ERISA-First Circuit Upholds Plan Administrator’s Determination Of Participant’s Years of Benefit Service For Purposes Of Calculating His Pension Benefit

The appeal in Vendura v. Boxer, No. 15-2387 (1st Cir. 2017), involves a suit for pension benefits that George Vendura (“Vendura”) brings against Northrop Grumman Corp. (“Northrop”) and a number of related entities and individuals (all, the “Defendants”).  The key point of contention concerns the number of “Years of Benefit Service” that should be credited to Vendura in calculating his pension benefits under his pension plan.

In this case, Vendura was hired by TRW Inc. (“TRW”) in 1993 and became a participant in the TRW Salaried Pension Plan (“TRW Plan”).  In 2002, Northrop acquired TRW and renamed the company Northrup Grumman Space and Mission Systems Corp. (“NGSMSC”), and the pension plan became the NGSMSC Plan.  Soon thereafter, NGSMSC attempted to terminate Vendura’s employment.  Vendura, however, challenged the attempt to lay him off, and, in 2003, Vendura and NGSMSC signed a settlement agreement that kept Vendura on board at NGSMSC, subject to certain conditions.

In April of 2013, Vendura filed a claim for pension benefits with the “Administrative Committee” for the NGSMSC Plan.  In making his pension benefits claim to the Administrative Committee, Vendura argued that he is entitled to twenty years of benefit service.  However, the Administrative Committee determined that Vendura was entitled to only 12 years of benefit service when calculating the pension benefits.  Eventually, Vendura filed this suit.  The district court granted summary judgment for the Defendants, and he appeals.

Upon reviewing the case, the First Circuit Court of Appeals (the “Court”) affirmed the district court’s judgment.  The Court noted that the NGSMSC Plan vests the Administrative Committee with the authority to interpret and apply the relevant provisions.  As a result, and in accord with the requirements of ERISA, the Court said that it will review the Administrative Committee’s interpretations of the settlement agreement and the NGSMSC Plan–here leading to the determination of the number of Vendura’s Years of Benefit Service-under the deferential arbitrary and capricious standard, which is functionally equivalent to the abuse of discretion standard.  Under this standard, the Court determined that the Administrative Committee’s interpretation of the settlement agreement and the NGSMSC Plan was reasonable, so that its determination of the number of Vendura’s Years of Benefit Service must be upheld.

 

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