IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 92-8125 _____________________
GEORGE G. WISE, et al.,
Plaintiffs-Appellants,
versus
EL PASO NATURAL GAS COMPANY,
Defendant-Appellee.
_______________________________________________________
Appeal from the United States District Court for the Western District of Texas _______________________________________________________
Before WILLIAMS, HIGGINBOTHAM and BARKSDALE, Circuit Judges.
JERRE S. WILLIAMS, Circuit Judge:
Plaintiffs appeal from the district court's grant of summary
judgment in favor of their former employer, El Paso Natural Gas
Company (which, along with its successors in interest, we refer
to as "El Paso"). In October 1985, El Paso informed its workers
that anyone who retired after a specified cut-off date would no
longer have their health insurance paid by the company.
Plaintiffs, upset that they "must devote a substantial portion of
what was anticipated to be disposable retirement income to pay
escalating health insurance premiums," argue that El Paso is
contractually bound to provide their health insurance. They also maintain that under the Employment Retirement Income Security Act
of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA"), the company is
statutorily obliged to do so. The district court disagreed as to
both assertions. It concluded that El Paso had no statutory or
contractual obligation to continue post-retirement benefits and
was free to eliminate paid coverage. We affirm.
I. FACTS AND PRIOR PROCEEDINGS
The underlying facts of this important case are uncontested.
Plaintiffs are long-time employees of El Paso. In 1959, fifteen
years before the enactment of ERISA, El Paso began providing
comprehensive medical insurance to its retirees. From that date,
the post-retirement medical plan (the "Plan") has been governed by
a series of underlying insurance policies or plan documents which
expressly grant El Paso the unilateral authority to modify or
terminate coverage at any time. El Paso has modified the Plan many
times, choosing both to decrease and increase benefits. From 1959
through 1976, the benefits plan was described in informal documents
such as brochures and handbooks.
Upon ERISA's effective date in 1977, El Paso began to spell
out the Plan's various rights and benefits in formal Summary Plan
Descriptions ("SPDs").1 Twice in 1977 and again in 1980, El Paso
1 ERISA mandates that every plan participant be given an SPD, which "shall be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and
2 prepared and distributed to eligible participants editions of the
statutorily-mandated SPD. All three versions of the SPD are
identical for purposes of the instant case and contained the
following passage, from which Plaintiffs glean a promise of
infinite duration: "Upon retirement, you, your spouse, and
eligible children under 19 years of age are automatically insured
for retirement health care benefits and the Company pays the entire
cost." None of these SPDs expressly addressed El Paso's
reservation of the right to amend or terminate the Plan's benefit
provisions, but they advised readers to consult the Plan's official
text for complete information.2
In December 1983, Burlington Northern, Inc. acquired El Paso,
and, following a transition period, began to provide through its
own plans the benefits flowing to El Paso's active workers and
retirees. Unlike the parent company and Burlington's other
subsidiaries, however, El Paso continued to pay the full cost of
its retirees' insurance. A new disclosure rule floated by the
Financial Accounting Standards Board, however, dramatically altered
the situation. The proposed requirement, that employers must
reflect on their balance sheets the present value of the estimated
obligations under the plan." 29 U.S.C. § 1022(a)(1). 2 El Paso contends that the plaintiffs did not rely upon the 1977 and 1980 SPDs in the district court but rely on them for the first time on appeal. We conclude, however, that sufficient reference was made to these documents in the district court that the plaintiffs are not precluded from asserting their relevance on appeal.
3 future costs for retirees' medical benefits, portended a serious
impact on Burlington's financial statements and prompted Burlington
to commission an actuarial analysis of how the rule might shape its
recorded liabilities. See Financial Accounting Standards No. 106:
Employers' Accounting for Postretirement Benefits Other Than
Pensions (1990).3
According to El Paso's motion for summary judgment, the new
balance sheet liability and annual expenses were conservatively
estimated to be "significantly greater than . . . for all of the
other Burlington-held companies added together." Under the heading
LEGAL CONSIDERATIONS, the actuarial report noted a recent pro-
retiree court ruling and evinced concern that El Paso's pre-1985
SPDs, unlike Burlington's, may have failed to include language
3 The new and much-publicized accounting rule, which ultimately took effect December 15, 1992, requires employers to adopt accrual accounting to expense accumulated benefits during employees' working careers rather than the past practice of waiting until the benefits are actually paid. While the change does not represent reductions in cash flow, it dramatically erodes estimates of net worth and pre-tax earnings as employers recognize the present value of projected post-retirement benefits. El Paso is not alone in its strong response; FASB 106 has combined with other factors to redden the financial statements of many companies, particularly those providing generous benefits. See, e.g., Robert L. Rose, Chilly Sunset: Firms' Attempts to Cut Health Benefits Break Calm of Retirement, THE WALL STREET JOURNAL, Febr. 24, 1993, at A1 (chronicling the jarring impact on various companies and their employees, and the firms' sober responses); Vineeta Anand, INVESTOR'S BUSINESS DAILY, Oct. 2, 1992, at Executive Update; Benefits, 4 (same); Lee Berton and Robert J. Brennan, Some Companies Use Subtle Methods To Curb the Cost of Retiree Benefits, THE WALL STREET JOURNAL, Febr. 24, 1993, at A14 (detailing the novel, blow-softening responses of several companies).
4 authorizing unilateral amendment and/or termination.4 Thus, in
March and June 1985, El Paso began to lay the groundwork for future
changes by issuing new SPDs which, for the first time, included the
following language under the heading "OTHER IMPORTANT INFORMATION":
The Company reserves the right to alter, amend, delete, cancel or otherwise change the plan or any of the provisions of the plan at anytime [sic]. If the plan is terminated, coverage for you and your eligible family members will end.
A few months later, in October 1985, El Paso exercised that
reserved right when it announced that it would continue to extend
benefits only for employees who retired on or before March 1, 1986;
anyone retiring after that designated cut-off date would forfeit
company-paid coverage.5
4 Apparently, the report was referring to the class action case, Eardman v. Bethlehem Steel Corp. Employee Welfare Benefit Plans, the approved settlement of which is cited at 607 F. Supp. 196, 215-17 (W.D.N.Y. 1985). In Eardman, retired workers contested reductions in their benefits on the ground that the plan documents had not reserved the right to amend. The district court had earlier found for the workers. Id. at 196-215 (W.D.N.Y. 1984). The opinion approving the settlement recognized the risk of reversal as one basis for approval. In light of a recent article examining the implications of FASB 106, the report's concerns proved to be prescient: "Experts say that employers should also examine the legal implications. For example, employers may be unable to alter plans unilaterally if they have not specifically retained that right and put retirees on notice that the plan could be changed." New Accounting Rule for Retiree Benefits Will Force Employers to Change Practices, BNA PENSIONS & BENEFITS DAILY (Nov. 4, 1992)(emphasis added). 5 Of special note is the fact that El Paso, while ceasing to provide free benefits for employees retiring after March 1, 1986, has nonetheless continued to maintain its Plan and to cover post- March 1986 retirees. The record reflects the following:
Under the Plan, post-March 1986 retirees are provided, at their own cost, (i) a number of benefits that would not be readily available to them in insurance contracts
5 On behalf of himself and other Plan participants, all of whom
retired between October 1986 and August 1989, George G. Wise
initiated this action in state court to contest El Paso's refusal
to pay for their post-retirement health coverage under the Plan.
Wise alleged a variety of state common law claims, including breach
of contract, negligence, and breach of the duty of good faith and
fair dealing. El Paso removed the action to federal court on the
basis of ERISA preemption. See 29 U.S.C. § 1144(a). The parties
now seem to agree that the instant suit is one to enforce the terms
of an employee benefit plan under 29 U.S.C § 1132(a)(1)(B).6 On
March 10, 1992, the district court granted El Paso's motion for
summary judgment. Plaintiffs timely appealed.
II. DISCUSSION
A. Standard of Review
Although it is a "comprehensive and reticulated statute,"
Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361,
and (ii) benefits at group rates significantly better than they could acquire as individuals in the open market. In addition, (iii) EPNG pays the full administrative costs of the Plan, including the portion of such costs related to post-March 1986 retirees. 6 29 U.S.C. § 1132(a)(1)(B) provides:
A civil action may be brought -- (1) by a participant or a beneficiary -- * * * (B) to recover benefits due him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.
6 100 S.Ct. 1723, 1726, 64 L.Ed.2d 354 (1980), ERISA fails to set out
the applicable standard of review for actions under § 1132(a)(1)(B)
challenging benefit eligibility determinations. The Supreme Court
has filled the gap. We review de novo § 1132(a)(1)(B) actions
challenging denials of benefits where the benefit plan fails to
give the administrator or fiduciary discretionary authority to
determine eligibility for benefits or to construe the plan's terms.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct
948, 956, 103 L.Ed.2d 80 (1989). In this case, neither party has
pointed to any Plan provision that expressly grants El Paso, the
Plan's administrator, discretionary authority regarding
entitlements. Accordingly, the district court's decision will be
tested under the broader de novo standard. See Schultz v.
Metropolitan Life Ins. Co., 872 F.2d 676, 678 (5th Cir. 1989).
B. El Paso's Right to Amend and Terminate Coverage
We are spared a significant inquiry. As mentioned above,
neither party disputes that the arrangement in question falls
within ERISA's statutory definition of an "employee welfare benefit
plan":
[A]ny plan, fund, or program . . . maintained by an employer . . . to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries . . . (A) medical, surgical, or hospital care or benefits[.]"
29 U.S.C. § 1002(1).
Indeed, the Plan fits easily within the Act's broad coverage. See
generally Id. at § 1002; see, e.g., Meredith v. Time Ins. Co., 980
7 F.2d 352, 354-57 (5th Cir. 1993)(explicating ERISA's various
definitional provisions).
1. ERISA's statutory requirements
It is undisputed that nothing in ERISA requires an SPD to
reference amendment rights or procedures. While Plaintiffs concede
that an SPD need not specify that it is subject to amendment,7 they
cite 29 U.S.C. § 1022(b), which requires an SPD to state the
"circumstances which may result in disqualification, ineligibility,
or denial or loss of benefits." The gravamen of Plaintiffs'
complaint is this: because § 1022(b) requires an employer to warn
participants of possible decreases in their benefits, El Paso "was
not free to amend the plan if the amendment caused a loss of
benefits." (emphasis in original). Under the SPD heading,
"TERMINATION OF BENEFITS AND CONVERSION PRIVILEGES," El Paso listed
three triggering events that would terminate a retiree's insurance:
(1) death of the retiree; (2) remarriage of a surviving spouse; and
(3) a dependent child reaching the age of 19. Plaintiffs leap upon
this seeming exclusivity:
This language does not state, or even indirectly imply, that the coverage will be terminated for any other reason. . . . [The pre-1985 SPDs] indicate three, and only three, instances in which such coverage will end . . . . Neither document in any way directly or indirectly reserves any right to alter, amend, modify or change the policy. (emphasis in original).
7 The plaintiffs acknowledge that the underlying plan documents, as distinguished from the 1977 and 1980 SPDs, expressly set forth the company's right to modify the plan.
8 In sum, since the earlier SPDs failed to meet § 1022(b)'s
disclosure requirement by including the possibility of unilateral
amendment or termination, Plaintiffs insist that El Paso is
estopped under ERISA from abolishing free, lifetime coverage.
The district court disagreed, pointing to the Plan itself and
to the SPDs issued in 1985, all of which reserved to El Paso the
unqualified right to alter or eliminate coverage. From this, the
court concluded that "[r]etired employees such as the Plaintiffs in
this case cannot claim entitlement to employer paid health benefits
in perpetuity where the plan itself and the SPD make it clear that
those benefits can be amended, modified, or even terminated at any
time." Upon a review of applicable caselaw, we agree with the
district court.
(a) no vesting
Congress has conspicuously chosen to exempt welfare
benefit plans from the full breadth of ERISA's extensive
requirements. Compare 29 U.S.C. § 1002(2)(A) with § 1002(1)
(distinguishing "employee pension benefit plans" from "employee
welfare benefit plans"). Welfare benefits such as medical
insurance, which may be ancillary to but are not part of a pension
plan, are not subject to the rather strict vesting, accrual,
participation, and minimum funding requirements that ERISA imposes
on pension plans. See 29 U.S.C. §§ 1051 et seq. and §§ 1081 et
seq. Accordingly, this Court and every other Circuit Court that
9 has considered the question agree that "ERISA simply does not
prohibit a company from eliminating previously offered benefits
that are neither vested nor accrued." Phillips v. Amoco Oil Co.,
799 F.2d 1464, 1471 (11th Cir. 1986), cert. denied, 481 U.S. 1016,
107 S.Ct. 1893, 95 L.Ed.2d 500 (1987); see, e.g., McGann v. McGann
Music Co., 946 F.2d 401, 405-07 (5th Cir. 1991), cert. denied sub
nom. Greenberg v. H & H Music Co., -- U.S. --, 113 S.Ct. 482, 121
L.Ed.2d 387 (1992); Adams v. Avondale Industries, Inc., 905 F.2d
943, 947-49 (6th Cir.), cert. denied, -- U.S. --, 111 S.Ct. 517,
112 L.Ed.2d 529 (1990).
The disparate treatment accorded welfare plans is not
accidental; indeed, its underlying rationale is highly pertinent to
our decision today. In a similar case involving retirees who
challenged their employer's decision to modify unilaterally its
benefits plan, the Second Circuit explained:
With regard to an employer's right to change medical plans, Congress evidenced its recognition of the need for flexibility in rejecting the automatic vesting of welfare plans. Automatic vesting was rejected because the costs of such plans are subject to fluctuating and unpredictable variables. Actuarial decisions concerning fixed annuities are based on fairly stable data, and vesting is appropriate. In contrast, medical insurance must take account of inflation, changes in medical practice and technology and increases in the costs of treatment depending on inflation. These unstable variables prevent accurate predictions of future needs and costs.
Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988).
10 We do not have the power to assume the legislator's role and
welcome additional layers of obligations. The provision must be
read in the light of ERISA's sweeping complexity. This is clearly
not a case of inadvertent omission. In such cases of deliberate
legislative inaction, the Supreme Court has issued a valuable
admonition: "[L]egislative silence is not always the result of a
lack of prescience; it may instead betoken permission or, perhaps,
considered abstention from regulation. In that event, judges are
not accredited to supersede Congress or the appropriate agency by
embellishing upon the regulatory scheme. Accordingly, caution must
temper judicial creativity in the face of legislative or regulatory
silence." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565,
100 S.Ct. 790, 797, 63 L.Ed.2d 22 (1980).
Since an employee's interest in such benefits is not
statutorily vested, El Paso is under no continuing obligation to
provide them under ERISA. It possesses the right to amend or
terminate coverage at any time. Section 1022(b) relates to an
individual employee's eligibility under then existing, current
terms of the Plan and not to the possibility that those terms might
later be changed, as ERISA undeniably permits.
(b) can change with notice
Against this established law, two recent opinions
from this Court interpreting ERISA's notification provisions posed
11 similar disclosure issues and support our decision today. In
Whittemore v. Schlumberger Technology Corp., 976 F.2d 922 (5th Cir.
1992), plaintiffs were former Schlumberger employees who sought
severance pay under a provision of the company's policy manual that
provided for such pay in lieu of notice of termination. A December
1988 amendment, however, had revoked that practice if employees
were terminated within a prescribed time and offered full-time
employment by a company acquiring the Schlumberger division in
which the employees worked. In Whittemore, the amended severance
plan, a welfare benefit plan under ERISA, became effective before
plaintiffs' division was sold to another company. Although
admitting that the amendment "technically occurr[ed] before the
employees' termination," Plaintiffs argued vigorously that
Schlumberger violated ERISA by failing fully to disclose the terms
of the amendment prior to the employees' discharge. In an analysis
applicable to the instant case, we observed:
Even if this concession [that the amendment occurred prior to termination] were not enough, the district court specifically found that Schlumberger complied with ERISA's disclosure requirements in that "plaintiffs admit receiving copies of the amended severance . . . plan on February 7, and admit receiving a summary description of this plan change on March 8, 1989." The plaintiffs do not dispute these facts.
The plaintiffs acknowledge that Schlumberger gave notice within the time permitted by ERISA. They argue only that "such a technical reading of the disclosure provisions . . . work [sic] an inequitable result and give [sic] effect to form over substance." We conclude, to the contrary, that Schlumberger was entitled to give notice within the statutory notice period and was not required to provide it sooner. The plaintiffs' argument is without merit.
Id. at 923-24 (emphasis added).
12 The instant plaintiffs concede that they received the revised
SPDs prior to El Paso's termination. Moreover, El Paso provided a
reasonable window during which eligible employees could choose to
retire with full, company-paid coverage. El Paso's workers, like
those in Whittemore, were placed on notice, however perfunctory,
that retirement after the prescribed date would result in the
forfeiture of free coverage.
Our recent decision in Godwin v. Sun Life Assurance Co. of
Canada, 980 F.2d 323 (5th Cir. 1992), decided after arguments in
the instant case, also concerned ERISA's disclosure requirements.
In Godwin, the plaintiff contended that an amendment to his welfare
benefit plan was inapplicable to him because he had never received
personal notice of the amendment. Although Sun Life issued updated
SPDs following each amendment to the plan, Godwin maintained that
his nonreceipt of notice of the change rendered it invalid as to
him. Framing the issue as whether the plan sponsor complied with
the ERISA requisites for plan modifications with respect to Godwin,
we held:
We agree with the district court that an amendment to a welfare benefit plan is valid despite a beneficiary's lack of personal notice, unless the beneficiary can show active concealment of the amendment, Blau v. Del Monte Corp., 748 F.2d 1348, 1352 (9th Cir.), cert. denied, 474 U.S. 865, 106 S.Ct. 183, 88 L.Ed.2d 152 (1985), [footnote omitted], or "some significant reliance upon, or possible prejudice flowing from" the lack of notice. Govoni v. Bricklayers, Masons and Plasterers Int'l Local No. 5 Pension Fund, 732 F.2d 250, 252 (1st
13 Cir. 1984). Here, there is no evidence of active concealment, and Godwin can show neither significant reliance nor prejudice from his alleged lack of notice. (footnote omitted).
Id. at 328.
In the instant case, Plaintiffs' assertions are weaker than
Godwin's. They cannot dispute that they received personal and
unambiguous notice of the prospective change months before it
became effective. El Paso concedes that the SPDs could possibly
suggest an "arguable commitment" to continue coverage for workers
retiring before the effective date and points out that it has in
fact extended post-retirement insurance to such retirees. The
instant plaintiffs, however, are asking us to do what neither
Congress nor any other court has ever done -- impose vesting for
employees who had not retired as of the date of the disputed
change.
Plaintiffs complain strenuously that no pre-1985 SPDs
contained the amendment/termination language. This omission, they
insist, is tantamount to a promise to maintain post-retirement
health care: "If the SPD's . . . contain such a promise, EPNG must
honor its commitment and cannot avoid that obligation, even by
amending its plan documents." We do not agree, particularly when
(1) ERISA does not mandate the inclusion within SPDs of amendment
rights or procedures and (2) any pre-1985 silence is followed by an
unequivocal statement to the contrary. El Paso's failure to
include that which ERISA does not require cannot act to prejudice
14 El Paso by imposing an infinite duty. Although Plaintiffs
acknowledge that it is "technically true" that amendment procedures
and rights need not be included in the SPD, they insist that when
amendments compromise benefits previously offered, they must be
precluded under § 1022(b). This argument is fanciful. Plaintiffs
must concede that amendments, almost by definition, do not always
herald pro-beneficiary news. The average plan participant must
realize that amendments to welfare benefit plans are not enacted
for the sole purpose of augmenting benefits, but often to diminish
them as well.
We are sensitive to Plaintiffs' earnest concerns and realize
that today's decision works a significant hardship on workers who
have invested, in many cases, most of their lives in service to the
company. Across the nation, companies faced with rapidly rising
costs and worried about their competitiveness are paring retiree
benefits that were once considered sacrosanct. But ERISA simply
does not grant employees unfettered rights to the corporate
treasury. Employers need not abandon prudent business behavior
when marketplace forces compel them to rethink earlier offers of
contingent, non-vested benefits. In light of today's spiraling
health care costs, cutbacks in government-sponsored health care
coverage (Medicare), and our ever-aging population, Congress may
enact changes. But the current ERISA requires no more.
15 2. Contractual Vesting?
There remains the question whether the instant dispute
can be recognized as a contract case, rather than a statutory one.
Plaintiffs urge this interpretation, insisting that even if ERISA
does not provide a statutory bar to El Paso's actions, the company
has incurred contractual obligations beyond ERISA to provide free,
lifetime coverage.
We held above that although ERISA includes elaborate vesting
requirements for pension plans, see 29 U.S.C. § 1053, "it does not
require that welfare plan benefits 'vest' or that an employer
maintain them at a certain level." Vasseur v. Halliburton Co., 950
F.2d at 1002, 1006 (5th Cir. 1992); see also McGann, 946 F.2d at
405. Although ERISA generally allows employers to modify or
discontinue such plans at will so long as the procedure followed is
consistent with the plan and the Act, we have held that an
employer's welfare plan itself may designate a vested benefit. In
Vasseur we stated: "An employer can oblige itself contractually to
maintain benefits at a certain level in ways that are not mandated
by ERISA." 950 F.2d at 1006. See also, e.g., In re White Farm
Equipment Co., 788 F.2d 1186, 1193 (6th Cir. 1986).
It follows that El Paso could have waived its statutory right
to modify or terminate benefits and vested its workers
contractually with the right to receive free lifetime coverage. We
16 cannot find such an obligation, however, anywhere in the record in
this case. Such extra-ERISA commitments must be found in the plan
documents and must be stated in clear and express language.
Neither the particular terms of El Paso's master policy nor its
pre-1985 SPDs come close to encompassing such a binding pledge.
See, e.g., Alday v. Container Corp. of America, 906 F.2d 660, 665
(11th Cir. 1990)("[A]ny retiree's right to lifetime medical
benefits at a particular cost can only be found if it is
established by contract under the terms of the ERISA-governed
benefit plan document.")(emphasis added), cert. denied, -- U.S. --,
111 S.Ct. 675, 112 L.Ed.2d 668 (1991); In re White Farm Equipment
Co., 788 F.2d at 1193 ("[T]he parties may themselves set out by
agreement or by private design, as set out in plan documents,
whether retiree welfare benefits vest, or whether they may be
terminated.") (emphasis added).
El Paso's plan documents and SPDs describe the extent of
benefits provided under the Plan; they make no reference to a
vesting of such benefits. El Paso's statement in the pre-1985 SPDs
that "[u]pon retirement, you . . . are automatically insured for
retirement health care benefits and the Company pays the entire
cost" discussed what the Plan then provided, not whether it would
be offered in perpetuity. As to yet-unretired workers, no
commitments were made. Nowhere does the SPD contain specific
language establishing a vesting of health benefits. If precise
language denying the right to withdraw benefits had been included,
17 such language would be contractually controlling. See Bryant v.
International Fruit Products Co., Inc., 793 F.2d 118, 123 (6th
Cir.)("An agreement that provides that an act can occur in no event
and under no circumstances cannot be converted into one that
permits the act by a series of amendments that first deletes the
reference to the prohibition and then adds a provision permitting
the forbidden act."), cert. denied, 479 U.S. 986, 107 S.Ct. 576, 93
L. Ed.2d 579 (1986).
Aside from the fact that the underlying documents and the
later SPDs did place employees on firm notice of the coming change,
we find no reason or authority to conclude that pre-1985 silence in
the SPDs is somehow tantamount to an affirmative contractual
commitment and that El Paso's earlier SPDs impliedly cede the right
to later amend or discontinue coverage. While clear and
unambiguous statements in the summary plan description are binding,
the same is not true of silence. There is nothing in the way of
context, inference, or presumption to persuade us otherwise.
Contractual vesting is a narrow doctrine. To prevail, Plaintiffs
must assert strong prohibitory or granting language; mere silence
is not of itself abrogation.
Even assuming, however, that the pre-1985 SPDs contained an
implied promise of continued benefits for future retirees, these
earlier summaries cannot govern the instant case because they are
no longer in effect. The SPDs issued in 1985 cover these
18 plaintiffs before us and therefore control our analysis. El Paso's
earlier SPDs cannot be read in isolation, and in no way can they be
construed to preclude the possibility of future amendment. Upon a
careful review of the summary judgment record, and with particular
emphasis upon the applicable 1985 SPDs which clearly highlight El
Paso's right to amend or terminate post-retirement benefits, we
conclude that no basis can be found in the language of the earlier
SPDs or in the plan documents to counter El Paso's reserved right
to do so. "Absent such a contractual assurance, ERISA permits an
employer to decrease or increase benefits." Vasseur, 950 F.2d at
1006.
Finally, we address Plaintiffs' argument that the 1985 SPDs
are themselves inconsistent and that the rules of construction
announced in our recent case, Hansen v. Continental Insurance
Company, 940 F.2d 971 (5th Cir. 1991), mandate that we adopt the
most pro-beneficiary interpretation. Specifically, Plaintiffs
contend that El Paso's failure to include the possibility of
amendment or termination under the SPD heading, WHEN YOUR COVERAGE
WILL END," (listing it instead under the heading "OTHER IMPORTANT
INFORMATION"), must be construed as a promise to provide free
health benefits. "Under Hansen," the plaintiffs maintain, "the
test is whether or not one provision of an SPD, taken in its most
natural reading, would entitle Plaintiffs to lifetime benefits. If
so, they are entitled to lifetime benefits." (citing Hansen, 940
F.2d at 981, n.7). We agree that Hansen is a case of significant
19 guidance and authority on this issue, and Plaintiffs cite the
general rule accurately. But close analysis reveals that it does
not buttress their position.
In Hansen, the plaintiff disputed payments made to him under
a group accidental health and dismemberment policy following the
death of his wife in an automobile accident. Hansen contended that
under the insurer's SPD, he was due $120,000, 60 percent of the
amount of coverage. Continental relied instead upon the
conflicting terms of the underlying policy and responded by
tendering a check for $80,000, 40 percent of the principal sum.
The company argued that the SPD had to be read in concert with the
plan document, and if doing so revealed ambiguity or conflict, the
plan's terms must control. We disagreed. After finding federal
jurisdiction under ERISA, we determined that the essential purpose
of an SPD -- "to enable the average participant in the plan to
understand readily the general features of the policy" -- would be
undermined if workers were held to the complex, master policy
whenever the statutorily-mandated SPD was either ambiguous or in
outright conflict with the policy. Id. at 981. Refusing to adopt
a rule that would "eviscerate" ERISA's requirement that an SPD be
"sufficiently accurate and comprehensive to reasonably apprise"
plan participants of their rights and duties under the plan, we
concluded:
[T]he ambiguity in the summary plan description must be resolved in favor of the employee and made binding against the drafter. Any burden of uncertainty created by careless or inaccurate drafting of the summary must be
20 placed on those who do the drafting, and who are most able to bear that burden, and not on the individual employee, who is powerless to affect the drafting of the summary or the policy and ill equipped to bear the financial hardship that might result from a misleading or confusing document. Accuracy is not a lot to ask. And it is especially not a lot to ask in return for the protection afforded by ERISA's preemption of state law causes of action--causes of action which threaten considerably greater liability than that allowed by ERISA.
Id. at 981-82 (and quoting 29 U.S.C. § 1022(a)(1)).
Plaintiffs urge that the present case parallels our concerns
in Hansen, where we addressed Continental's argument that the
certificate of insurance that was included at the back of the SPD
-- and which asserted a payout percentage of 40 percent -- should
be considered part and parcel of the SPD. Assuming that erroneous
contention to be true, we still saw no help to Continental since
"[a]t least one provision of the summary plan description, taken in
its most natural reading, would entitle Hansen to 60% of the
principal sum." Id. at 981, n.7. Plaintiffs focus upon this
narrowly-used language:
Certainly, parts of the 1985 SPD, taken in their most natural natural reading . . . constitute a commitment for non- contributory retiree insurance until death, remarriage of a surviving spouse, or loss of eligibility status by dependent children. Hence, under the rationale of footnote 7, Plaintiffs are entitled to that benefit. The concurring opinion of Judge Garwood is expressly based upon footnote 7.
The above language, however, was used in a carefully limited
context. A careful reading of Hansen, and particularly footnote 7,
reveals that its principal concern was with positive
inconsistencies, either within the SPD or between the SPD and the
master documents. None exist here. The amendment/termination
21 language was clearly included in the body of the SPD itself in the
case before us. Plaintiffs attempt to manufacture ambiguity by
asserting that El Paso's inclusion of amendment/termination
authority within the 1985 SPDs was misplaced -- listed under "OTHER
IMPORTANT INFORMATION" instead of under "WHEN YOUR COVERAGE WILL
END" -- and that this location created irreconcilable ambiguity.
This argument is without merit. As we held in Hansen, "the summary
plan description must be read as a whole. It would be error to
attend only to one paragraph, page, or portion of the summary."
Id. at 981 (citing Sharron v. Amalgamated Ins. Agency Servs., Inc.,
704 F.2d 562, 566-67 (11th Cir. 1983)). Based upon our reading of
the SPDs as an integrated whole so as to give effect to all of the
provisions, Plaintiffs' argument that El Paso has promised lifetime
continuation of employer-paid medical benefits must fail.
Although a beneficiary's view of an SPD is important, the
correct interpretation cannot be "unrealistically narrow."
Sharron, 704 F.2d at 566 (To "focus on only one page of the summary
[would] represent[] an unrealistically narrow view of how a
reasonably prudent employee would read and review this important
document."). The three listed occurrences that would result in
termination of an individual's benefits speak only to the
elimination of coverage on an individual basis and do not address
the continuation of the Plan as a whole. We find no basis in the
language of the documents to contradict El Paso's unequivocal
reservation of the right to modify or eliminate coverage
22 prospectively as to employees retiring after March 1, 1986. The
terms of the governing 1985 SPDs are clear and consistent with the
reservation of rights set out in the Plan itself.8
III. CONCLUSION
In sum, El Paso exercised its reserved, unambiguous right
under ERISA to amend its Plan with respect to health benefits, and
it accurately described that change in the governing 1985 SPDs.
Additionally, El Paso did not incur, nor intend to incur, any
extra-ERISA obligations. El Paso was free to make such a business
decision pursuant to its reserved right. There being no violation
of ERISA, nor any affirmative contractual commitment denying El
Paso's right to withdraw health benefit coverage, the judgment of
the district court was correct.
AFFIRMED.
8 We do not consider the issue whether plan participants should prevail in instances where the employer fails to inform them in the SPD that their benefits are subject to unilateral change and/or termination. That issue does not arise in this case.