puerto Rico breach of contract claim. The district court granted the employer’s motion to dismiss the denial of benefits and state law claims and subsequently granted the employer’s motion for summary judgment on the equitable estoppel claim.

ERISA estoppel

Conceding the “problematic performance” of the employer’s benefits department, the appellate court nevertheless affirmed the district court’s judgments against the retiree. The First Circuit has yet to recognize an ERISA estoppel claim under ERISA §502(a)(3). It noted that those circuits that do recognize such a claim do so only when plan terms are ambiguous. Why? A plan beneficiary might reasonably rely on an informal statement interpreting an ambiguous plan provision, the court explained. However, in this instance, the retiree failed to demonstrate that the plan’s definitions of “Years of Service” or “Years of Credit” were ambiguous. Thus, his estoppel claim failed.

Denial of benefits

According to the appellate court, in order to sustain a 502(a)(1)(B) claim for benefits based on the retiree’s contention that various plan fiduciaries represented to him in writing that he would receive credit under the plan for his service with other employers, those representations would have to amount to plan amendments. The court found it implausible that any of these writings were intended as such: none claimed to be amending the plan, and nearly all clearly labelled themselves as “estimates” of the retiree’s pension benefits. (The retiree never alleged breach of fiduciary duty claims.)
Finally, the court affirmed the lower court’s ruling that ERISA preempted the retiree’s state breach of contract claim.

Source: Guerra-Delgado v. Popular, Inc. (CA-1).

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