Randy Erven v. Blandin Paper Company

Several participants in the Blandin Paper Company Employees' Retirement
Plan ("the Plan") sued Blandin Paper Company and the Plan for improperly
calculating lump sum benefits in violation of ERISA. 29 U.S.C. § 1132(a)(1)(B). The
parties filed cross-motions for summary judgment, and the district court granted summary judgment in favor of Blandin and the Plan. The participants appeal, and we
affirm in part and reverse in part.

I

Blandin established the Plan in 1950 with the purpose of providing eligible
employees with pensions upon retirement. On December 31, 2002, Blandin froze the
Plan, meaning that the Plan would not accept new participants and that existing
participants would no longer accrue benefits under the Plan. A few weeks later, the
company terminated the Plan, giving each participant the option of transferring a lump
sum into an account in the company's 401(k) program. At all relevant times, the Plan
was a defined benefit pension plan governed by ERISA. 29 U.S.C. § 1003. Under the
terms of the Plan, Blandin served as plan administrator, and its CEO was responsible
for managing the Plan. The Plan allowed the CEO to delegate this responsibility to
an "administrative manager." Section 3.3 of the Plan provided the administrative
manager with discretion to interpret and administer the Plan, including the power to
make rules and regulations necessary for the Plan's administration.

On July 1, 1989, the Plan was amended to allow participants to receive a lump
sum distribution upon retirement. A participant electing to receive a lump sum would
receive a single payment equal to the projected value of the monthly annuity that the
Plan otherwise would pay. Because annuity payments would be made until the
participants died, the amount of the lump sum depended on the assumptions that the
Plan made about the participant's life expectancy. In making this calculation, the
Plan's language directed the administrator to rely on actuarial tables published by the
Pension Benefit Guaranty Corporation ("PBGC"). The Plan initially stated that the
mortality assumptions used in calculating lump sums "shall be those applicable for
healthy male lives for Plan terminations on the August 1 of the Plan Year in which
equivalence is to be determined." (Appellants' App. at 85 (hereafter "App.")). On
August 29, 1997, the Plan was amended, and the new version stated:

Lump sum payment amounts shall be . . . the present value of the
Participant's life only annuity . . . applying Pension Benefit Guaranty
Corporation assumptions that are applicable for healthy male lives for
termination of insufficient trusteed single employer plans, on the August
1 of the Plan year in which the benefit distribution is to be made.

(App. at 236). Each Plan year began on August 1. Thus, the mortality assumptions
applicable on August 1 would apply to all distributions made in the twelve months
that followed.

A group of participants brought suit challenging the Plan administrator's
method of calculating lump sums. The participants argue that amendments to the
PBGC's regulations in 1993 changed the applicable mortality assumptions, and that
the administrator used an obsolete table, which was less favorable to the participants,
in calculating their lump sums. The participants fall into two groups. One group
consists of former employees who retired after August 1, 1994, and elected to receive
a lump sum distribution instead of monthly annuity payments. The second group
consists of current or recently retired employees who opted to transfer a lump sum
amount into their 401(k) accounts upon termination of the Plan in November 2003.

This dispute turns on which mortality table the Plan administrator was
permitted to use in calculating lump sum benefits. Blandin argues that it was
reasonable throughout the period from 1994 to 2003 for the Plan to apply the mortality
assumptions set forth in Table I of Appendix A to 29 C.F.R. Part 2619 (1993) ("Table
I"), which applied to "healthy male lives," even though the table ceased to be included
in the Code of Federal Regulations in 1996. The participants argue that a table
anticipating later death should have been used as of August 1, 1994, thus resulting in
higher lump sum benefits throughout the period from 1994 to 2003. They point to
amendments to the PBGC's regulations in 1993 and subsequent years, which they say
changed the applicable table for healthy males, and thus made unreasonable the Plan's
decision to apply the mortality assumption embodied in the former table.

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