Donald Boos, et al v. AT&T, Inc., et al
PUBLISHED OPINION FILED. [10-50353 Affirmed ] Judge: EMG , Judge: CES , Judge: CH Mandate pull date is 06/24/2011 [10-50353]
Case: 10-50353 Document: 00511498075 Page: 1 Date Filed: 06/03/2011
IN THE UNITED STATES COURT OF APPEALS
United States Court of Appeals
FOR THE FIFTH CIRCUIT
June 3, 2011
Lyle W. Cayce
DONALD O. BOOS, on behalf of himself and all other persons similarly
situated; RAYMOND D. JOHNSON, on behalf of himself and all other
persons similarly situated; WANDA N. MYERS, on behalf of herself and all
other persons similarly situated,
Plaintiffs – Appellants
AT&T, INCORPORATED; BELLSOUTH CORPORATION; BELLSOUTH
TELEPHONE CONCESSION PLAN,
Defendants – Appellees
Appeal from the United States District Court
for the Western District of Texas
Before GARZA, STEWART, and HAYNES, Circuit Judges.
HAYNES, Circuit Judge:
Donald Boos, Raymond Johnson, and Wanda Myers, representing
themselves and those similarly situated (collectively, “Plaintiffs”), brought an
enforcement suit against AT&T, Incorporated (“AT&T”), BellSouth Corporation
(“BellSouth”) and the BellSouth Telephone Concession Plan (collectively,
“Defendants”) under the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. §§ 1001-1461. Plaintiffs assert that Defendants’ practice
of reimbursing those retirees who live outside of the Defendants’ service area for
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their telephone expenses constitutes a pension plan and that Defendants have
failed to follow ERISA regulations for pension plans. The district court granted
summary judgment to Defendants, concluding that Defendants’ practice of
offering discounted telephone services to employees and retirees (“Concession”)
is not a pension plan in whole or in part. For the following reasons, we AFFIRM
the judgment of the district court.
Since at least the 1920s, Bell1 has offered its employees and retirees
discounts for its telephone services. By 1982, Bell had extended Concession to
out-of-region (“OOR”) employees and retirees who, because they lived outside of
Bell’s service area, were unable to benefit from the discount. For those OOR
beneficiaries, Bell would reimburse the beneficiary for telephone services
provided by the beneficiary’s local telephone company.
In 1984, BellSouth was created pursuant to a court-ordered divestiture
which divided Bell into seven separate regional operating companies. BellSouth
continued Bell’s practice of offering Concession to in-region and OOR employees
and retirees. BellSouth originally required all employees and retirees to seek
reimbursement for Concession benefits. Soon thereafter, BellSouth began to
consequently, to administer the OOR benefits separately. In 1997, BellSouth
began to outsource the administration of Concession for OOR retirees.
Since April 1, 1985, the basic structure of Concession has remained
unchanged. All employees with six months, but less than thirty years, of service
receive a 40% discount for local services and reimbursement of up to $25 for
In 1984, Atlantic Telephone and Telegraph was divided into seven separate regional
telephone operating companies by court order. For purposes of clarity, we will refer to the predivestiture company as Bell to distinguish it from the defendant AT&T, Inc., which was
formed by the merger of SBC Communications, Inc. (formerly Southwestern Bell) and the postdivestiture AT&T Corporation.
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intraLATA calls.2 Employees with thirty or more years of service and all retirees
receive a 100% discount for basic local service, 40% discount for optional
services, and a reimbursement of up to $50 for intraLATA calls.
BellSouth revised Concession so that any employee hired after April 1, 1996, is
ineligible for the OOR Concession, but all employees and retirees hired before
that date would continue to be eligible for the OOR Concession.
In 2006, BellSouth merged with AT&T. Following the merger, BellSouth
employees and retirees have continued to receive Concession pursuant to
BellSouth’s pre-merger policies.
Plaintiffs brought this suit against Defendants in 2007, alleging that
Concession is a defined benefit pension plan as defined by ERISA and that
Defendants failed to meet ERISA’s requirements for such plans, including
funding, vesting, and disclosure regulations. The parties filed cross-motions for
summary judgment as to whether Concession is a pension plan because it
“provides retirement income.” See 29 U.S.C. § 1002(2)(A). Defendants also
sought a declaration that Concession does not result from the deferral of income.
See id. The district court granted summary judgment to Defendants on both
issues and held that Concession is not a pension plan.
This circuit reviews grants of summary judgment de novo, applying the
same standards as the district court. Swanson v. Hearst Corp. Long Term
Disability Plan, 586 F.3d 1016, 1018 (5th Cir. 2009). In reviewing a grant of
summary judgment, the court will affirm only if there is no dispute of material
fact, and the movant is entitled to judgment as a matter of law. McDonald v.
Provident Indem. Life Ins. Co., 60 F.3d 234, 235 (5th Cir. 1995). The court
IntraLATA calls are commonly known as “local long distance.”
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resolves all doubts and makes all reasonable inferences in favor of the
nonmovant. Swanson, 586 F.3d at 1018. No genuine issue of material fact
exists if the evidence is such that no reasonable factfinder could find for the
“ERISA does not regulate all benefits paid by an employer but only those
paid pursuant to an ‘employee benefit plan.’” Musmeci v. Schwegmann Giant
Super Markets, Inc., 332 F.3d 339, 344 (5th Cir. 2003); see also Murphy v. Inexco
Oil Co., 611 F.2d 570, 574 (5th Cir. 1980) (“Congress did not, however, attempt
to control . . . every promise made to employees.”). An employee benefit plan is
a plan which is an employee welfare benefit plan (“welfare plan”) or an employee
pension benefit plan (“pension plan”) or both. 29 U.S.C. § 1002(3). The parties
agree that Concession is not a welfare plan. Therefore, the only question before
us is whether Concession, in part or in whole, is a pension plan.
As defined by ERISA, a pension plan is:
any plan, fund or program . . . established or maintained by an
employer . . . to the extent that by its express terms or as a result of
surrounding circumstances such plan fund or program (i) provide[s]
retirement income to employees, or (ii) results in a deferral of
income by employees for periods extending to the termination of
covered employment or beyond.
Id. at § 1002(2)(A); see also Murphy, 611 F.2d at 575. Pension plans are further
divided into defined contribution plans and defined benefit plans. See 29 U.S.C.
§ 1002 (34), (35). Boos maintains that the OOR Retiree Concession is a defined
benefit plan, which is essentially any pension plan other than an individual
account plan. Id. at § 1002(35).
Although welfare plans and pension plans are both covered by ERISA,
welfare plans are less heavily regulated than pension plans. See Curtiss-Wright
Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995) (noting that ERISA establishes
minimum participation, vesting, and funding requirements for pension plans,
but not welfare plans).
Plaintiffs’ Complaint alleges that BellSouth has
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maintained Concession as a pension plan without meeting the funding, vesting,
and disclosure requirements that ERISA requires of such plans.
As discussed above, Concession consists of discounted telephone services
for Defendants’ employees and retirees who live in-region, and reimbursement
in the same amount for those services for OOR beneficiaries. As we noted in
Musmeci, one important aspect of whether a plan is a pension plan is whether
the plan provides income as defined by the Internal Revenue Code (“IRC”). 332
F.3d at 345 (“[W]e believe that the interconnection between ERISA and the IRC
reflects an intent to use common terminology.”). Where a plan does not provide
income, it cannot be a pension plan. See id. at 347 (noting that courts have
found that benefits were not a pension plan where the benefits offered were “noadditional-cost” services).
For those retirees who live within the Defendants’ service area, Concession
is not income, but rather a “no additional cost” service. See 26 U.S.C. § 132(a)(1)
(excluding no-additional-cost services from gross income); Treas Reg. § 1.1322(a)(2) (stating that services eligible for treatment as no-additional-cost services
“include excess capacity services such as . . . telephone services”). Plaintiffs
concede that for these in-region retirees, Concession is not a pension plan; they
contend, however, that because the OOR retirees receive the benefit as taxable
income, Concession must be treated as a pension plan, in whole or in part.
Plaintiffs present four arguments in support of this assertion: (1) Concession for
OOR retirees is a separate plan from Concession as a whole because it is
separately administered; (2) even if Concession is a single plan, it is a pension
plan “to the extent” that its beneficiaries receive taxable income; (3) Concession,
when viewed as a whole, provides retirement income; and (4) Concession, when
viewed as a whole, results from the deferral of income. We address each in turn.
The district court, in determining whether Concession is a pension plan,
determined that it “must look at how [Concession] was designed to treat and how
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it does treat all retirees, not just out-of-region retirees.” Plaintiffs assert that the
district court’s conclusion was erroneous because Concession for OOR retirees
is a separate plan from the in-region retiree plan, or alternatively, if the
Concession is one plan as to all retirees, the court should determine the “extent”
to which it may qualify as a pension plan.
The district court held that Concession is one plan as to in-region and OOR
retirees because the benefit was the same for both groups and because the
groups were not discrete, immutable groups. Plaintiffs claim that the district
court erred and that the OOR Retiree Concession should be viewed in isolation
because it is separately administered. See Stoffells v. SBC Commc’ns, Inc., 555
F. Supp. 2d 745, 757 (W.D. Tex. 2008) (“The Court finds as a matter of fact that
[the OOR Retiree] Concession was structured separately from other segments
of the telephone discount and should be analyzed as a distinct plan.”), vacated
on reconsideration, No. SA-05-CA-233-XR (Jan. 14, 2011).
We hold that the district court did not err in holding that Concession is one
plan, at least as it regards all retirees.3 Whether a benefit plan is a single plan
or multiple plans is determined by employer intent. See Loren v. Blue Cross &
Blue Shield of Mich., 505 F.3d 598, 606 (6th Cir. 2007) (“The evidence . . . does
not sufficiently establish that the employers either intended to operate these
options as separate plans or actually did so in practice.”); Chiles v. Ceridian
Corp., 95 F.3d 1505, 1511 (10th Cir. 1996) (“We conclude that [the employer]
intended to create separate plans.”); cf. House v. Am. United Life Ins. Co., 499
F.3d 443, 452 (5th Cir. 2007) (“The policy contemplates and establishes a single
plan.”). Although intent is often a question of fact, here, where the underlying
facts are undisputed, the question is one of law. Cf. House, 499 F.3d at 448 (“We
have frequently stated that the existence of an ERISA plan within the statutory
Defendants assert that Concession is one plan as to all employees and retirees. Such
a finding is not required by our disposition of this case, so we reserve the issue.
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definition is a question of fact. However, where the factual circumstances are
established as a matter of law or undisputed, we have treated the question as
one of law to be reviewed de novo.”) (internal citations omitted).
Courts consider many different factors to determine whether an employer
intended a benefit program to consist of one or multiple plans. One important
factor is whether the plan is located in one or multiple plan documents and
whether those documents show an intent to create a single plan or multiple
plans. See Loren, 505 F.3d at 605 (“[W]e start with the strong presumption that
the filing of only one ERISA plan document indicates that the employer intended
to create only one ERISA plan.”); Chiles, 95 F.3d at 1511 (“[I]t is clear from the
language of the plan documents that the company intended to establish four
different plans.”). Courts may also consider whether the benefits are separately
funded. Nowell v. Cent. Serv. Ass’n, 106 F. Supp. 2d 888, 894 (S.D. Miss. 2000)
(“‘Plan’ means a single plan . . . , as opposed to a number of plans, if, on an
ongoing basis, all of the plan assets are available to pay benefits to employees
who are covered by the plan and their beneficiaries.”); cf. Hughes Aircraft Co.
v. Jacobson, 525 U.S. 432, 442 (1999) (“The act of amending a pre-existing plan
cannot as a matter of law create two de facto plans if the obligations . . . continue
to draw from the same single, unsegregated pool or fund of assets.”). Courts also
consider, as the district court did here, whether the offered benefit is the same.
See House, 499 F.3d at 452 (noting “the anomaly of requiring some insureds to
pursue benefits under state law while requiring others covered by the identical
policy to proceed under ERISA”).
Separate administration may also be
considered. See Loren, 505 F.3d at 605 (considering “whether the plans shared
the same administrator or trust”); cf. Peace v. Am. Gen. Life Ins. Co., 462 F.3d
437, 440 (5th Cir. 2006) (“[W]e consider whether [an employer] was engaged in
an ongoing administrative scheme to determine whether a plan existed.”).
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In this case, Defendants established both in-region and OOR Concession
benefits with the same plan documents. Furthermore, those documents refer to
Concession as a single policy.4
The plan offered the same benefits to both
Furthermore, both in-region and OOR benefits are drawn from
Defendants’ general funds. We also agree with the district court that the fact
that retirees could move between the in-region and OOR discount is significant.
Indeed, the in-region and OOR discount appear to be two parts of a distinct
whole. For those retirees who receive Concession, each retiree receives either
the in-region discount or OOR reimbursement, there are no retirees who qualify
for both benefits or neither benefit; nor does a change from one form of the
benefit to another require any qualification. Thus, although the plan for OOR
retirees was administered separately from that of in-region retirees, we find that
there is no genuine issue of material fact that Concession is a single plan as it
relates to all retirees. See Loren, 505 F.3d at 606 (determining that separate
administration did not create a genuine issue of material fact).
Alternatively, Plaintiffs argue that even if Concession is a single plan, the
district court erred in reviewing the plan as a whole, because ERISA makes a
plan a pension plan “to the extent” that it provides retirement income or results
For example, each of the plan documents begin with a statement that it is BellSouth’s
policy to provide discounted telephone services. Plaintiffs point to other documents which
refer to Concession as consisting of numerous plans. Neither of these documents show that
Defendants considered Concession to be different for OOR retirees than in-region retirees
apart from their separate administration, which we hold does not establish that Concession
was separate plans.
Plaintiffs assert that the reimbursement for telephone services that OOR retirees
receive is a different benefit than the discounted telephone services that in-region retirees
receive. We disagree. Concession is structured so that an OOR retiree may only receive
reimbursement for qualified telephone expenses. The retiree must submit a bill proving the
eligible expenses, and where two Concession-eligible retirees live at the same residence, only
one may receive the benefits. The fact that the discount is provide as a reimbursement to OOR
retirees does not change the character of the benefit. Indeed, in the early stages of BellSouth’s
administration of Concession, both in-region and OOR retirees received the discount as
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from a deferral of income. See 29 U.S.C. § 1002(2)(A). Courts have consistently
read this language as expressing Congress’s intent to avoid subjecting those
benefits which under ERISA are welfare plan benefits to the more stringent
requirements of pension plan benefits simply because the welfare benefits are
included within a pension plan. See Rombach v. Nestle USA, Inc., 211 F.3d 190,
193-94 (2d Cir. 2000) (“Under the plain language of the statute, ‘to the extent’
that Nestle’s Pension Plan provides benefits that are triggered by disability, that
portion of the plan is a welfare plan under § 1002(1).”); McBarron v. S & T
Indus., Inc., 771 F.2d 94, 98 (6th Cir. 1985) (“In our view, the words ‘to the
extent that’ rather than ‘solely’ clearly indicate that Congress intended to allow
any plan or part of a plan having disability provisions to be considered an
‘employee welfare benefit plan,’ and thus be exempt from [ERISA’s pension plan
regulations].”); see also Williams v. Plumbers & Steamfitters Local 60 Pension
Plan, 48 F.3d 923, 925 (5th Cir. 1995) (“ERISA’s vesting, accrual, and
nonforfeiture provisions do not apply to an employee welfare benefit plan.”).
Plaintiffs provide no authority for the proposition that courts should parse
a single benefit to determine whether some part of that benefit is arguably a
pension plan. Indeed, Murphy implicitly rejects such an idea. There, we noted
that “payments to some employees or their heirs are likely to continue after the
employee has retired or ceased work because of death or disability,” but held
that the benefit was not a pension plan because “the primary thrust of the plan
is to reward employees during their active years.” Murphy, 611 F.2d at 574.
More recently, we declined to interpret ERISA in such a way that plan
beneficiaries “could assert identical claims relating to identical terms in the
identical certificates of insurance . . . and governed by a single subscription
agreement, but [some beneficiaries’] claims would be governed by state law and
[other beneficiaries’] claims would be governed by ERISA,” determining that
such a result would be “out of keeping with Congress’s intent of achieving
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uniformity in the law governing employment benefits.” House, 499 F.3d at 452.
The district court did not err by refusing to examine the OOR Retiree Concession
Plaintiffs next assert that even when Concession is viewed as to all
retirees, it is a pension plan under ERISA because it “provides retirement
income.” As we have noted, this definition is:
not to be read as an elastic girdle that can be stretched to cover any
content that can conceivably fit within its reach. Any outright
conveyance of property to an employee might result in some
payment to him after retirement. The words “provides retirement
income” patently refer only to plans designed for the purpose of
paying retirement income whether as a result of their express terms
or surrounding circumstances.
Murphy, 611 F.2d at 575 (emphasis added).
As such, we held that an oil
company’s practice of giving royalty interests as bonuses was not an ERISA
plan. Id. Although under the bonus plan,“payments to some employees or their
heirs are likely to continue after the employee has retired,” we noted that “the
primary thrust of the plan [was] to reward employees during their active years.”
Id. at 574.
We conclude that although Concession does provide income to some
retirees, such income is incidental to the benefit. The “primary thrust” of
Concession is to provide retirees with discounted phone service, which a vast
majority of the beneficiaries receive as a “no-additional-cost” service. In the
interests of parity and good will, BellSouth and AT&T continued Bell’s policy of
providing Concession to those retirees who live outside of their service area as
well as those within. We find it significant that a retiree’s status as either an inregion or OOR beneficiary, and thus whether he receives income from
Concession, is not immutable, but is purely a function of whether he lives in the
Defendants’ service area. In short, no beneficiary of Concession has a certainty
of income from it. This case is, therefore, unlike Musmeci, where the benefit was
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undeniably income to all of its recipients. Due to these contingencies, we cannot
conclude that Concession, when viewed as to all retirees, was “designed for the
purpose of paying retirement income.”
Finally, Plaintiffs argue that Concession, when viewed as to all retirees,
results from a deferral of income. Under Musmeci, “income” has the same
meaning under ERISA as the IRC. 332 F.3d at 345. As we have stated above,
for OOR retirees, Concession undoubtedly produces income.
To show that Concession results from deferred income, Plaintiffs must
show that they forewent income at some point in exchange for receiving income
from Concession at a later date, which they have failed to do. For in-region
retirees, Concession cannot be considered deferred income, because it supplies
them no income. Neither is Concession deferred income for OOR retirees.
Concession does not provide OOR retirees with a fixed income; rather, they are
reimbursed for qualified telephone expenses. Therefore, an OOR retiree has no
right to income from Concession until after he has purchased Concession-eligible
services from his local telephone company. See Rathbun v. Qwest Commc’ns
Int’l, Inc., 458 F. Supp. 2d 1238, 1248 (D. Colo. 2006) (“[T]he program
reimbursements cannot be characterized as deferred income because employees
and retirees have no entitlement to any funds until they have expended the
reimbursable amount on telephone services.”); cf. Modzelewski v. Resolution
Trust Corp., 14 F.3d 1374, 1378 (9th Cir. 1994) (“[A] right is vested when the
employee holding the right is entitled to claim immediate payment.”).
Therefore, similarly to the royalty interests in Murphy, the nature of the OOR
reimbursement is such that the beneficiaries are paid over time, as the right to
the income is realized. Compare Murphy, 611 F.2d at 575 (“It is an inherent
characteristic of the royalty interest that it is paid on oil and gas production
whenever that is realized.”).
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Plaintiffs argue that the payments “were provided to employees ‘as a
result of their prior service with their employer’”; however, a plan does not result
in deferred income merely because “some payments under [the] plan may be
made after an employee has retired or left the company.” Murphy, 611 F.2d at
575. Indeed, the royalty payments in Murphy, which we held were not deferred
income, were similarly “to reward employees for their service.” Id. at 574.
Plaintiffs also received a similar telephone benefit service while they were
employed. Plaintiffs’ evidence that they received Concession as a result of their
employment therefore fails to establish a genuine issue of material fact that
Concession results in a deferral of income.
We therefore hold that Concession does not result in a deferral of income.
For the foregoing reasons, we AFFIRM the district court’s grant of
summary judgment to Defendants.
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