Appeal from the United States District Court for the Western District of Texas. D.C. DOCKET NUMBER EP-89-CV-435. JUDGE Harry Lee Hudspeth
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").*fn1 Twice in 1977 and again in 1980, El Paso 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.*fn2
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 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).*fn3
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 authorizing unilateral amendment and/or termination.*fn4 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.*fn5
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).*fn6 On March 10, 1992, the district court granted El Paso's motion for summary judgment. Plaintiffs timely appealed.
Although it is a "comprehensive and reticulated statute," Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361, 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":
Any 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[.]"
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 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,*fn7 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).
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 "retired 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, ...