Cooper v. Willis Towers Watson Pension Plan for U.S. Emps.

562 F.Supp.3d 890

Harold COOPER

v.WILLIS TOWERS WATSON PENSION PLAN FOR U.S. EMPS. et al.

Case No.: 2:21-cv-04319-SB-JC

United States District Court, C.D. California.

Filed March 3, 2022

James P. Keenley, Brian Henry Kim, Emily A. Bolt, Bolt Keenley Kim LLP, Berkeley, CA, for Harold Cooper.

Megan C. Eckel, Pro Hac Vice, Todd D. Wozniak, Pro Hac Vice, Holland and Knight LLP, Atlanta, GA, Samuel J. Stone, Sarah Ann Marsey, Holland and Knight LLP, Los Angeles, CA, for Willis Towers Watson Pension Plan for U.S. Employees, Willis Towers Watson Benefit Plans Administration Committee.

Proceedings: ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT [Dkt. Nos. 34, 35]

STANLEY BLUMENFELD, JR., United States District Judge

This case involves a dispute over the "anti-cutback" rule of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1054(g), and its corresponding provision in the Internal Revenue Code (I.R.C.), 26 U.S.C. § 411(d)(6). Plaintiff Harold Cooper is a participant in Defendant Willis Towers Watson Pension Plan for United States Employees (the Plan), which is administered by Defendant Willis Towers Watson Benefit Plans Administration Committee (the Committee). The Plan previously allowed participants to defer receipt of their pension benefits until the January 1st nearest their 70th birthday. In July 2017, the Plan was amended to require participants, including Plaintiff, to begin receiving their pension benefit not later than their attainment of age 62. Citing the Plan's original terms, Plaintiff filed a claim to defer his pension benefit until age 70 and argued that the July 2017 amendment constituted an illegal cutback of his vested and accrued benefits. The Committee denied Plaintiff's claim and his appeal of the denial. Plaintiff now challenges the Committee's decision. The parties filed cross-motions for summary judgment, Pltf. Mot, Dkt. No. 34 and Def. Mot., Dkt. No. 35, and oppositions, Pltf. Opp., Dkt. No. 42 and Def. Opp., Dkt. No. 44. For the following reasons, the Court grants Plaintiff's motion and denies Defendants’ motion.

I. BACKGROUND

Plaintiff worked as an actuary at Towers Perrin, a predecessor entity to Willis Towers Watson, until March 15, 1991. Joint Administrative Record (AR) 106, Dkt. No. 32.¹ At the time of his termination, Plaintiff was vested in an accrued pension benefit under the 1988 version of the Towers Perrin Retirement Income Plan for U.S. Employees (the 1988 Plan).² AR 26. Plaintiff was a Terminated Vested Member, rather than a Retired Member, because his employment with Towers Perrin terminated before he reached normal retirement age. Id.

Under the terms of the 1988 Plan, Plaintiff had the right to defer commencement of his pension benefit until age 70, as long he submitted a written request for commencement by the January 1st nearest the date on which he attained that age. AR 389.

The current version of the Plan took effect on July 1, 2017 (the 2017 Plan). AR 115. Section 6.01(b) of the 2017 Plan states:

Timing of Distribution and Special Rules: [D]istribution of benefits under this section to the Participant shall be made as soon as practicable after the Participant's Separation from Service; provided, however, that in the case of a Participant whose lump sum value of the vested Accrued Benefit exceeds $5,000, distribution shall be made as of the first day of the month following the latest of (A) the Participant's Separation from Service, (B) the Participant's attainment of age 62 or (C) the Participant's attainment of Normal Retirement Age³ unless the Participant consents to an earlier distribution following his Separation from Service.

AR 156. In late 2018, Plaintiff called the Plan's service center to dispute Section 6.01(b) and argued that the 1988 Plan gave him the right to delay commencement of his pension benefit until a later age. AR 373. In response to Plaintiff's call, the Committee sent Plaintiff a letter on October 4, 2018, explaining that it considered the July 2017 amendment to be legally valid. Id. On December 16, 2018, Plaintiff submitted a formal written claim to defer his pension benefit. AR 375-76. Plaintiff argued that the timing and commencement of his pension benefits are protected "optional forms of benefit" under I.R.C. § 411(d)(6), and that the 2017 Amendment requiring Plaintiff to begin receiving his benefits by age 62 was an illegal cutback of those benefits in violation of that provision. Id.

On February 12, 2019, Defendants denied Plaintiff's claim. AR 378. Defendants stated that "[a]ny amendment to the Plan regarding the distribution of Plan benefits upon the attainment of normal retirement age (or age 62, if later) is not a prohibited cutback ... because the payment of retirement benefits after normal retirement age is not a protected benefit." AR 379. Defendants also cited 26 C.F.R. § 1.417(e)–1(b)(1) to support their assertion that, because Plaintiff had attained age 62, his consent was not required to commence his benefits under the Plan. AR 380.

On May 29, 2019, Plaintiff appealed the Committee's decision. AR 381. Plaintiff reiterated that "the right to commence benefits at a time specified by the plan in effect when the benefits were earned ... cannot be restricted by subsequent amendment" under the anti-cutback provisions of ERISA and the I.R.C. Id. On July 23, 2019, the Committee denied Plaintiff's appeal. AR 388. The Committee agreed with Plaintiff that the right to defer is a protected optional form of benefit under I.R.C. § 411(d)(6) that could not be eliminated by amendment unless an exception to the anti-cutback rule applied. AR 391. The Committee asserted that the exception stated in 26 C.F.R. § 1.411(d)–4, Q & A–2(b)(2)(v) applied, and that this exception "permits the Plan to be amended to eliminate the deferral of benefit commencement until a terminated participant's required beginning date and require that payments commence by the later of a participant's attainment of normal retirement age or age 62." AR 392. Having exhausted his administrative remedies, Plaintiff filed this action on May 24, 2021, challenging the Committee's denial of his claim to defer commencement of his pension benefits under ERISA § 502(a)(1)(B).⁴ Complaint ¶ 2, Dkt. No. 1.

After hearing oral argument on the parties’ cross-motions for summary judgment, the Court took the matter under submission. Dkt. No. 46. The Court then conducted further research and became aware of an entry in the Federal Register by the IRS titled "Increase In Cash-Out Limit Under Sections 411(a)(7), 411(a)(11), and 417(e)(1) for Qualified Retirement Plans." The Court ordered supplemental briefing on whether the IRS's interpretation of the anti-cutback rule, as articulated in Subsection G of that Federal Register Entry, is entitled to deference under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc ., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) or Auer v. Robbins , 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997). Dkt. No. 47; see Dkt. Nos. 48 (Pltf. Supp. Brief) and 49 (Def. Supp. Brief).

II. STANDARD OF REVIEW

"In the ERISA context, ‘a motion for summary judgment is merely the conduit to bring the legal question before the district court, and the usual tests of summary judgement, such as whether a genuine dispute of material fact exists, do not apply.’ " Harlick v. Blue Shield of Cal. , 686 F.3d 699, 706 (9th Cir. 2012) (quoting Nolan v. Heald Coll. , 551 F.3d 1148, 1154 (9th Cir. 2009) ).

"[T]he de novo standard of review normally applies when a court reviews a claim that a plan administrator improperly denied benefits under § 502(a)(1)(B) of ERISA." McDaniel v. Chevron Corp. , 203 F.3d 1099, 1107 (9th Cir. 2000). However, the abuse of discretion standard applies when a pension plan confers discretionary authority on a plan administrator to construe the terms of a pension plan and to determine benefit eligibility. Id. (citing Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) ). "[T]he presumption of de novo review can be overcome only when a plan's reservation of discretion is unambiguous." Id. (citing Kearney v. Standard Ins. Co. , 175 F.3d 1084, 1088-89 (9th Cir. 1999) ). Here, the Plan grants the Committee "total and complete discretion to interpret the Plan and all documents comprising the Plan ... and to determine all questions arising in the administration, interpretation, and application of the Plan, including eligibility for benefits," and provides that such "absolute discretion ... will be final, conclusive and binding upon all Participants." AR 174. As this is an "unambiguous" reservation of discretion, McDaniel , 203 F.3d at 1107, the Court reviews the Committee's construction of the Plan's terms for abuse of discretion, see Bendixen v. Standard Ins. Co. , 185 F.3d 939, 943 & n.1 (9th Cir. 1999) (applying the abuse of discretion standard where the plan stated "we have full and exclusive authority to interpret the Group Policy ... [and] any decision we make ... is conclusive and binding").

But the analysis does not end there. In denying Plaintiff's claim to defer benefits, the Committee did not merely construe the terms of the Plan, but also interpreted at length several provisions of the I.R.C. and ERISA as well as multiple Treasury Regulations and the seminal Supreme Court anti-cutback rule case, Cent. Laborers’ Pension Fund v. Heinz , 541 U.S. 739, 124 S.Ct. 2230, 159 L.Ed.2d 46 (2004). See AR 378-80, 389-93. The Ninth Circuit has cautioned that courts "cannot defer to a plan administrator's construction of a federal statute." McDaniel , 203 F.3d at 1108. Thus, because "[t]he interpretation of a federal statute, such as ERISA, is a question of law," the Court reviews the Committee's interpretations of law de novo. Arnold v. Arrow Transp. Co. of Del. , 926 F.2d 782, 785 (9th Cir. 1991) ; see also Burrey v. Pac. Gas & Elec. Co. , 159 F.3d 388, 391-92 (9th Cir. 1998) ("[I]n this case, the retirement plan...