Firm Not Liable for Botched Benefit Estimates

Court documents show that, when the employee retired from BPPR, the plan sponsor undertook a final calculation of his pension payments, yielding monthly payments substantially lower than earlier estimates had suggested. The employee brought claims seeking the higher amount under § 502(a)(1) of the Employee Retirement Income Security Act (ERISA). He also sought recourse under 29 U.S.C. § 1132(a)(1), via the theory of estoppel and Puerto Rico contract law.

A district court dismissed the ERISA and contract claims, holding that the employee could not be awarded relief under the terms of BPPR’s retirement plan and that ERISA preempted the commonwealth law claims. After discovery, the district court granted summary judgment against the complainant on the estoppel claim, holding that estoppel could not apply where the terms of the retirement plan were unambiguous. Agreeing with the United States District Court for the District Of Puerto Rico, the 1st U.S. Court of Appeals affirmed.

According to the appeals court’s opinion, Alfredo Guerra-Delgado could not demonstrate that the plain language of the plan as adopted requires that he be credited for the years he worked at other firms. Rather, he alleged that those years should be counted because various fiduciaries of the plan represented to him that they would be counted.

For Guerra-Delgado to be entitled to benefits under the terms of the plan, those representations would have to amount to plan amendments, the 1st Circuit said. But such representations cannot plausibly have amended the plan because ERISA-covered plans cannot be modified orally, per 29 U.S.C. § 1102(a)(1), which states ERISA plans must be “established and maintained pursuant to a written instrument.” Similarly, of the written documents Guerra-Delgado incorporated into his complaint, none purport to make any change to the plan, and nearly all of them clearly identify themselves as “estimates” of pension benefits.

Guerra-Delgado was an employee of Banco de Ponce for eight years, from 1980 to 1988. Although Banco de Ponce merged with BPPR in 1990, Banco de Ponce was not affiliated with BPPR during Guerra-Delgado's tenure there. He resigned from Banco de Ponce in February 1988 to work for First Bank of Puerto Rico, where he remained until he moved to Florida in May 1995.

In late 1996, a former colleague recruited Guerra-Delgado to work for the New York branch of BPPR. According to the court opinion, Guerra-Delgado alleges that BPPR agreed, as part of its recruiting effort, to credit 17 years of work for other firms toward his pension at BPPR; his pension would essentially reflect prior work at two different banks, as well as his other jobs in Florida, beginning with his employment for Banco de Ponce in February 1980. BPPR recruiters deny making such a promise.

Guerra-Delgado began working for BPPR in New York in April 1997. In January 1999, Guerra-Delgado and many other BPPR employees in New York became employees of a new entity, Banco Popular North America, Inc. (BPNA). Although he retained the same employee ID number, worked in the same office, and performed the same work, Guerra-Delgado was technically an employee of BPNA from January 1999 until he transferred to a BPPR office in Puerto Rico a year later, in January 2000.

At that time, Guerra-Delgado asked if the period from 1980 onwards was still being credited towards his pension. In June 2000, a BPPR benefits department representative sent Guerra-Delgado a letter on BPPR letterhead, which stated: “Having been an employee of [BPNA] from February 1, 1980, until December 31, 1998, these years of service will be considered as years of credit for purposes of the Banco Popular Pension Plan. From January 1, 1999, until January 2, 2000 [i.e., the period Guerra-Delgado worked in New York for the new BPNA entity], these years of service will be considered as years of eligibility for purposes of the . . . Plan."

According to his compliant, Guerra-Delgado read this letter as confirmation that his employer would continue to honor the alleged 1997 promise. Notwithstanding the contents of the letter, court documents show it is uncontested that Guerra-Delgado did not, in fact, work for BPNA from February 1, 1980 through December 31, 1998.

Every year from 2003 to 2007, Guerra-Delgado received an annual "Total Compensation Report" from BPPR. These reports contained estimates of Guerra's pension benefits, calculated on the basis of a 1980 start date. The appeals court noted that each report contained a disclaimer that the estimates did not govern the final benefits calculation, and that the official policies of the company's retirement plan would govern such calculations.

In 2005, BPPR's benefits structure changed, such that employees who had accrued fewer than 10 years of benefits had their benefits frozen and received an 11% pay raise. Employees who had accrued more than 10 years of benefits continued to accrue benefits and received a smaller, 3% raise. Even though Guerra-Delgado did not actually begin working for BPPR until 1997, he received the latter deal because he had, according to BPPR's records, accrued more than 20 years of pension benefits by that time.

In 2008, Guerra-Delgado contacted the BPPR benefits department to determine what his benefits would be if he retired early. On September 8, 2008, the benefits department sent Guerra-Delgado an email estimating that he would receive $2,371.99 per month if he retired on February 1, 2009. Guerra-Delgado subsequently received a written "Estimated Pension Calculation" with the same information. Based on this information, he formally informed BPPR on December 1, 2008, that he would retire in February 2009.                

On January 21, 2009, Guerra-Delgado attended a meeting for pending retirees. There, a representative from the BPPR benefits department suggested to Guerra-Delgado that he might receive credit for only 10 years of service, and that the emails and the Estimated Pension Calculation based on the 1980 start date may have grossly overestimated his benefits. Guerra-Delgado nevertheless retired on February 1, 2009.

Guerra-Delgado then received a letter from the firm explaining that he had accrued only seven years of credit, yielding monthly benefits of $570.87, not the $2,371.99 monthly payment he had expected. The seven years excluded the one-year period he worked for BPNA in New York and the 17 years he had worked for other firms—per plan documents.

Guerra-Delgado filed suit in June 2011 against Popular, Inc. (BPPR and BPNA's parent company), as well as BPPR and BPNA. He also sued the Plan de Retiro de Banco Popular and Comité Administrativo de Beneficios de Popular, Inc.

Guerra-Delgado sought declaratory and injunctive relief, and restitution to redress denial of benefits, breach of contract, and consequential losses. The defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion in part, holding that Guerra-Delgado did not sufficiently state a claim under ERISA § 502(a)(1), and that ERISA preempted the commonwealth claims.

Only the estoppel claim survived, but after discovery, the defendants successfully moved for summary judgment on the estoppel claim. The district court held that the unambiguous plan terms precluded a claim for estoppel. On appeal, Guerra-Delgado challenged both the dismissal of his ERISA and contract claims and the summary judgment on his estoppel claim.

The appellate court’s decision is here.