Program Providing Reimbursement of Phone Services for Retirees is an ERISA Plan

The court noted that the documents for SBC Communications’ Telephone Concession Plan for out-of-region retirees indicated an intent for the plan not to be governed by ERISA, but that “[d]efendants mistaken belief that Concession would not be governed by ERISA does not mean that Concession does not meet all requirements, including an intent to provide retirement income, that effectuate ERISA protection.”

The court pointed out that ERISA defines a pension benefit as any plan, fund, or program established or maintained by an employer that either provides retirement income or results in a deferral of income by employees.

SBC’s out-of-region retiree concession is a plan, fund, or program because a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and the procedures for receiving the benefits, the opinion said. The company argued the intended benefits could not be ascertained because there was no way of knowing upon retirement how much in benefits a retiree would receive, but the court said intended benefits expressed as a formula (i.e. a percentage of charges for telephone services) are ascertainable.

In addition, the court determined the source of financing is ascertainable if the benefits are paid from the general funds of the company, and it is not necessary for benefits to come from a separate trust fund. The procedure for receiving benefits under the concession plan was ascertainable because SBC hired a third party administrator to process claims for benefits.

Proof that SBC maintained Concession as a plan was in the agreement with the TPA that processed claims which explicitly stated, “SBC…maintains the ‘Retired Employee Telephone Concession’ (hereinafter the “Program’).”

The court found that the Concession provided retirement income as it was the only benefit that resulted in regular payments starting at retirement, and retirees received W-2s for the payments, which indicated they were considered income. The court also noted that the cash reimbursement could be used for telephone services or for any other expenses of the retirees.

The defendants argued that the intent of Concession was not to provide retirement income, but to create parity between out-of-region retirees and other retirees and show appreciation to retirees. The court said the fact that a plan has a purpose in addition to providing retirement income does not prevent it from being a pension plan.

The plan was a continuance of a benefit of AT&T prior to its divestiture. AT&T provided its employees and retirees free and discounted telephone services, and concession for out-of-region employees and retirees who did not have access to AT&T services consisted of reimbursements for the cost of purchasing services from local carriers.

When AT&T divested in 1984, the Regional Bell Operating Companies agreed that “each eligible pre-divestiture retiree will continue to receive a comparable level of telephone concession that he or she received immediately prior to divestiture.” Concession was also provided to post-divestiture retirees.

The case is Stoffels v. SBC Communications Inc., W.D. Tex., No. SA-05-CA-0233-WWJ.