Full opinion text
OPINION DIAMOND, District Judge. Plaintiffs, a class of retirees at Duquesne Light Company (“Duquesne Light”), commenced this action pursuant to the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et -seq., seeking a declaration that the defendants are required to include in the calculation of pension benefits under two retirement plans income from the plaintiffs’ exercise of stock option and appreciation rights acquired pursuant to an incentive plan. Plaintiffs contend that they are entitled to a recalculation of their benefits consistent with the formulas contained in the retirement plans. A subclass of plaintiffs also contend that their accrued pension benefits were reduced improperly due to a change in the social security wage base prior to their retirement date. In addition to the substantive relief request, plaintiffs seek costs, expenses and reasonable attorney’s fees associated with this action. Presently before the court are cross-motions for summary judgment. Both parties mainly rely on the same documentary evidence and deposition testimony to support their positions and contend that the factual record demonstrates that they are entitled to judgment as a matter of law. For the reasons noted below, the parties’ cross-motions for summary judgment will be granted in part and denied in part. Standard of Review Fed.R.Civ.P. 56(c) provides that summary judgment may be granted if, drawing all inferences in favor of the non-moving party, “the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.” Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party’s claim, and upon which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the initial burden of identifying evidence which demonstrates the absence of a genuine issue of material fact. Once that burden has been met, the non-moving party must set forth “specific facts showing that there is a genuine issue for trial,” or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. Matsushita Electric Industrial Corp. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(a), (e)) (emphasis in Matsushita). An issue is genuine only if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The recent Supreme Court cases discussing the standards for granting summary judgment have established that the motion “is no longer a disfavored procedural shortcut....” Big Apple BMW, Inc. v. BMW of North America, 974 F.2d 1358, 1362 (3d Cir.1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993). While the court is not permitted to weigh the facts or the competing inferences therefrom, the court is no longer required to “turn a blind eye” to the weight of the evidence. Id. In meeting its burden of proof, the “opponent must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). In establishing a genuine issue of material fact, the opponent “cannot merely rely upon con-clusory allegations in [its] pleadings or in memoranda and briefs.” Harter v. GAF Corp., 967 F.2d 846 (3d Cir.1992). Likewise, mere conjecture or speculation by the party resisting summary judgment will not provide a basis upon which to deny the motion. Robertson v. Allied Signal, Inc., 914 F.2d 360, 382-83 n. 12 (3d Cir.1990). Background The named plaintiffs are representatives of the following class which the court certified on October 28, 1993: All participants or former participants in the Duquesne Light Long-Term Incentive Plan [Incentive Plan] who have retired or will retire after March 1, 1990 under the retirement plan for employees of Du-quesne Light Company [Retirement Plan] and/or the Supplemental Retirement Plan for Non-represented Employees of Du-quesne Light [Supplemental Plan]. Document 17 at p. 5. On February 1, 1994, the Chairman of the Board and Chief Executive Officer of Duquesne Light issued a notice which indicated that the Board of Directors had amended the Retirement Plan and the Supplemental Plan (“Plans”) to exclude from the Plans’ definitions of compensation the type of compensation at issue. On February 3, 1994, the Plans’ Administrator notified the participants under both Plans about the upcoming change. The notice indicated that the amendment was to operate prospectively. The plaintiffs do not explicitly challenge the propriety of the Board’s amendments to the Plans nor seek relief beyond the amendment’s effective date of March 1, 1994. Defendants are the Plans’ sponsor, the Plans and the administrator of the Plans. The Retirement Plan is an ERISA defined benefit pension plan designed to cover management employees who are represented by collective bargaining units. The Supplemental Plan is an ERISA defined benefit pension plan which provides benefits to employees of Duquesne Light who are not in collective bargaining units. The Retirement Plan and the Supplemental Plan were both amended on or about January 1,1985, and modified on March 10, 1987. Both plans are qualified plans and pursuant to the defined benefit formulas set forth therein contain the following definition of compensation: “Compensation” means, with respect to a calendar year, the amounts reported by the employer to the Internal Revenue Service on Form W-2 as the participant’s compensation for the year; but excluding any amounts attributable to relocation expenses, transportation mileage, imputed income derived from insurance premiums and such other extraordinary items of remuneration as the plan administrator shall determine from time to time pursuant to such uniform and nondiscretionary rules as he shall adopt. The relevant summary plan description (“SPD”) for the Retirement Plan, which became effective as of January 1, 1989, provides: Compensation: The remuneration paid to an eligible employee for the performance of job duties, including wages or salary, overtime and/or shift premiums, gratuities and other payments which were reported as income for federal income tax purposes on that employee’s W-2. Also included are all amounts contributed by the employer on behalf of that employee under a wage-salary reduction agreement (e.g., under a 401(k) retirement savings plan). Compensation does not include amounts attributable to transportation, mileage, relocation expenses, meal allowances, imputed income from insurance premium payments or other similar extraordinary payments or amounts in excess of allowable limits under the law. The SPD for the Supplemental Plan was last published in 1981. After November 1989, an employee requesting information on the Supplemental Plan received the SPD for the Retirement Plan with an explanation which indicated that the SPD generally covered both the Retirement Plan and the Supplemental Plan and that a new SPD for the Supplemental Plan would be published after finalization of the new Internal Revenue Service regulations applicable to that plan. The 1981 SPD for the Supplemental Plan remained available to participants upon request. In 1987, Duquesne Light initiated a Long-Term Incentive Plan (“LTIP”). The LTIP was first discussed by the Board of Directors at a meeting of the Compensation Committee on January 15, 1987. Duquesne Light had experienced financial difficulties in 1986 and 1987. There were no merit increases for Duquesne Light employees in 1985. There were no merit increases for employees in salary grades 18 and above in 1986. There were no merit increases for employees in 1987. The company had experienced lost sales, a reduction in dividends, a decrease in the price of its stock and the closing of plants and layoffs. In light of this background, the LTIP was presented to the Compensation Committee in order to provide it “with an independent indication of the reasonableness of the effect of the plan on total salaries.” The chairman of the committee indicated that “with the company’s recent cuts in personnel, company employees had assumed additional work responsibilities and should, if possible, receive some reward and recognition for their efforts.” Senior management formally presented the LTIP to the Board of Directors on January 20,1987, and described it as the “1987 Proposed Salary Program.” After the Board formally adopted the LTIP, the LTIP was presented to the employees in a letter dated February 11, 1987, from Wesley von Schack, Duquesne Light’s CEO, which stated: “We plan to use Du-quesne Light common stock options as a means of compensation in 1987.” Management employees were then given a presentation regarding the LTIP and therein it was described as “a performance driven compensation program.” Thereafter, numerous documents were distributed to employees regarding the LTIP, the operation of it and the fact that it represented a new compensation program. Duquesne Light also distributed to management employees a questionnaire on the LTIP. One question read as follows: Will the program replace pay for performance? No. This is a one-time allocation and there is no intent to keep it available to all employees. We anticipate a return to a more traditional approach to employee salaries in the fixture. Like merit increases the LTIP was funded from normal salary expenses. The employees were further informed that the exercise of their stock option and appreciation rights under the LTIP would specifically result in recognized taxable income for federal tax purposes on the employees’ W-2 forms. The LTIP was structured so that the employees did not recognize any taxable income until they exercised their stock option and appreciation rights. After exercising their stock option and appreciation rights, the employees received statements which indicated that the LTIP income and the dividends accredited to the participants’ accounts were a percentage of their current annualized salary- All management and professional employees who were active on the date the stock option was granted and who had received on a scale of 1 to 5 a performance rating of “3” or better in 1986 were eligible to receive the LTIP stock option and appreciation rights. Management and professional employees with a performance rating of 2¡é were eligible with a recommendation from their immediate supervisor. The Compensation Committee of Du-quesne Light’s Board administered the LTIP. The committee was given discretion to determine which eligible employees should receive the options and how many options a particular employee should receive based upon the following criteria: ... the Committee shall consider the position and the responsibilities of the employee being considered, the nature and value to the Company or a Subsidiary of his or her services, his or her present and/or potential contribution to the successes of the Company or a Subsidiary and such other factors as the Committee may deem relevant. As a merit-based form of compensation, the LTIP is not subject to Internal Revenue Code rules forbidding discrimination in favor of highly paid employees under tax-favored benefit plans. The LTIP permitted the salaried employees who were given stock option and appreciation rights to exercise their options up to ten years from 1987, however the first exercise could not take place until 1989. Under the LTIP, an employee’s options vested as follows: 50% in 1989; 25% in 1990; and 25% in 1991. At no time during the introduction and implementation of the LTIP was there ever any indication that the LTIP was a program designed to provide supplemental retirement income. All affirmative evidence indicates that it was designed as a merit-based program offered as a substitute for salary increases in 1987. At the time the LTIP was adopted, Duquesne Light’s common stock was selling at $12.00 per share. The value of the stock increased to $39.00 per share by January of 1994. When an employee exercised his/her LTIP options, the exercise resulted in taxable income to the employee which was reflected on the employee’s W-2 statement. Prior to June 5,1990, this taxable income was included in an employee’s pension calculations under the Plans. The practice which had developed prior to June 5,1990, treated the recognized income from the LTIP program as ordinary compensation for the calculation of pension benefits under the definition of compensation in the Plans. The income from the exercise of the LTIP rights was included in the pension benefit calculations of the employees who retired prior to June 5, 1990. In December of 1989 it came to the attention of Gary Sehwass, chief financial officer of Duquesne Light, that participants in the LTIP were having the amounts received upon the exercise of their stock option and appreciation rights included in their “compensation” in calculating their pension benefits. Thereafter the corporate secretary of Duquesne Light issued a memorandum which stated in pertinent part: Gary Sehwass has been raising questions concerning the use of LTIP exercises as part of “compensation” used in pension calculations. Human Resources has been including it. I understand legal believes that is correct ... Gary discussed his opposition with [von Schack] at the last Board rehearsal and [von Schack] agreed based on Gary’s limited explanation.... After Sehwass brought the matter to the attention of von Schack, von Schack spoke to Dianna Green, the Plans’ administrator, and indicated that it was his recollection that it was never the company’s intention to include the LTIP compensation in employees’ pension calculations. Sehwass subsequently opined to George Bentz, Duquesne Light’s general manager for human resources, that the amounts should not be included in such calculations. Sehwass then brought the matter to the attention of Jim Wilson, Duquesne Light’s director of benefits. Wilson had been involved in drafting the language of the Retirement Plan and the SPD which was provided to employees upon request. Wilson indicated to Bentz that the reason the amounts realized upon the exercise of the stock option and appreciation rights pursuant to the LTIP were included in a participant’s “compensation” in calculating pension benefits was that the language of the Plans required that re-suit. Wilson further indicated that if something was defined as “compensation” that definition could not be changed without Board approval. Wilson discussed the matter with Laura Lane Amelio, a senior attorney at Duquesne Light. Amelio then wrote a memorandum dated September 18, 1989, stating that in order to exclude from “compensation” the exercise of the LTIP stock option and appreciation rights, the definition of compensation in the Plans would have to be amended and that such a result could not be accomplished through discretionary action taken by the plan administrator. After setting forth the definition of compensation in the Plans, Ame-lio wrote: To somewhat oversimplify, the amount of an individual’s pension under the Retirement Plans is based on a calculation of the five highest consecutive years’ salary. George said that Gary was insistent that to include the LTIP payments would unfairly discriminate in favor of those employees who exercise and receive benefits under the LTIP and then retire, as opposed to those who receive benefits but then do not retire until after expiration of the Plan in 1997. I advised George and Jim that, in my opinion, the practice of including the amounts payable under the LTIP in a retiring employees’ compensation calculation of retirement benefits was proper under the Retirement Plans. All amounts paid pursuant to an exercise are reportable to the IRS on Form W-2 and are taxed and treated for all respects as compensation to the employee. George confirmed my recollection that when the LTIP was adopted it was specifically done so as a compensation mechanism in lieu of the annual salary increase to employees because of the two year salary freeze in 1986-87. The fact that the awards under the LTIP, and the administration of the LTIP itself, is within the exclusive jurisdiction of the Board’s Compensation Committee further buttresses the characterization of the awards as compensation. In any event, the amounts payable under the LTIP certainly are within the definition of “Compensation” under the Retirement Plans. George then asked whether it would be possible for the Plan Administrator to declare such amounts not to be Compensation. He indicated that about 40 or 50 people have already retired and received the benefit of the higher calculation. I believe that such a change could only be made prospectively and would only be permissible if it does not result in a disproportionate impact on lower paid employees (because of ERISA non-discrimination requirements). I do not believe that such a change would have a discriminatory impact in favor of highly compensation individuals but I would recommend that Human Resources consult Mercer Meidinger to verify that fact. If amounts received under the LTIP are to be excluded from “Compensation” for purposes of the Retirement Plans, the change may only be accomplished by amending the Retirement Plans’ definition of “Compensation” to specifically list “amounts received pursuant to the Long Term Incentive Plan” as an item excluda-ble under Section 1.7 or 1.8 of the Plans. Amendment of the Plans would require Board approval. It appears that making any such change by action of the Plan Administrator would not be appropriate under the regulations to Internal Revenue Code Section 411(d)(6). Those regulations prohibit pension plans from containing any discretionary provisions which affect the definite determination of benefits under a plan. The purpose of this requirement was to enable a plan beneficiary to know on the basis of the plan document itself what factors his or her benefits will be calculated upon, with nothing left to the sole discretion of the Plan.... ... Should it be desired to eliminate those amounts from the definition of “Compensation,” I would recommend that it be done by amendment to the Plan rather than by Plan Administrator action because of the legal restrictions which arise under the regulations to I.R.C. Section 411(d)(6). Plaintiffs’ Exhibit 11. • Green received the copy of Amelio’s memorandum and thereafter provided a copy of it to Schwass with a note asking Schwass to advise Green how Schwass wanted Green to proceed. Green also sent a carbon copy of the memorandum to von Schaek. In a memorandum dated January 17,1990, Bentz informed Green of the effects of including the LTIP compensation in the pension calculations of the participants who already had retired or were about to retire. Bentz estimated that “the total monthly cost for 10 employees” who had retired in 1989 or were going to retire in 1990 was $65.85 and “[t]he total present value of the promised benefit using the estimated life expectancy of each of the retirees is $6,942.” Bentz further noted: “We will pursue this matter with legal and financial to determine what actions must be taken to exclude these earnings at the earliest possible date.” At a meeting in the spring of 1990 among various Duquesne Light executives, Terry Moten, an in-house lawyer at Duquesne Light, “discussed various approaches to excluding LTIP payouts from the definition of compensation” with the other officials present. Moten subsequently testified that he understood his assignment to encompass a determination of whether a plan amendment was the only way to exclude the taxable compensation recognized from the exercise of stock option and appreciation rights under the LTIP from the definition of “compensation.” Moten suggested that outside counsel be retained because he did not understand the inner-workings between the Plans and § 411(d)(6) of the Internal Revenue Code. Thereafter, Duquesne Light retained outside counsel and requested an opinion as to whether the exclusion of the LTIP compensation could be done by the plan administrator or only by plan amendment. Duquesne Light hired William Powderly III of Jones, Day, Reavis & Pogue. Powderly was paid by Duquesne Light for the services rendered. Powderly was asked to analyze the Plans and to make certain factual assumptions which generally corresponded to the background of the instant litigation, but he was not asked to nor did he provide an opinion which was based upon the instant evidentiary record. Powderly noted in a memorandum letter that the plan administrator “has the power to ‘determine from time to time pursuant to ... uniform and non-discriminatory rules,’ whether extraordinary items of remuneration included in a W-2 should be excluded for the purpose of determining benefits under the plan.” Powderly opined that the authority of the plan administrator and the plan sponsor were co-extensive. It was his opinion that if the plan sponsor could amend the plan without running afoul of § 411(d)(6) of the Internal Revenue Code, the plan administrator could act without violating that provision. Powderly further opined that with respect to taxable compensation from the LTIP exercises which were reported on any particular participant’s W-2 for the 1989 year, such amounts were accrued benefits once the calendar year closed and could not be eliminated by either the plan administrator or the plan sponsor because of § 204(g) of ERISA and § 411(d)(6) of the Internal Revenue Code. With regard to eliminating the LTIP income for the 1990 calendar year and beyond, Powderly warned: [FJrom the standpoint of having to establish justification, the action of the plan administrator has the more tortious path. On the other hand, the actions of the sponsor will be subject to closer review concerning reduction in accrued benefits due to section 204(g) of ERISA (Sec. 411(d)(6) of the Code). Powderly indicated that the “exposure” of eliminating the compensation earned pursuant to the exercise of the LTIP stock option and appreciation rights would be less if the action was taken by the Plans’ administrator. He opined that the participants who received taxable income from the LTIP in 1990 prior to the announcement of a rule excluding such amounts by the plan administrator might be able to sue and win. Powderly indicated that the Plans’ administrator should undertake the following procedure in making an appropriate determination: You should be aware that there is a significant legal difference between the actions of the Plan Administrator in exercising its discretion as granted under the terms of the Plan and the Sponsor’s discretion in exercising its retained power to amend or modify the terms of the Plan. In the first instance, the Plan Administrator is acting as a fiduciary and as such must exercise the discretion it has been specifically granted in matters such as the inclusion or exclusion of a particular item in compensation in conformity with law. Thus, exercise of such discretion should be in the sole interest of the participants and their beneficiaries and in accordance with the terms of the Plan, if such terms are not inconsistent with law. Based upon this principal, the Plan Administrator would be required to look closely at the type of income the Plan sponsor has indicated that is to be excluded, i.e., relocation expenses, travel pay and moving expenses. The Plan Administrator then must discern if the Sponsor would have considered the Incentive Plan Benefits in the same class as those which have been specifically excluded. The Plan Administrator should look at the time the Plan was established in determining the Sponsor’s intent. If the answer to this is yes, the Sponsor would have excluded the benefits, the inquiry is ended. If the answer is either no or there is not sufficient information for the Plan Administrator to make the determination, then the Plan Administrator is faced with determining whether the inclusion or exclusion is good for the participants as a whole. Plaintiffs’ Exhibit 30 at p. 5. Moten received Powderly’s memorandum but did not distribute it to anyone at Du-quesne Light. Moten expounded upon Pow-derly’s work and issued a memorandum to Bentz. Moten agreed with Powderly’s opinion that the amounts received in 1989 as W-2 income from the LTIP could not be eliminated by action of the plan administrator because they were accrued benefits. Moten further opined that the amounts received in subsequent years could be eliminated by such action. Moten recommended that in making this determination the plan administrator “examine the items that were listed, the exclusions listed in the definition, and the language of such other extraordinary items, and [determine] whether [the plan administrator] believed that these long-term incentive plan payouts fit within those other extraordinary items.” Moten also reiterated that action by the Plan sponsor would be more closely scrutinized due to the nature and tax status of the Plans. Moten forwarded his opinion which indicated that a plan amendment would be more closely scrutinized under § 204(g) and (h) of ERISA to Green. On June 5, 1990, Green issued the following memorandum to James W. Wilson, manager of the benefits department at Duquesne Light: It has been brought to my attention that monies received when eligible employees exercise then.* rights under the 1987 Long Term Incentive Plan have not been included as “... such other extraordinary items of remuneration ...” within the meaning of paragraph 1.8 of the Retirement Plan for Employees of Duquesne Light Company and paragraph 1.7 of the Supplemental Retirement Plan for Non-Represented Employees of Duquesne Light Company (collectively referred to as the “Plans”). Thus, these monies have been included as “compensation” in the pension benefit calculations under the Plans. Upon review of this matter, we requested and received an opinion of counsel. As Plan Administrator, it is my determination that monies received from the exercise of rights under the Long Term Incentive Plan should never have been included in the pension benefit calculations under the Plans. Such monies are considered “... such other extraordinary items of remuneration ...” within the meaning of the Plans and are therefore not considered compensation as defined in the Plans. Thus, they are not be included in any future benefit calculations effective immediately. This determination is not a modification of either Plan, it is simply intended to correct misapplication practiced since January 1989. Therefore, no notice to Plan Participants is required. See Memorandum of Dianna Green dated June 5, 1990. Pursuant to the above memorandum, Green retroactively excluded the LTIP compensation which the participants who had not yet retired had received in 1989. In making the above determination, Green did not consider or analyze the types of income the Plans identified as excludable. Green considered the intent of the drafters of the Plans to be irrelevant in determining whether the LTIP income should be excluded and made no effort to determine who drafted the plan provisions which she was interpreting because she was making a decision about stock option and appreciation rights which did not exist at the time the authors drafted the language in the Plans. Green did not inquire as to whether the employees had received any previous information indicating that the LTIP income would be included in their pensionable earnings. Green was aware that the prior practice was to include the compensation from the exercise of stock option and appreciation rights in an employee’s base income for calculating pension benefits. Green did not believe it was significant that the employees were told or led to believe that the compensation received pursuant to the LTIP exercises would be reported as W-2 compensation. Green did not review any documents that had been sent to the employees which characterized the LTIP program and explained to them how the program would work and why it was instituted. Green also did not consider the SPD which previously had been issued to the employees and indicated that the SPD was not relevant to her decision. Green further indicated that she did not believe that one of the purposes of a SPD is to provide participants with the information necessary to understand their retirement benefits and how they are calculated. Green did believe that the Plans did not give her the authority to make a change in the meaning of the Plans without going to the Board and asking for a plan amendment, but she reasoned that “under my interpretation of my authority under the plan, any items that were not specifically expressed as being included or excluded” could be excluded as extraordinary remuneration. Green further opined that if it was the express intent of the company to include LTIP benefits in pensionable earnings at the time the LTIP was implemented, then the only way such items could be excluded was by plan amendment passed by the Board of Directors. When asked what the scope of the administrator’s authority was to exclude income reported on an individual’s W-2, Green indicated it was “those items that are not expressly listed in the plan, or those items that have not been previously determined or items which it is the duty of the plan administrator to determine under extraordinary items.” Green’s understanding of extraordinary items of remuneration was “those items that are not specifically included or specifically excluded.” If they were not specifically addressed, her understanding was they were subject to her discretionary review. Green did not inquire or consider whether her determination on the LTIP income had to be consistent with the items previously excluded pursuant to the definitional language in the Plans. She indicated that she was unaware of what imputed income derived from insurance premiums was or how such income was calculated or imputed. Green did not understand how or when the reimbursement expenses excluded in the definition of compensation would be reported on an individual’s W-2. Green did not have knowledge of how the previous administrators had determined that other items not specifically excluded in the definitional language contained in the Plans properly were excluded. She further indicated that it was her understanding that relocation expenses, transportation-related payments, travel pay, and the like were excluded from an individual’s compensation for calculating pension benefits even though the excluded items “may or may not be on [an employee’s] W-2.” Green further revealed that she did not do discrimination testing and did not inquire about whether the exclusion of the LTIP income by itself might violate the nondiscriminatory rules required for qualified tax treatment under the Internal Revenue Code. Green did not ask for tax advice about the definitions of income required for tax-favored treatment and the concomitant safe harbor rules which could be used to fashion an alternative definition that would continue to qualify for tax-favored treatment. See, e.g., Plaintiffs’ Exhibit 48, Advise of Lawrence J. Sher, F.S.A., to Wilson dated July 31, 1990 (indicating that the definition used in the Plans “comes closest to satisfying the W-2 safe harbors”; advising that deferred income could be excluded if all such forms of income were uniformly excluded; and indicating that in order to exclude the LTIP income all forms of stock option income would have to be uniformly excluded); see also Memorandums at Plaintiffs’ Exhibit 85 authored by Duquesne Light’s Human Resources Unit (indicating that all forms of earned income should be included and that income from reimbursement expense and other forms of unearned income as well as one time incentive pay deferred until after retirement should be excluded). Green did receive and consider information about the actuarial impact on the funding of the Plans with the inclusion of stock option and appreciation rights exercised pursuant to the LTIP and believed that the inclusion of such items would have an impact of several million dollars, that the Plans were not specifically funded for the inclusion of the LTIP income and that inclusion would favor highly compensated employees. Green read the definitional language in the Plans and also reviewed the legal opinion issued by Amelio in making her decision. She orally consulted with various staff members during the undertaking designed to determine whether she could exclude the LTIP income. She considered Bentz’s opinion which indicated that nothing in the documents pertaining to the implementation of the LTIP indicated that a specific determination had been made about whether the LTIP income was to be included under the Plans and that the Plans vested discretionary authority in the administrator to exclude other extraordinary remuneration reflected in an employee’s W-2 income. Green also held the position of vice president of administrative services at Duquesne Light. In this capacity Green received incentive compensation based upon the company’s bottom-line yearly performance. Her incentive compensation included a 30% cash award over her annual salary of $156,000 plus stock options which vested at 30% per year in the first two years and 40% in the third year. Pursuant to a separate long-term incentive compensation plan applicable to Green and others, the company set aside in 1991 20,000 shares of stock of which she earned 30% in one year, 30% in year two and the remaining 40% in the third year. Green was permitted to defer the compensation under this incentive program until retirement or termination. For each cash incentive award she received annually or stock option which was not deferred until retirement or termination, Green understood this type of award to be included in her pension earnings. Green had never excluded these amounts under this separate incentive program as extraordinary items of renumeration. Contentions of the Parties Count One of plaintiffs’ amended complaint is based upon the plain language of the Plans, the SPD of the Plans and other information about the Plans provided to plaintiffs prior to and during the relevant time period. Plaintiffs contend that the language of the Plans and the concomitant language of the SPD clearly indicate an intent by the settlor to include the type of income received pursuant to the LTIP in calculating pension benefits. Plaintiffs note that no document was ever distributed to the plan participants which indicated that the LTIP compensation would be excluded from compensation. Plaintiffs argue that under the doctrine of ejusdem generis, it is clear that the settlor’s intent was to include items like the LTIP compensation in the definition of compensation because the definition was inclusive and the income received pursuant to the exercise of stock option and appreciation rights under the LTIP was not in any way similar to the types of reported W-2 income which the Plans excluded from compensation for pension benefits. Plaintiffs contend that because no class member ever received a copy of the June 5, 1990, memorandum authored by Green, the terms of the Plans and the SPD remained unchanged until the March 1, 1994, amendment to the Plans and accordingly plaintiffs are entitled to have their retirement benefits calculated pursuant to the terms of the Plans as written. In support of their contention, plaintiffs assert that a plan administrator cannot secretly change the basis for payment of benefits to participants under the terms of a defined pension plan in light of the fact that ERISA requires an employee benefit plan to “specify the basis upon which payments are made ... from the plan.” 29 U.S.C. § 1102(b)(4). Plaintiffs also note that in order to be a qualified pension plan, the plan must provide “definitely determinable” benefits. See Treasury Reg. § 1.401 — l(b)(l)(i). Plaintiffs contend that if an administrator had the ability simply to pick and choose among the various types of reported W-2 income, the plan would violate ERISA’s requirement “that a plan be maintained in a written document and that any written plan, no matter how informal, can never be modified orally and without prior notice to affected participants.” Defendants contend that the exclusion of the LTIP income was within the discretionary authority granted to the plan administrator and that the plan administrator properly exercised her discretion in excluding the LTIP income under the present circumstances. Defendants contend that under the language of the Plans the “true meaning of that which constitutes ‘compensation’ is remuneration or pay for services, not the non-reoecurring or extraordinary amounts received by an exercise of the stock option or [stock appreciation rights] which happens to be reflected in a W-2 statement.” Defendants assert that income reflected in a W-2 must be limited to that which an employee receives each pay period to meet living expenses. Defendants characterize the LTIP income as a non-reoccurring item of income and accordingly an extraordinary item of income. Defendants further argue that the SPD provided to the employees was sufficient to meet the applicable disclosure requirements under ERISA because such statements were not required to anticipate every contingency that might arise with regard to the calculation of a particular participant’s benefits. Defendants argue that the SPD put plaintiffs on notice that what was to be included in calculating pension benefits was actual pay or compensation for the performance of job duties. Defendants further note that the United States Court of Appeals for the Third Circuit has ruled that “an inaccurate summary plan description cannot provide a basis for equitable estoppel, at least in the absence of ‘extraordinary circumstances.’” Gridley v. Cleveland Pneumatic Co., 924 F.2d 1310, 1319 (3d Cir.), cert. denied, 501 U.S. 1232, 111 S.Ct. 2856, 115 L.Ed.2d 1023 (1991). Relying on Gridley, defendants assert that a violation of a procedural requirement under ERISA does not give rise to a substantive remedy. With regard to the language of the Plans, defendants assert the following: The items specifically listed as exclusions under the plans have one (and just one) common element: they are all payments of benefits to employees which go beyond regularly stated yearly salary or normal pay. They are “extras” or “fringes.” They are not recurring items of compensation. They are items which are very clearly income as far as the IRS is concerned, yet which just as clearly would artificially inflate a person’s pension in a grossly unfair manner. The items constitute extraordinary remuneration. For example, no reason exists for a person who has traveled and received mileage and meal expenses to obtain a higher pension than someone who was paid the same but did not travel. Similarly, highly compensated employees who received stock options or stock appreciation rights could reap a second large benefit beyond the actual stock option or stock appreciation right to the disadvantage of those who did not receive them. Defendants further assert that under a qualified defined benefit pension plan, the plan need not disclose all the specific circumstances surrounding the various provisions contained in it because a plan must be permitted under law to remain sufficiently flexible to allow for changes with regard to new items that arise and which were not contemplated by the settlor. In this regard, defendants contend that a detailed listing of every possible requirement and exclusion in the SPD would be wholly impractical. Accordingly, defendants contend that the language of the Plans grant the administrator broad authority to determine whether any specific item reported on a W-2 would constitute extraordinary income and that Green properly exercised her discretion in excluding the LTIP income. In response, plaintiffs argue that defendants’ position is inconsistent with (1) the Plans’ language, (2) the language of the SPD issued to plan participants, (3) the practice of including such income prior to June 5, 1990, and (4) Green’s interpretation of the definition in the Plans. Plaintiffs contend that defendants’ position demonstrates “the kind of employer activity that ERISA seeks to redress: manipulation of a tax-qualified trust to an employer’s advantage in a way that frustrates employee expectations.” Gluck v. Unisys Corp., 960 F.2d 1168, 1184 (3d Cir.1992). Plaintiffs also elaborate on their contention that the administrator’s interpretation and retroactive exclusion of the employees’ W-2 income was outside of the narrow scope of exclusions set forth in the Plans. Plaintiffs argue that the language in the Plans indicates that all compensation for work effort is to be included and what is to be excluded is income from expense reimbursement or imputed income and that the LTIP income is not similar in any way to expense reimbursement or imputed income. Plaintiffs note that the SPD informs the employees that compensation goes beyond normal yearly salary and includes overtime, shift premiums, gratuities and other payments reported on an individual’s W-2. The plaintiffs further note that under the Plans the employees’ income from suggestion awards, service bonus awards, nuclear bonuses, instructor fees, slogan awards and other non-recurring payments beyond yearly salary or base pay traditionally had been and continued to be included in calculating pensions benefits. Plaintiffs contend that defendants’ assertion that the term compensation is to be limited to “non-recurring items” simply is unsupported by the definition in the Plans and the previous practice of those in charge of administering them. Plaintiffs further note that Green’s assessment did not even include an analysis of whether “non-recurring” items of income were subject to exclusion. Count II of plaintiffs’ amended complaint alleges that defendants effectuated a material change in the definition of compensation and attempted to reduce prior accrued benefits in a manner inconsistent with 29 U.S.C. § 1054(g). Plaintiffs further contend that the utilized procedure failed to provide proper notice of a plan amendment pursuant to 29 U.S.C. § 1054(h). Plaintiffs assert that Green’s decision of June 5, 1990, was a de facto amendment to the Plans and because defendants failed to properly amend the Plans prior to March 1, 1994, and failed to provide proper written notice to plaintiffs more than fifteen days prior to the effective date of Green’s June 5,1990, amendment, the attempt by Green to exclude the LTIP stock option and appreciation income was void ab initio. In support of Count II the plaintiffs note that defined benefit plans are dependent upon the compensation of the participant received during a particular period and that the definition of compensation is critical in calculating the rate at which a participant’s benefits accrue. Plaintiffs contend that the concept of “accrued benefits” is the line drawn between employer flexibility and employee expectations. Plaintiffs argue that because pension plans are subject to participation, vesting and funding, Green’s decision as of June 5, 1990, to retroactively exclude the income from the exercise of stock option and appreciation rights was contrary to law and all participants’ retirement benefits as of January 1,1990, had to include in the participants’ compensation the amounts received from the exercise of their stock option and appreciation rights and reported in their W-2. Plaintiffs also assert that because Green’s June 5, 1990, decision failed to comply with § 1054(h), the purported amendment was ineffective and accordingly the plaintiffs are entitled to the inclusion of all income from the exercise of their stock option and appreciation rights up to March 1, 1994. In response, defendants contend that the practice of excluding the LTIP income from pension benefit calculations did not result from a plan amendment, de facto or otherwise. Defendants assert that Green’s memorandum of June 5, 1990, constituted an exercise of appropriate discretionary authority under the Plans and simply was intended to correct a mistake in practice which had inadvertently developed. Count III of plaintiffs’ amended complaint alleges that Green breached her fiduciary duty in excluding the LTIP income. Plaintiffs assert that Green did not perform her duties as plan administrator in good faith and with the best interests of the beneficiaries in mind. Defendants assert that ERISA does not permit damages to be recovered against a plan administrator, that Green fulfilled her fiduciary duties in deciding to exclude the LTIP income from the definition of compensation and that Green had no duty to notify the plaintiffs of her decision and disclose the change in practice which she effectuated in her June 5, 1990, internal memorandum. Analysis The parties’ submissions pursuant to the instant cross-motions for summary judgment raise the issue of the appropriate standard of review. The Supreme Court recently addressed the issue of the degree of deference due ERISA plan administrators in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). The Bruch Court held that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard “unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Bruch, 489 U.S. at 115, 109 S.Ct. at 956. If the plan vests such discretion in the administrator, the decision is to be reviewed under the more deferential arbitrary and capricious standard of review. Id.; see also Luby v. Teamsters Health, Welfare & Pension Trust Funds, 944 F.2d 1176, 1180 (3d Cir.1991) (whether plan administrator’s exercise of power is mandatory or discretionary depends upon the terms of the plan). The determination of whether a plan grants the administrator discretionary power to construe its terms is dependent upon the principles of trust law and the settlor’s intent as expressed in the instrument. Id. (“The terms of trusts created by written instruments are ‘determined by the provisions of the instrument as interpreted in light of all the circumstances and such other evidence of the intent of the settlor with respect to the trust is not inadmissible.’ ”) (citing Firestone, 489 U.S. at 112, 109 S.Ct. at 955 and quoting Restatement (Second) of Trusts § 4, cmt.d (1959)); Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1256 (3d Cir.1993) (where plan language grants discretionary authority to administrator further inquiry is not necessary and administrator’s determination is to be reviewed under deferential arbitrary and capricious standard of review). In Bruch, the Supreme Court also addressed how an allegation of a conflict of interest is to be factored into the analysis and noted that “if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion.’” Bruch, 489 U.S. at 115, 109 S.Ct. at 957 (quoting Restatement (Second) of Trust § 187 comment d (1959)). In other words, the presence of a conflict of interest does not change the standard of review. It is, however, an important factor to be considered in applying the standard of review. See Daniels v. Anchor Hocking Corp., 758 F.Supp. 326, 330 (W.D.Pa.1991) (“We believe that a more accurate interpretation of Bruch leads to the conclusion that the alleged conflict of interest becomes a factor to be considered and given some weight during the reviewing process, rather than changing the substantive nature of the review itself.”). As the Daniels court noted, “the clear import of [the language used by the Supreme Court in Bruch ] is that the terms of the plan document, rather than a possible conflict of interest, controls the standard of review.” Id. Likewise, allegations of bad faith do not change the applicable standard of review. Instead, such allegations are an additional factor to be considered in determining whether there has been a wrongful denial of benefits under an ERISA plan. The language contained in the instant Plans grants the administrator the discretionary authority to determine whether other “extraordinary” items not specifically excluded from the definition of compensation are similar to the delineated categories of exclusions set forth therein and within the scope of those types of items the settlor intended to exclude. The language of the Plans grants the administrator discretionary authority to determine whether an item of remuneration is extraordinary and similar to the extraordinary situation where an employee recognizes reportable W-2 income from the receipt of money for transportation mileage, relocation expenses, meal allowances or imputed income from insurance payments. The SPD further demonstrates that the employees were made aware of the fact that the administrator could exclude similar extraordinary payments to those set forth in the definition of compensation by indicating that “compensation does not include amounts attributable to transportation mileage, relocation expenses, meal allowances, imputed income from insurance payments or similar extraordinary payments.... ” In addition, the SPD informed the participants that the plan administrator had the overall responsibility for the operation of the Plans and the authority to construe and control the administration of the Plans. Likewise, the Plans granted to the administrator the discretionary authority to construe the plan. In light of this discretion, Count I of plaintiffs’ complaint seeking relief pursuant to the plain meaning of the language contained in the Plans does not provide a separate substantive basis for relief and the contentions raised thereunder must be analyzed pursuant to Counts II and III of the amended complaint. See Wildbur v. ARCO Chemical Co., 974 F.2d 631, 637-38 (5th Cir.1992) (where plan gives administrator discretionary authority to construe plan, an interpretation challenged under the plain meaning of the language is to be analyzed under the arbitrary and capricious standard; the assessment of whether the administrator gave the plan a uniform construction and a fair reading are factors to be taken into account under the deferential standard of review). Pursuant to Count II, plaintiffs seek partial summary judgment with regard to the exercise of their stock option and appreciation rights occurring in 1989. Plaintiffs assert that under § 204(g) of ERISA, the administrator’s decision of June 5,1990, constituted a de facto amendment to the Plans or at a minimum constituted an exercise of discretion which attempted to retroactively eviscerate accrued benefits. Plaintiffs further contend that the administrator’s June 5, 1990, decision likewise ran afoul of § 204(h) of ERISA because it constituted an amendment to the Plans and resulted in a significant reduction in the rate of future benefit accrual without the appropriate notice required under that statutory provision. ERISA was designed to promote the interests of employees and their beneficiaries in employee benefit plans. Nazay v. Miller, 949 F.2d 1323, 1329 (3d Cir.1991). ERISA’s primary concern is with the administration of benefit plans and not with the precise design of a plan. The primary purpose of the statute is to insure that an ERISA plan is properly executed and administered once it has been established by the sponsor. Id. at 1329; see also Haberern v. Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan, 24 F.3d 1491, 1498 (3d Cir.1994), cert. denied, — U.S. , 115 S.Ct. 1099, 130 L.Ed.2d 1067 (1995). By requiring employee benefit plans to be established and maintained pursuant to a written ERISA instrument, Congress promoted ERISA’s goal of assuring that “every employee may, on examining the plan documents, determine exactly what his rights and obligations are under the plan.” Hamilton v. Air Jamaica, Ltd., 945 F.2d 74, 77 (3d Cir.1991), cert. denied, 503 U.S. 938, 112 S.Ct. 1479, 117 L.Ed.2d 622 (1992) (citing Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1163-64 (3d Cir.1990)). ERISA requires that a qualified pension benefit plan “specify the basis upon which payments are made ... from the plan.” 29 U.S.C. § 1102(b)(4). In order to become a qualified pension plan, the plan itself must provide “definitely determinable” benefits. See Treasury Reg. § 1.401-1(b)(1)(i). Unlike other plans falling within the scope of ERISA, defined benefit plans are subject to vesting, funding and participation requirements established pursuant to ERISA and the Internal Revenue Code. See, e.g., Berger v. Edgewater Steel Co., 911 F.2d 911, 914 (3d Cir.1990), cert. denied, 499 U.S. 920, 111 S.Ct. 1310, 113 L.Ed.2d 244 (1991). The benefits under a defined benefit plan “are not dependent upon the current or future assets of the plan. The employer must provide a ‘defined benefit’ to the plan participant upon retirement, termination or disability, [Chait v. Bernstein, 835 F.2d 1017, 1019 n. 7 (3d Cir.1987)], and the employer must satisfy shortfalls if the actuarial assumptions of the plan prove incorrect.” Malia v. General Electric Co., 23 F.3d 828, 830-31 n. 2 (3d Cir.), cert. denied, — U.S.-, 115 S.Ct. 377, 130 L.Ed.2d 328 (1994). Likewise, an excess in the assets of a defined benefit plan “typically accrues to the employer’s benefit by reducing the out-of-pocket contribution the employer must make to maintain required funding levels for the present value of the defined benefits.” Id. ERISA defines an accrued benefit in the case of a defined benefit plan as “the individual’s accrued benefit determined under the plan, and, except as provided in section 1054(c)(3) of this Title, expressed in the form of an annual benefit commencing at normal retirement age_” 29 U.S.C. § 1002(23)(A). ERISA further provides that “the accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(c)(8) or 1441 of this Title.” 29 U.S.C. § 1054(g)(1). It follows a fortiorari that an accrued benefit may not be retroactively decreased through the purported exercise of an administrator’s discretion. In the instant matter, the administrator did not attempt to exercise any purported discretion to exclude the LTIP income generated from the stock option and appreciation rights prior to June 5, 1990. Because the language contained in the Plans defining compensation was inclusive rather than exclusive and specifically encompassed the type of income recognized upon the LTIP exercises, it follows that those employees which exercised their stock options and appreciation rights in 1989 and had income reported on their W-2’s for the calendar year of 1989 acquired an accrued benefit. Accordingly, plaintiffs are entitled to partial summary judgment on this aspect of the claim set forth in Count II. Plaintiffs also move for summary judgment as to all LTIP income realized during the calendar years of 1990 up to March 1, 1994. Plaintiffs contend that Green’s June 5, 1990, internal memorandum was in effect a defacto amendment and that the failure to provide timely notice under § 1054(h) entitles them to relief. That section provides: A plan described in paragraph (2) may not be amended so as to provide for a significant reduction in the rate of future benefit accrual, unless, after adoption of the plan amendment and not less than 15 days before the effective date of the plan amendment, the Plan Administrator provides a written notice, setting forth the plan amendment and its effective date to— (A) each participant in the plan.... 29 U.S.C. § 1054(h)(1)(A). In Davidson v. Canteen Corp., 957 F.2d 1404 (7th Cir.1992), the court considered whether a company’s failure to provide its employees with advanced notice of a change in the definition of compensation in a retirement plan violated § 1054(h). The plan defined compensation for calculating pension benefits as the employee’s “annual W-2 earnings.” The defendant sought to exclude from that definition the exercise of stock option and appreciation rights. The sponsor purportedly had amended the plan, but had failed to provide notice to any participants reflecting its intent to exclude from the definition of compensation any income resulting from the company’s stock option plan. A number of employees exercised their stock options and subsequently retired. The amount of compensation from the exercise reported on the employees’ W-2 was not included in calculating their pension benefits. The employees had received oral notice of the amendment prior to exercising their stock options, but contended that the oral notice was ineffective. The court agreed and concluded that the attempted modification without proper notice denied the employees “what section 204(h) requires: the opportunity to take advantage of an existing benefit before it is lost.” Id. at 1407. Other courts have considered whether various changes in the interpretation of language contained in a defined benefit pension plan constituted an amendment within the meaning of § 1054(h). In Production and Maintenance Employees’ Local 504 v. Roadmaster Corp., 954 F.2d 1397, 1400 (7th Cir.1992), the defendant adopted an amendment which sought to retroactively exclude the accrual of benefits. The defendant posted notice of the amendment on the plant bulletin boards and subsequently sent a letter to the employees’ union. The court held that the notice on the bulletin board and the letter to the union failed to comply with either § 1054(g) or (h) and thus the employees’ benefits continued to accrue. Two years later the defendant issued a “clarification” to the amendment which purported to make the effective date three days after the original amendment was purportedly adopted. The defendant did not give the employees notice of its subsequent clarification of the original amendment’s effective date. The court held that the subsequent “clarification,” like the original amendment, was another attempt to retroactively reduce accrued benefits and to amend the plan as to future accrual without proper notice. The clarification violated § 1054(h) and (g) and was likewise ineffective. In Pickering v. USX Corp., 809 F.Supp. 1501 (D.Utah, 1992), the court held that the resulting change in the language of a pension plan was an amendment even though the defendant never labeled the change as an amendment, a clarification, a modification or anything else. USX had entered into “the June agreement” which made another company a subsidiary under USX’s 1987 pension agreement. Under the June agreement, the years of service with the subsidiary differed significantly from the language of the original pension agreement. The court found that USX had “amended the 1987 pension agreement within the scope of ERISA § 204(h), which governs such an amendment.” Id. at 1562. The court indicated that it is not the characterization of the alleged action taken by the administrator or sponsor which governs; instead, it is the substantive effect of the action taken. In assessing a transaction to determine whether a merger between the two corp