Where union and plan participants challenged sponsor’s failure to appropriately consider a proposal to merge its defined benefit plan into a Taft-Hartley plan, the U.S. Supreme Court concluded that no fiduciary duty attached, as the merger of one plan into another was not a valid way under ERISA to ‘terminate’ a plan. “The idea” the Court said, “that the decision whether to merge could switch from a settlor to a fiduciary function depending upon the context in which the merger proposal is raised is an odd one. But once it is realized that a merger is simply a transfer of assets and liabilities, PACE’s argument becomes somewhat more plausible: The purchase of an annuity is akin to a transfer of assets and liabilities (to an insurance company), and if Crown was subject to fiduciary duties in selecting an annuity provider, why could it automatically disregard PIUMPF simply because PIUMPF happened to be a multiemployer plan rather than an insurer?” However, “terminating a plan through purchase of annuities (like terminating through distribution of lump-sum payments) formally severs the applicability of ERISA to plan assets and employer obligations. Merger is fundamentally different: it represents a continuation rather than a cessation of the ERISA regime.” Also, the Court notes, “in a standard termination ERISA allows the employer to (under certain circumstances) recoup surplus funds, as Crown sought to do here. But ERISA forbids employers to obtain a reversion in the absence of a termination…. Crown could not simply extract the $5 million surplus from its plans, nor could it have done so once those assets had transferred to PIUMPF. This would have run up against ERISA’s anti-inurement provision, which prohibits employers from misappropriating plan assets for their own benefit.” See Beck v. PACE, 127 S.Ct. 2310 (2007).
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