The Supreme Court issued its ruling in Beck v. PACE International Union. You can find it on the Court's website here. Beck involves an employer's decision to terminate its pension plan and pay its employee obligations by purchasing an annuity that will satisfy ERISA's mandate to pay all pension liabilities owed to plan participants. The union favored an alternative: merging the obligations into the union's own multiemployer plan. At stake was who would get a $5 million dollar reversion that would be paid based on overfunding of the plan that had occurred for years. Purchasing the annuities would allow the employer to get the money while merging the plans would allow the dough to go to the union's multiemployer plan. The employer opted to buy the annuities. The union argued that the employer failed to give diligent and fair consideration to its merger proposal and, thus, violated ERISA's fiduciary duty requirements. The trial court agreed with the union as did the Ninth Circuit. The Supreme Court reversed the ruling in favor of the union in a unanimous opinion that resolved the case on relatively narrow grounds. The Court ruled that merger was not one of the options available to the employer under ERISA when terminating a pension plan. Merger of one pension plan into another does not satisfy all benefit liabilities under the terminated plan in the same way that purchasing an annuity or otherwise providing for complete satisfaction of those liabilities does. Consequently, the Court ruled that even if the allegations of the union were true, there was no breach of fiduciary duty when the employer failed to consider going with the merger. The decision is fairly narrow and has limited application to ERISA situations outside of the termination of pension plan scenario. However, the case will undoubtedly be cited in the future as authority for the idea that it is necessary and appropriate to rely on the reasoning of, and the position taken by, the regulatory agency charged with interpreting ERISA and filling in gaps in the statutory framework. In this case that agency, the Pension Benefit Guaranty Corporation ("PBGC"), weighed in at the Ninth Circuit level and before the Supreme Court in favor of the employer's position. The Court stated that this was a significant factor in its decision: "We have traditionally deferred to the PBGC when interpreting ERISA, for 'to attempt to answer these questions without the views of the agencies responsible for enforcing ERISA, would be to embar[k] upon a voyage without a compass.' . . . In reviewing the judgment below, we must examine 'whether the PBGC's policy is based upon a permissible construction of the statute.' . . .We believe that it is. PACE [the union] has 'failed to persuade us that the PBGC's views are unreasonable'" (citations omitted).
Post A Comment