Wegmann v. Young Adult Institute, Inc.

Background

The court had previously ruled that Karen Wegmann was entitled to relief on her claim under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(1)(B). Following a bench trial on May 29, 2019, the court issued findings of fact and conclusions of law on October 31, 2019. The court then held a hearing on November 13, 2019, to determine the amount of benefits owed.

The parties generally accepted the accuracy of calculations prepared by defendants’ actuary, Victor Harte, but disagreed about three issues: which payments counted as Wegmann’s “total annual earnings”; whether the 2008 amendment limited her annual annuity before offset; and whether the court should use the formula in the 1985 pension-plan document or the 2008 amendment.

Calculation of Total Annual Earnings

Under the 1985 plan document, the court found that “total annual earnings” meant Wegmann’s salary and Young Adult Institute (YAI) bonus. It did not include her longevity bonus, car allowance, long-term-disability payments, or bonus from the New York League of Early Learning (NYL). The court found that her highest earnings under this definition were $317,146.57, consisting of $270,885.53 in regular pay and $46,261.04 in YAI bonus.

The 2008 amendment defined total annual earnings as all cash compensation—salary plus bonuses—paid through an agency affiliated with the YAI National Institute for People with Disabilities Network, excluding specified bonuses called “YAI Bonus II” and “YAI Interest Bonus.” The court included Wegmann’s regular pay, YAI bonus, and longevity bonus. It excluded the car allowance and long-term-disability payments because they were not salary or bonuses. It also excluded the NYL bonus because the record did not show that NYL was affiliated with YAI as required by the amendment. Wegmann’s highest earnings under the 2008 amendment were $390,964.46.

Limit on the Annual Annuity

The 2008 amendment limited the annual annuity before offset for certain specifically identified people to the greater of their accrued benefit before June 30, 2008, or 65% of their highest annual earnings. Defendants argued that this limitation should also apply to Wegmann, even though she was not one of the people identified in the amendment.

The court rejected that argument. It concluded that the amendment’s wording was clear and that the plan administrator could have applied the limitation to all participants but did not do so. The court therefore did not apply that limitation to Wegmann.

Selection of the Applicable Formula

Wegmann argued that the court should use the 1985 formula because the 2008 amendment’s preamble referred to changes agreed to in employment agreements involving two other people. The court rejected this interpretation, concluding that the preamble authorized those changes as well as “certain other changes.” Thus, the absence of an agreement concerning Wegmann did not prevent the amendment from applying to her.

The court nevertheless applied the 1985 plan’s protection against an amendment that would reduce a participant’s accrued interest. It calculated Wegmann’s benefit under both formulas and used the formula that provided the greater benefit. The 1985 formula produced a net annual annuity of $224,787.55. The 2008 amendment produced a net annual annuity of $274,339.09. Because the 2008 amendment provided the greater benefit, the court applied it.

Disposition

Judge Katherine Polk Failla awarded Wegmann a net annual annuity of $274,339.09, payable in monthly installments beginning January 25, 2022, when Wegmann reached age 65. The court also ordered the parties to meet and confer about attorneys’ fees and costs. If they could not agree on an amount, they were ordered to submit a proposed briefing schedule for a fee motion by March 7, 2020. The order did not itself award attorneys’ fees or costs.