Mealey's (August 12, 2016, 1:16 PM EDT) -- CHICAGO — A Seventh Circuit U.S. Court of Appeals panel on Aug. 10 affirmed that a union pension fund’s denial of a former business representative’s attempt to have board services payments included in his pension benefits was not arbitrary and capricious because the payments were not “salary payments” as defined by the pension plan (William Rabinak v. United Brotherhood of Carpenters Pension Fund, No. 15-1717, 7th Cir.; 2016 U.S. App. LEXIS 14738).
(Opinion available. Document #54-160914-011Z.)
William Rabinak was a full-time business representative for the Chicago Regional Council of Carpenters and served on the council’s executive board. Rabinak received quarterly payments of $2,500 for his service on the board. The council made these quarterly payments in checks separate from those for Rabinak’s weekly salary.
When he retired, Rabinak qualified for a pension from the United Brotherhood of Carpenters Pension Fund, an employee benefit plan governed by the Employee Retirement Income Security Act. After receiving a letter detailing his annual retirement benefit, Rabinak noticed that the compensation amount upon which the fund calculated his annual retirement benefit did not include $10,000 he had received each year from the council, with the result that his retirement payments would be lower than he thought they should be.
Calculation Appealed
Rabinak thought that the fund had not counted the $10,000 per year he received by virtue of his service on the executive board. Rabinak appealed the fund’s calculation of this annual benefit to the fund’s appeals committee, arguing that the executive board payments were “compensation” under the plan because his service on the board was required as part of his job duties.
The fund’s plan administrator responded in a memorandum to the appeals committee that the council had informed her that it does not make contributions to the fund for “Executive Committee wages.” The plan administrator included a letter from the council’s legal counsel, who took the position that the payment for executive board service was a “stipend,” not a wage payment, and therefore properly not included in the plan’s definition of compensation.
The fund appeals committee, made up of a subcommittee of the fund’s board of trustees, denied Rabinak’s appeal. Rabinak sued the fund in the U.S. District Court for the Northern District of Illinois, Eastern Division, seeking to recover pension benefits he maintains are due him. Judge Manish S. Shah granted the fund’s motion for summary judgment, and Rabinak appealed to the Seventh Circuit.
Under the terms of the pension plan, a participant’s monthly pension payment is based upon “final compensation,” which the plan defines as a calculation based on “compensation.” The plan defines compensation as “all salary” but does not include “overtime, or fees or expenses paid or reimbursed.” Rabinak argued that the plan’s determination that his executive board service payments were not compensation was arbitrary and capricious and emphasized that his service on the board was part of his job duties.
Panel’s Review
In an opinion written by Circuit Judge Anne Claire Williams, the Seventh Circuit panel said its de novo review of a denial of benefits asks only whether the plan administrator’s denial was arbitrary and capricious.
“Whether payments are ‘salary’ is what matters under this particular plan,” Judge Williams wrote. “It is not unreasonable to conclude that if the Council truly was increasing Rabinak’s salary by $10,000 a year for his Board service, it would have done so by increasing the amount paid in his separately issued weekly salary checks. In light of our standard of review, we cannot say that the plan’s interpretation was unreasonable.”
Chief Judge Diane P. Wood and Circuit Judge William J. Bauer concurred.
Rabinak was represented by Sean Morales-Doyle of Despres, Schwartz & Geoghegan in Chicago. The fund was represented by John Thomas DeCarlo and Desmond C. Lee of DeCarlo & Shanley in Los Angeles.
(Additional documents available: Appellant brief. Document #54-160914-012B. Appellee brief. Document #54-160914-013B.)...