Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

DeHoff v. Kansas AFL-CIO Employee Benefit Plan and Trust

United States District Court, Tenth Circuit

August 28, 2013

JIM DEHOFF, Plaintiff/Counterclaim Defendant,
KANSAS AFL-CIO EMPLOYEE BENEFIT PLAN AND TRUST, Defendant/Counterclaim Plaintiff, and KANSAS AFL-CIO ASSOCIATION, Counterclaim Plaintiff



Plaintiff Jim DeHoff claims the Kansas AFL-CIO Employee Benefit Plan and Trust (“the Plan”) unlawfully reduced his pension benefits in violation of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. The Plan and its sponsor, the Kansas AFL-CIO Association, deny any violation and claim plaintiff is liable to the Plan for breaching fiduciary duties and for engaging in transactions prohibited by ERISA.

The dispute hinges on a 1997 amendment to the Plan that increased pension benefits for employees of the Kansas AFL-CIO Association (hereinafter “Employer”). It altered the benefit formula to effectively increase the maximum benefit from 70% of an employee’s pay to 85%. Plaintiff, who was Employer’s Executive Secretary-Treasurer as well as the Plan Administrator (in addition to being a Plan participant), executed this amendment in Employer’s name. The amendment was not discussed with or approved by Employer’s Executive Board.

Nine years later – in 2006 – Plaintiff retired and began drawing a pension based on the 85% benefit formula.[1] In 2007, Employer advised plaintiff and other retired plan participants that the 1997 amendment was invalid and, as a result, their monthly pension benefit would be reduced to the level previously authorized by the Board. Employer’s Executive Board formally amended the Plan in 2007 to affect this reduction. Plaintiff’s pension was reduced from $3702 per month to $3026 per month.

The case was tried to the court on March 12-14, 2013. The following decision represents the court’s findings of fact and conclusions of law. See Fed.R.Civ.P. 52(a).

I. Findings of Fact.

a. Stipulated Facts. (Doc. 55 at 2-3).

Employer is a not-for profit Corporation under Kansas law, with members rather than shareholders. The members elect an Executive Board, which is Employer’s board of directors. Employer’s rules of governance are contained in its Constitution and Bylaws.

The Plan, a defined benefit plan under ERISA, was adopted by Employer effective October 1, 1964. The Plan was subsequently amended and/or restated at various times, including on October 1, 1984; October 1, 1989; October 1, 1994; October 1, 1997; October 1, 1999; October 1, 2002; and November 2007.

The validity of the October 1, 1997 Amendment and its benefit formula increase is at issue in this case, as is the 2002 Plan that incorporated the same benefit formula. The November 2007 amendment and its benefit reduction when compared to the 1997 Amendment is also at issue in this case.

During his employment with Employer, Plaintiff was the Plan Administrator in charge of administering the plan until his retirement on August 31, 2006.

The Plan benefit formula was increased in 1994 to 70% of pay for persons with 15 or more years of service with Employer.[2] The subsequent 1997 Amendment, if valid, increased benefits to 85% of pay for persons with 15 or more years of service.

Under the terms of the Plan, Employer had the right to amend the Plan.

On August 31, 2006, Plaintiff retired from Employer with more than 15 years of service and was entitled to a pension under the Plan.

By letter dated November 19, 2007, Employer advised Plaintiff and other Plan participants that the monthly benefit to be paid by the Plan would be reduced from the monthly benefit they had been receiving since their retirement. The letter said “irregularities” had been discovered consisting of some beneficiaries receiving enhanced pension benefits without approval from the Board of Directors. The letter said the Plan was underfunded and changes were necessary to reduce benefits to the level last approved by the Board of Directors.

b. Facts shown at trial.

The court finds the following facts from all of the evidence presented, including the credibility of the witnesses who testified in court or by deposition.

Plaintiff was born and raised in Lawrence, Kansas. After high school he attended a Plumbers and Pipefitters School and became an apprentice pipefitter/welder. He worked in construction for several years and became a journeyman welder. He was elected vice-president of the Plumbers and Pipefitters Local 763 Union and became its business manager, serving in that capacity for 13 years. Beginning in 1982, Plaintiff additionally served on the Executive Board of Directors of the Kansas AFL-CIO (Employer).

In 1986 Plaintiff accepted a full-time paid position with Employer in Topeka, Kansas, as its Executive Secretary-Treasurer. He remained in that position until his retirement in 2006.

Employer’s Structure.

Employer typically had five or six employees at any given time. Its primary function was to lobby the Kansas legislature for laws favorable to organized labor and to recommend candidates for elective office who favor policies benefitting organized labor.

Employer’s Constitution and Bylaws describe how Employer operates. (Pl. Exh. 1; Def. Ex. 401). Employer is composed of local and national unions with which Employer is affiliated. (Art. IV). These unions pay a per capita tax to be admitted as members. (Art. V). Employer’s revenue comes from these taxes. As of 2006, each affiliated union paid Employer a monthly per capita tax of ninety cents on its members. Employer’s Executive Board was responsible for setting aside funds from this revenue to be used for the political and other purposes of Employer, as well as funds to provide pension, health and other benefits for Employer’s full-time employees. (Art. VI).

Employer was required to meet “in convention” every other year. (Art. VII). Each affiliated union was entitled to have delegates to the convention, with the number of delegates dependant upon each union’s membership.

Employer had the following elective officers: a President, Executive Vice-President, Executive Secretary-Treasurer, and 21 Executive Board members. The election of officers was done by majority vote of delegates at the conventions. Board members were elected to 2-years terms; other officers were elected to 4-year terms.

Collectively the foregoing elective officers constituted Employer’s Executive Board. The judicial and executive authority of Employer between conventions was vested in the Executive Board. (Art. XVI). The Board was required to meet at least two times per year and could call special meetings if necessary. It typically met two or three times per year.

The President’s duties included presiding at all of meetings of Employer and its Executive Board, appointing all committees, calling Board meetings, and transacting other related business. The President was to interpret the Constitution and Bylaws, with his interpretation binding unless changed by the Executive Board or Convention. (Art. XVII). This was a non-paying position, and the President typically had little involvement in matters outside of Board meetings and conventions.

Plaintiff, as Executive Secretary-Treasurer, was Employer’s full-time executive officer. His duties included supervising all employees and officers in the performance of their designated duties, approving or rejecting any financial obligations of Employer “subject to Executive Board consideration between conventions, ” and being consulted on other matters. (Art. XIX). He was to keep the minutes of conventions and Board meetings, receive all moneys due Employer, keep a correct account between Employer and its affiliates, and have his books ready for examination by the Board. He was to pay out all moneys by check and deposit all money in a bank in Employer’s name. All checks had to be countersigned by either the President or Vice-President. The Secretary-Treasurer was to provide the Board and its affiliates with an annual report of Employer’s financial condition. He was to engage the necessary personnel to conduct Employer’s business and to perform the foregoing duties and such other duties as the Board prescribed.

The Executive Vice-President was a full-time officer who was to perform duties assigned by the convention and Executive Board, under the supervision of the Executive Secretary-Treasurer. (Art. XVIII).

The Executive Secretary-Treasurer and Executive Vice-President were entitled to salaries determined by the Board. (Art. XXII).Employer also adopted a retirement Plan for the benefit of all full time salaried employees, with the Plan administered pursuant to a trust agreement. (Art. XXIII).

The Plan; Plan Administration; Pension Committees.

At Employer’s 1964 Convention, the Board recommended adoption of the initial pension Plan. The Plan had been studied and recommended by a committee. The Plan was adopted by the members at the convention.

The initial Plan was amended and restated on October 1, 1984, and was amended several times thereafter. The Plan provides retirement benefits to employees according to formulas set forth in the Plan. The Plan is funded entirely by contributions from Employer.

The Plan provides that Employer will appoint one or more Administrators whose primary responsibility is to administer the Plan for the exclusive benefit of the Participants and their beneficiaries, subject to the terms of the Plan. Any person, including an employee, was eligible to serve as Administrator. Plaintiff was named Plan Administrator from January 1986 through August 2006. He received no pay for doing so. He became a Plan participant in 1987.

The Plan also provided for a Trustee. The Trustee was responsible for investing and managing the Plan assets, paying out benefits at the direction of the Administrator, and maintaining records and providing annual reports. The Trustee during the relevant period was the Mercantile Bank of Topeka, which at some point was bought out by and merged into U.S. Bank.

The Plan provided that whenever Employer was permitted or required to do an act under the terms of the Plan, “it shall be done and performed by a person duly authorized by its legally constituted authority.” The Plan identified Employer, the Administrator, and the Trustee as named Fiduciaries, and that said each one had only the specific powers and duties given them under the Plan. Employer’s specific powers and obligations included sole authority to amend the Plan.

Employer engaged an actuary to calculate current and projected premiums and benefits for the Plan. The actuary also filled out required “5500” IRS forms and Pension Benefit Guarantee Corporation (PBGC) forms. The actuary provided the Administrator with an annual report showing what contributions Employer should make to the Plan for the upcoming year. The report showed a range of contributions that would meet IRS minimum and maximum contribution requirements. Plaintiff would select a specific contribution level within this range. He would not seek pre-approval from the Board before doing so, but the expenditures would thereafter be approved by the Board at Board meetings. No one on the Board ever told Plaintiff that he needed to get pre-approval before making or increasing contributions to the Plan.

Under the terms of the Constitution, all funds of Employer, including the Plan trust fund, were required to be audited on an annual basis by an accountant, with the results reported to the Board. There would be a specific line item included in the auditor’s report showing Employer’s contributions to the Plan. The report included a side-by-side comparison for each line item showing changes from the prior year. The Board would vote to either approve or not approve the audit report. The Board typically approved the audit report with few or no questions asked.

Prior to 2007, Employer’s Constitution did not specifically provide for appointment of a Pension Committee, but it gave the President discretionary authority to appoint committees not otherwise provided for.

Plaintiff has cited evidence that a Pension Committee was appointed around January 1987 by Employer’s then-President, Dale Moore. (Pl. Exh. 3). The minutes from a Board meeting on October 6, 1987, show this committee adopted a motion to find a new actuary for the Plan. Plaintiff reported to the Board that three companies were being looked at to determine their fees. After a lengthy discussion, the Board decided to study the matter further and get information from these companies “before taking any action by the Board.”

Plan Amendments; Practice of Employer.

Under the terms of the Plan, Employer had the right to amend the Plan at any time, subject to certain limitations. (For example, no amendment could be effective if it permitted any part of the trust fund to be used for a purpose other than to benefit participants or beneficiaries, or if it reduced the accrued benefit of any participant except as allowed by law.).

The minutes of a January 7, 1993, Board meeting show that Plaintiff recommended Employer change actuaries and hire Steve Cooper, a local actuary. A Board member made a motion to change actuaries, but the minutes indicate the motion was withdrawn after further discussion. (Def. Ex. 435). There was also discussion about increasing pension contributions and reducing the service period required for full vesting from 10 years to 5 years. When Board member Jim Hastings opined that the vesting period should be reduced to 5 years, another member asked if that would require a motion, but Hastings felt “it would be changed automatically with the new actuary.” (It is unclear what Hastings meant by this comment.) The minutes indicate that, notwithstanding the apparent withdrawal of the motion to change actuaries, the Board decided to engage a new actuary.[3]

According to Board minutes from January 12, 1994, Plaintiff told the Board that actuary Cooper was recommending a pension benefit increase of “10%” for active participants. After clarification that such an increase would not apply to the three Plan participants who were already retired, and an estimate from Plaintiff as to the costs, a motion to approve the increase was made, seconded, and carried by the Board. (Def. Ex. 436).

Plaintiff testified he then instructed Cooper to increase the pension benefits by ten percent. The record contains two versions of an amended 1994 Plan with slightly differing formulas. (Pl. Ex. 5 & 6). Both versions were apparently, with an effective date of October 1, 1994. Each bears Plaintiff’s signature (unattested) as well as the Trustee Bank’s signature indicating its acceptance of the Plan as amended. Both total up to a maximum pension benefit of 70%, although the first requires only 15 years’ service to reach that level while the second requires 18 years’ service. (The parties apparently agree that the version requiring 15 years’ service was the one enacted.)

Plaintiff testified that he did not recall there were two such versions until he saw them in this lawsuit. He said he does not know which one was a draft and which one was final. All he remembers is that he instructed the actuary to increase the pension benefits by 10%, and he relied on the actuary to do it, “whether that was from the 55 to 65 or how he came up with ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.