During Chapter 11 liquidation proceedings, Crown Vantage, Inc. (Crown) terminated its employee pension plan and purchased an annuity for the employee participants as a replacement. The participants advocated merging the current plan into a multiemployer PACE International Union (PACE) pension plan but Crown did not investigate the possibility. The participants alleged that Crown breached its fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by not acting "solely in the interests of the participants" (Section 1104(a)(1)). A bankruptcy court ordered Crown to maintain the plan's funds until they were distributed to the participants.

A District Court affirmed, finding that Crown failed to consider its employees' interest. Crown appealed to the U.S. Court of Appeals for the Ninth Circuit, claiming that it did not consider the PACE plan because Section 4041 of ERISA prevents termination by way of a merger into a multiemployer plan. The Ninth Circuit affirmed the District Court, ruling that ERISA does allow termination by way of a merger into a multiemployer plan.

Question:

Does the Employee Retirement Income Security Act of 1974 require an employer to consider merging an employee pension plan into a multiemployer pension plan prior to terminating the plan?

Conclusion:

No. In a unanimous opinion authored by Justice Antonin Scalia, the Court held that "merger is not a permissible method of terminating a single-employer defined-benefit pension plan." Therefore, PACE's argument that Crown was required by ERISA to consider merger as a method of terminating the pension plan was rejected. Since ERISA does not expressly list merger as a method of termination, the Court relied on the view of the Pension Benefit Guaranty Corporation (PBGC) that merger is not covered under the statute's residual clause. This interpretation was supported by the structure of ERISA, which deals with mergers in a separate section.

Decisions

Decision: 9 votes for Beck, 0 vote(s) against
Legal provision: Employee Retirement Income Security

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