Roger C. Johnson, Plaintiff-appellee Cross-appellant, v. Albert Franco, Shannon J. Wall, Martin F. Hickley, et al.,defendants-appellants Cross-appellees, 727 F.2d 442 (5th Cir. 1984)

The plaintiff Johnson, born in 1928, sues to recover monthly pension benefits allegedly owed him since 1969, when his right to receive the pension vested because of his twenty years of covered employment. Johnson contends that suspension under the multi-employer employee pension benefit plan of an employee's vested right to receive monthly pension benefit payments amounts to a statutorily prohibited forfeiture under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., of pension benefits during the period of suspension. The central (but not only) issue of this appeal concerns ERISA's intended meaning of "normal retirement age," and arises out of the plaintiff's contention, sustained by the district court, that the plan's provision for suspension-forfeiture of his vested benefit rights for this reason is contrary to an ERISA provision that requires pension plans subject thereto to "provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age." Sec. 203(a) of ERISA, 29 U.S.C. § 1053(a) (emphasis added).

We reverse the district court's determination that the "normal retirement age" must under the statute be the age at which an employee's right vests to receive normal retirement benefits. We instead hold, consistently with other circuits that have approached the issue, that the statutorily intended meaning of "normal retirement age" is provided by ERISA's own definitions section, which defines the meaning of terms used for purposes of that statute, Sec. 3 of ERISA, 29 U.S.C. § 1002. Under this provision, the present plan's definition of "normal retirement age" as 65 is, for the reasons set forth below, in compliance with ERISA's statutory requirements for a covered plan's "normal retirement age," Sec. 3(24) of ERISA, 29 U.S.C. § 1002(24).

Procedural Stance

The plaintiff Johnson sues the National Maritime Union Pension Trust of the National Maritime Union Pension and Welfare Plan (the "plan"), and its administrator (Franco) and trustees, to recover unpaid monthly pension benefits allegedly due from June 26, 1969 (the date of Johnson's retirement from employment connected with the National Maritime Union) to December 1, 1977 (the date on which the plan began paying him pension benefits). The district court held that the plan had wrongfully denied pension benefits to Johnson from January 1, 1976, the effective date of ERISA, a holding we reverse on the plan's appeal.

With regard to other contentions raised by Johnson, the district court held that he was not entitled to his pension benefits from June 26, 1969 to January 1, 1976 either under the Labor Management Relations Act, 29 U.S.C. § 141 et seq., or under applicable provisions of state law. On Johnson's cross-appeal from these rulings, we affirm.

Context Facts

The National Maritime Union ("NMU") is a labor organization whose membership consists entirely of seamen unlicensed by maritime authorities. With several employers of its seamen, NMU had created a pension plan for the benefit of its members employed by them. The plaintiff Johnson was an NMU member from 1946 until his retirement on June 26, 1969 and was employed during that period as an "unlicensed" seaman covered by the plan. At the time of his retirement in 1969, Johnson had accumulated more than 20 NMU "pension credits," which entitled him to a $250 per month "Service Pension" under the terms of the plan, provided that he refrain from certain types of employment after his retirement.

At the time of his retirement, the provisions of the NMU plan prohibited pensioners from becoming reemployed in any capacity aboard an American flag vessel or any vessel covered by an NMU collective bargaining agreement. This plan restriction was in effect until May 1973, when it was modified to allow employment on an American flag vessel, provided that the vessel was not covered by an NMU collective bargaining agreement. Johnson first applied for his pension in April 1973, but was denied benefits since he was then employed aboard an NMU contract vessel--albeit as a "licensed" seaman.¹  On November 23, 1977, the plan restrictions were again amended so as to preclude payment of vested pension benefits only for employment as an "unlicensed" seaman on an NMU contract vessel. In 1978, Johnson again applied for pension benefits. Since Johnson was then employed as a "licensed" (not as an "unlicensed") seaman, the plan paid him benefits retroactively to December 1, 1977, the effective date of the amended plan restriction.

Johnson again demanded benefits for the period between June 26, 1969 (the date his employment as an unlicensed seaman terminated) and December 1, 1977 (the date the amended plan permitted him to draw benefits despite his employment as a licensed seaman). The plan again denied benefits for this period, relying upon a provision of the plan that the "normal retirement age" was 65 and upon other limitations of the plan, based upon continued maritime employment, that suspended Johnson's right to receive his service pension prior to December 1, 1977. Johnson then instituted the present action.

The district court granted Johnson retroactive benefits from January 1, 1976 to December 1, 1977 on the ground that ERISA prohibited the suspension of his pension benefits by the type of reemployment restrictions imposed by the NMU plan for that period. The plan appeals this ruling. The threshold issue in this regard is whether the district court erred in determining that for purposes of ERISA-protections the "normal retirement age" is not the age of 65 as expressly defined by the plan, but instead is the date (in 1969) at which the plan participant (Johnson) became eligible to receive the normal retirement benefits provided for service pensions by the plan.

The plaintiff Johnson relies upon an ERISA provision that "each pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of his normal retirement age." Sec. 203 of ERISA, 29 U.S.C. § 1053 (emphasis added). Section 203 does not, however, by itself bar a plan's provision that suspends the payment of benefits before a pension plan participant reaches "normal retirement age." Hurn v. Retirement Fund of Plumbing, Heating & Piping Industry, 648 F.2d 1252, 1253 (9th Cir. 1981); Riley v. MEBA Pension Trust 586 F.2d 968, 969-970 (2d Cir. 1978) ("Riley II") (citing legislative history reference). The restriction on reemployment in the NMU plan would therefore not violate ERISA Sec. 203 if it suspended Johnson's retirement benefits before he reached "normal retirement age", within the intended meaning of the statute.

Section 3 of ERISA, 29 U.S.C. § 1002, entitled "Definitions", provides the meaning of certain terms " [f]or purposes of this subchapter [ERISA]." Section 3(24), 29 U.S.C. § 1002(24), defines "normal retirement age":

(24) The term "normal retirement age" means the earlier of--

(A) the time a plan participant attains normal retirement age under the plan, or

(B) the later of

(i) the time a plan participant attains age 65, or

(ii) the 10th anniversary of the time a plan participant commenced participation in the plan. [Emphasis added.]

By comparison, the present NMU pension plan defines "normal retirement age" as:

[T]he first day of the calendar month coincident with or immediately following a Participant's 65th birthday or if later, the first day of the calendar month following the tenth anniversary of the day the person becomes a Participant....

Under the plan's definition, Johnson will reach "normal retirement age" at age 65, since that date falls later than his 10th anniversary with the plan.²  Similarly, by the definition of subparagraph B of Sec. 3(24) of ERISA, Johnson reaches normal retirement age at 65, since that date is later than his tenth anniversary with the plan. By either definition, thus, Johnson will not reach "normal retirement age" until he reaches age 65. Consequently, the NMU plan's provision for a "normal retirement age" of age 65 does not contravene the ERISA-specified minimum requirement for a plan's "normal retirement age"--for that reason, it does not implicate a violation of the provision of ERISA that a pension plan must provide "that an employee's right to his normal retirement benefits is nonforfeitable upon the attainment of his normal retirement age." Sec. 203 of ERISA, 29 U.S.C. § 1053 (emphasis added).

We are thus unable to agree with the thoughtful opinion of the district court, by which it reasoned that the "normal retirement age" should be derived from the substance of the plan's provision for retirement benefits. By this reasoning, Johnson had reached the "normal retirement age", even though the plan defined that term as age 65, because in 1969 his rights vested to a full service pension, which therefore--construing the plan as a whole--as a practical matter constituted his reaching the normal retirement age. We do not find to be persuasive as applied to the present facts the reasoning and holding in an unreported decision of the District of Columbia district court, Nichols v. Board of Trustees of the Asbestos Workers, etc., No. 79-0263 (D.D.C. Feb. 23, 1979), upon which the present trial court relied. (We pretermit its possible distinguishability as involving a plan that (unlike the present) did not expressly provide for "normal retirement age".)

In summary, under Sec. 3(24) of ERISA, 29 U.S.C. § 1002(24), quoted supra, the "normal retirement age" may be either (1) the age that a participant "attains normal retirement age under the plan," Sec. 3(24) (A) (emphasis added) or (2) "the time a plan participant attains age 65" (or the 10th anniversary of his participation in the plan, if he became a participant later than age 55), Sec. 3(24) (B), quoted above--whichever is the "earlier" of the two. With regard to the issue before us, the present pension plan expressly defines its "normal retirement age" as age 65. Under its statutory terms, ERISA would invalidate, for forfeiture-suspension purposes, only a "normal retirement age under the plan", Sec. 3(24) of ERISA, 29 U.S.C. § 1002(24), that does not meet the statutorily prescribed minimum "normal retirement age" provided by Sec. 3(24) (B) of ERISA, 29 U.S.C. § 1002(24) (B). The "normal retirement age" specified by the present plan--which would be controlling as to nonforfeiture were it earlier (as it is not) than the ERISA minimum--does indeed meet ERISA's minimum age-65 requirement. Consequently, the plan's trustees were not barred by ERISA's nonforfeiture provision from a plan stipulation that suspended payment of Johnson's vested pension rights following the effective date of ERISA on January 1, 1976.

Our holding is consistent with that of other circuits that the "normal retirement age" provided by a pension plan controls the issue as to the date upon which a participant's pension rights become nonforfeitable under ERISA, provided the normal retirement age so provided meets ERISA's minimum requirements (as does the present). Janowski v. International Brotherhood of Teamsters, 673 F.2d 931, 937 (7th Cir.), cert. denied, --- U.S. ----, 103 S. Ct. 130, 74 L. Ed. 2d 112 (1982); Hernandez v. Southern Nevada Culinary & Bartenders, 662 F.2d 617, 619-20 (9th Cir. 1981); see also Fine v. Semet, 699 F.2d 1091, 1093 (11th Cir. 1983). In Hernandez, a case involving issues very similar to those presented here, the Ninth Circuit found that although a pensioner had a "100% vested interest in his accrued pension benefits," he had "no vested right to receive pension benefits until he reaches normal retirement age" (in that case, defined by the plan as age 62). Hernandez, supra, 662 F.2d at 618-619 (italics the court's).

Since Johnson had not reached "normal retirement age" as defined either by Sec. 3(24) of ERISA, 29 U.S.C. § 1002(24), or by the NMU pension plan, he was not entitled to the protection afforded by ERISA's nonforfeitability provision, Sec. 203, 29 U.S.C. § 1053, for the period of January 1, 1976--September 1, 1977, during which the NMU plan suspended his benefits. Provided that post-employment restrictions, such as those that suspended Johnson's pension benefits, do not violate other provisions of ERISA, pension plans may adopt restrictions which limit or suspend the payment of vested pension benefits prior to the time the pensioner reaches "normal retirement age," such as provisions suspending payments from multi-employer funds (while the entitled employee works in the same craft or trade and in the same geographic area. See e.g., 29 U.S.C. § 1053(a) (3) (B) (i); Thompson v. Asbestos Workers Local No. 53 Pension Fund, 716 F.2d 340 (5th Cir. 1983)). We find, therefore, that the district court erred in ruling that the suspension of Johnson's benefits from January 1, 1976 to December 1, 1977 violated the nonforfeitability provisions of ERISA.³ 

II. The Labor Management Relations Act and State Law Claims

On his cross-appeal, Johnson contends that the district court erred in dismissing his pre-ERISA claim for pension benefits from 1969 to 1976, sought both on federal-law and state-law grounds.

For his federal-law basis, Johnson claims that he was entitled to pension benefits from June 26, 1969 until January 1, 1976 because the plan restrictions that suspended his benefits (due to his reemployment as a licensed seaman aboard NMU contract vessels) violated Sec. 302(c) (5) of the Labor Management Relations Act, 29 U.S.C. § 186(c) (5). Section 302(c) (5) requires that any money paid by management to a labor trust or pension fund must be "for the sole and exclusive benefit of the employees of such employer." This section has been held to prohibit the trustees of union pension funds from establishing "arbitrary exclusions from pension benefits." Knauss v. Gorman, 583 F.2d 82, 88 (3rd Cir. 1978).

The defendant plan and its trustees contend preliminary that there is no subject-matter jurisdiction over the claim under the federal Labor Management Relations Act. In so arguing, the defendants rely upon expressions that whether a pre-ERISA eligibility requirement in a pension plan is arbitrary or capricious is primarily a question of state, not federal, substantive law, Woodfork v. Marine Cooks & Stewards Union, 642 F.2d 966, 974-75 (5th Cir. 1981), and that "only structural deficiencies in a plan that defeat the 'sole and exclusive benefit' provision of section 302(c) (5), and not simple breaches of fiduciary duty, violate that provision." Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1258 n. 3 (5th Cir. 1980). These expressions concerning the propriety of a Sec. 302(c) (5) claim, however, do not raise an issue of subject matter jurisdiction, rather an issue of whether the statutory provision has created a private cause of action under non-structural-defect circumstances that would entitle a retiree to recover his pension benefits.

Section 302(e) of the Labor Management Relations Act, 29 U.S.C. § 186(e), clearly provides the district courts with the jurisdiction to "restrain violations of this section [Sec. 302]." "To protect the rights of pensioners, courts have found it necessary to subject the conduct of pension plan trustees to judicial review and correction." Bayles v. Central States, Southeast and Southwest Areas Pension Fund, 602 F.2d 97, 100 (5th Cir. 1979). However, "the actions of the trustees in the administration of the pension plan must be sustained unless plaintiff can prove such activities have been arbitrary or capricious." Id. The majority of the courts that have considered the issue have held, consistently with our expression in Bowen, supra, that a plaintiff states a claim under Sec. 302(c) (5) if his allegations are to the effect that the plan has a "structural defect" that has worked to exclude a group of retirees from benefits arbitrarily and capriciously, i.e., for no reasonable purpose.⁴ 

The plaintiff Johnson contends that the restrictions imposed by the plan arbitrarily limited the right of many members such as himself to receive their pensions simply because of their continued maritime employment. He particularly complains of as without legitimate foundation the provision that suspended the pensions only of retirees who worked on American flag vessels or on NMU contract vessels, not of those who worked on other vessels. He claims that this distinction arbitrarily precludes the receipt of pension benefits to retirees of entitlement equal to those retirees also working as seamen, based solely upon the identity of the employer of a seaman rather than upon the type of post-retirement maritime employment obtained by him.

Without detailing the plan's reasons for the maritime-employment-based suspension of payment of service pensions to otherwise qualified retirees, we think it is sufficient to note that the initial more stringent limitations upon any maritime employment arose in an effort to assure that those who collected benefits were really retired from the maritime industry and thus in need of the benefits, that the more liberalized later restrictions were designed to encourage more senior NMU members to retire and to create openings in union jobs for other younger NMU members who faced unemployment in changing economic conditions, and that some of the restrictions (later abandoned) for employment on American flag and NMU-contract vessels were designed to ensure that maritime employers contributing to the NMU plan did not simultaneously pay the same person both a union pension (through their contributions to the pension fund) and a salary while he was working.

The reasons advanced for the employment-related suspension of service pensions to retirees cannot be said to be without reasonable purpose, nor can they be said to deprive arbitrarily one group of pensioners from entitlement to immediate payment of benefits, as contrasted with the treatment accorded others allegedly similarly situated. Under the limited judicial review permitted by the arbitrary and capricious standard, therefore, we affirm the district court's rejection of the federal-law Sec. 302(c) (5) claim asserted by Johnson.

With regard to Johnson's state-law claim, it likewise at the least requires for recovery that the pension plan's denial of benefits be shown to be arbitrary and capricious. For the same reasons as those that justified as nonarbitrary under the federal-law claim the plan's suspension of the payment of pensions during maritime employment, supra, we likewise affirm the district court's dismissal of the plaintiff Johnson's state-law claim.

For the reasons stated, we REVERSE the judgment of the district court that Johnson was entitled to pension benefits from January 1, 1976 to December 1, 1977 under the provisions of ERISA, and AFFIRM the district court's judgment that Johnson was not entitled to his pension benefits prior to January 1, 1976 under either the Labor Management Relations Act or state law. The plaintiff-appellee is to pay all costs.

AFFIRMED IN PART, REVERSED IN PART.