Members of the plaintiff class made contributions to this plan. In 1986 RCA merged into a wholly-owned subsidiary of GE, which also had a defined benefit pension plan. The residual assets were even greater as of the time of the plans' merger, although the exact figure is not shown. Plaintiffs claim that, when the two plans merged, this was an event which should have led to a revision of benefits to be paid to the former RCA employees to take into account the residual assets in the RCA plan attributable to employee contributions. No such revision has been made.
Plaintiffs seek a judgment declaring their rights.
In a defined contribution plan the benefits are based upon the contributions, subject to gains or losses which occur in the plan's assets. By contrast, a defined benefit plan is one where the employee, upon retirement, is entitled to a fixed periodic payment regardless of the performance of the plan's assets. If unsuccessful investment of the plan assets impairs the plan's ability to make up the scheduled payments from the plan assets, the employer must nonetheless make up any deficiency from its own assets. By the same token, if the investment of plan assets is successful and produces a surplus, the employer benefits. Under this provision, a merger may not cause reduction of the benefit below what it would be upon a hypothetical termination of the plan.