     05-3828
     McCarthy v. Dun & Bradstreet




 1                                    UNITED STATES COURT OF APPEALS
 2                                        FOR THE SECOND CIRCUIT
 3
 4                                           August Term 2005
 5
 6          (Argued February 15, 2006                            Decided March 29, 2007
 7                                                          Errata Filed April 4, 2007)
 8
 9      -------------------------------------------------------x
10                            Docket No.: 05-3828-cv
11
12      Mary McCarthy, Clayton Borowski, on behalf of others similarly
13      situated, and individually, Gail Adams, Donald Bakert, RoseMarie
14      Black, Albin Blom, Mike Blount, William Brady, Donna Cochran,
15      Steve Crowther, Michael Coughlin, Delia Coy, Paul Crowe, Cary
16      Elbaum, Lisa Farnsworth, Jack Finley, James Gabrys, Gregory
17      Gopodarek, Laura Gue, James Hadley, Gerald Hillard, Carl
18      Langbein, Thomas Majka, Frederick Markt, Doris Megesi, Steve
19      Miholics, Marleen Miller, Lewis Moore Jr., Philip Moscato, Brian
20      Neary, Karl Nicosia, Barry O’Neill, Roger Ruggieri, Philip
21      Salamone, Robert Short Jr., Ruth Stewart, Charles Szymanski,
22      Billie Thomas, Frank Tricoli, Bill Tuohy, Jerry Vincent, Walter
23      Waitz, Mark Weiss, Donald Wickersham, John Zimmer and Debbie K.
24      Lubonski, Exec. of the Est. of Katherine J. Lubonski,
25
26                                        Plaintiffs-Appellants,
27
28                                                –- v.–-
29
30      The Dun & Bradstreet Corporation, The Dun & Bradstreet
31      Corporation Retirement Account, and The Dun & Bradstreet Career
32      Transition Plan,
33
34                                         Defendants-Appellees,
35
36      Aldo Camerin, Terri Carpenter, Denise Cyphers and Katherine
37      Lubonski,
38
39                                 Plaintiffs.
40      -------------------------------------------------------x
41
42      B e f o r e :               KEARSE and SACK, Circuit Judges, and STANCEU,
43                                  Judge.*
44
45                    Appeal of grant of motion to dismiss count of complaint,

46      grant of summary judgment, and denial in part of motion to amend

        * The Honorable Timothy C. Stanceu, United States Court of
        International Trade, sitting by designation.
 1   complaint, by the United States District Court for the District

 2   of Connecticut (Stefan R. Underhill, J.), in favor of Defendants-

 3   Appellees.

 4        AFFIRMED.

 5

 6                                   Thomas G. Moukawsher, Esq.
 7                                   Moukawsher & Walsh, LLC, Hartford,
 8                                   Connecticut, for Plaintiffs-
 9                                   Appellants.
10
11                                   Patrick W. Shea, Esq., Paul,
12                                   Hastings, Janofsky & Walker LLP,
13                                   Christine Button, of counsel,
14                                   Stamford, Connecticut, for
15                                   Defendants-Appellees.
16
17
18   Stanceu, Judge:

19        Plaintiffs-appellants are former employees of the Dun &

20   Bradstreet Corporation (“Dun & Bradstreet”) who were terminated

21   from the company when Dun & Bradstreet sold its “Receivables

22   Management Services” operations, conducted in the United States,

23   Canada, and Hong Kong, on April 30, 2001.      Upon the sale,

24   plaintiffs-appellants became employees of a new corporation, “Dun

25   & Bradstreet Receivables Management Services,” which resulted

26   from the sale.    Their change in employment did not qualify them

27   to receive severance benefits under the “Career Transition Plan,”

28   a Dun & Bradstreet benefit plan.       It also affected the retirement

29   benefits that they could receive under another benefit plan, the

30   “Master Retirement Plan,” which on December 31, 2001 was replaced


                                        2
 1   by the “Dun & Bradstreet Corporation Retirement Account Plan.”

 2   The new pension plan established as the Dun & Bradstreet

 3   Corporation Retirement Account Plan created different retirement

 4   benefits but assumed the vested obligations of the superseded

 5   Master Retirement Plan, which is at issue in this appeal.

 6        Plaintiffs-appellants, many of whom had nearly attained the

 7   age of 55 at the time of the sale of the Receivables Management

 8   Services operations, sued Dun & Bradstreet, the Dun & Bradstreet

 9   Corporation Retirement Account Plan, and the Dun & Bradstreet

10   Career Transition Plan in the United States District Court for

11   the District of Connecticut, seeking individual and class action

12   relief.   They alleged that they were wrongfully denied benefits

13   under the Dun & Bradstreet Corporation Retirement Account Plan

14   and the Dun & Bradstreet Career Transition Plan, contrary to the

15   requirements of the Employee Retirement Income Security Act of

16   1974 (“ERISA”), 29 U.S.C. § 1001 et seq.   The district court

17   ruled against plaintiffs with respect to both benefit plans.

18   McCarthy v. Dun & Bradstreet Corp., 372 F. Supp. 2d 694

19   (D. Conn. 2005) (McCarthy II); McCarthy v. Dun & Bradstreet

20   Corp., No. 03CV431, 2004 WL 2743569, 2004 U.S. Dist. LEXIS 23996

21   (D. Conn. Nov. 30, 2004) (McCarthy I).

22        Plaintiffs-appellants appeal the district court’s rulings on

23   three motions in favor of defendants-appellees: (1) the district

24   court’s grant of defendants’ motion to dismiss, under


                                      3
 1   Fed. R. Civ. P. 12(b)(6), plaintiffs-appellants’ claim that the

 2   “Summary Plan Description” for the Master Retirement Plan

 3   violated ERISA by inadequately disclosing the method by which a

 4   benefit of the Master Retirement Plan (the “deferred vested

 5   retirement benefit”) is reduced actuarially when paid to former

 6   employees of Dun & Bradstreet, such as plaintiffs-appellants, who

 7   elected to receive payments before reaching age 65; (2) the

 8   district court’s grant of defendants-appellees’ summary judgment

 9   motion to deny relief on plaintiffs-appellants’ claim that the

10   Master Retirement Plan used an unreasonably high discount rate of

11   6.75 percent to reduce actuarially the deferred vested retirement

12   benefit that the Master Retirement Plan paid to such former

13   employees; and (3) the district court’s denial in part of

14   plaintiffs-appellants’ motion to amend their complaint to

15   challenge as unlawful under ERISA the mortality table that the

16   Master Retirement Plan used in the actuarial reduction.   For the

17   reasons discussed in this opinion, we affirm all three rulings of

18   the district court.

19                             I.   BACKGROUND

20        The facts underlying this appeal, as summarized below, are

21   undisputed.   Plaintiffs-appellants ceased being employees of Dun

22   & Bradstreet on April 30, 2001, the date on which the company

23   sold its Receivables Management Services operations.   As former

24   employees of Dun & Bradstreet who were terminated before reaching


                                      4
 1   the minimum early retirement age of 55, plaintiffs-appellants no

 2   longer qualified for the early retirement benefit that was

 3   available under the Master Retirement Plan to employees retiring

 4   directly from Dun & Bradstreet.       As former employees whose

 5   pension benefits had vested by the accrual of a minimum of five

 6   years of credited service with Dun & Bradstreet, but who were

 7   separated from Dun & Bradstreet before reaching the age of 55,

 8   plaintiffs-appellants remained eligible to receive a deferred

 9   vested retirement benefit under the Master Retirement Plan.

10   Under the terms of this deferred vested retirement benefit,

11   pension-vested former employees such as plaintiffs-appellants

12   could receive, upon reaching the normal retirement age of 65, the

13   full retirement benefit for which they qualified under the plan.

14        The Master Retirement Plan calculated the full retirement

15   benefit according to a formula based on a participant’s years of

16   credited service and earnings with Dun & Bradstreet, with a

17   reduction designed to compensate for Dun & Bradstreet’s

18   contribution to the participant’s Social Security retirement

19   benefit (the “Social Security Offset”).       The Social Security

20   Offset is based on a percentage of the estimated annual

21   retirement benefit the participant would be entitled to receive

22   at age 65 under the Social Security program.

23        The Master Retirement Plan provided that former employees,

24   i.e., employees who terminated their employment before reaching


                                       5
 1   the age of 55, instead of receiving their deferred vested

 2   retirement benefit upon their reaching the age of 65, could

 3   choose to receive payments as early as age 55.   Under this early

 4   payment option, a former employee’s deferred vested retirement

 5   benefit was actuarially reduced from the amount that would have

 6   been paid at age 65 in two respects.   First, to reflect the time

 7   value of money, the Master Retirement Plan reduced the benefit by

 8   a 6.75 percent discount rate for each year prior to the age of 65

 9   that payments began.   Second, the benefit was reduced by a

10   mortality factor to adjust actuarially for the possibility that a

11   participant might not live to the age of 65.

12        Unlike former employees such as plaintiffs-appellants who

13   were eligible only for deferred vested retirement benefits,

14   employees retiring directly from Dun & Bradstreet were eligible

15   to receive an early retirement benefit under the Master

16   Retirement Plan.   The Master Retirement Plan provided this early

17   retirement benefit to employees who accrued ten years of credited

18   service with Dun & Bradstreet, retired directly from Dun &

19   Bradstreet after reaching the age of 55, and chose to receive

20   payments before reaching the age of 65.   This early retirement

21   benefit was a more desirable benefit than the deferred vested

22   retirement benefit as actuarially reduced under the early payment

23   option.   Under the early retirement benefit, the accrued pension




                                      6
 1   was reduced by only three percent for each year that payments

 2   began before the retiree reached the age of 65.

 3        To apprise plan participants of the benefits available under

 4   the Master Retirement Plan, Dun & Bradstreet, as required by

 5   ERISA, provided plan participants with a summary plan description

 6   (“Summary Plan Description”).    The Summary Plan Description

 7   contains both a “Vesting” section that explains the deferred

 8   vested retirement benefits available to pension-vested former

 9   employees and an “Early Retirement Benefit” section that

10   discusses the early retirement benefits available to

11   directly-retiring Dun & Bradstreet employees.    Included in the

12   Early Retirement Benefit section is a reduction table that

13   illustrates the percentage of accrued retirement benefits a

14   direct retiree would receive for each year that payments begin

15   before age 65, based on the three percent annual reduction.

16   There is no table or discussion in the Vesting section of the

17   Summary Plan Description that sets forth the percentage by which

18   the actuarial reduction will reduce the benefit of a pension-

19   vested former employee who is terminated from employment with Dun

20   & Bradstreet before reaching the age of 55 but elects to receive

21   payments before the age of 65.

22        On March 12, 2003, plaintiffs sued in district court,

23   claiming that the provision of the Master Retirement Plan that

24   actuarially reduced benefits of former employees who elected to


                                       7
 1   receive payments prior to attaining the age of 65 could not be

 2   enforced against them because, in their view, the Summary Plan

 3   Description was inadequate under ERISA.    They maintained that, as

 4   a result of the deficiencies in the Summary Plan Description,

 5   they should be held to qualify for unreduced benefits or,

 6   alternatively, for the early retirement benefits they would have

 7   received had they retired directly from Dun & Bradstreet.    The

 8   district court dismissed this count of plaintiffs’ complaint

 9   under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon

10   which relief can be granted.   The district court concluded that

11   the treatment of the actuarial reduction in the Summary Plan

12   Description was satisfactory under ERISA.    Plaintiffs-appellants

13   raise the same issue on appeal.

14        Plaintiffs-appellants argue, as a second issue on appeal,

15   that the district court erred in denying them the opportunity to

16   amend their complaint to raise a challenge to the mortality table

17   used in the Master Retirement Plan which, together with the 6.75

18   percent discount rate reduction, actuarially reduced the deferred

19   vested retirement benefit payable to former employees choosing to

20   receive payments before reaching age 65.    The district court

21   denied the motion, concluding that the amendment would constitute

22   an entirely new claim that would have prejudiced defendants

23   because the amendment was sought at a late stage of the




                                       8
 1   litigation, after the close of discovery and after defendants had

 2   moved for summary judgment.

 3         Plaintiffs-appellants also claimed in district court, and

 4   argue again on appeal, that the 6.75 percent discount rate that

 5   the Master Retirement Plan used to reduce actuarially the

 6   deferred vested retirement benefits of former employees renders

 7   the actuarial reduction unreasonable.     This discount rate, in

 8   their view, “works a prohibited forfeiture of benefits under

 9   ERISA Section 203(a).”   Am. Compl. ¶ 95.     The district court

10   awarded summary judgment to defendants-appellees, concluding that

11   ERISA does not require a “zero-risk” discount rate and that no

12   reasonable juror could find that the 6.75 percent discount rate

13   was unreasonable.   McCarthy II, 372 F. Supp. 2d at 699 & n.2.

14                             II.    DISCUSSION

15    A.   The District Court Did Not Err in Dismissing the Claim that
16               the Summary Plan Description Violates ERISA

17         Section 102 and related provisions of ERISA require that a

18   summary plan description be furnished to all participants and

19   beneficiaries of an employee benefit plan and that it reasonably

20   apprise participants and beneficiaries of their rights and

21   obligations under the plan.     29 U.S.C. §§ 1022(a),

22   1024(b) (2000).   Before the district court, plaintiffs-appellants

23   claimed in their amended complaint that Dun & Bradstreet violated

24   ERISA Section 102 by “fail[ing] to include in the [Master

25   Retirement Plan] summary plan description the actuarial

                                        9
 1   assumptions and/or the reduction chart it intended to apply to

 2   early retirement for former employees . . . .”   Am. Compl. ¶ 93.

 3   They sought as relief “unreduced benefits upon early retirement

 4   or, in the alternative, early retirement benefits reduced for

 5   former employees in the same manner as such benefits are reduced

 6   for current Dun & Bradstreet employees.”   Am. Compl. WHEREFORE

 7   Cl. ¶ 3.   The district court, concluding that the Summary Plan

 8   Description satisfied the requirements of ERISA, granted

 9   defendants’ motion to dismiss.   McCarthy I, 2004 WL 2743569,

10   at *5, 2004 U.S. Dist. LEXIS 23996, at *15.

11        We review de novo determinations of a district court that

12   resolve a motion to dismiss a complaint.   Miller v. Wolpoff &

13   Abramson, L.L.P., 321 F.3d 292, 300 (2d Cir. 2003).   In reviewing

14   a motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to

15   state a claim upon which relief can be granted, we accept as true

16   all factual statements alleged in the complaint and draw all

17   reasonable inferences in favor of the non-moving party.    In re

18   Tamoxifen Citrate Antitrust Litig., 429 F.3d 370, 384

19   (2d Cir. 2005), amended by 466 F.3d 187, 200 (2d Cir. 2006).      In

20   general, our review is limited to the facts as asserted within

21   the four corners of the complaint, the documents attached to the

22   complaint as exhibits, and any documents incorporated in the

23   complaint by reference.    Taylor v. Vt. Dep’t of Educ., 313 F.3d

24   768, 776 (2d Cir. 2002).


                                      10
 1        The Federal Rules of Civil Procedure require that a pleading

 2   contain “a short and plain statement of the claim showing that

 3   the pleader is entitled to relief.”   Fed. R. Civ. P. 8(a)(2).

 4   Under this simplified standard for pleading, “a court may dismiss

 5   a complaint only if it is clear that no relief could be granted

 6   under any set of facts that could be proved consistent with the

 7   allegations.”   Tamoxifen, 429 F.3d at 384 (quoting Swierkiewicz

 8   v. Sorema N.A., 534 U.S. 506, 514 (2002) (quotation marks,

 9   citation, and alteration omitted)).   We therefore must construe

10   the complaint liberally to determine whether the district court

11   erred in concluding that plaintiffs could prove no set of facts

12   that would entitle them to relief on their claim that the Summary

13   Plan Description violates Section 102 of ERISA.   See generally

14   Jaghory v. N.Y. State Dep’t of Educ., 131 F.3d 326, 329 (2d Cir.

15   1997).   We find no error in the district court’s grant of the

16   motion to dismiss and agree with the underlying conclusion that

17   the Summary Plan Description did not violate Section 102 of

18   ERISA.

19        Section 102(a) of ERISA provides that a summary plan

20   description “shall be sufficiently accurate and comprehensive to

21   reasonably apprise such participants and beneficiaries of their

22   rights and obligations under the plan.”   29 U.S.C. § 1022(a).

23   ERISA Section 102(b) lists specific information that must be

24   included in every summary plan description, including the


                                     11
 1   “circumstances which may result in disqualification,

 2   ineligibility, or denial or loss of benefits . . . .”

 3   Id. § 1022(b).

 4        The disclosure requirements ERISA imposes on summary plan

 5   descriptions present two issues concerning the Summary Plan

 6   Description for the Master Retirement Plan.   The first, and more

 7   general, issue is whether the Summary Plan Description, in

 8   describing the deferred vested retirement benefit, is

 9   sufficiently accurate and comprehensive to satisfy Section

10   102(a).   Because plaintiffs do not claim that the Summary Plan

11   Description is inaccurate, the question is whether the Summary

12   Plan Description is insufficiently comprehensive to “reasonably

13   apprise” plaintiffs of their rights because it does not disclose

14   the method by which the deferred vested retirement benefit

15   available to former employees choosing to receive payments before

16   age 65 would be actuarially reduced.   The second, and more

17   specific, issue is whether the Summary Plan Description, in not

18   disclosing that method of actuarial reduction, complies with the

19   Section 102(b) requirement to disclose “circumstances which may

20   result in disqualification, ineligibility, or denial or loss of

21   benefits.”

22        ERISA provides some guidance on the meaning of the

23   requirement in Section 102(a) to “reasonably apprise”

24   participants and beneficiaries by including a long list of

25   specifically-required disclosures in Section 102(b).    That
                                     12
 1   statutory list does not include, specifically or by implication,

 2   the method of actuarial reduction at issue in this case.     The

 3   Department of Labor has promulgated regulations that interpret

 4   and expand the statutory list of required disclosures and, in so

 5   doing, provide further guidance to drafters of summary plan

 6   descriptions on what disclosures are required to meet the general

 7   statutory requirement to reasonably apprise beneficiaries of plan

 8   benefits.    See 29 C.F.R. §§ 2520.102-2 - 102-4.   The regulations,

 9   like the statute, do not explicitly require disclosure of the

10   method of actuarial reduction at issue here.   This omission,

11   while somewhat indicative, does not entirely resolve the issue

12   before us.   It can be argued that the method of actuarial

13   reduction, even though not expressly required to be disclosed by

14   the statute or the regulations, is important enough to a

15   description of the deferred vested retirement benefit that any

16   such omission results in a summary plan description that is

17   insufficient under Section 102(a).

18        The Summary Plan Description for the Master Retirement Plan

19   addressed in separate sections the normal retirement benefit, the

20   early retirement benefit, and the deferred vested retirement

21   benefit.    From our review of the Summary Plan Description and of

22   these three sections in particular, we conclude that the Summary

23   Plan Description reasonably apprised plan participants and

24   beneficiaries of their rights under the deferred vested

25   retirement benefit and thereby satisfied Section 102(a) of ERISA.
                                      13
 1   It did so by apprising participants and beneficiaries of the

 2   deferred vested retirement benefit in general and by specifically

 3   distinguishing that benefit from the early retirement benefit.

 4        In a section under the heading “How the Retirement Plan

 5   Works,” the Summary Plan Description explains that the normal

 6   retirement date under the Plan is a participant’s 65th birthday,

 7   that payment of benefits normally begins the first full month

 8   thereafter, and that the retirement benefit is calculated based

 9   on credited service and earnings at separation from service with

10   Dun & Bradstreet.1   The same section contains a reference to the

11   possibility of retirement as early as age 55, if certain

12   requirements are met.   This early retirement option is discussed

13   in more detail in the “Early Retirement Benefit” section of the

14   Summary Plan Description, which explains that an employee with at

15   least 10 years of vesting service may choose to retire as early


          1
           The Summary Plan Description, under the heading How the
     Retirement Plan Works, discusses the normal retirement benefit as
     follows:

               Your normal retirement date under the Plan is your
          65th birthday and retirement benefits generally begin
          with your first full month of retirement. The Plan
          pays a monthly retirement benefit based on credited
          service and earnings at separation from service with
          the Company.

               If you wish, you can retire as early as age 55
          . . . provided you meet certain service requirements.
          Your Retirement Plan benefit is reduced if you begin
          receiving payments before age 65 or before age 60 if
          you have at least 35 years of service.

     Summ. Plan Description at 8-9.
                                      14
 1   as age 55.   The section also explains that an early-retiring

 2   employee may choose to delay receiving payment until age 65, in

 3   which case the full accrued benefit would be paid.   It further

 4   explains that an employee retiring early may choose to receive

 5   payments as early as age 55 but that, as a result, the accrued

 6   benefit will be reduced by three percent for each year that

 7   payments begin before age 65.   The same section contains the

 8   aforementioned reduction table setting forth the percentage of

 9   accrued retirement benefits a direct retiree would receive for

10   each year that payments begin before age 65, based on the

11   reduction of three percent for each year that payments begin

12   before the participant reaches the age of 65.2

13        In discussing the ordinary and early retirement benefits

14   available to employees, the sections of the Summary Plan


          2
           The relevant text of the Early Retirement Benefit section
     of the Summary Plan Description states as follows:

               You can retire before age 65 -- as early as age 55
          -- if you have completed at least 10 years of vesting
          service. Your accrued benefit at early retirement is
          calculated based on the same formula used for normal
          retirement, but the amount payable to you is subject to
          reduction as described below if payments begin before
          you reach age 65. You also may retire early and delay
          receiving payment until age 65. In this case, your
          full accrued benefit is paid.

               If payments start early, your Retirement Plan
          accrued benefit is reduced 3% for each year that
          payments begin before age 65. That’s because you’ll
          receive benefits over a longer period of time. If you
          are between any 2 of the ages shown in the following
          table, the reduction is pro-rated.

     Summ. Plan Description at 11.
                                     15
 1   Description entitled How the Retirement Plan Works and Early

 2   Retirement Benefit do not expressly or impliedly refer to the

 3   situation of an employee who is separated from employment before

 4   reaching the minimum early retirement age of 55 and who chooses

 5   to receive payments before reaching age 65.     Deferred vested

 6   retirement benefits are discussed in the separate section

 7   entitled Vesting, which appears later in the Summary Plan

 8   Description.   The Vesting section, to which plaintiffs-appellants

 9   direct their principal argument that the Summary Plan Description

10   is inadequate under Section 102 of ERISA, begins by defining the

11   concept of vesting, explaining that “[v]esting means earning the

12   right to receive a retirement benefit, at a future date –– even

13   if you leave the Company before you are eligible for retirement.”

14   Summ. Plan Description at 17.   It adds that “[y]ou are fully

15   vested in your accrued Retirement Plan benefits after you

16   complete 5 years of vesting service.”     Id.   The next paragraph

17   describes the deferred vested retirement benefit in general,

18   i.e., as it applies absent the early payment option, stating that

19   “[i]f you terminate employment after becoming vested, you will be

20   entitled to receive a deferred vested retirement benefit from the

21   Plan” and that “[y]our deferred vested benefit is calculated in

22   the same way as a normal retirement benefit assuming benefit

23   payments begin at age 65.”   Id.    Finally, in a third paragraph

24   consisting of a single sentence, the Summary Plan Description

25   discusses the consequence of electing early payment of the
                                        16
 1   deferred vested retirement benefit.    The sentence reads as

 2   follows: “If you choose, the payment of your deferred vested

 3   benefit can begin as early as age 55, but the amount of the

 4   benefit will be reduced actuarially, resulting in a lower Plan

 5   benefit than if the reduction table in the ‘Early Retirement

 6   Benefit’ section was used.”    Id.

 7        The Summary Plan Description might have been more

 8   informative in discussing the early payment option of the

 9   deferred vested retirement benefit.    However, neither ERISA nor

10   the Labor Department’s regulations require a summary plan

11   description to describe or illustrate every method by which a

12   plan benefit may be limited under an early payment option or

13   similar such limitation.    The Labor Department’s regulations

14   expressly allow a Summary Plan Description to summarize, rather

15   than describe in every detail, the benefits available under an

16   employee pension benefit plan.    “Such plan benefits shall be

17   described or summarized.”    29 C.F.R. § 2520.102-3(j)(1).   For

18   these reasons, we are unable to agree with plaintiffs-appellants’

19   argument that the Summary Plan Description is inadequate under

20   Section 102(a) of ERISA, 29 U.S.C. § 1022(a).

21        We turn next to the second issue presented, i.e., whether

22   the Summary Plan Description complied with Section 102(b) of

23   ERISA, 29 U.S.C. § 1022(b).    As the district court observed,

24   § 1022(b) “specifically says that the [Summary Plan Description]


                                      17
 1   must set out ‘circumstances which may result in . . . loss of

 2   benefits.’”    McCarthy I, 2004 WL 2743569, at *4, 2004 U.S. Dist.

 3   LEXIS 23996, at *12 (quoting 29 U.S.C. § 1022(b)) (emphasis added

 4   by district court).    The Summary Plan Description, in the section

 5   entitled “Vesting,” discloses the circumstances in which the

 6   actuarial reduction would occur, i.e., when a participant whose

 7   employment terminates after the participant’s benefits become

 8   vested but before the participant becomes eligible for retirement

 9   chooses to receive payments before reaching the normal retirement

10   age of 65.    As did the district court, we decline to construe

11   Section 102(b) of ERISA to require disclosure of more detail,

12   e.g., the specific method of actuarial reduction, than the

13   circumstances resulting in the reduced benefits.

14        The Labor Department’s regulations expand on the statutory

15   obligation of Section 102(b) to disclose in a summary plan

16   description “circumstances which may result in disqualification,

17   ineligibility, or denial or loss of benefits . . . .”

18   29 U.S.C. § 1022(b).    The regulations, in this regard, require

19   that the summary plan description disclose the “circumstances

20   which may result in disqualification, ineligibility, or denial,

21   loss, forfeiture, suspension, offset, reduction, or recovery

22   (e.g., by exercise of subrogation or reimbursement rights) of any

23   benefits that a participant or beneficiary might otherwise

24   reasonably expect the plan to provide on the basis of the


                                      18
 1   description of benefits required by paragraphs (j) and (k) of

 2   this section.”   29 C.F.R. § 2520.102-3(l) (emphasis added).    The

 3   Summary Plan Description at issue satisfies this requirement of

 4   the regulations, both by disclosing the circumstances in which

 5   the actuarial reduction will occur, and by distinguishing the

 6   early payment option of the deferred vested retirement benefit

 7   from the early retirement benefit.    As the district court

 8   observed, “[t]here is simply no way that a former employee

 9   reading [the Vesting] section could be under the impression that

10   he was to receive the same benefits as current employees.”

11   McCarthy I, 2004 WL 2743569, at *4, U.S. Dist. LEXIS 23996,

12   at *13.

13        The Labor Department’s regulations, in addressing the

14   contents of a summary plan description, provide that

15       [t]he format of the summary plan description must not
16       have the effect to [sic] misleading, misinforming or
17       failing to inform participants and beneficiaries. Any
18       description of exception [sic], limitations,
19       reductions, and other restrictions of plan benefits
20       shall not be minimized, rendered obscure or otherwise
21       made to appear unimportant. Such exceptions,
22       limitations, reductions, or restrictions of plan
23       benefits shall be described or summarized in a manner
24       not less prominent than the style, captions, printing
25       type, and prominence used to describe or summarize plan
26       benefits.
27
28   29 C.F.R. § 2520.102-2(b) (emphasis added).    Here also, the

29   Summary Plan Description does not run afoul of the regulatory

30   requirements.    The regulations permit a summary plan description



                                      19
 1   to summarize a limitation on a benefit, so long as the other

 2   requirements of the regulations are observed.

 3        Plaintiffs-appellants argue that the Summary Plan

 4   Description is inadequate because, in failing to disclose the

 5   method of actuarial reduction in the Vesting Section, it does

 6   not disclose “what their age 55 retirement benefits are.”

 7   Br. of Pls.-Appellants 12.   They argue further that the Summary

 8   Plan Description “misleads the plaintiffs by highlighting what

 9   Dun & Bradstreet says are the subsidized benefits of current

10   employees and obscuring the stunning difference between

11   subsidized (70 percent of normal retirement) and unsubsidized

12   (38 percent of normal retirement) early retirement benefits,”

13   id., and “minimizes” the effect of benefit limitations and

14   restrictions, id. at 5.   They argue that the Summary Plan

15   Description causes confusion by omitting discussion of the

16   “fate” of terminated early retirees in the Early Retirement

17   Benefit section in the Summary Plan Description and by

18   discussing this type of former employee “only briefly” in a

19   “vaguely titled” section called Vesting.   Id.   In their view,

20   the Summary Plan Description should have included a reduction

21   table, statement, or illustration to explain the extent of the

22   actuarial reduction.   Id. at 20.

23        We find no reason to conclude that the Vesting section of

24   the Summary Plan Description confuses, misleads, or misinforms


                                     20
 1   plan participants whose employment is terminated prior to their

 2   reaching the minimum early retirement age of 55 such that they

 3   would believe that they will receive the early retirement

 4   benefit.   To the contrary, the Vesting section expressly informs

 5   the reader that a plan participant who leaves Dun & Bradstreet

 6   before becoming eligible for retirement and who receives the

 7   deferred vested retirement benefit prior to the age of 65 will

 8   not receive the early retirement benefit determined according to

 9   the reduction table in the Early Retirement Benefit section but

10   instead, as a result of actuarial reduction, will receive a

11   lower benefit.   Moreover, because the Vesting section is

12   sufficiently prominent within the context of the Summary Plan

13   Description as a whole, we do not conclude that the text or

14   format of the Summary Plan Description minimized, rendered

15   obscure, or otherwise made to appear unimportant the limitation

16   resulting under the early payment option of the deferred vested

17   retirement benefit that was available to employees leaving Dun &

18   Bradstreet before reaching the age of 55 and choosing to receive

19   payments prior to age 65.

20        Plaintiffs-appellants maintain that the failure of the

21   Summary Plan Description to disclose the size of the actuarial

22   reduction violates ERISA as construed in Layaou v. Xerox Corp.,

23   238 F.3d 205 (2d Cir. 2001).   We disagree that our holding in

24   Layaou compels the conclusion that the Summary Plan Description


                                     21
 1   at issue in this appeal violates ERISA.    Layaou does not hold

 2   that to satisfy ERISA requirements a summary plan description

 3   invariably must describe or illustrate the method by which a

 4   specific retirement benefit is actuarially reduced in a

 5   particular circumstance, such as this case, where the employees

 6   separated before reaching the minimum early retirement age and

 7   elected to receive a vested benefit before reaching the ordinary

 8   retirement age.

 9        The plaintiff Layaou, upon voluntarily leaving the employ

10   of Xerox in 1983, had received under a retirement plan lump-sum

11   distributions totaling $22,353.88.    Layaou, 238 F.3d at

12   206 & n.2.    Layaou was re-employed by Xerox in 1987, began

13   earning retirement benefits for this second employment period,

14   and was laid off in 1994 during a reduction-in-force.

15   Id. at 206.    Each year, Layaou had received from Xerox a

16   brochure to fulfill the ERISA obligation for a summary plan

17   description as well as a form listing the estimated individual

18   retirement benefits Layaou had earned to date.    Id. at 206-07.

19   The summary plan description brochure stated,“[t]he amount you

20   receive may also be reduced if you had previously left the

21   Company and received a distribution at that time.”    Id. at 210.

22   The form issued to Layaou in 1994 estimated for Layaou a monthly

23   retirement benefit of $924 as calculated under the Retirement

24   Income Guarantee Plan guaranteed annuity calculation method


                                      22
 1   (“RIGP method”), which was one of three methods used by the

 2   Xerox retirement plan to calculate retirement benefits; the

 3   Xerox retirement plan paid benefits upon retirement in an amount

 4   equal to the highest result of three different calculation

 5   methods.   Id. at 206, 210.    The $924 estimated monthly benefit

 6   was based on retirement at age 65.     See id. at 206-07.   As did

 7   the brochure, the form stated that the benefits as calculated

 8   under the RIGP method “may be reduced if you receive amounts

 9   before age 65 or receive amounts from another Xerox retirement

10   plan.”   Id. at 207.   The 1994 form notified Layaou that under

11   the Cash Balance Retirement Account method (“CBRA method”) of

12   calculating his benefits, he would receive a lump sum payment of

13   $18,403 and that under the Transitional Retirement Account

14   method (“TRA method”), his lump sum benefit would be $9,244.

15   Id.

16         When Layaou’s retirement became effective in 1995, by which

17   time Layaou had reached the age of 55, the plan administrator

18   calculated Layaou’s benefit as a lump sum and converted it to a

19   monthly payment of $145; this amount was calculated not under

20   the RIGP method but under the CBRA method, which under the plan

21   administrator’s calculation yielded the highest of the three

22   benefit calculation methods.     Layaou, 238 F.3d at 207-08.   The

23   final calculation of Layaou’s monthly retirement benefit

24   reflected a reduction for what Xerox referred to as a “phantom


                                       23
 1   account” offset, under which earned benefits were reduced by the

 2   value of a hypothetical account containing the original

 3   distributed sum (in this case, $22,353.88) and an amount based

 4   on an estimate of what that distribution would have earned had

 5   it been invested.     Id. at 206-07.

 6         The brochure constituting the summary plan description did

 7   not inform Layaou about the “phantom account” offset other than

 8   by stating that “[t]he amount you receive may also be reduced if

 9   you had previously left the Company and received a distribution

10   at that time.”     Id. at 210.   The form containing the annual

11   estimate, in referring to the benefit calculated under the RIGP

12   method, alluded generally to the possibility of a reduction “if

13   you . . . receive amounts from another Xerox retirement plan.”

14   Id.   The form did not include such a qualification in presenting

15   the estimated lump-sum distributions calculated under the CBRA

16   and TRA methods.

17         We concluded in Layaou that the summary plan description

18   contravened ERISA by “fail[ing] to provide notice to Layaou and

19   other similarly situated employees that their future benefits

20   would be offset by an appreciated value of their prior lump-sum

21   benefits distributions.”     Id.   We found that the summary plan

22   description failed to satisfy Section 102 of ERISA and the Labor

23   Department’s regulations, noting that the summary plan

24   description did not clearly identify the loss of benefits caused


                                        24
 1   by a prior lump-sum distribution.     Id. at 211 (citing 29 C.F.R.

 2   § 2520.102-3(l)).

 3        In contrast to the summary plan description at issue in

 4   Layaou, the Vesting section of the Summary Plan Description for

 5   the Master Retirement Plan is definite in informing a

 6   participant that a reduction will occur under the early payment

 7   option and gives some information, albeit limited, about the

 8   method of reduction, stating that “the amount of the benefit

 9   will be reduced actuarially, resulting in a lower Plan benefit

10   than if the reduction table in the ‘Early Retirement Benefit’

11   section was used.”   Summ. Plan Description at 17.    The

12   information provided about the method of reduction, although

13   presented only in brief summary form, is sufficient under

14   Section 102 of ERISA and the Labor Department’s regulations,

15   which permit some details about a particular option associated

16   with a particular benefit to be summarized.    The Summary Plan

17   Description reasonably apprises participants of their rights

18   concerning the deferred vested retirement benefit provided by

19   the Master Retirement Plan and discloses the circumstances under

20   which that benefit will be reduced.

21        Plaintiffs-appellants point to dicta in Layaou in which we

22   noted that a statement such as “‘[a]ny future benefit will be

23   offset by the appreciated value of any prior distribution

24   assuming that amount remained in the plan’” would have sufficed


                                     25
 1   to provide employees with sufficient notice of the plan’s offset

 2   provision, and in which we indicated that a clarifying example

 3   calculating the benefits of an employee who had received a prior

 4   distribution could have provided adequate notice.    Layaou,

 5   238 F.3d at 211.   We do not consider the dicta in the Layaou

 6   opinion to signify that ERISA imposes a blanket requirement

 7   under which a Summary Plan Description invariably must describe

 8   the method of calculating an actuarial reduction or must use a

 9   clarifying example to illustrate how a benefit is actuarially

10   reduced when a participant who has vested rights to receive a

11   particular plan benefit chooses to receive payments before

12   reaching normal retirement age.

13        Plaintiffs-appellants’ reliance on various other precedents

14   is also misplaced.   Plaintiffs-appellants argue that in Feifer

15   v. Prudential Insurance Co. of America, 306 F.3d 1202

16   (2d Cir. 2002), this court refused to allow a plan sponsor to

17   reduce disability plan benefits by the amount of participants’

18   social security benefits where the reduction was not properly

19   disclosed in a summary plan description.    Id. at 1212.     Feifer,

20   however, does not support this argument.    In Feifer, the

21   employer had distributed a “Program Summary” with an

22   accompanying booklet announcing a new benefits plan that did not

23   exist in written form at the time the Program Summary was

24   distributed.   Id. at 1205.   We concluded that the Program

25   Summary and the booklet, at the time they were distributed,
                                       26
 1   constituted the actual retirement plan for ERISA purposes and

 2   that no summary plan description of the retirement plan existed

 3   at that time.      Id. at 1209-10.    As a result, the Program Summary

 4   controlled the amount of permissible reductions to an employee’s

 5   benefits.    Id.   Feifer did not involve the question of the

 6   adequacy of a disclosure of a benefit reduction in a summary

 7   plan description associated with a retirement plan and therefore

 8   has no bearing on the issue before us.

 9        Plaintiffs-appellants also rely on Burke v. Kodak

10   Retirement Income Plan, 336 F.3d 103 (2d Cir. 2003).        They argue

11   that pursuant to the holding in Burke, an employer may not

12   enforce a plan requirement where that requirement was not

13   clearly set forth in the section of the summary plan description

14   that dealt with the benefits at issue.        However, Burke is

15   distinguishable because it involved a conflict between the

16   employer’s summary plan description and the retirement plan.

17   See id. at 110-11.     In Burke, a plaintiff sued for survivor

18   income benefits under a retirement plan that conditioned

19   eligibility for receipt of such benefits on the filing of an

20   affidavit.    Id. at 106.   The “Survivor Income Benefits” section

21   of the summary plan description omitted any reference to the

22   affidavit requirement, to which the summary plan description

23   made reference in sixteen other sections.        Id.   Accordingly, we

24   held that the summary plan description violated ERISA, applying

25   the well-established principle that “[w]here the terms of a plan
                                          27
 1   and the [summary plan description] conflict, the [summary plan

 2   description] controls.”   Id. at 110.   Plaintiffs-appellants are

 3   not alleging a conflict between Dun & Bradstreet’s Summary Plan

 4   Description and the Master Retirement Plan.

 5        Plaintiffs-appellants argue that the common-law principle

 6   of Gediman v. Anheuser Busch, Inc., 299 F.2d 537 (2d Cir. 1962),

 7   a pre-ERISA case, requires us to reject a summary plan

 8   description that conceals the size of a benefit reduction.     We

 9   do not find this argument persuasive.    Gediman involved benefits

10   owed on behalf of a deceased beneficiary of a pension plan who

11   previously had received negligent advice from an employer’s

12   pension consultants.   Id. at 541.   H. James Gediman, the

13   executor of an estate, brought the action on behalf of the

14   deceased former employee, James Barsi, to recover amounts

15   allegedly due under the employer’s pension plan.    Id. at 538-39.

16   Barsi, who had arranged for an early retirement date and had

17   elected to receive deferred cash benefits instead of an annual

18   pension benefit, died as a result of a car accident prior to

19   receiving the payments under the deferred cash benefit option.

20   Id. at 540-41.   Just before he elected to receive the deferred

21   cash benefits, Barsi wrote a letter to his employer, seeking

22   advice regarding his retirement benefit options.    Id.   He

23   received written advice in the form of a memorandum from the

24   employer’s pension consultants that failed to inform him that,

25   as a result of an election to receive the cash benefits, the
                                     28
 1   value of his benefits would be greatly reduced in the event of

 2   his death before the deferral date for the cash payments.

 3   Id. at 545.   The employer was held liable in tort for the

 4   negligent advice of the pension consultants.     Id. at 547-48.

 5        Gediman is distinguishable from this case in two ways.

 6   First, because the case did not arise out of ERISA, it does not

 7   involve the statutory and regulatory requirements imposed on a

 8   summary plan description.   Instead, the case involved the

 9   application of common-law principles regarding the fiduciary

10   duty of care that arose when the pension consultants voluntarily

11   undertook to give advice to Barsi.     Second, the facts of Gediman

12   are inapposite.   In Gediman, the court held that the defendant

13   misinformed Barsi as to the consequences of the election that he

14   made upon retirement.    Id. at 539.   The opinion explains that

15   the memorandum from the pension consultants failed to disclose

16   that the retirement plan would provide a greatly reduced benefit

17   if Barsi should die before rather than after his deferral date

18   and also failed to disclose that the retirement plan, in that

19   event, provided a benefit under a “wholly different regime.”

20   Id. at 545 (“[T]he ‘death benefit’ described in paragraph 3 of

21   their memorandum differed from that in paragraph 2 not just in

22   degree but in kind.”).   The court even went so far as to

23   conclude that the defendants had misled Barsi.     Id. at 547.

24        In contrast to the situation in Gediman, the Summary Plan

25   Description at issue here did not misinform or mislead the
                                      29
 1   plaintiffs-appellants.   It disclosed the circumstances that

 2   would result in a reduction of their benefits and, as set forth

 3   above, was not required by statute or regulation to disclose the

 4   specifics of how the reduction would occur.

 5        Plaintiffs-appellants also direct our attention to Wilkins

 6   v. Mason Tenders District Council Pension Fund, 445 F.3d 572

 7   (2d Cir. 2006), which was decided after briefing and oral

 8   argument in this appeal.     Plaintiffs-appellants argue that the

 9   holding in Wilkins supports their claim that the Summary Plan

10   Description violates ERISA because it fails to disclose relevant

11   information regarding the size of benefits due to former

12   employees electing to receive early payment of deferred vested

13   retirement benefits.   We disagree.    Wilkins involved the failure

14   of a summary plan description to disclose “‘circumstances which

15   may result in disqualification, ineligibility, or denial or loss

16   of benefits.’”   Id. at 580-81 (quoting 29 U.S.C. § 1022(b)).

17        The plaintiff in Wilkins was a union employee who, over a

18   period of thirty years, worked in the construction industry for

19   several different employers.     Id. at 575.   The employers were

20   required by collective bargaining agreements with the union to

21   contribute to the union pension fund based on their employees’

22   covered employment.    Id.   In Wilkins’s case, there were

23   significant discrepancies between the earnings that the

24   employers reported to the pension fund and those the employers

25   reported to the Social Security Administration.      Id. at 575-76.
                                       30
 1   Following his receipt of a lump sum benefit in 1999, Wilkins

 2   claimed additional benefits based on work that was not reflected

 3   in the records of the fund but was reflected in his Social

 4   Security Administration statement of earnings.      Id. at 576.    The

 5   pension fund maintained a policy that employees seeking benefits

 6   based on work that was not reported by employers must submit

 7   “proof of covered employment as a condition of receiving the

 8   benefits to which they are entitled under the terms of the plan

 9   . . . .”   Id. at 584.   Social Security earning statements did

10   not suffice under the policy.     Id. at 576-77.   Additionally,

11   this policy was not set forth in the summary plan description.

12   Id. at 581.   Because Wilkins did not produce proof of covered

13   employment, his claim was denied.      Id. at 576-77.

14        The district court denied relief on other grounds.

15   Id. at 577-78.   On appeal, Wilkins argued that his benefits were

16   wrongfully denied due to the failure of the summary plan

17   description to comply with 29 U.S.C. § 1022(b), and we agreed.

18   Id. at 584.   “It seems to us obvious that the Policy, by

19   erecting an additional, mandatory prerequisite to the receipt of

20   promised benefits, may result in disqualification,

21   ineligibility, or a denial or loss of benefits.     It must,

22   therefore, be disclosed in the [summary plan description].”        Id.

23   Because “no provision of the [summary plan description] even

24   arguably gives notice of the Policy,” the summary plan

25   description violated ERISA.     Id. at 582.
                                       31
 1        Unlike the summary plan description at issue in Wilkins,

 2   the Summary Plan Description for the Master Retirement Plan

 3   adequately discloses the circumstances under which the actuarial

 4   reduction will occur.   As we stated previously, the relevant

 5   circumstances are those of a participant whose employment

 6   terminates after the participant becomes vested but before the

 7   participant becomes eligible for retirement, and who chooses to

 8   receive payments before reaching the normal retirement age

 9   of 65.

10    B. The District Court Did Not Abuse its Discretion in Denying
11   in Part Plaintiffs-Appellants’ Motion to Amend the Complaint to
12                    Challenge the Mortality Table
13
14        Before the district court, plaintiffs moved under Fed. R.

15   Civ. P. 15(a) to amend their previously amended complaint to

16   add, inter alia, a claim that the mortality table used by the

17   Master Retirement Plan to calculate the actuarial reduction for

18   deferred vested retirement benefits is outdated and unreasonable

19   when combined with the 6.75 percent discount rate.    Br. of

20   Pls.-Appellants 29, 32.   The district court denied the motion in

21   part, declining to allow plaintiffs to add the claim concerning

22   the mortality table, which the district court considered to be

23   an entirely new claim that was being raised at a late stage in

24   the litigation, i.e., after discovery had been completed and

25   after defendants had moved for summary judgment.     McCarthy II,

26   372 F. Supp. 2d at 700-01.

27        We review the determination of a district court to deny a
                                     32
 1   party leave to amend the complaint under Fed. R. Civ. P. 15(a)

 2   for abuse of discretion.   Grochowski v. Phoenix Constr.,

 3   318 F.3d 80, 86 (2d Cir. 2003).        We find that the district court

 4   did not abuse its discretion in denying the motion in part and

 5   thereby disallowing the claim pertaining to the mortality table.

 6        Although Rule 15(a) of the Federal Rules of Civil Procedure

 7   provides that leave to amend “shall be freely given when justice

 8   so requires,” it is within the sound discretion of the district

 9   court to grant or deny leave to amend.        See Zahra v. Town of

10   Southold, 48 F.3d 674, 686 (2d Cir. 1995) (upholding the denial

11   of a motion to amend a complaint that was filed two and one-half

12   years after the commencement of the action and three months

13   prior to trial); see also Ansam Assocs., Inc. v. Cola Petroleum,

14   Ltd., 760 F.2d 442, 446 (2d Cir. 1985) (upholding the denial of

15   a motion to amend a complaint when discovery already had been

16   completed and the non-movant had already filed a motion for

17   summary judgment).   A district court has discretion to deny

18   leave for good reason, including futility, bad faith, undue

19   delay, or undue prejudice to the opposing party.        See Foman v.

20   Davis, 371 U.S. 178, 182 (1962).       However, “[o]utright refusal

21   to grant the leave without any justifying reason for the denial

22   is an abuse of discretion.”   Jin v. Metro. Life Ins. Co.,

23   310 F.3d 84, 101 (2d Cir. 2002).

24        Plaintiffs filed the original complaint in this action on

25   March 12, 2003 and amended it on July 9, 2003.        McCarthy II,
                                       33
 1   372 F. Supp. 2d at 699.     They moved to amend the complaint a

 2   second time on December 21, 2004, more than two months after

 3   discovery was completed and more than a year and a half after

 4   the filing of the original complaint.     Id. at 700.   The district

 5   court originally granted the motion, believing it unopposed.

 6   Id.   Defendants moved to vacate the order granting the motion to

 7   amend.    Id.   Defendants did not object to most of plaintiffs’

 8   proposed amendments but opposed the amendment that would add a

 9   claim concerning the reasonableness of the mortality table used

10   in the Master Retirement Plan’s actuarial reduction.      Id.

11         In denying plaintiffs’ second motion to amend, the district

12   court noted that plaintiffs’ complaint “specifically alleged an

13   unreasonable interest rate” but “did not allege, in general, an

14   improper actuarial reduction, which might encompass a number of

15   factors, including the mortality table used.”      Id. at 701.    The

16   district court noted that the first amended complaint “did not

17   claim that the ‘application of an unreasonable actuarial

18   reduction’ worked a forfeiture, and it certainly did not claim

19   that the ‘application of an unreasonable mortality table’ worked

20   a forfeiture.”     Id.; see Am. Compl. ¶ 95.   The district court

21   concluded that “plaintiffs’ motion to amend seeks to add a new

22   claim.”    McCarthy II, 372 F. Supp. 2d at 700.   The district

23   court further concluded that “[i]f the amendment is allowed,

24   merits discovery will need to be reopened and the litigation


                                       34
 1   will, in essence, start over – the same experts will likely need

 2   to produce new reports and be re-deposed.”    Id. at 701.

 3        Plaintiffs became aware of the need to consider a possible

 4   claim directed to the mortality table more than seven months

 5   before moving to amend their complaint.    Their own expert had

 6   provided, by April 30, 2004, a declaration disclosing his

 7   position that the mortality table used by the Master Retirement

 8   Plan raised an issue.    See Claude Poulin Decl. dated

 9   Apr. 30, 2004, ¶ 20.    His declaration stated that “the mortality

10   table used by the Plan in the calculation of the actuarial

11   reduction factors is an old table that overestimates the

12   mortality rates currently applicable to the affected plan

13   participants.”   Id. ¶ 18.    On May 27, 2004, the same expert,

14   during a deposition, again identified a potential issue with the

15   mortality table, testifying that the mortality tables used by

16   the plan were outdated and led to a skewed actuarial reduction.

17   Claude Poulin Dep. dated May 27, 2004, at 122.

18        Plaintiffs-appellants argue that defendants were not

19   prejudiced by an amendment because the April 2004 declaration and

20   May 2004 deposition of plaintiffs’ actuarial expert gave

21   defendants full and fair notice that the mortality table

22   “significantly contributed to the ERISA violation alleged in the

23   original complaint.”    Br. of Pls.-Appellants 29-30.    As the

24   district court correctly noted, however, the amended complaint

25   challenged specifically the discount rate used in the actuarial
                                      35
 1   reduction, not the actuarial reduction method itself.

 2   McCarthy II, 372 F. Supp. 2d at 701.   A complaint provides a

 3   defendant with “notice of what the plaintiff’s claim is and the

 4   grounds upon which it rests.”   See Swierkiewicz, 534 U.S.

 5   at 512-14 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957))

 6   (quotation marks omitted).   Having received such notice, a

 7   defendant may conduct his trial preparation accordingly and is

 8   not required, based on the plaintiff’s subsequent conduct in

 9   litigation, to anticipate future claims that a plaintiff might

10   intend to pursue.   Thus, when plaintiffs’ counsel attempted to

11   question defendants’ expert about mortality assumptions during an

12   October 6, 2004 deposition, defendants’ counsel objected, stating

13   that “[a]t some point I have [to move for] a protective order if

14   you turn it into a deposition not about the opinion the witness

15   has been retained to testify on, but on a separate issue that is

16   not mentioned in the complaint, not mentioned at the motion to

17   dismiss stage that led to this round of briefing, and is not in

18   the case.”   Edward W. Brown Dep. dated Oct. 6, 2004, at 74.

19        Plaintiffs sought to amend their complaint after an

20   inordinate delay.   By that time, discovery had closed, defendants

21   had filed for summary judgment, and nearly two years had passed

22   since the filing of the original complaint.   In light of this

23   record, we conclude that the district court did not exceed its

24   discretion in denying plaintiffs’ leave to amend.


                                     36
 1    C.   The District Court Did Not Err in Granting Summary Judgment
 2           on the Lawfulness of the 6.75 Percent Discount Rate
 3
 4         We review de novo a district court’s grant of summary

 5   judgment.   Miller, 321 F.3d at 300.   Summary judgment is awarded

 6   when there are no genuine issues of material fact and the moving

 7   party is entitled to judgment as a matter of law.      Fed. R.

 8   Civ. P. 56(c).   In ruling on a summary judgment motion, the

 9   district court must “‘resolve all ambiguities, and credit all

10   factual inferences that could rationally be drawn, in favor of

11   the party opposing summary judgment’” and determine whether there

12   is a genuine dispute as to a material fact, raising an issue for

13   trial.   Kessler v. Westchester County Dep’t of Soc. Servs.,

14   461 F.3d 199, 206 (2d Cir. 2006) (quoting Cifra v. Gen. Elec.

15   Co., 252 F.3d 205, 216 (2d Cir. 2001)).    A fact is “material”

16   when it “‘might affect the outcome of the suit under governing

17   law.’” Jeffreys v. City of N.Y., 426 F.3d 549, 553 (2d Cir. 2005)

18   (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

19   (1986)).    An issue of fact is “genuine” if “‘the evidence is such

20   that a reasonable jury could return a verdict for the nonmoving

21   party.’”    Id. (quoting Anderson, 477 U.S. at 248).    Unless the

22   nonmoving party offers “‘some hard evidence showing that its

23   version of the events is not wholly fanciful[,]’” summary

24   judgment is granted to the moving party.    Id. at 554 (quoting

25   D’Amico v. City of N.Y., 132 F.3d 145, 149 (2d Cir. 1998)).



                                      37
 1        Before the district court and again on appeal, plaintiffs-

 2   appellants argued that one component of the Master Retirement

 3   Plan’s actuarial reduction, the 6.75 discount rate, violated

 4   ERISA because the discount rate was unreasonable and “[t]he

 5   application of an unreasonable rate of interest works a

 6   prohibited forfeiture of benefits under ERISA Section 203(a).”

 7   Am. Compl. ¶ 95   According to plaintiffs-appellants, a

 8   reasonable discount rate is “a long-term rate” based on

 9   “relatively risk-free investments,” namely the thirty-year

10   Treasury Bond, that would “‘yield the kind of investment return

11   retiring plan participants would experience in the marketplace.’”

12   Br. of Pls.-Appellants 8-9 (quoting Claude Poulin Dep. dated

13   May 27, 2004, at ¶ 14).

14        The district court granted summary judgment to defendants,

15   concluding as a matter of law that ERISA does not mandate the use

16   of a zero-risk discount rate.   McCarthy II, 372 F. Supp. 2d

17   at 699.   The district court saw no genuine issue of material fact,

18   considering the rate chosen by the Plan to be “one that no

19   reasonable juror could find unreasonable . . . .”   Id.

20        We agree with the district court that ERISA does not require

21   a plan to use in the actuarial reduction a zero-risk discount rate

22   or a rate that is practically risk-free.   We see no error in the

23   district court’s finding that the actuarial reduction used in the

24   Master Retirement Plan was not unreasonable solely for using a


                                     38
 1   6.75 percent discount rate.      We therefore affirm the grant of

 2   summary judgment to defendants-appellees.

 3            Section 206(a) of ERISA requires employers offering an early

 4   retirement benefit to current employees to offer an equivalent,

 5   although actuarially reduced, early retirement benefit to

 6   qualifying employees who have separated from service prior to

 7   satisfying the age requirement for early retirement.      29 U.S.C.

 8   § 1056(a).3     The benefit the separated employee receives upon

 9   satisfying the age requirement for early retirement must be “not

10   less than the benefit to which he would be entitled at the normal

11   retirement age, actuarially reduced under regulations prescribed

12   by the Secretary of the Treasury.”      Id.

13            Section 206(a), among other sections of ERISA, has a

14   counterpart in the Internal Revenue Code, which contains



          3
           ERISA Section 206 was amended by the Pension Protection
     Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (2006), which
     resulted in the addition of a new subsection. The text of
     Section 206(a), which was not modified by the amendment, is as
     follows:

              In the case of a plan which provides for the payment
         of an early retirement benefit, such plan shall provide
         that a participant who satisfied the service requirements
         for such early retirement benefit, but separated from the
         service (with any nonforfeitable right to an accrued
         benefit) before satisfying the age requirement for such
         early retirement benefit, is entitled upon satisfaction
         of such age requirement to receive a benefit not less
         than the benefit to which he would be entitled at the
         normal retirement age, actuarially reduced under
         regulations prescribed by the Secretary of the Treasury.

      29 U.S.C. § 1056(a).
                                        39
 1   provisions allowing favorable tax treatment to qualifying

 2   retirement plans.   Section 401(a)(14) of Title 26 contains the

 3   parallel provision to ERISA Section 206(a) in providing that a

 4   qualified defined benefit pension plan must afford early

 5   retirement benefits that are “not less than the benefit to which

 6   [the participant] would be entitled at the normal retirement age,

 7   actuarially, reduced under regulations prescribed by the Secretary

 8   [of the Treasury].”   26 U.S.C. § 401(a)(14) (2000).

 9        The Secretary of the Treasury has promulgated regulations to

10   construe Internal Revenue Code § 401(a)(14).    These regulations

11   provide that under a qualifying plan the “reduced normal [i.e.,

12   early] retirement benefit is the benefit to which the participant

13   would have been entitled under the plan at normal retirement age,

14   reduced in accordance with reasonable actuarial assumptions.”

15   26 C.F.R. § 1.401(a)-14(c)(2) (emphasis added).

16        We conclude, as did the district court, that the regulations

17   do not specify a rate or range of discount rates that qualify as

18   “reasonable actuarial reductions” for payment of early retirement

19   benefits.   McCarthy II, 372 F. Supp. 2d at 696.   The parties are

20   also in agreement on this point.     See Edward W. Brown Report dated

21   Aug. 4, 2004, at 4 (stating that “[n]either the IRS [n]or any

22   actuarial organization has published guidance on what constitutes

23   a reasonable interest rate for determining early retirement

24   payments”); Claude Poulin Decl. dated Apr. 30, 2004, ¶ 20 (stating

25   that “there are no prescribed interest rate or mortality table
                                     40
 1   assumptions for the calculation of early retirement reduction

 2   factors . . . .”).   We further conclude that by failing to specify

 3   a discount rate, the regulations provide benefit plans with a

 4   degree of discretion in setting discount rates to achieve a

 5   reduction according to reasonable actuarial assumptions.

 6        The question of whether the discount rate qualifies as a

 7   reasonable rate for purposes of ERISA is a mixed question of law

 8   and fact.   “Because statutory terms are at issue, their

 9   interpretation is a question of law, and it is the court’s duty to

10   define the appropriate legal standard.”    Chandris, Inc. v. Latsis,

11   515 U.S. 347, 369 (1995).   However, a question of fact exists if

12   reasonable persons applying the proper legal standard could differ

13   on whether the reduction was accomplished according to actuarial

14   assumptions that were reasonable as a result of the discount rate

15   used.   See id.   Mixed questions of law and fact are reviewed under

16   the de novo standard.    Beth Israel Med. Ctr. v. Horizon Blue Cross

17   and Blue Shield of New Jersey, Inc., 448 F.3d 573, 580

18   (2d Cir. 2006).

19        In determining whether the Master Retirement Plan was

20   reasonable in its use of the 6.75 percent discount rate for the

21   actuarial reduction, the district court found that “a plan has met

22   its ERISA obligations with respect to calculation of early benefit

23   payments if it selects a discount rate that is reasonably

24   calculated to be representative of its participants’ average

25   discount rate,”    McCarthy II, 372 F. Supp. 2d at 698, i.e., the
                                      41
 1   average of the rates of return desired by the participants, which

 2   would vary according to such factors as degree of risk and

 3   duration of investment, see id. at 697.     The court then considered

 4   the assumptions a plan can make with regard to the average

 5   discount rate of its participants.   The court noted that in

 6   selecting a discount rate, a plan could assume that its

 7   participants have a zero tolerance for risk or could instead focus

 8   on a plan’s rate of return.   The court determined that the

 9   investment characteristics of a plan and a plan’s rate of return

10   are instructive because the rate of return controls the amount of

11   defined benefit a plan will offer.   Id.    The district court

12   considered the discount rate used in the Master Retirement Plan

13   not to be unreasonable because that rate, although above the zero-

14   risk rate on thirty-year government securities that plaintiffs

15   proposed, was well below the approximate 8-10 percent rate of

16   return on the Master Retirement Plan’s assets.     Id. at 698-99.

17        Plaintiffs-appellants submit that the rate is unreasonable,

18   arguing that employer contributions, not plan returns, control the

19   amount of defined benefits that a plan is able to offer in the

20   first place.   Br. of Pls.-Appellants 24.   They consider it

21   unreasonable to use a plan’s investment experience when

22   calculating deferred vested retirement benefits because investment

23   in the equities market is volatile, future projections of a plan’s

24   investment returns are self-interested, and allowing a plan

25   sponsor to rely on investment returns assumes that past returns
                                     42
 1   are relevant to the analysis of long-term future investment

 2   returns.    Id. at 25-26.

 3        The court finds no error in the district court’s conclusion

 4   that the actuarial reduction method was not unreasonable solely

 5   for its use of a 6.75 percent discount rate.   The rate was

 6   significantly lower than the approximately 8-10 percent rate of

 7   return earned on the assets of the Master Retirement Plan, the

 8   6.75 discount percent rate was below the 7.37 and 6.88 percent

 9   average interest rates on thirty-year government securities that

10   existed around the time the plan was created, and plaintiffs-

11   appellants’ own expert did not testify that the 6.75 percent

12   discount rate was presumptively unreasonable as an actuarial

13   matter when used in a calculation for deferred vested retirement

14   benefits.

15        A plan’s experience in the market, i.e., the actual rate of

16   return on the plan’s investments, is relevant to determining

17   whether an actuarial rate is reasonable.   In 2002, the Master

18   Retirement Plan’s actuary estimated, for funding purposes, that

19   the plan’s projected rate of return would be 8.25 percent.

20   McCarthy II, 372 F. Supp. 2d at 698.   The Master Retirement Plan’s

21   investment experience in the equities market yielded relatively

22   consistent results: “Over the past two years, the Plan assets have

23   earned a rate of return of 9.63%; over the last year, 15.91%; over

24   the past 10 years, 10.78%; and over the past 15 years, 10.27%.”

25   Id. at 696.   The 6.75 percent discount rate used by the Master
                                     43
 1   Retirement Plan for purposes of the actuarial reduction was thus

 2   below both the estimated rate of return and the actual rate of

 3   return achieved by the assets of the plan.

 4        A discount rate chosen by a plan may be suspect where a plan

 5   projects inordinately high returns or experiences unusually high

 6   investment success and bases its actuarial discount rate on this

 7   high rate.   There is no indication here, however, that the Master

 8   Retirement Plan sought to link the discount rate with its

 9   projected return on investment.        The fact that the discount rate

10   selected by the Master Retirement Plan to calculate actuarial

11   reductions fell well below that rate, which was projected to be

12   8.25 percent but actually yielded an average over 10 percent, is a

13   further indication that the actuarial assumptions are not

14   unreasonable solely because of the use of the 6.75 percent

15   discount rate.   Nor is there any indication in the record that the

16   Master Retirement Plan based its portfolio of investments on high-

17   risk equities yielding volatile returns.

18        Additionally, the Master Retirement Plan selected and

19   maintained a discount rate that was, at the time, comparable to

20   the interest rate on thirty-year government securities.       The

21   Master Retirement Plan was amended and restated in 1994, in which

22   year the average interest rate for thirty-year government

23   securities was 7.37 percent.   See Fed. Reserve Statistical

24   Release: Selected Interest Rates: Historical Data: 30-year

25   Treasury Bill, available at
                                       44
 1   http://www.federalreserve.gov/releases/h15/data.htm.   In 1995, at

 2   the time the Internal Revenue Service (“IRS”) reviewed the plan

 3   for compliance with the trust qualification requirements of

 4   26 U.S.C. § 401(a), the average interest rate for thirty-year

 5   government securities was 6.88 percent, a rate comparable to but

 6   still higher than the Plan’s 6.75 percent rate.4   Id.; Br. of

 7   Pls.-Appellants 10 (stating that the 6.75 percent fixed rate ten

 8   years ago approximated the rate of the thirty-year Treasury Bond).

 9   By selecting a discount rate that was lower than the average

10   interest rate set for thirty-year government securities, the

11   Master Retirement Plan applied a discount rate that was at that

12   time more favorable to participants in the plan than would have

13   been the thirty-year interest rate on government securities.     In

14   summary, the district court’s finding that no juror could have

15   found on this record that the use of the 6.75 percent discount


         4
           Defendants-appellees argue that the 1995 determination
     letter that Dun & Bradstreet received from the IRS demonstrates
     implicit approval by the IRS that the discount rate and other
     actuarial assumptions in the Master Retirement Plan were
     reasonable. The determination letter refers to only two sections
     of the Treasury regulations, sections 1.401(a)(4)-1(b)(2) and
     1.401(a)(4)-4(b), both of which require that benefits be provided
     in a nondiscriminatory manner, and does not refer to the
     regulation addressing reasonable actuarial assumptions, section
     1.401(a)-14(c)(2). See 26 C.F.R. §§ 1.401(a)(4)-1(b)(2),
     (a)(4)-4(b), (a)-14(c)(2). In addition, I.R.S. Publication 794,
     which discusses the significance and limitations of a favorable
     determination letter, states that “[a] determination letter does
     not consider whether actuarial assumptions are reasonable for
     funding or deduction purposes or whether a specific contribution
     is deductible.” I.R.S. Publ. 794, Favorable Determination Letter
     at 2 (Rev. Sept. 2006). The court therefore declines to accord
     great weight to the determination letter. See Esden v. Bank of
     Boston, 229 F.3d 154, 175-76 (2d Cir. 2000).
                                    45
 1   rate was unreasonable is further supported by the average rate of

 2   return on the Master Retirement Plan’s investments, which was

 3   substantially higher than the discount rate, and the rate of

 4   return on thirty-year government securities around the time the

 5   plan was created, which was comparable to the discount rate.

 6            Plaintiffs-appellants argue that although application of the

 7   6.75 percent discount rate may have been reasonable in 1995, it is

 8   not reasonable in today’s low interest rate environment.5

 9   Essentially, plaintiffs-appellants advocate for “periodic”

10   adjustment of the rate used to determine actuarial equivalence.

11   Reply Br. of Pls.-Appellants 18 (arguing that “nothing prevents

12   the company from periodically reviewing its rate and changing it

13   as needed”).      ERISA does not specifically require that retirement

14   plans periodically adjust their actuarial interest rates.     If a

15   plan were required to do this, an employer potentially could

16   manipulate the benefits provided to a participant, particularly in

17   a year in which interest rates were extraordinarily high.     The

18   court recognizes the concern expressed in the relevant provisions

19   of Title 26, Title 29, and the related regulations, that employers

20   should not be able to manipulate actuarial assumptions to their

21   benefit and to the detriment of employees.      See, e.g.,

22   26 U.S.C. § 401(a)(25) (requiring, in order for a defined benefit


          5
           At the time the District Court issued its Memorandum and
     Order on June 6, 2005, the rate on thirty-year Treasury bills was
     approximately 4.9 percent. See McCarthy II, 372 F. Supp. 2d
     at 698.
                                     46
 1   plan to be treated as providing definitely determinable benefits,

 2   that “whenever the amount of any benefit is to be determined on

 3   the basis of actuarial assumptions, such assumptions [be]

 4   specified in the plan in a way which precludes employer

 5   discretion”).

 6           Plaintiffs’ expert, Claude Poulin, prepared a declaration and

 7   testified at deposition on the unreasonableness of the actuarial

 8   discount rate.6    Notably, he did not testify that the 6.75 percent

 9   discount rate was presumptively unreasonable or that it failed to

10   comply with industry standards.    Instead, he testified that he had

11   seen discount rates both lower and higher than that used by the

12   Master Retirement Plan.    Claude Poulin Dep. dated May 27, 2004,

13   at 49.     He concluded that “the interest rate in conjunction with

14   the mortality tables [was] unreasonable in determining actuarial

15   equivalency.”     Id. at 122 (emphasis added).   The essence of

16   Mr. Poulin’s testimony was that the discount rate adopted by the

17   Master Retirement Plan became unreasonable when it was used in

18   connection with what he considered to be an outdated mortality

19   table.    Id. at 48, 52.   Mr. Poulin testified that “it is possible

20   to generate or create a mortality table that combined with a 6.75

21   percent interest rate would produce a reasonable actuarial



         6
            Both parties relied on experts that are Fellows in the
     Society of Actuaries, members of the American Academy of
     Actuaries, and Enrolled Actuaries under ERISA. See Claude Poulin
     Decl. dated April 30, 2004, ¶ 1, Ex. A; Edward W. Brown Report
     dated Aug. 4, 2004, at 1.
                                     47
 1   equivalent benefit.”     Id. at 132.   The fact that plaintiffs’ own

 2   expert did not characterize the 6.75 percent discount rate as

 3   presumptively unreasonable but testified that “many plan rates are

 4   lower or maybe slightly higher” supported the district court’s

 5   conclusion.     Id. at 49 (emphasis added).

 6           Plaintiffs’ expert further stated that “the rates used for

 7   the calculation of lump sums give an indication of what ERISA and

 8   the Internal Revenue Code prescribe as reasonable actuarial

 9   assumptions for the purpose of determining actuarial equivalence

10   in general.”     Claude Poulin Decl. dated Apr. 30, 2004, ¶ 20.   The

11   statute, 26 U.S.C. § 417(e)(3)(A)(ii)(II), formerly required that

12   qualified retirement plans use the annual interest rate yield on

13   thirty-year Treasury securities in determining certain

14   distributions.7    We note significant differences between lump sum

15   distributions and deferred vested retirement benefits.     Although

16   use of the thirty-year Treasury rate may create a strong

17   presumption that a plan complies with 26 C.F.R.

18   § 1.401(a)-14(c)(2), neither the Internal Revenue Code nor any

19   regulations require use of the rate on thirty-year Treasury


         7
            This section of the Internal Revenue Code has been amended
     to provide, in relevant part, that the applicable interest rate
     means “the adjusted first, second, and third segment rates
     applied under rules similar to the rules of section 430(h)(2)(C)
     for the month before the date of the distribution or such other
     time as the Secretary may by regulations prescribe.” 26 U.S.C.
     § 417(e)(3)(C), amended by Pension Protection Act of 2006,
     Pub. L. No. 109-280, 120 Stat. 780 (2006). The amendments made
     by this section apply with respect to plan years beginning after
     December 31, 2007. Id.
                                     48
     1   securities to determine the actuarial equivalent of a deferred

     2   vested retirement benefit.

     3                            III.   CONCLUSION

     4        For the reasons stated in the foregoing, the district court’s

     5   grant of defendants’ motion to dismiss the count of the complaint

     6   that challenged the Summary Plan Description, the district court’s

     7   denial in part of plaintiffs’ motion to amend the complaint to

     8   disallow a claim relating to the mortality table, and the district

     9   court’s award of summary judgment in favor of defendants on the

 10      issue of the use by the Master Retirement Plan of the 6.75 percent

11       discount rate in the actuarial reduction, are AFFIRMED.




                                         49
