# Mead Corporation v. Tilley

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## Dissenting Opinion

    Stevens
United States Supreme Court
490 U.S. 714
Mead Corporation v. Tilley
No. 87-1868 Argued: Feb. 22, 1989. --- Decided: June 5, 1989
Syllabus
Under the Employee Retirement Income Security Act of 1974 (ERISA), the Pension Benefit Guaranty Corporation (PBGC) guarantees certain nonforfeitable benefits provided by qualified defined benefit pension plans. When an employer voluntarily terminates a single-employer defined benefit pla , all accrued benefits automatically vest, notwithstanding the plan's particular vesting provisions. Plan assets are then distributed to participants in accordance with a six-category allocation scheme set forth in § 4044(a), which requires that plan administrators first distribute nonforfeitable benefits guaranteed by the PBGC, §§ 4044(a)(1-4); then "all other nonforfeitable benefits under the plan," § 4044(a)(5); and finally "all other benefits under the plan." § 4044(a)(6). Any remaining funds may be recouped by the employer. § 4044(d)(1)(A). Respondents, five employees of the Lynchburg Foundry Company (Foundry), formerly a wholly owned subsidiary of petitioner Mead Corp. (Mead), were covered by the Mead Industrial Salaried Retirement Plan (Plan), a single-employer defined benefit plan funded entirely by the employer. Plan benefits included normal retirement benefits payable at age 65, early retirement benefits payable at age 55 but reduced for each year by which retirement preceded normal retirement age, and unreduced early retirement benefits available to participants who had 30 or more years of service and elected to retire after age 62. When Mead sold Foundry and terminated the Plan, it paid unreduced early retirement benefits only to those who had met both the age and years of service requirements for such benefits. Respondents-all under age 62-received pay equal to the present value of the normal retirement benefit to which they would have been entitled had they retired at age 65, a sum less than the present value of unreduced early retirement payments. After distribution, Mead recouped nearly $11 million in plan assets. Respondents filed a suit in Virginia state court, which was later removed to the Federal District Court, alleging, inter alia, that the failure to pay the present value of the unreduced early retirement benefits violated ERISA. The District Court granted Mead summary judgment, concluding that since early retirement benefits are not "accrued benefits" under ERISA, respondents were not entitled to any additional sums under the Plan, and that the remaining fund assets could revert to Mead. The Court of Appeals reversed, holding that before plan assets may revert to an employer, § 4044(a)(6) requires payment of early retirement benefits to plan participants even if those benefits were not accrued at the time of termination.
Held:
1. Upon termination of a defined benefit plan, § 4044(a) does not require a plan administrator to pay plan participants unreduced early retirement benefits provided under the plan before residual assets may revert to an employer. Section 4044(a)(6) does not create benefit entitlements but simply provides for the orderly distribution of plan assets required by ERISA's provisions. Pp. 721-725.
(a) Neither § 4044(a)'s plain language nor its legislative history in any way indicates an intent to confer a right upon plan participants to recover benefits not provided for elsewhere. Contrary to respondents' argument-that contingent unreduced early retirement benefits, even if unaccrued, are benefits "under the plan" under category 6 and must be distributed before an employer can recoup residual assets-the "under the plan" language refers only to allocation of benefits provided by the terms of the terminated plan. That § 4044(a) is a distribution mechanism is also illustrated by ERISA's structure, since it is inconceivable that Title IV-which simply provides for insurance for benefits generated elsewhere-was designed to modify the carefully crafted provisions of Title I, which determine the employee's right to benefits. The PBGC, whose views are accepted in light of ERISA's language and legislative history, as well as the IRS and the Labor Department, agrees that category 6 is limited to benefits created elsewhere. Pp. 721-724.
(b) Respondents are also mistaken in their alternative statutory argument that because all accrued benefits vest upon plan termination, they are nonforfeitable ben fits falling within category 5, and, thus, category 6 would serve no purpose if it did not cover forfeitable benefits such as those at issue. The PBGC has consistently maintained that, for the purposes of § 4044(a) allocation, the characterization of benefits as forfeitable or nonforfeitable depends upon their status before plan termination. Respondents' contrary interpretation cannot be squared with the plain meaning of the statute, since including both forfeitable and nonforfeitable benefits in category 5 would contravene the clear directive of the allocation scheme to give priority to nonforfeitable benefits. Pp. 724-725
2. On remand for a determination whether respondents are entitled to damages based on either of their two alternative grounds for concluding that ERISA requires payment of unreduced early retirement benefits before surplus assets revert to the employer-that unreduced early retirement benefits may qualify as "accrued benefits" under ERISA, and that such benefits may be "liabilities" within the meaning of § 4044(d)(1)(A)-the Court of Appeals should consider the views of the PBGC and the IRS. Pp. 725-726.
815 F.2d 989 (CA4 1987), reversed and remanded.
MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, BLACKMUN, O'CONNOR, SCALIA, and KENNEDY, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 727.
Patrick F. McCartan for the petitioner.
Clifford L. Harrison, Radford, Va., for the respondents.
Justice MARSHALL delivered the opinion of the Court.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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