Full opinion text
HOFFMAN, District Judge. In these consolidated causes the court is asked to determine the validity of the practice of certain Bell System companies in offsetting federal old-age insurance benefits, (referred to hereafter as OASI or Social Security benefits) against the amount of the service pensions paid to retired employees of the Bell System companies. The case has been fully tried to the court without a jury and the parties’have filed exhaustive briefs. The facts, for the most part, are undisputed, and the issues are largely legal. In case No. 51 C 577 the plaintiff, Freeman S. Hurd, is a retired employee of Illinois Bell Telephone Company (Illinois Bell), a defendant together with American Telephone and Telegraph Company (AT & T) and The Bankers Trust Company of New York (Bankers Trust), the trustee of the several pension funds established by AT & T and the other associated and allied companies of the Bell System. The second action, No. 52 C 777, which was subsequently consolidated with the prior suit, was brought by the plaintiffs Harley A. Seybold and Charles E. Kluegel, retired employees of Western Electric Company, Incorporated (Western Electric), and by the plaintiffs Walter S. Young, Milo S. Buck, W. E. Oliver and Archie B. Callender, retired employees of AT & T, against Western Electric, AT & T and Bankers Trust. The pension plans of the three Bell System defendants were inaugurated at the same time, have been amended at approximately the same times and are in all material respects identical. They will be referred to collectively as the Bell Plan. While each of the plans — entitled “Plan for Employees’ Pensions, Disability Benefits and Death Benefits”- — contains, as the title indicates, provisions for other types of benefits, only the retirement pension is involved in this case. The plaintiffs have acknowledged that Bankers Trust, with which each of the Bell System companies has entered into a trust agreement, has fully met its duties under the agreements; and no independent relief is sought against it. Bankers Trust was included as a party so that in the event that the plaintiffs prevail in their action against the Bell System defendants, a recovery might be had from the trust funds. For convenience, the term “defendants” will refer only to the three Bell System defendants unless otherwise indicated. On January 1, 1913, the Bell System defendants first established a Plan for Employees’ Pensions, Disability Benefits and Death Benefits. The Plan provides for the payment of a service pension to employees who retire upon reaching one of several combinations of age and years of service — e.g., 60 years of age and 20 years of service for male employees. The formula for determining the amount of' the pension (Section 4) is 1 per cent of the average annual pay for 10 consecutive years multiplied by the number of years of employment. The formula has been the same throughout the history of the Plan. In addition, provision is made for a minimum pension which has been increased over the years and was, from 1949 to 1952, $100 per month after age 65 and $75 per month before 65, both including the amount of Social Security benefits received by the retired employee. From its inception the defendants have provided all the funds required by the pension agreement, and the employees have at no time contributed to the financing of the program. Since 1927 the amounts required to meet the defendants’ obligations under the Plan have been determined by what is called an “actuarial accrual method” (Tr. 221-22). The amount so determined each year is set aside from operating expenses and placed in the trust funds maintained separately by Bankers Trust for each of the defendants. The sums placed in the Pension Fund may not, according to the terms of the trust agreements, be used for any purpose other than the discharge of the companies’ pension obligations. Administration of the Plan within each company is vested in the Employees’ Benefit Committee, which is composed of five members appointed by the Board of Directors (Section 3). Representatives of the employees do not serve on the Committee. Section 10 of the Plan provides that the Benefit Committee, with the consent of the President and subject to the approval of the Board of Directors, may make changes in the Plan, and the Company may terminate the Plan, “but such, changes or termination shall not affect the rights of any employee, without his consent, to any benefit or pension to which he may have previously become entitled hereunder.” It is this section which the defendants rely on as authority for the amendments of the Plan to which the plaintiffs object. The provisions of the Plan which are at the heart of this controversy are those dealing with the adjustment of company pensions to reflect the receipt of government benefits. Since its inception the Plan has provided for such an adjustment. As amended in 1914, the provision read as follows (Section 9 (29) in the 1914 version; hereafter referred to as Section 8(27), the present designation): “In case any benefit or pension shall be payable under the laws now in force or hereafter enacted of any State or Country to any employee of the Company or his beneficiaries under such laws, the excess only, if any, of the amount prescribed in these Regulations above the amount of such benefit or pension prescribed by law shall be the benefit or pension payable under these Regulations. * * * The amounts payable by the Company under any law as aforesaid, whether paid directly to the employee or his beneficiaries, or to any other persons, or to any company, commission or State, to provide for the payment of such benefits or pensions shall, on approval of the Committee, be chargeable to the Fund.” The term “Fund” as used in this provision referred to the reserve funds maintained by the defendants themselves and not to the trust funds. When the defendants entered into the agreements with Bankers Trust in 1927, establishing separate trust funds, the last sentence of this section was eliminated. In November 1936, after the passage of the Social Security Act but before it became fully effective, the president of each of the defendant companies sent a written announcement to all employees of that company explaining the effect of the Social Security Act on the Bell Plan. The announcement read as follows: “No change is contemplated in the Plan on account of the Federal Social Security Act of 1935 except that if the Act shall remain in effect unchanged until 1942, when payment of Government Pensions begins under the Act, it is expected that the provision now in the Plan that all of the pension paid by the Government shall be deducted from pension otherwise payable under the Plan will be changed to provide that only one-half the pension paid by the Government under the Act shall be deducted. In other words, if the Act remains unchanged, the employee retiring on pension after 1941 will receive from the Government and the Company together the equivalent of his or her full pension from the Company plus one-half of the Government pension, which half represents, in effect, what the employee has contributed toward the Government pension through the tax on his or her salary or wages.” (Def.Ex. 1, 6, 9). The Social Security Act Amendments of 1939 advanced the effective date of OASI benefit payments to 1940, and the defendants then amended the Plan in accordance with the announcement of 1936. These were the amendments of January 1, 1940. Section 8(27) was revised only to the extent of adding a phrase at the end of the first sentence so that it read: “In- case any benefit or pension shall be payable under the laws now in force or hereafter enacted of any State or Country to any employee of the Company or his beneficiaries under such laws, the excess only, if any, of the amount prescribed in these Regulations above the amount of such benefit or pension prescribed by law shall be the benefit or pension payable under these Regulations, except as provided in Paragraph 28 of this Section.’’ (Emphasis has been added by the court throughout unless otherwise indicated.) A new Paragraph 28 was added, which had the effect of limiting the offset to one-half, instead of the full amount, of the Social Security payments to which the employee was entitled under the 1939 Act. “From the time when a person retired on a service pension under this Plan is entitled to a ‘primary insurance benefit’ under the ‘Social Security Act Amendments of 1939’ the amount of his monthly service pension otherwise payable under this Plan shall be reduced by one-half of said ‘primary insurance benefit’ subject to the following conditions: “a) Such adjustment shall begin as soon as such person would become entitled to receive, upon application, said ‘primary insurance benefit’ solely on the basis of employment included in his ‘term of employment’ as defined in this Plan. * * * * * “ * * * This Paragraph 28 shall be effective only while the Act entitled ‘Social Security Act Amendments of 1939’ shall remain in effect unchanged.” In 1946 Section 8(27) was again amended to make it applicable to “any benefit or pension, which the Committee shall determine to be of the same general character as a payment provided by the Plan”. This is substantially the approach that the defendants had followed from the beginning, and the plaintiffs raise no particular issue about this amendment. In addition, a sentence was added that service pensions under the Plan were not to be reduced by reason of governmental pensions payable on account of military service. In 1939 it became apparent that Congress would again amend the Social Security laws, among other things increasing the amount of OASI benefits. The defendants, believing that further Social Security revisions would nullify the operation of Section 8(28) of their Plan —which was specifically limited to the duration of the 1939 Social Security Act Amendments — and that full offset of OASI benefits would come into play under Section 8(27), again revised their Plan. As it was thus modified effective November 16, 1949, Section 8(28) read, as follows: “A benefit or pension payment under this Plan shall be reduced by one-half the amount of any related benefit which the recipient would be entitled to receive under the Federal Social Security Act, as in effect at the time the payment is made * *, subject to the following conditions: “a) No pension shall be adjusted to an extent which brings it below the minimum specified under Paragraph 2(a) of Section 4 in any case to which that minimum applies. * * * “c) In the event the Social Security Act is amended to provide for tax contributions which are different in rate as between employer and employees, the adjustment provided for in this Paragraph 28 shall be changed with respect to a benfit or pension granted thereafter by substituting for ‘one-half’ in the computation of such adjustment the ratio which the Company’s rate of tax contribution bears to the combined rate of tax imposed upon employer and employees.” It will be seen that by this amendment the one-half offset was no longer tied to a particular Social Security Act but rather to the Act in effect at the time the pension payment is made. One final amendment to Section 8(28), which is relevant here only for several limited purposes, was made by the defendants in 1952 after Congress again increased Social Security benefits. Under this revision employees who retired prior to August 31, 1952, were to have their pensions adjusted by one-half of the OASI benefits to which they would be entitled under the Social Security Act as amended in 1950, while those retiring after August 31, 1952, would have their pensions adjusted on the basis of the Act in effect on the date of retirement. The effect of these various provisions • may be illustrated by showing the adjustments made in the service pension of one of the plaintiffs, Freeman S. Hurd. Date of Retirement— January 1, 1941. Basic Pension (computed according to Section 4 of Plan) $178.47 OASI Benefits to which entitled, beginning March 1, 1944 30.46 One-half of OASI Benefits 15.23 Adjusted Service Pension, March 1, 1944, to September 1, 1950 163.24 Combined Service Pension and OASI t Benefits, March 1, 1944, to September 1, 1950 193.70 OASI Benefits, September 1, 1950, to August 31, 1952 54.60 One-half of OASI Benefits 27.30 Adjusted Service Pension, September 1, 1950, to August 31, 1952 151.17 Combined Service Pension and OASI Benefits, September 1, 1950, to August 31, 1952 205.77 From this table it can be seen that each increase in Social Security benefits resulted in a decrease in Hurd’s Illinois Bell service pension, although his total income was greater with each such increase. Against the background of these provisions in the Bell Plan, the plaintiffs object to four practices of the defendants which may be summarized as follows: I (A) Neither Section 8(27) of the Plan, nor any other provision, authorized the defendants to deduct any part of Social Security benefits from the plaintiffs’ Bell pensions; and the amendment of 1940 providing for one-half offset is void. (B) If such offset was authorized by the Plan, it is unlawful because it amounts to a transfer of the economic benefits of Social Security payments to the defendants in violation of Section 207 of the Social Security Act, 42 U.S.C.A. § 407. II (A) Even if the defendants had the authority to make the original Social Security offsets in 1940, the 1949 amendment to the Plan, which further increased the amount of the offset, was void. There is no authority in the Plan to redetermine the amount of a service pension after an employee is retired. (B) This additional adjustment is also contrary to the policy of the Social Security Act. III The 1952 amendment to the Plan — by which the defendants adopted the principle that the amount of a pension may not be redetermined after retirement, but which they applied only to those retiring after 1952 — discriminated against the plaintiffs and others in their position and violated the defendants’ fiduciary duty to retired employees. IV There is no authority in the Plan to justify the defendants’ practice of continuing to offset Social Security when the employee takes covered employment and thereby loses his Social Security benefits. The plaintiffs asked for injunctive relief and for the restoration of all amounts unlawfully deducted from their service pensions by the defendants. The defendants’ answer to the plaintiffs’ chief contentions (numbers I and II) is that Section 10 of the Plan authorizes the revision of its provisions so long as the amendment does not affect the rights of any employee, without his consent, to any benefit or pension to which he may have previously become entitled. Neither the 1940 nor the 1949 amendment reduced employees’ rights under the Plan, and, in fact, both amounted to a liberalization of the Plan in the employees’ favor. The defendants also contend that the decision of the Benefit Committee on “all questions” arising in the administration of the Plan is by its terms conclusive if the decision is made in good faith; that this applies to questions of law as well as fact; and that such a provision is held valid and binding. With respect to the Social Security Act the defendants say that this law was not intended to have any effect on private pension plans. On the contrary, Congress anticipated some form of integration with private pensions and in several ways since the advent of Social Security has demonstrated its approval of the offset practice. Before proceeding to a discussion of the specific issues raised, some comment will be made on what the plaintiffs call “preliminary considerations”, certain basic premises which the court must recognize and accept in order to decide this case in the proper framework. By way of background the plaintiffs have described what they deem to be the historical development of the law relating to industrial pensions. They say that while private pensions were once treated as an unenforceable gratuity on the part of the employer, they are now universally regarded as deferred wages which form a part of the employee’s contract of employment and are fully enforceable as any other contractual obligation. This new status of pensions has particular significance here, it is said, for it means that this is essentially a wage case, and the reduction of the plaintiffs’ pensions by reference to Social Security is a reduction of wages. In interpreting wage contracts courts have always resolved any doubts and ambiguities in favor of the employee, strictly construing the terms of the contract against the employer. It is by no means clear that the change in the legal status of private pensions has been as complete or universally accepted as the plaintiffs insist. As recently as 1954 an Illinois court held that a “noncontributory pension plan did not give rise to an enforceable unilateral contract”. Hughes v. Encyclopaedia Britannica, Inc., 1954, 1 Ill.App.2d 514, 117 N.E.2d 880, 881, 42 A.L.R.2d 456. A similar holding is found in Umshler v. Umshler, 1947, 332 Ill.App. 494, 76 N.E. 2d 231; Dolan v. Heller Bros. Co., 1954, 30 N.J.Super. 440, 104 A.2d 860; Menke v. Thompson, 8 Cir., 1944, 140 F.2d 786; McCabe v. Consolidated Edison Co. of New York, City Ct.N.Y.1941, 30 N.Y.S. 2d 445; Webster v. Southwestern Bell Telephone Co., Tex.Civ.App.1941, 153 S.W.2d 498. The two most clear-cut decisions upholding the enforceability of private pension plans are Schofield v. Zion’s Co-op. Mercantile Institution, 1934, 85 Utah 281, 39 P.2d 342, 96 A.L.R. 1083, and Psutka v. Michigan Alkali Co., 1936, 274 Mich. 318, 264 N.W. 385. Neither by the timing of the cases nor by the nature of the particular plan involved (in all it w.as a noncontributory “voluntary” plan) is it possible satisfactorily to reconcile all of these cases. Apparently the same diversity of view prevails with respect to public pension plans established for governmental employees. See Note, 99 U. of Penn. L. Rev. 701 (1951). A careful reading of the decisions indicates, however, that even the states following a strict view of pension plans would enforce employees’ rights in a separately established trust fund; and many other cases can be found in which the court and the parties have assumed that the pension plan creates an enforceable contract obligation. The defendants have conceded as much, for they have not' questioned the right of the plaintiffs to enforce the terms of the Bell Plan. Again, it is not as clear as the plaintiffs contend that a suit to enforce a pension right is in effect a suit to obtain a deferred wage and thus a “wage case”. The plaintiffs point to Inland Steel Co. v. N. L. R. B., 7 Cir., 1948, 170 F.2d 247, 12 A.L.R.2d 240, certiorari denied, 1949, 336 U.S. 960, 69 S.Ct. 887, 93 L.Ed. 1112, as the “decisive clarification for the whole field of pension law in holding that the contract was one for the payment of a deferred wage.” The Inland Steel ,case clearly held that pensions are a subject of compulsory collective bargaining under the Labor Management Relations Act. The court concluded that the “better” view was that the benefits of pension plans are included in the term wages, but that in any event they are one of the conditions of employment and thus covered by the Act. See also, Ledwith v. Bankers Life Insurance Co., 1952, 156 Neb. 107, 54 N.W.2d 409, describing retirement benefits as “a form of contingent deferred compensation” for purposes of a state statute regulating the compensation of insurance company employees. Accepting the view that pensions are deferred wages, however, the court is unable to see in what way that determines the outcome of this case. The instrument upon which the litigation turns is, as both parties admit, a unilateral contract to pay a' pension; and the court’s duty is to establish the meaning and effect of that contract, guided by applicable principles of interpretation and whatever relevant evidence the parties have introduced that will aid in finding the meaning. Apparently the plaintiffs’ concern in labeling this as a “wage” case is the belief that the doctrine of contra proferentem will then resolve the issues in their favor. This is one of the guides to the interpretation of a contract, the effect of which is that when there is doubt as to which of several possible meanings is to be given to the words of a contract, the words should be construed most strongly against the party who chose them. The court is not aware of a separate and distinct rule that wage contracts are always strictly construed against the employer. Judicial expressions to this effect can readily be traced to the contra proferentem rule. This appears clearly in Western Union Telegraph Co. v. Hughes, 4 Cir., 1915, 228 F. 885, 887-888 a case cited by the plaintiffs. The Western Union case was an action arising under a benefit plan in which the court explicitly adopted “the rule that the words of an insurance policy, being those of the insurance company itself, should be taken most strongly against it”. See also, Forrish v. Kennedy, 1954, 377 Pa. 370, 105 A.2d 67; National Symphony Orchestra Ass’n v. Konevsky, Mun.Ct.App.D.C.1945, 44 A. 2d 694. The plaintiffs have relied on this rule as a command to adopt each interpretation of the Bell Plan which they put forward. But it can have no such effect. At best it is a secondary rule of interpretation, a “last resort” which may be invoked after all of the ordinary interpretative guides have been exhausted and there remain two or more reasonable interpretations of the language in question. 3 Corbin, Contracts, § 559 (1951); and see the cases cited in 17 C.J.S., Contracts, § 324. The defect in the plaintiffs’ case is that they have applied none of the other principles of interpretation. Bather, they have isolated certain words or phrases and assigned to them a precise meaning which was designed to create ambiguity and then resolved the resulting ambiguity in their own favor. Such a course would not lead to a proper interpretation of the contract. The court has at all times been guided by what it finds to have been the principal purpose of the Bell Plan and particularly of the provisions in issue here and by what the language was intended to mean and known by the plaintiffs to mean. See United States Trust Co. of New York v. Jones, 1953, 414 Ill. 265, 111 N.E.2d 144. As the court understands the second of the plaintiffs’ underlying principles, it is that the relationship between the defendants and their retired employees is that of beneficiary and fiduciary. They recite the creation of the trust funds in 1927 under agreement with Bankers Trust and the undertaking which such agreement implied — that the trust funds, corpus and income, could be used only to satisfy the defendants’ obligations to their employees under the terms of the trust agreements and the Plan. From this they argue that upon retirement of the plaintiffs the defendants assumed the role of fiduciary with the concomitant strict standards of conduct applicable to trustees. ' They also say that basically the proceeding is thus one for the interpretation of a trust agreement and the proper application of trust funds. They do not reconcile this with their earlier contention that the proceeding is basically a wage case. It is not questioned that the sums of money required to meet the defendants’ obligations under the Plan are in trust and that the funds may be used only for the benefit of the employees. But the court is unable to follow the plaintiffs’ reasoning by which they transform the creator of the trust into the trustee. If misconduct were charged against Bankers Trust, the law of trusts would be relevant. But the plaintiffs’ rights in relation to the Bell System defendants are contractual. The plaintiffs alleged in their complaint that these were class suits and that they were brought on behalf of themselves and all other past and prospective pensioners of Bell System companies whose service pensions have been or would be reduced by reason of OASI benefits. On the record the court believes that the plaintiffs have met the requirements of Rule 23(a) (3) of the Federal Rules of Civil Procedure, 28 U. S.C., and that they were entitled to bring these suits as “spurious” class actions — although the class which the plaintiffs claim to represent is not as broad as the several groups listed in the final amended complaints. The necessary identity of interest would extend only to those employees of AT & T, Illinois Bell and Western Electric who retired prior to September 1, 1950, and whose service pensions had been adjusted upon the receipt of Social Security benefits. No other members of the class, however, intervened in these proceedings; and since Rule 23(a) (3) is a permissive joinder device and only the original parties and intervenors are bound by a judgment in a spurious class action, the court cannot think of any advantage to be gained by the plaintiffs, or the defendants, in calling this a class action under the circumstances. Clearly the determination has no relevance to the merits of the action. I (A) The first of the plaintiffs’ principal contentions is that the Bell Plan never contained the authority which the defendants attributed to it to deduct OASI benefits from the companies’ service pensions. This argument is made, and will be discussed, in terms of the following specific points: 1. It is said that the phrase “the excess only, if any, of the amount prescribed in the Plan above the amount of such payment prescribed by law shall be payable under the Plan.” is “literally unintelligible” and that Section 8(27) is so vague as to be unenforceable. The plaintiffs argue that the amount “prescribed in the Plan” and the amount “payable under the Plan” are identical and that it reduces the provision to absurdity to subtract a third amount, the government pension, from one of two equals and still assert that they are equal. This assumes that the two phrases express an identical meaning, but there is nothing to indicate that they do. They are not technical terms. One is used to refer to the pension determined by application of the basic formula of the Plan, while the second expresses the effect of Section 8(27) that only the excess of the basic pension, after deduction of any government pension, will actually be paid. “An interpretation which gives a reasonable, lawful and effective meaning to all manifestations of intention is preferred to an interpretation which leaves a part of such manifestations unreasonable, unlawful or of no effect.” Restatement, Contracts § 236(a) (1932). There is no difficulty in understanding the intended operation of Section 8(27). 2. In further support of the asserted fatal ambiguity of Section 8 (27), the plaintiffs contend that the defendants themselves have been confused about the scope of the provision in particular cases. It is doubtful that an uncertainty about the applicability of the provision in other, and perhaps more difficult, cases would be very persuasive in proving that the section was so ambiguous as to be unenforceable. But, in any event, the evidence does not bear out the plaintiffs’ contention. What it does show is that the defendants knew that they had used all-inclusive terms — i. e., that every government benefit or pension required by law was to be deducted — - but, recognizing that in some circumstances the deduction would operate in an unfair or undesirable manner, modified the policy set out in Section 8(27). For example, in connection with state old-age pensions, the Employees’ Benefit Committee of AT & T determined that very few employees retired on a company pension would be eligible for state old-age pensions, that the laws were in a process of change and that those so far enacted should not be considered for the present. (Pl. Ex. 84, letter of February 24, 1931). In recommending, the 1946 amendment to Section 8(27), specifically excluding military pensions, the Benefit Committees of AT & T and Illinois Bell stated that a “literal interpretation” of the provision required the deduction of any kind of payment provided by law but that in the interest of equity the Committee had endeavored to limit it to payments of the same general character. (Def. Ex. 23, 24). Both the exclusion of military pensions and the limitation to benefits of the same general character were then incorporated into Section 8 (27). Again, in the case of the Rhode Island cash sickness benefits the AT & T Benefit Committee recognized that Section 8(27) required it to deduct these benefits from the disability benefits that would be paid under the Plan but recommended reimbursing the employee because the Rhode Island benefits were provided for solely by employee contributions. (Pl. Ex. 90). This pattern is repeated in Pl. Ex. 88 with respect to Workmen’s Compensation payments received by a Bell employee for injuries suffered in outside employment. “the excess only, if any, of the amount prescribed in these Regulations above the amount of such benefit or pension prescribed by law shall be the benefit or pension payable under these Regulations.” 3. The plaintiffs next contend that old-age insurance benefits are neither a pension nor a benefit as those terms are used in Section 8(27). It is claimed that OASI payments are, as the name indicates, a form of insurance, paid for out of an actuarial fund which is maintained by contributions made in part by the employees. The plaintiffs acknowledge that “ ‘pension’ is sometimes loosely used to refer to any retirement annuity”; but they say that when the very issue is the meaning of the term, it is established in federal jurisprudence that “pension” has an exact meaning which does not include retirement annuities payable by the government out of funds contributed by the beneficiaries. Dismuke v. United States, 1936, 297 U.S. 167, 56 S.Ct. 400, 80 L.Ed. 561, and Lemly v. United States, 1948, 75 F.Supp. 248, 109 Ct.Cl. 760, are relied upon. In both of these cases the courts held that the claim sued upon by the plaintiff was not one for a pension within the meaning of statutes restricting the jurisdiction of federal courts over claims for pensions. In the Dismuke case the Supreme Court was interpreting what it believed Congress meant by the term “pension” when it passed the Tucker Act limiting jurisdiction. In the Lemly case the court was dealing with an act in which Congress separately listed “pensions” and “retirement pay”, and it concluded that Congress gave each word an individual meaning. A further examination of the Lemly case shows, however, that under the definitions which the court gave to the two terms, Social Security benefits would seem to qualify as a pension rather than as retirement pay. That these cases do not prescribe an established meaning of the term “pension” for all purposes is more apparent from the décision in Anderson v. United States, 9 Cir., 1953, 205 F.2d 326. The court, at p. 328, observed that the word “pension” “is an ambiguous term at best.” It acknowledged that “pension” has been “loosely” defined as a government gratuity; but despite the fact that the claim sued on in the Anderson case rested on a gratuitous allowance, the court nevertheless held that it was not a pension within the meaning of the jurisdictional .statutes. The court ■concluded that prior decisions, including the Dismuke case, meant only that in enacting the jurisdictional limitations Congress intended the term “pension” to refer to gratuitous pensions paid to military veterans. There is no attempt in these cases to settle the meaning in other contexts. But even if “pension”, as used in federal statutes, does not ordinarily encompass a contributory retirement scheme (and the Social Security laws do not refer to OASI benefits as a pension), we are not at this stage interpreting the Social Security Act but, rather, the defendants’ private pension plan. The plaintiffs attempt to ascribe to the terms used in Section 8(27") a precise and technical meaning which was never intended and which the words have acquired, if at all, only in recent years and in other contexts. What they ignore is that Section 8(27), in its present form, was drafted in 1914 at a time when the scope and variety of present-day old-age and disability plans were unknown and, indeed, industrial pensions themselves were a rarity.- Section 8(27) by its terms was to cover “laws hereafter enacted”. There is evidence to show that the provision was “purposely made very broad in order to cover the many possible forms of social insurance, which it is impossible to foresee in detail, but which if enacted would, in the absence of a provision of this sort, result in duplicate payments to employees or their beneficiaries, to which the Company would be forced to contribute either directly * * * or indirectly * * (Def. Ex. 33). In 1918 the Secretary of the Employees Benefit Fund Committee of AT & T wrote that, “The wording is broad enough to cover health insurance laws, old age pensions, and similar laws if any such laws are ever enacted in this country.” (Def. Ex. 32). Whatever weight these expressions are entitled to (they were intra-company communications), it would be difficult to conceive of a governmental payment which more accurately fulfills the stated purpose of Section 8(27). The court would not be justified in nullifying this provision because the defendants were unable to describe in detail the social legislation of 20 years hence which — with rather surprising foresight — they anticipated and provided for. Much of what has been said applies also to the argument that the term “benefit”, as used in the Bell Plan, has a precise and technical meaning. The plaintiffs are correct, however, in pointing out that the Plan is generally consistent in referring to the retirement payments as pensions and to the sickness and accident payments as benefits, from which they argue that the two terms are mutually exclusive. If Section 8(27) were confined to the deduction of benefits (instead of benefits or pensions, as it provides), this contention would be entitled to serious consideration. On the other hand, it is not accurate to say that the term “benefit” is never used in the Plan in the broader sense which the word connotes. The “Summary of Benefits”, which was included in all copies of the Plan distributed to employees, includes a description of the pension provisions as one of the “benefits to which employees may become entitled”; and Sections 8(1) and (2) and 9 speak of benefits in a nonexclusive sense. In addition, the plaintiffs, to be consistent with their earlier argument on the term “pension”, would have to acknowledge that Title II of the Social Security Act identifies the OASI payments as benefits. 4. The plaintiffs contend that Social Security benefits could not be offset against company pensions under Section 8(27) because the two are not in pari materia — ■%. e., the Social Security benefit is not the same kind of payment as the Bell service pension. The source of this argument is the defendants’ expressed policy that government benefits were intended to be offset only when they are of the same character as the benefit payable under the Plan. (Pl Ex. 42). This policy was written into the Plan when Section 8(27) was amended in 1946 to apply to “any benefit or pension, which the Committee shall determine to be of the same general character as a payment provided by the Plan”. The reason for this policy, as expressed in company statements, is to avoid duplication of payments and costs. Building on this, the plaintiffs argue that the only criterion for determining whether benefits duplicate one another is the identity of the purposes which they serve and that OASI benefits and the private pension do not have the same purpose. Social Security is a “remedy for a general social evil — destitution in old age of retired industrial workers who have been unable to provide retirement income out of their own savings.” (Pl. Brief, p. 39). The purpose of an industrial pension, on the other hand, is to obtain a particular business advantage for the company maintaining it, principally in encouraging long service by employees and in promoting efficiency by enabling the company to retire older workers, whose contribution has probably diminished, and thus make room for younger men. There is no quarrel with these characterizations so far as they go. But it seems to the court that the plaintiffs have avoided the fundamental similarities between Social Security and the private pension by concerning themselves only with motivation in a narrow sense which is not justified by the standard of Section 8(27) that the benefits be of “the same general character.” Of course, Congress in énacting the Social Security Act directed its attention to broad economic and social problems. Congress does not legislate for the advantage, business or otherwise, of individual companies. The defendants, on the other hand, could hardly justify to their shareholders, or public regulatory agencies, the expenditure of millions of dollars, which each of the plans has cost, if they could point to no business advantage to the companies. The defendants’ witness Latimer, who is intimately acquainted both with the development of the Social Security scheme and with a large number of private industrial pension plans, testified on cross-examination in answer to a question as to whether he would agree that there are differences of a substantive character between an industrial pension and Social Security: “I am not sure that I know what is meant by ‘substantive’. “I can answer that by saying that to me they are of the same general character. They are not identical, but I am fully convinced that they are of the same general character because of the objectives in common, held by both the Government and the companies, by the character of the person to whom the payment is made, and by and large the general over-all purpose which they serve.” (Tr. 403). Both the Social Security payments and the service pensions granted under the Bell Plan provide retirement income to defendants’ employees and both enable the so-called superannuated employees to be retired without becoming public charges and thus make room for the younger members of the labor force. The fact that one is paid for indirectly by the defendants through payroll taxes required by law and the other directly by contributions made to a trust fund does not destroy the similar function they serve for the employer and even more for the employee within the meaning of Section 8(27). 5. Finally, the plaintiffs say thát the defendants have consciously misled their employees for some 20 or 30 years by claiming that Section 8(27) authorized the deduction of government pensions when, in fact, as they knew, that section authorized only the deduction of benefits paid under law by the companies themselves. In this they rely principally on the language of Section 8 (27) as it appeared (as Section 9(32) ) in the original Plan of 1913: “In ease any employee or his beneficiaries shall be entitled under the laws of any State to any compensation, pension or other benefit greater than that herein provided, the amount paid to the employee shall be that prescribed by statute. The Committee are authorized to pay the amount of such liability in the manner prescribed by law instead of in accordance with the provisions contained herein. In case the statutory liability is less than the Company’s liability hereunder, the Committee may make the payments required by law and shall pay to such employee or to those persons entitled to take hereunder the excess of the amount payable hereunder above the amount so paid in accordance with law. In case any statutory payment has to be made or any judgment is recovered by an employee or his beneficiaries against, the Company on account of the legal liability above described or any liability for damages on account of accident or death, or on account of any liability hereunder, the amount of the statutory payment or judgment shall be chargeable to the Fund.” When the section was amended in 1914 to read in substantially its present form, the plaintiffs contend that the intent to deduct only company-paid benefits required by law was continued in the last sentence of the revised provision: “The amounts payable by the Company under any law as aforesaid, whether paid directly to the employee or his beneficiaries, or to any other person, or to any company, commission or State, to provide for the payment of such benefits or pensions shall, on approval of the Committee, be chargeable to the Fund.” The precise argument made by the plaintiffs with respect to Section 9 (32) of the 1913 Plan was considered and rejected by the Supreme Court of Oregon in McLemore v. Western Union Telegraph Co., 1918, 88 Or. 228, 171 P. 390, modified on other grounds, 171 P. 1049. In that case the court was asked to hold that a benefit payment made to plaintiff by the State of Oregon for the death of her husband was not within the scope of the identical Section 9(32) of Western Union’s Plan because the payment had been made by the state and not by the employer. “We are not favorably impressed with this contention. The fund from which the state makes payments under the act of 1913 is supplied chiefly by contributions made by employers of labor. Most of the payments made to the employés and their beneficiaries are made indirectly by the j employers. Giving to the plan the fair construction to which it is entitled, an intention is manifested that it shall be read in the light of the laws of the state in which the employé resides and in which he is injured. * * * At the time when the defendant promulgated its scheme the Oregon statute had not been enacted. The author of the plan was evidently familiar only with compensation laws which provided for payments by the employer directly to the employé. The intention is nevertheless apparent from the language used in section 32 of article 9, and it should be given effect as above stated.” 171 P. at page 394. The court sees no reason to disturb this decision which was certainly fair notice that the Bell Plan was not confined to benefits paid directly by the companies, As for the last sentence of the provision as it appeared in the Plan from 1914 to 1928, the court believes that it clearly meant that the amounts which the companies might be required to pay either directly to the employees or indirectly in the form of taxes or other assessments could be charged to the Benefit Fund, which was at that time a bookkeeping account. This is consistent with the elimination of that sentence in 1928 when the defendants changed to a trust fund method of segregating the amounts required to meet their obligations. The company “expositions” relied upon by the plaintiffs as proof of their interpretation (Pl. Ex. 89, 92) were fully answered in Def. Ex. 33 and 34 by the Benefit Committee of AT & T. The court has given careful consideration to each of the points made by the plaintiffs on this aspect of the case and has concluded that neither singly nor together are they persuasive. There is, in addition, another weakness underlying the plaintiffs’ entire attack on the validity of offsetting Social Security benefits under the terms of the Bell Plan. At least as early as 1936 the defendants set forth their interpretation of Section 8 (27) in the announcement admittedly sent to all employees (quoted supra 136 F.Supp. 130) explaining the effect of the Social Security Act on the Bell Plan. This interpretation was acted on in 1940 when the defendants amended the Plan to provide for the deduction of only one-half of Social Security benefits. The defendants have continuously made the offset since then, and the plaintiffs accepted their reduced pension checks for some 11 years without objection so far as this record shows. Not until the filing of Hurd’s first amended complaint in 1951 was the issue suggested. It is an accepted principle of contract law that an interpretation given to the agreement by one party and concurred in by the other may be accorded great .weight by the court in arriving at the meaning which it adopts. See 3 Corbin, Contracts § 558 (1951), and the many cases cited there; Restatement, Contracts § 231(e) (1932). Particularly apt is Judge Learned Hand’s opinion in Nolte v. Hudson Navigation Co., 2 Cir., 1926, 16 F.2d 182. The question was whether the city of New York could claim compensation for a shed, located near the company’s pier, which the company had occupied for some years without paying rent. Judge Hand, in disallowing the claim, said with respect to the contract between the parties relating to the occupancy of the pier: “ * * * True, there is no apt language to include the maintenance of a shed upon the land inside the bulkhead; but there is equally none to exclude it. ‘Emoluments’ ‘appurtenant’ to the wharf is indeed a vague phrase, and was used because it was; the exact extent of what was granted was not known, and was not meant to be set out in detail. * * * “However, we need not say that, if the words stood bare, as they did in 1898, we should feel obliged to construe them in this way. At least, when parties choose such equivocal language, they must be content with the interpretation which they put upon it immediately thereafter, and to which they continuously adhered for nearly 25 years. While the new pier and bulkhead were building, the company asserted its right under the contract to a new shed located relatively to the new bulkhead as the old shed was located relatively to the old bulkhead, and the city assented, not as the grant of a new right, but as something included within the old. “Nobody read any other meaning into the words until this claim was filed, and everybody concerned acted on the assumption that the first interpretation had been right. The canon of contemporaneous and subsequent construction of a contract applies, not only to individuals, but also to municipalities * * 16 F.2d at page 184. The court therefore concludes that the Bell Plan has from its inception provided for the offset of a government benefit like Social Security and that the 1940 amendment calling for a one-half offset did not reduce any rights of the plaintiffs. I (B) The second ground on which the plaintiffs claim that the offset of Social Security benefits from company pensions is invalid is that it constitutes a transfer prohibited by Section 207 of the Social Security Act, 42 U.S.C.A. § 407. This section provides: “The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.” The plaintiffs’ argument is summarized as follows: “ * * * where the receipt of the Social Security payment is made the sole legal ground for the reduction pro tanto in the amount of a deferred wage which, but for such receipt, would otherwise be due, there is a corresponding shift in the economic benefit of the Social Security payment, and therefore a transfer under Sec. 407.” (Pl. Brief, p. 51). Additional evidence of this “shift in economic benefit” is said to be apparent from the fact that the operation of the offset provision decreased both the amount of accrual and the rate of accrual of each of the defendants. In other words, after Social Security the defendants were able to reduce their financial obligations under the Plan. It is conceded that the plaintiffs’ service pensions were reduced after the passage of the Social Security Act and that the defendants’ obligations were also reduced by reason of its enactment. The court cannot accept the plaintiffs’ interpretation of Section 207 of the Social Security Act. The language used and the context both indicate that the provision was directed at the ordinary type of transfer or assignment such as a wage assignment. The section may well have been a statutory enactment of a rule of law commonly followed that government pensions are not assignable. See 4 Corbin, Contracts § 857, 6 id. § 1427 (1951). The only eases decided under Section 407 have involved problems of the transfer of rights by operation of law to a deceased wage-earner’s estate. See Gardner v. Ewing, D.C.S.D. Ohio 1950, 88 F.Supp. 315, affirmed, 6 Cir., 1950, 185 F.2d 781, reversed as to taxation of costs, 1951, 341 U.S. 321, 71 S.Ct. 684, 95 L.Ed. 968; Beers v. Federal Security Administrator, 2 Cir., 1949, 172 F.2d 34; cf. Anderson v. United States, 9 Cir., 1953, 205 F.2d 326. In the Gardner case the district court said: “In using the words ‘transferable or assignable’ in Section 207 of the Social Security Act * * * Congress intended to prohibit voluntary alienation by the wage-earner, nothing more.” 88 F.Supp. at page 323. As the plaintiffs admit, the application of the defendants’ offset provisions in no way affects their right to OASI benefits. They continue to receive the full government check to which they are entitled under the Act. It is in calculating the service pension that the defendants take into account one-half of the OASI allowance. But Section 207 was never intended to freeze a worker’s private pension at a particular level. It was concerned only with guaranteeing that the worker would actually receive for his own use the amount due him under the Social Security Act. Moreover, the offset practice cannot be said to violate some broader policy of the Social Security Act. There is nothing in the Social Security Act or in its legislative history to show that Congress intended to establish standards of validity or invalidity for private pension plans. What little does appear in the legislative history indicates, contrary to the plaintiffs’ position, that some form of integration was a hoped-for aftermath of the federal program. Some members of Congress expressed a fear that the new act might lead to the abandonment of more generous private programs, and they were reassured by Senate leaders of the Social Security legislation that there was nothing in the bill to prevent such companies from considering the federal program as a minimum and continuing to pay their employees an additional retirement income. 79 Cong.Rec. 9273, 9529,.9533, 9535 (1935). In fact, offset was suggested by name during the hearings on the proposed legislation. Dr. J. Douglas Brown, a member of the professional staff of the President’s Committee on Economic Security, which developed the Social Security program, and a specialist in the problems of old-age security, testified before the House Ways and Means Committee: “This particular program incorporated in the bill acts as a basic pension protection. It does not go ■ anywhere near as high as some private pension plans, particularly in the case of higher paid employees. “This is a social-insurance annuity program, not a private annuity program, so that all of these more progressive companies who already have pension plans can merely permit this protection to offset the lower level of protection they are already affording and then go beyond it if they are so inclined. * * » * * * “ * * * Suppose a man’s contribution plus his employer’s contribution entitled him to $75 under this plan, and he were a higher-paid employee, say entitled to $100 under the former company plan, the company would make certain provisions that whatever the Federal annuity plan provided would be offset against their obligation under the private plan.” The total absence of any reference to private pension plans, in the light of these expressions, leaves no doubt that Congress did not intend the Social Security Act to be the legal cause of invalidating a private plan that was integrated with the federal program. This is further confirmed in the reports of hearings relating to the 1939 Amendments to the Social Security Act. By this time a number of companies with private pension plans had effected an integration of their own benefits with the federal program. Congress was fully informed of this practice by the chairman of the Social Security Board, members of the Advisory Council on Social Security and others who had first-hand experience with integrated schemes. Dr. Arthur Altmeyer, Chairman of the Social Security Board, for example, testified: “ * * * The private pension plan must adapt itself to the basic old-age insurance plan, and practically all of them have done so. The private pension plans that were in existence have adapted themselves, so they are superimposed on the basic Federal old-age insurance system. There have also been a great many new ones that have been set up that have done so.” And in commenting on a FCC report suggesting that Bell System companies should consider reducing pensions by the full amount of Social Security benefits or discontinuing their plan altogether, Dr. Altmeyer said: “ * * * Certainly the Social Security Board would be very reluctant and unhappy to see the Bell Telephone Co. or any other employer reduce the net or the overall protection to its employees, counting in both the benefits from the old-age system and the benefits under their own system.” Similar comments or disclosures of integrated pension plans are found in Hearings before House Committee on Ways and Means relative to Social Security Act Amendments of 1939, 76th Cong., 1st Sess. 1089, 1096-97, 1109-10, 1117, 1156, 1161 (1939); Hearings before Senate Finance Committee on H. R. 6635, 76th Cong., 1st Sess. 169 (1939). No provision was added to the 1939 Amendments, however, to express Congressional disapproval of this practice. II (A) The plaintiffs’ second principal ground of attack is directed against the 1949 amendment to the Plan. In 1940, when the effective date of the Social Security Act was advanced, the defendants amended the Plan in accordance with the announcement of 1936 to all employees to provide for a one-half offset of OASI benefits instead of the full offset which the Plan authorized. Section 8(28), which incorporated the one-half offset principle, specifically provided that it “shall be effective only while the Act entitled ‘Social Security Act Amendments of 1939’ shall remain in effect unchanged.” This provision limited the one-half offset to the life of the 1939 Act. If the Act were subsequently amended or repealed, it was the defendants’ view that this section would lapse and the full offset required by Section 8(27) would again come into force until the Plan might again be amended. Def. Ex. 13, 17, 21 (Questions and Answers for Supervisory Employees, November 1939); Def. Ex. 22 (letter of October 17, 1939, to all associated company presidents from vice-president of AT & T). The plaintiffs concede that this was the effect of the 1940 amendment, and, indeed, it is the only reasonable interpretation of that amendment. But, they say, the lapse and restoration of full offset was limited to employees retiring thereafter and could not be applied to those already retired. A service pension irrevocably vests in an employee on the date of his retirement and can never be redetermined after his retirement; and the plaintiffs’ pensions, once determined on the basis of the 1939 Act, could not be readjusted to reflect the 1950 Act. It is clear that unless the defendants were somehow prohibited from making any / adjustment in the plaintiffs’ pensions after their retirement, the 1949 amendment to the Plan was valid as to them since it continued the one-half offset instead of permitting full offset to come into play. In their insistence upon the concept of vested rights, the plaintiffs have overlooked the nature of the right which became vested in the plaintiffs when they fulfilled all the requirements for a pension and were retired. It was not an irrevocable right to a specific sum of money, but a right to receive a pension determined in accordance with the provisions of the Plan. It cannot be argued that the plaintiffs are any less bound by the express terms of the contract than are the defendants. “* * Whatever rights were acquired by the pensioners in this case were acquired under the rules.” Cowles v. Morris & Co., 1928, 330 Ill. 11, 21, 161 N.E. 150, 154. In Menke v. Thompson, 8 Cir., 1944, 140 F.2d 786, 791, the court held that even if the offer of a pension in that case did result in a binding contract, the employee “must be held to have accepted the offer subject to its express conditions.” And if one of those conditions is that upon the happening of certain contingencies the pension will be modified or reduced after retirement, it is a valid and binding provision. In Casserly v. City of Oakland, 1936, 6 Cal.2d 64, 56 P.2d 237, the plaintiffs, former police and fire employees of the city, had been retired on a pension “ ‘equal to one-half of the salary attached to the rank held’ ”. Subsequently the city reduced the salaries of police and fire men and the plaintiffs’ pensions, which were geared to the salary, were also reduced. The plaintiffs contended that their right to a pension became vested and that there could be no reduction in the amount of the original award (although it could be revised upwards). In rejecting the plaintiffs’ position and holding that they had a vested right to a pension but not to a specific amount, the court said: “Authorities involving a fixed sum of money are not in paint, nor can it be argued that there was an abrogation of contractual rights, any more than it may be argued that the reduction in pay of the active officer is a violation of his contract. The reduction in the amount of the pension is in strict accord with the compensation agreement.” 56 P.2d at page 239. To the same effect, see Jacobus v. Massachusetts Mutual Life Ins. Co., D.C.W. D.N.Y.1950, 91 F.Supp. 674; Brennan v. McCoy, D.C.N.D.W.Va.1940, 34 F. Supp. 865; Fay v. O’Brien, Sup.Ct.1949, 195 Misc. 865, 91 N.Y.S.2d 137, affirmed 1950, 300 N.Y. 750, 92 N.E.2d 457; Aitken v. Roche, 1920, 48 Cal.App. 753, 192 P. 464. The case of Schofield v. Zion’s Co-op. Mercantile Institution, 1934, 85 Utah 281, 39 P.2d 342, 343, 96 A.L.R. 1083, which’ the plaintiffs urge as decisive of this issue, presented a very different situation. In that case the defendant employer’s pension plan provided for the retirement of employees who met certain conditions of age and service. The formula for determining the amount of the pension (which was similar to that of the Bell Plan) was set out in the plan which also provided that, “ ‘The amount, of pension to which an employee is entitled at 65 shall be the amount paid him when he actually does retire.’ ” In addition, there was a provision’ reserving to the Board of Directors the right “ ‘to change the basis of pension allowances by increasing or reducing the same * * •*/» iphe court interpreted this reservation of power to mean that the Board could revise the pension base at any time before the employee retired but said that it had no application to a retired pensioner whose pension had already been fixed. This was an attempt by the employer to reserve to itself the power, in effect, to ignore the provisions of the plan for computing and awarding pensions and without any guiding standards to fix an amount after the retirement of an employee which it then decided it could pay to him. The court’s interpretation, which prevented the plan from being a worthless offer, was undoubtedly justified under the circumstances. The defendants in this case have not changed or ignored the formula set forth in the