                             In the

United States Court of Appeals
               For the Seventh Circuit

No. 08-2923

T HOMAS R. W ETZLER,
                                               Plaintiff-Appellant,
                                 v.

ILLINOIS CPA S OCIETY & F OUNDATION
R ETIREMENT INCOME P LAN AND
P LAN A DMINISTRATOR FOR THE ILLINOIS
CPA S OCIETY & F OUNDATION R ETIREMENT
INCOME P LAN,
                                      Defendant-Appellee.


            Appeal from the United States District Court
                 for the Central District of Illinois.
             No. 07 C 1326—Michael M. Mihm, Judge.



    A RGUED JANUARY 22, 2009—D ECIDED N OVEMBER 10, 2009




  Before M ANION and K ANNE, Circuit Judges,                  and
K ENDALL, District Judge. 





  Hon. Virginia M. Kendall, District Judge for the Northern
District of Illinois, is sitting by designation.
2                                               No. 08-2923

   K ENDALL, District Judge. After working twenty-two
years, Plaintiff Thomas Wetzler (“Wetzler”) wanted a
lump-sum disbursement of his entire retirement
benefits from Illinois CPA Society & Foundation Retire-
ment Income Plan (the “Plan”). At the time of his
request, there were not enough assets in the Plan to
cover his lump-sum payment. His request would have
put the small plan in the hole and in violation of the
Internal Revenue Code. Explaining that its obligations
under the law and to the other participants in the Plan
required it to do so, the Plan refused his request. Wetzler
filed suit in the United States District Court alleging that
an Amendment to the plan violated the anti-cutback
provisions of the Employee Retirement and Income
Security Act (“ERISA”) 29 U.S.C. § 1054(g). The district
court granted summary judgment in favor of defendants,
and Wetzler appealed. For the reasons stated below,
we affirm.


                       Background
  Wetzler began working at the Illinois CPA Society (the
“Society”) in 1984 and participated in the Plan through-
out his employment. At the time of his retirement, Wetzler
was the Society’s Vice President of Governmental Affairs
and qualified as a highly-compensated employee (“HCE”)
under the terms of the Plan.
  The Plan is a defined benefit plan consisting of less than
100 participants and is required to comply with the
ERISA, 29 U.S.C. § 1054(g) and Sections 401(a) and 501(a)
No. 08-2923                                                3

of the Internal Revenue Code. On the date that Wetzler
retired, May 31, 2006, the plan had sixty-one participants
and approximately $2 million in assets. Section 5.02(d) of
the Plan provided that participants could select a “single
sum cash payment” of their benefits.
  The first and only HCE to retire under the Plan prior to
Wetzler did so in 2002. At that time, the Society’s actuary
permitted that HCE to take a lump-sum payout of his
benefits without providing any security to the Plan even
though the Plan was underfunded. The Plan now main-
tains that this distribution was made in error. Indeed,
such a lump-sum distribution was not permitted by the
applicable Treasury Regulations.
  The Plan maintains that it did not find out about the
2002 lump-sum distribution until 2004. Once it deter-
mined that the lump-sum distribution violated Treasury
Regulations and therefore risked the Plan’s tax status,
the Board of Directors adopted Amendment One on
June 24, 2004. This Amendment provided that all plan
distributions would be subject to Treasury Reg. Sections
1.40(a)(4)-5(b)(2) and (3). In addition, restricted distribu-
tions made prior to July 1, 2004 would remain available if
accompanied by the posting of security as permitted by
Revenue Ruling 92-76. Specifically, the Amendment
allowed a lump-sum distribution to an HCE if the HCE
obtained the distribution before July 1, 2004 and provided
security in the form of either: (1) an escrow account con-
taining 125% of the distribution amount; (2) a letter of
credit in the amount of the distribution; or (3) a bond in
the amount of the distribution. The Plan adopted Amend-
4                                               No. 08-2923

ment One in order to correct the prior improper payout
and protect the Plan from disqualification by the IRS.
  When Wetzler retired from the Society in 2006, he
received forms from the Society which listed a lump-sum
disbursement as an option. Similarly, on May 18, 2006,
Wetzler discussed his retirement options with the Society
during a teleconference during which the lump-sum
disbursement was discussed as an available option. The
next day, however, the Society notified Wetzler that a
lump-sum disbursement was unavailable due to the
amount of disbursement. Wetzler elected to defer his
benefits in a letter dated May 30, 2006.
  In September of 2006, Wetzler requested a Plan Amend-
ment that would allow him to receive a lump-sum dis-
bursement of his benefits without posting security. The
Executive Committee denied this proposal. Later, in
January of 2007, Wetzler sent a letter demanding that
his benefits be rolled into an IRA in a lump sum with-
out any security. The Plan denied this request, noting
specifically that because the Plan was underfunded, a
lump-sum disbursement would violate Treasury Regula-
tions and would cause the Plan to risk its tax-qualified
status. Finally, Wetzler once again demanded a lump-
sum distribution in a letter dated June 7, 2007, this time
offering to post security. The Plan once again rejected
his demand.
  Wetzler filed this suit on August 7, 2007, arguing that
Amendment One to the Plan violated the anti-cutback
rules of ERISA by eliminating a previously-available
benefit and that the Plan acted arbitrarily and capriciously
No. 08-2923                                               5

in denying his demands for a lump-sum distribution.
The district court granted summary judgment in favor
of the Plan noting that the Plan granted discretion to the
administrator to interpret its terms. The district judge
reviewed the administrator’s interpretation under the
deferential arbitrary and capricious standard and
accepted the administrator’s interpretation that a lump-
sum distribution was not allowed before Amendment
One and therefore such a distribution was not an accrued
benefit and did not violate ERISA’s anti-cutback provi-
sions. The district judge concluded that the Plan’s
denials of Wetzler’s requests for a lump-sum distribu-
tion were not arbitrary and capricious.
  Wetzler appealed, arguing that the district court
erred in: (1) applying the incorrect standard of review;
(2) finding that Amendment One did not violate ERISA’s
anti-cutback provision; (3) concluding that lump-sum
distributions were not allowed by the Plan prior to Amend-
ment One; and (4) ruling that the Plan’s denial of
Wetzler’s request for a lump-sum distribution was not
arbitrary and capricious.


                   Standard of Review
  This Court reviews the district court’s decision on cross-
motions for summary judgment de novo. See, e.g., Hess v.
Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 658 (7th Cir.
2005). In ERISA cases, denials of benefits are reviewed
de novo unless the plan at issue gives the plan admin-
istrator discretion to construe the policy terms. Id. Where
a plan administrator is given discretion to interpret the
6                                               No. 08-2923

provisions of the plan, the administrator’s decisions are
reviewed using the arbitrary and capricious standard.
James v. Gen. Motors Corp., 230 F.3d 315, 317 (7th Cir.
2000) citing Firestone Tire and Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989). Under that standard, an administrator’s
interpretation is given great deference and will not be
disturbed if it is based on a reasonable interpretation of
the plan’s language. Russo v. Health, Welfare & Pension
Fund, 984 F.2d 762, 765 (7th Cir. 1993) (“although it is an
overstatement to say that a decision is not arbitrary and
capricious whenever a court can review the reasons
stated for the decision without a loud guffaw, it is not
much of an overstatement”). An issue as to whether a
certain term as construed violates ERISA is a question of
law and as such, reviewed de novo. Silvernail v. Ameritech
Pension Plan, 439 F.3d 355, 357 (7th Cir. 2006).


                        Discussion
  Wetzler first argues that the district court erred by
using the arbitrary and capricious standard of review in
ruling on the motions for summary judgment on the
issue of whether Amendment One violated ERISA and
asserts that a de novo standard of review should have
been used because the question at issue was whether a
term in the Plan violated ERISA.
  Denials of benefits are reviewed de novo unless the plan
at issue gives the plan administrator discretion to
construe the policy terms. Hess, 423 F.3d at 658. If the
administrator is given such discretion, then its decision
No. 08-2923                                                  7

is reviewed under the “arbitrary and capricious” stan-
dard. Id. The Plan at issue here grants the administrator
such discretion stating, “the Administrative Committee
shall have . . . the power to interpret and construe the Plan,
to determine all questions of eligibility, status and rights of
Participants, their Beneficiaries, an others hereunder, to
commute payments, and to decide any disputes arising
hereunder.”
  The district court first had to determine whether a lump-
sum distribution was available prior to Amendment
One. That is, the anti-cutback rule of ERISA provides
that “the accrued benefit of a participant under a plan
may not be decreased by an amendment of the plan”
29 U.S.C. § 1054(g)(1). A plan amendment which has the
effect of “eliminating an optional form of benefit, with
respect to the benefits attributable to service before
the amendment shall be treated as reducing accrued
benefits.” 29 U.S.C. § 1054(g). Therefore, before the district
court could determine whether the Amendment violated
ERISA, it first had to determine whether the option to
receive a lump-sum distribution was available before,
and then taken away, by Amendment One. This deter-
mination involved reviewing the administrator’s inter-
pretation of the provisions of the plan, which was appro-
priately conducted using the arbitrary and capricious
standard.
  Once the District Court concluded that the administra-
tor’s determination that a lump-sum distribution was not
available before the amendment was not arbitrary and
capricious, it correctly used de novo review in determining
8                                               No. 08-2923

if the plan violated the anti-cutback provisions of ERISA.
Compare Williams v. Rohm & Haas Pension Plan, 497 F.3d
710, 712 (7th Cir. 2007) (since the parties agreed as to
the effect of the terms of the plan, the court needed only
to decide if that formulation violated ERISA). Therefore,
the district court applied the correct standard of review
to both the administrator’s interpretation of the terms
of the Plan and the legal determination of whether the
plan violated the anti-cutback provisions of ERISA.
  Wetzler next argues that the district court erred in
finding that Amendment One did not violate the anti-
cutback provisions of ERISA. According to the admin-
istrator’s interpretation, Section 5.02, which allowed lump-
sum distributions, must be read in conjunction with the
Internal Revenue Code, and as such, a lump-sum distribu-
tion would not be available since it violated the code. Since
the plan is intended to have a tax-qualified status, thereby
allowing tax benefits for its beneficiaries, it must, as the
Administrator asserted, comply with Section 401(a).
   In order to comply with Section 401(a), the Plan must not
discriminate significantly in favor of HCEs such as
Wetzler. According to Treasury Regulation 1.401(a)(4)-
5(b)(3)(i)(A), significant discrimination occurs if pay-
ments to an HCE exceed the amount equal to a straight
life annuity to which the individual is entitled under the
plan. 26 C.F.R. 1.401(a)4-5(b)(3). Such action, however, is
not discriminatory if the plan assets exceed 110% of
liabilities post-distribution, the distribution is less than
1% of current liabilities, or the benefits payable do not
exceed the amount described in Section 411(a)(11)(A).
No. 08-2923                                                9

   The parties agree that at all relevant times, the plan was
underfunded, so a lump-sum distribution would have
violated Section 401(a). Since the plan was intended to
comply with § 401(a) at all times, both before and after
Amendment One, it could not pay out the lump-sum
payment that Wetzler wanted. Thus, the Administrator’s
interpretation of the plan such that a lump-sum benefit
was not available to Wetzler prior to Amendment One
is well-reasoned and not arbitrary and capricious.
   Wetzler argues that I.R.S. Revenue Ruling 97-26 renders
the administrator’s decision arbitrary and capricious.
Revenue Ruling 97-26 held that a lump-sum distribution
may be allowed when a plan is underfunded if the HCE
receiving the lump-sum payment provides an escrow
account containing 125% of the distribution as security.
Rev. Rul. 92-76, 1992-38 I.R.B. 5. Revenue rulings are not
binding on this Court and we give them “the lowest degree
of deference” which equates to “some deference” or
“respectful consideration.” Bankers Life and Cas. Co. v.
United States, 142 F.3d 973, 978 (7th Cir. 1998). Regardless,
no language permitting distributions like the language
in the plan at issue in Revenue Ruling 92-76 is present
in the CPA Society’s Plan. The Administrative Com-
mittee’s amendment to the Plan to include such language
for a limited period of time supports the Plan’s position
that it did not intend to include such a provision in the
first place. The Administrator’s decision to require the
plan to comply with the letter of the binding regulation
as opposed to a Revenue Ruling entitled to the lowest
degree of deference does not equate to unreasonableness.
In light of the significant financial strain that would
10                                              No. 08-2923

be placed on the small, single-employer plan 1 and its
potential loss of its tax status, the Administrator’s
decision could not be rendered arbitrary and capricious.
  Since the Administrator’s interpretation of the plan was
not arbitrary and capricious, we turn to the issue of
whether Amendment One, which allowed a lump-sum
distribution to an HCE when the plan was underfunded
between June 24, 2004 and July 1, 2004 so long as that
HCE provided the relevant security, violated ERISA’s anti-
cutback provisions.
  ERISA’s anti-cutback provision states that “the
accrued benefit of a participant under a plan may not be
decreased by an amendment of the plan” 29 U.S.C.
1054(g)(1). The purpose of this provision is to protect
“employees’ justified expectations.” Cent. Laborers’ Pension
Fund v. Heinz, 541 U.S. 739, 743 (2004). For example, in
Heinz, the plan at issue suspended payments to retired
beneficiaries if they engaged in “disqualifying employ-
ment” and after Heinz’s retirement, amended the defini-
tion of disqualifying employment to include working as
a supervisor. Id. at 740. In finding that this amendment



1
  Notably, the Plan submitted additional authority after oral
argument indicating that it would not be easy for the Plan to
collect on any security provided to it by HCEs who received
lump-sum distributions. Rather, the administrator “could
draw on an HCE’s letter of credit only in the event of plan
termination, and then only if the HCE fail[ed] to repay
amounts needed to distribute the Plan’s remaining assets in
a manner that [did] not discriminate in favor of HCEs.”
No. 08-2923                                             11

violated ERISA’s anti-cutback provision, the Court deter-
mined that Heinz had accrued benefits under the plan
allowing him to supplement his retirement income by
working as a supervisor and those benefits were cur-
tailed by the amendment. Id. at 741.
   As set forth in ERISA’s anti-cutback provision, an
accrued benefit is separate and distinct from an “optional
form of benefit” despite the fact that the statute treats
a plan amendment which reduces or eliminates an “op-
tional form of benefit” as reducing accrued benefits.
29 U.S.C. § 1054(g)(1) (“A plan amendment which has the
effect of eliminating an optional form of benefit, with
respect to the benefits attributable to service before the
amendment shall be treated as reducing accrued bene-
fits.”). Title 29 United States Code Section 1002(23)(A)
defines “accrued benefit” as “the individual’s accrued
benefit determined under the plan . . . expressed in the
form of an annual benefit commencing at the normal
retirement age.” 29 U.S.C. § 1002(23)(A). An “optional
form of benefit” is not defined in ERISA, and while its
meaning is obscure, it is generally a benefit that
involves the right of a plan participant to choose the way
in which his payments under a plan will be made or
applied. See Call v. Ameritech Mgmt. Pension Plan, 475
F.3d 816, 821 (7th Cir. 2007). A plan participant’s ability
to take a lump-sum distribution of benefits is an
“optional form of benefit” as defined by the anti-cutback
provision of ERISA. Id. Therefore, for purposes of the
statutory anti-cutback provision, a plan amendment
may not eliminate one’s entitlement to take his pension
benefits as a lump sum at normal retirement age. See
29 U.S.C. § 1054(g)(1).
12                                             No. 08-2923

   Here, Wetzler asserts that the implementation of Amend-
ment One violated ERISA’s anti-cutback provision
because Amendment One eliminated a pre-existing
“optional form of benefit,” namely the ability to receive
a lump-sum distribution. As found above, however, due
to underfunding, HCEs never had the option of
collecting lump-sum distributions prior to Amendment
One, which makes this case distinct from Heinz where
the amendment altered a pre-existing benefit. While the
anti-cutback provision in Section 204(g)(2)(B) of ERISA
states that eliminating an “optional form of benefit” shall
be treated as reducing accrued benefits, Section 204(g)(2)
only applies if the benefit—a lump-sum distribu-
tion—qualifies as an “optional form of benefit” and is
t he re fore “ at trib u ta ble t o s erv ic e b efore t he
amendment . . . .” 29 U.S.C. § 1054(g)(2). As the Plan
rightly argues, Amendment One did not eliminate or
affect any lump-sum option that was previously avail-
able to plan members. Instead, the Amendment gave
the Plan a way of correcting a distribution that was not
allowed under the Treasury Regulations at the time it
was made. Because plan participants were not entitled,
under the Plan, to a lump-sum distribution, Amend-
ment One did not eliminate an “optional form of benefit”
and does not violate ERISA’s anti-cutback provision. See
Herman v. Cent. States, Southeast & Sw. Areas Pension
Fund, 423 F.3d 684, 692 (7th Cir. 2005) (an amendment
that does not render any person ineligible for benefits
for which he or she was previously eligible does not
violate the anti-cutback provision).
No. 08-2923                                                13

  Furthermore, even if the right to receive lump-sum
distributions had been an “optional form of benefit” that
was “attributable to service” prior to Amendment One,
Amendment One brought the Plan into compliance with
the Internal Revenue Code and accompanying Treasury
Regulations, see I.R.C. § 401(a); 26 C.F.R. 1.401(a)4-5(b)(3),
bringing it outside the ambit of ERISA’s anti-cutback
statute. See 29 U.S.C. § 1054(g)(2) (“The Secretary of the
Treasury may by regulations provide that this subpara-
graph shall not apply to a plan amendment [eliminating
an optional form of benefit] (other than a plan amend-
ment having [the effect of eliminating or reducing an
early retirement benefit or a retirement-type subsidy].”).
   Finally, Wetzler argues that the Administrative Com-
mittee’s decision denying his request for a lump-sum
distribution was arbitrary and capricious. “Absent
special circumstances, such as fraud or bad faith, the
plan administrator’s decision may not be deemed
arbitrary and capricious so long as it is possible to offer a
reasoned explanation, based on the evidence, for that
decision.” Semien v. Life Ins. Co. of N.A., 436 F.3d 805, 812
(7th Cir. 2006) citing Trombetta v. Cragin Fed. Bank for
Savings Employee Stock Ownership Plan, 102 F.3d 1435, 1438
(7th Cir. 1996). Here, the administrator had a clear rea-
sonable basis for denying a lump-sum distribution since
it would have put the Plan in deficit and would have
violated the Internal Revenue Code, thus risking the
tax status of the plan for all of its participants.
  As the District Court accurately stated, “since a lump-
sum distribution without security was never available
14                                              No. 08-2923

to Wetzler under the terms of the Plan, and was not
available with security any time other than the limited
time provided in the Amendment, the denial of his
claim cannot be arbitrary and capricious.” Although
Wetzler would like to hold the Plan to the mistake that
it made in allowing the one-time lump-sum payment to
the previous HCE who received it, the district court
correctly held that the evidence supported that the pay-
ment was a mistake and was immediately corrected upon
discovery by the Plan which required the former CEO to
post security for the distribution as part of its effort to
correct the mistake and protect the Plan’s tax-deferred
status. It was not arbitrary and capricious for the Plan to
deny Wetzler’s requests for a lump-sum distribution
simply because it had, in error, made such a lump-sum
distribution in the past and attempted to correct it. It was
reasonable for the administrator to take actions to protect
the financial viability of the Plan for its members.
  The district court applied the proper standards of
review and did not err in finding that the administrator’s
interpretation of the Plan’s terms was not arbitrary and
capricious, that the plan therefore did not violate the anti-
cutback provisions of ERISA and that the administrator’s
decision to deny a lump-sum distribution to Wetzler was
not arbitrary and capricious. Therefore, we A FFIRM .




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