The memorandum disposition filed October 3, 1990, is redesignated as an authored opinion by Judge Brunetti.
BRUNETTI, Circuit Judge:
Plaintiff-appellant Calvin Arnold ("Arnold") sued his employer, defendant-appellee Arrow Transportation Co. ("Arrow"), and its retirement plan, defendant-appellee Retirement Plan for Employees of Arrow Transportation Co. (the "Retirement Plan"), alleging the improper denial of his pension benefits due under the Retirement Plan in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B). After a bench trial the district court ruled that appellees did not violate ERISA in reducing Arnold's retirement benefits. We affirm.
A. Facts and Procedural Background
The facts of this case are undisputed. Arnold was an employee of Arrow, whose principal place of business is in Portland, for thirty-seven years. Arnold was elected to Arrow's executive committee in 1970, made Vice President in 1976, and was covered under the Retirement Plan from 1963 until his voluntary retirement on March 1, 1985, one month short of his sixtieth birthday. The Retirement Plan was a qualified defined benefit plan, as defined by ERISA, 29 U.S.C. § 1001 et seq., that provided benefits based on a formula using the employee's years of service and final average salary.
At the end of 1983 Arrow amended the Retirement Plan, ceasing all benefit accruals and freezing already accrued benefits of all participants. On March 29, 1984 Arrow filed a Notice of Intent to Terminate the Retirement Plan with the Pension Benefit Guaranty Corp. ("PBGC"). Arrow terminated the Retirement Plan on April 9, 1984. At that time, as in prior years, the actuarial present value of benefits exceeded the amount of assets in the fund. In other words, the Retirement Plan had unfunded liabilities and did not have enough assets to pay full accrued benefits as determined under its benefit formula. However, the Retirement Plan did satisfy minimum funding standards for each Retirement Plan year, and there was no accumulated funding deficiency with respect to any year.
The PBGC subsequently issued Arrow a Notice of Sufficiency on March 20, 1987 approving the allocation of the assets under the Retirement Plan and determining that the Retirement Plan assets were sufficient to discharge all obligations of the Retirement Plan to the extent guaranteed by the PBGC.
In April 1984 Arnold requested a statement of what his benefits would be at age 60. On March 4, 1985 and again on March 11, he received letters from the Retirement Plan actuaries stating that "benefits may be adjusted or recaptured if plan assets are insufficient to satisfy guaranteed benefits, after assets are allocated according to ERISA." (emphasis added). On March 14, 1985, two weeks after his retirement, he received a corrected estimate of a monthly benefit of $1,443.12 with an initial death benefit of $177,676.87.
On June 23, 1985 he was first notified that he would receive monthly benefits of only $996.74, with an initial death benefit of $99,160, and not the previous estimate. On October 30, 1987 he was notified that he would receive monthly the PBGC-guaranteed single life annuity of $1,041.48. Arnold currently receives a full cash refund annuity of $975.15; the $1,041.48 amount is the actuarial equivalent to this full cash refund annuity. While other employees have also received less than their full accrued benefits, it is undisputed that the funds in the Retirement Plan, to the extent they were distributed to participants, were correctly allocated as required by the Retirement Plan and ERISA.
Arnold was informed that the $996.74 estimate was based on a retirement age of sixty-one, not sixty, and as a normal annuity, rather than a full cash refund.
On July 23, 1987 Arnold filed suit, alleging four claims. The district court dismissed on summary judgment three of his claims; this dismissal is not challenged on appeal. The final claim, tried to the court, alleged the improper denial of benefits because any Retirement Plan language purporting to limit Arnold's right to payment of full accrued benefits or permit termination of the Retirement Plan at Arrow's will, without consideration of Arrow's ability to continue funding the Retirement Plan, was included by mistake and contrary to the intent and subsequent interpretation of Arrow's management. Moreover, Arnold alleged that the inclusion of any such language was not made known to him or other participants. Arnold sought the payment or issuance of an annuity from Arrow covering the difference between his entitled benefits under the Retirement Plan and his actual received benefits.
The district court found that Arnold "received notice of Arrow's right to terminate the plan and the possibility of loss of benefits which could result from a termination of the plan." The court held that Arrow's termination of the Retirement Plan and its monthly payments of $975.15 to Arnold did not violate the provisions of the Retirement Plan or ERISA, 29 U.S.C. § 1132(a)(1)(B).
Arnold appeals this ruling, contending that Arrow did not adequately disclose its limited liability, as the limited liability provisions of the Retirement Plan's Summary Plan Description did not satisfy the legal requirements of ERISA, 29 U.S.C. § 1022, and that because Arrow allegedly promised full payment of accrued benefits, it is directly liable for the difference between his entitled benefits under the Retirement Plan and his actual received benefits.
Arrow argues at the outset that (1) Arnold alleged the inadequacy of the Summary Plan Description in one of the claims dismissed on summary judgment, which is not on appeal, and therefore this subject should not be addressed and (2) Arnold seeks benefits directly from Arrow under a separate agreement or promise, as he agrees that Arrow properly distributed the benefits under the Retirement Plan and ERISA, and therefore fails to state a claim for loss of benefits under the Retirement Plan or ERISA.
We disagree. Both the litigated claim and the district court's opinion address the issue of the adequacy of notice of the possibility of loss of benefits. Therefore, the legal adequacy of such notice falls within the scope of this appeal. Furthermore, Arrow's alleged promises to provide benefits beyond the Retirement Plan are contained within the Summary Plan Description, Arnold has stated a claim for benefits under the Retirement Plan and ERISA. Cf. Edwards v. State Farm Mut. Auto. Ins. Co., 851 F.2d 134, 136 (6th Cir. 1988) (summary plan statements are binding); Kochendorfer v. Rockdale Sash Trim Co. Profit Sharing Plan, 653 F. Supp. 612, 614 (N.D.Ill. 1987) and Gors v. Venoy Palmer Market, Inc., 578 F. Supp. 365, 368 (E.D.Mich. 1984) (challenges to a plan can be based on summary plan description and such a summary may modify the terms of the plan).
B. Standard of Review
Arnold contends that whether the limited liability provisions of the Retirement Plan's Summary Plan Description satisfy the legal requirements of ERISA is a legal question reviewed de novo. Arrow maintains that the district court's determinations as to the findings of fact are to be upheld unless clearly erroneous, and that its own interpretation and construction of the Retirement Plan's provisions should be reviewed under an arbitrary and capricious standard of review.
We review the district court's findings of fact under the clearly erroneous standard. Fed.R.Civ.P. 52(a); Rozay's Transfer v. Local Freight Drivers, 850 F.2d 1321, 1326 (9th Cir. 1988), cert. denied, 490 U.S. 1030, 109 S.Ct. 1768, 104 L.Ed.2d 203 (1989). We review its findings of law de novo. Id. The interpretation of a federal statute, such as ERISA, is a question of law, and we review it de novo. Saratoga Sav. Loan Ass'n v. Federal Home Loan Bank Bd., 879 F.2d 689, 691 (9th Cir. 1989).
C. Limited Liability Provisions
Arnold first contends that Arrow did not adequately disclose its limited liability, as the limited liability provisions of the Retirement Plan's Summary Plan Description did not satisfy the legal requirements of ERISA, 29 U.S.C. § 1022. Whether these provisions satisfy ERISA is a legal question, which we review de novo. See Rozay's Transfer, 850 F.2d at 1326.
Under ERISA an employer must provide a summary plan description to participants which must describe "circumstances which may result in disqualification, ineligibility, or denial or loss of benefits" and shall "be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. § 1022. See Stahl v. Tony's Bldg. Materials, Inc., 875 F.2d 1404, 1406-09 (9th Cir. 1989).
The Code of Federal Regulations specifically provides that a summary plan description:
1. Must not minimize limitations;
2. Must describe limitations as prominently as benefits;
3. Must not be misleading; and
4. Must either disclose limitations in close conjunction to benefit provisions or provide page numbers on which restrictions are described adjacent to a description or summary of benefits.
29 C.F.R. § 2520.102-2(a) and (b).
In Stahl we evaluated a "Service Credits" limiting provision, described and referenced in two "Service Credits" sections, one of which was highlighted "IMPORTANT," of a multi-employer summary plan description that exceeded fifty pages. Id. at 1406-07. We held that the provisions met the legal requirements of ERISA, 29 U.S.C. § 1022, and ruled:
A plan summary description, therefore, cannot violate ERISA merely because it could have included language more specifically discussing the precise situation of a particular beneficiary. The description, instead, should provide information about the general circumstances in which benefits could be lost. The plan's rules should be explained to permit the ordinary employee to recognize that certain events or actions could trigger a loss of benefits. It need not discuss every imaginable situation in which such events or actions might occur, but it must be specific enough to enable the ordinary employee
to sense when there is a danger that benefits could be lost or diminished.
Stahl, 875 F.2d at 1408.
In 1979 Arrow distributed a Summary Plan Description of the Retirement Plan's 1976 Restatement to Arnold. The Summary Plan Description, entitled "Your Retirement Program," provided in part:
This Restatement, a complete revision of the Retirement Plan to conform to the then recently-passed ERISA legislation, specifically provided, "If the fund is insufficient to provide any benefits, neither the employer nor the insurance company shall be liable to provide such benefits." (emphasis added). However, Arnold testified that he never saw this document, nor its 1971 predecessor.
LOSS OF BENEFITS
Conditions which could disqualify you or your beneficiary from receiving anticipated benefits under the plan are as follows:
. . .
If the plan terminates and there is not enough money in the fund to provide full benefits (benefits may be provided by the Pension Benefit Guaranty Corporation, subject to its limitations on maximum benefits).
. . . . . TERMINATION OF THE PLAN
In the event the plan is terminated, any benefits you may have accumulated up to that time will become nonforfeitable, and plan funds accumulated up to the date of termination will be used to provide you with benefits
to the extent permitted by the amount then available in the pension fund.
At plan termination, benefits under this plan are insured by the Pension Benefit Guaranty Corporation (PBGC). Generally, the PBGC guarantees most vested normal, early and late retirement benefits (and certain disability and spouse's benefits). However,
the PBGC does not guarantee all types of benefits under covered plans, and the amount of benefit protection is subject to certain limitations.
(emphasis added).
We believe that these provisions are not misleading and are sufficiently clear to apprise Plan participants as to the possibility that benefits could be lost or reduced, subject, however, to a minimum floor benefit guaranteed under the PBGC. Moreover, these provisions are prominent, appearing on pages eleven and twelve of the twelve-page Summary Plan Description in the same typeface as the preceding ten pages of various benefit provisions. We find that because of the prominence and clarity of these provisions and their close conjunction to the summary of benefits, within a few pages in a short document, the limited liability provisions of the Retirement Plan's Summary Plan Description satisfied the legal requirements of ERISA, 29 U.S.C. § 1022, as they "provide[d] information about the general circumstances in which benefits could be lost [and] permit[ted] the ordinary employee to recognize that certain events or actions could trigger a loss of benefits [and were] specific enough to enable the ordinary employee to sense when there [was] a danger that benefits could be lost or diminished." See Stahl, 875 F.2d at 1408. Therefore, we hold that Arrow adequately disclosed its limited liability.
Arnold himself admits that while he reviewed the Summary Plan Description, he did not read the "LOSS OF BENEFITS" provisions, considering them "insurance company language" and believing that "it was something that was required in every plan, and it really wasn't too much of a concern to me." Had he read these sections, he would have realized the possibility that his future benefits might be reduced.
Because we hold that Arrow adequately disclosed its limited liability in circumstances where the Plan could not provide full benefits, we need not address Arnold's claims as to Arrow's alleged promises of full payment of accrued benefits. See generally, Murphy v. Heppenstall Co., 635 F.2d 233, 239 (3d Cir. 1980) (employer obligated to provide full accrued benefits itself where no limitation of its liability), cert. denied, 454 U.S. 1142, 102 S.Ct. 999, 71 L.Ed.2d 293 (1982).
Attorney's Fees
Both parties have requested attorney's fees on the appeal pursuant to ERISA, which provides that "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132(g)(1). Because we find in favor of Arrow on the merits, we deny Arnold's request for attorney's fees. Furthermore, because we find that (1) Arnold did not act in bad faith; (2) his ability to pay an attorney's fees award is questionable, as he is a retired truck driver; (3) any such award would not have a deterrent effect against others bringing such suits; (4) the suit did not raise a significant ERISA question; and (5) although ruling in Arrow's favor, Arnold's position was not without some merit, we deny Arrow's request for attorney's fees as well. See Hummell v. S.E. Rykoff Co., 634 F.2d 446, 453 (9th Cir. 1980) (setting forth guidelines for ERISA attorney's fees awards); Paddack v. Morris, 783 F.2d 844, 846 (9th Cir. 1986) (recent application of Hummell guidelines).
AFFIRMED.