In Cocker v. Terminal Railroad Association of St. Louis Pension Plan For Nonschedule Employees, No. 15-2690 (7th Cir. 2016), the plaintiff is a participant in a retirement plan (the “Terminal Plan”) governed by ERISA; the defendant is the Terminal Plan.
In this case, the plan document provides that “the retirement income benefit payable under this Plan shall be offset by the amount of retirement income payable under any other defined benefit plan … to the extent that the benefit under such other plan or plans is based on Benefit Service taken into account in determining benefits under this Plan.” The Terminal Plan based its calculation of the plaintiff’s plan benefits on his total years of work, including the years he’d spent working for Union Pacific Railroad. So it made sense for the plan to subtract from the plaintiff’s benefits under the Terminal Plan any benefits that Union Pacific had already given him for his years of working for that company. The Terminal Plan provides that if “the benefit under such another plan is paid in a form other than the form of payment under this Plan, including without limitation a single lump sum cash payment made prior to retirement, the amount of such offset shall be the dollar amount per month of the benefit that would have been payable under such other plan in the form of a Single Life Annuity commencing on the Participant’s Normal Retirement Date” (emphasis added).
The appeal revolves around the meaning of “payable” in the plan document. The plaintiff had taken early retirement from Union Pacific in 2006. His normal retirement date would have been in 2019, and had he waited until then to retire he would have received a retirement benefit of $2,311.73 a month. Instead he chose to begin receiving his benefits in 2009, in the form of a monthly benefit of $1,022.94. The two dollar figures are actuarially identical, in the sense that the present value of the two streams of money is the same because the smaller monthly benefit is received for 111 months longer than the larger one. After retiring from Union Pacific the plaintiff went to work for Terminal Railroad and became a participant in the Terminal Plan. When in 2010 he retired from Terminal Railroad, the Terminal Plan’s administrator calculated the monthly benefit owed him for his combined years of service to Terminal and Union Pacific to be $3,725.02, from which the Terminal Plan would deduct the monthly benefits payable under the Union Pacific Plan. The question is whether the amount to be deducted each month should be $2,311.73 or $1,022.94. The plaintiff argued to the plan administrator for the smaller deduction; the administrator rejected the argument. So the plaintiff sued the Terminal Plan under 29 U.S.C. § 1132(a)(1)(B). He won in the district court, precipitating the Plan’s appeal in this case.
Upon reviewing the case, the Seventh Circuit Court of Appeals determined that the plan administrator was right, so that the proper deduction is the $2,311.73 amount. This obtains because that amount is the amount payable under the prior employer’s plan, without actuarial reduction for a pre-normal retirement date start of payments.