Source: https://www.legalcrystal.com/case/104801/nachman-corp-vs-pbgc
Timestamp: 2018-10-21 10:54:19
Document Index: 435543901

Matched Legal Cases: ['§ 4062', '§ 4062', '§ 4022', '§ 1001', '§ 4022', '§ 1322', '§ 4062', 'art, 435', '§ 3', '§ 2', '§ 1001', '§ 4062', '§ 1362', '§ 4062', '§ 4022', 'art, 435', '§ 4082', '§ 1381', '§ 4082', '§ 1381', '§ 4022', '§ 4062', '§ 4004', '§ 1304', '§ 4062', '§ 211', '§ 1061', '§ 3', '§ 1002', '§ 3', '§ 4044', '§ 1344', '§ 4022', '§ 1301', '§ 1002', '§ 1002']

Nachman Corp Vs Pbgc - Citation 104801 - Court Judgment | LegalCrystal
Nachman Corp. Vs. Pbgc - Court Judgment
LegalCrystal Citation legalcrystal.com/104801
Case Number 446 U.S. 359
Appellant Nachman Corp.
Respondent Pbgc
nachman corp. v. pbgc - 446 u.s. 359 (1980) u.s. supreme court nachman corp. v. pbgc, 446 u.s. 359 (1980) nachman corp. v. pension benefit guaranty corporation no. 78-1557 argued january 7, 1980 decided may 12, 1980 446 u.s. 359 certiorari to the united states court of appeals for the seventh circuit syllabus as one of the means of protecting the interests of beneficiaries under private pension plans for employees, title iv of the employee retirement income security act of 1974 (erisa) created a plan termination insurance program that became effective in four successive stages. section 4022(a) of title iv provides that, if benefits are "nonforfeitable," they are insured by respondent pension benefit guaranty.....
U.S. Supreme Court Nachman Corp. v. PBGC, 446 U.S. 359 (1980)
Held: The plan's limitation of liability clause does not prevent the vested benefits from being characterized as "nonforfeitable," and thus covered by the insurance program. Petitioner's argument that the Title I definition of "nonforfeitable" determines which benefits are insured under Title IV, that, thus, benefits are not insured unless they are "unconditional" and "legally enforceable against the plan," that, because of the limitation of liability clause such elements of the definition are not satisfied, and that therefore the benefits are forfeitable, and necessarily uninsurable, is without merit. Such argument is not supported by a literal reading of the definition on which it relies, and it is inconsistent with t.he clear language, structure, and purpose of Title IV. Pp. 446 U. S. 370 -386.
(a) To view the term "nonforfeitable" as describing the quality of the participant's right to a pension, rather than a limit on the amount he may collect, is consistent with the Title I definition of such term, and accords with the interpretation of the term in Title IV adopted by the PBGC, the agency responsible for administering the Title IV insurance program. Pp. 446 U. S. 370 -374.
(b) There is no evidence that Congress intended to exclude otherwise vested benefits from the insurance program solely because the employer had disclaimed liability for any deficiency in the pension fund. To the contrary, § 4062(b), the reimbursement provision, makes it clear that Congress was not only worried about plan terminations resulting from business failures, but was also concerned about the termination of underfunded plans, such as the one here, by solvent employers. And the fact that the provision of § 4062(b) limiting the amount of employer liability for reimbursement to 30% of the employer's net worth would be meaningless unless the employer has disclaimed direct liability demonstrates that Congress did not intend such a disclaimer to render otherwise vested benefits "forfeitable" within the meaning of § 4022. Pp. 446 U. S. 374 -382
(c) Petitioner's proposed construction of the statute, whereby cost-free terminations of pension plans would be authorized prior to January 1, 1976, with full liability for all promised benefits thereafter, would distort the orderly phase-in of the statutory program designed by Congress. It appears that Congress intended to discourage unnecessary terminations even during the phase-in period, and to place a reasonable ceiling on the potential cost of a termination during the principal life of ERISA -- the period after January 1, 1976. Pp. 446 U. S. 382 -386.
STEVENS, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, MARSHALL, and BLACKMUN, JJ., joined. STEWART, J., filed a dissenting opinion, in which WHITE, POWELL, and REHNQUIST, JJ., joined, post, p. 446 U. S. 386 . POWELL, J., filed a dissenting opinion, post, p. 446 U. S. 396 .
On September 2, 1974, following almost a decade of studying the Nation's private pension plans, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, 29 U.S.C. § 1001 et seq. As a predicate for this comprehensive and reticulated statute, [ Footnote 1 ] Congress made detailed
Stated in statutory terms, the question is whether a plan provision that limits otherwise defined, vested benefits to the amounts that can be provided by the assets of the fund prevents such benefits from being characterized as "nonforfeitable" within the meaning of § 4022(a) of ERISA, 29 U.S.C. § 1322(a). [ Footnote 2 ] If the benefits are "nonforfeitable," they are insured by the Pension Benefit Guaranty Corporation (PBGC) under Title IV. [ Footnote 3 ] And if insurance is payable to the
former employees, the PBGC has a statutory right under § 4062(b) to reimbursement from the employer. [ Footnote 4 ] It was petitioner's interest in avoiding liability for such reimbursement that gave rise to this action for declaratory and injunctive relief.
The relevant facts are undisputed. In 1960, pursuant to a collective bargaining agreement, petitioner established a pension plan covering employees represented by the respondent union at its Chicago plant. The plan, as amended from time to time, provided for the payment of monthly benefits computed on the basis of age and years of service at the time of retirement. [ Footnote 5 ] Benefits became "vested" -- that is to say, the
employee's right to the benefit would survive a termination of his employment -- after either 10 or 15 years of service. The 15-year vesting provisions would not have complied with the minimum vesting standards in Title I of ERISA that were to become effective on January 1, 1976, [ Footnote 6 ] the day after termination of the plan.
Petitioner agreed to, and did, make regular contributions sufficient to cover accruing liabilities, to pay administrative expenses, and to amortize past service liability over a 30-year period. [ Footnote 7 ] Consistent with the agreement and with accepted actuarial practice, it was anticipated that the plan would not be completely funded until 1990.
App. 24. [ Footnote 8 ]
In 1975 petitioner decided to close its Chicago plant. Its collective bargaining agreement expired on October 31, 1975, and it terminated the pension plan covering the persons employed at that plant on December 31, 1975, the day before ERISA would have required significant changes in at least the vesting provisions of the plan. At that time, 135 employees had accrued benefits with an average value of approximately $77 per month. Those benefits were concededly "vested in a contractual sense." [ Footnote 9 ] The assets in the fund were sufficient to pay only about 35% of the vested benefits.
The Court of Appeals for the Seventh Circuit reversed. 592 F.2d 947 (1979). Relying on the definition of "nonforfeitable" in Title I of ERISA, [ Footnote 10 ] the court concluded that the limitation of liability clause merely affected the extent to which the benefits could be collected, without qualifying the employees' rights against the plan. This conclusion was buttressed
by a comprehensive review of the legislative history in which Judge Sprecher noted that the words "vested" and "nonforfeitable" had been used interchangeably throughout the congressional reports and debates, that the specific purpose of Title IV insurance was to protect employees from the kind of risk presented here (insufficient funds in the plan to cover vested benefits at termination), and that a contrary holding "would totally subvert the Congressional intent." [ Footnote 11 ]
Having construed the statute as it did, the Court of Appeals was required to confront petitioner's constitutional argument that the imposition of a retroactive liability for the payment of unfunded, vested benefits that was not assumed under the collective bargaining agreement, violates the Due Process Clause of the Fifth Amendment. The Court of Appeals agreed that ERISA was not wholly prospective, in that it applies to pension plans in existence before the effective date of the Act. It concluded, however, that Congress had adequately tempered the Act's burdens on employers, and that those burdens were sufficiently justified by the public purposes supporting the legislation. [ Footnote 12 ]
Petitioner urges us to adopt a construction of the statute that would avoid the necessity of confronting constitutional questions, [ Footnote 13 ] and correctly points out hat new rules applying
to pension funds "should not be applied retroactively unless the legislature has plainly commanded that result." Los Angeles Dept. of Water & Power v. Manhart, 435 U. S. 702 , 435 U. S. 721 . But petitioner's argument for reversal relies primarily on the language of the statutory definition of "nonforfeitable" contained in Title I, see n 10, supra. If the Title I definition determines which benefits are insured under Title IV, benefits are not insured unless they are "unconditional" and "legally enforceable against the plan." Since petitioner's plan expressly states that benefits "shall be only such benefits as can be provided by the assets of the fund," petitioner argues that those elements of the statutory definition are not satisfied. Therefore, the benefits are forfeitable, and necessarily uninsurable. Thus, petitioner concludes, it is not liable to anyone under the statute for the fund's inability to cover all vested benefits. Petitioner submits that this result is consonant with Congress' decision to postpone the effective date of the minimum vesting and funding requirements of Title I until January 1, 1976. Petitioner interprets that postponement as having been intended, among other things, to allow employers the opportunity to avoid the harsh consequences of the statute's retroactive application by freely terminating their plans at any time prior to that date.
We must reject petitioner's argument. We first note that the plan provision on which petitioner relies, supra at 446 U. S. 365 , read as a whole, merely disclaims direct employer liability and imposes no condition on the benefits. See n 8, supra, and n 17, infra. Thus, petitioner's argument is not supported by a purely literal reading of the definition on which it relies and is inconsistent with the clear language, structure and purpose of Title IV. Since we construe petitioner's plan as containing only an employer liability disclaimer clause, we cannot accept its statutory argument without virtually eviscerating Title IV as applied to plans terminating prior to January 1, 1976. Such a result not only would be contrary to the four-stage phase-in of the program of insurance and employer
The key statutory term, "nonforfeitable benefits," is nowhere defined in Title IV. Petitioner relies on the definition of "nonforfeitable" in Title I, § 3(19), see n 10, supra. But definitions in that section are not necessarily applicable to Title IV, because they are limited by the introductory phrase, "For purposes of this title." [ Footnote 14 ] Nothing in the statute or its legislative history tells us why the Title I definition of "nonforfeitable"
is not made expressly applicable to Title IV. The legislative history does disclose, however, that earlier versions of what finally emerged as the Title I definition would unquestionably have covered the benefits at stake in this litigation, and that those earlier versions applied to the entire Act, including the termination insurance provisions. [ Footnote 15 ] If we assume that the original intent to have the definition apply to the entire statute survived the unexplained changes in the form of the definition, we should likewise assume that no change was intended in the substantive coverage of the insurance program. Indeed, as we shall demonstrate, [ Footnote 16 ] the latter assumption is supported by the legislative history. But even assuming, arguendo, that the Title I definition controls, and even if the legislative history were less clear than it is, three aspects of the Title I definition itself refute petitioner's argument that the "nonforfeitable" character of a participant's rights should be determined by focusing on whether the employer is liable for any deficiency in the fund's assets.
for the employer. With or without such a clause, the pension fund could pay no more than the amount of assets on hand. Giving the employer protection against liability does not qualify the beneficiary's rights against the plan itself. [ Footnote 17 ]
death or temporary reemployment -- that might otherwise be construed as causing a forfeiture of the entire benefit. It is therefore surely consistent with the statutory definition of "nonforfeitable" to view it as describing the quality of the participant's right to a pension, rather than a limit on the amount he may collect. This reading of the Title I definition accords with the interpretation of the term "nonforfeitable" in Title IV adopted by the agency responsible for administering the Title IV insurance program. The PBGC has promulgated regulations containing a completely unambiguous definition of the term, [ Footnote 18 ] and has been paying benefits to over 12,000 participants in terminated plans on the basis of this understanding of its statutory responsibilities. [ Footnote 19 ] We surely may not reject this
contemporary construction of the statute by the PBGC [ Footnote 20 ] without a careful examination of Title IV and its underlying legislative history to see what benefits Congress intended to insure.
One of Congress' central purposes in enacting this complex legislation was to prevent the "great personal tragedy" [ Footnote 21 ] suffered by employees whose vested benefits are not paid when pension plans are terminated. [ Footnote 22 ] Congress found
ERISA § 2(a), 88 Stat. 832, 29 U.S.C. § 1001(a). Congress wanted to correct this condition by making sure that, if a worker has been promised a defined pension benefit upon retirement -- and if he has fulfilled whatever conditions are required to obtain a vested benefit -- he actually will receive it. The termination insurance program is a major part of Congress' response to the problem. Congress provided for a minimum funding schedule and prescribed standards of conduct for plan administrators to make as certain as possible that pension fund assets would be adequate. But if a plan nonetheless terminates without sufficient assets to pay all vested benefits, the PBGC is required to pay them -- within certain dollar limitations not applicable here [ Footnote 23 ] -- from funds established by that corporation.
Throughout the entire legislative history, from the initial proposals to the Conference Report, the legislators consistently described the class of pension benefits to be insured as "vested benefits." [ Footnote 24 ] Petitioner recognizes, as it must, that the terms "vested" and "nonforfeitable" were used synonymously. [ Footnote 25 ]
Since Title IV neither uses nor defines the term "vested," [ Footnote 26 ] it is reasonable to infer that the term "nonforfeitable" was intended to describe benefits that were generally considered
"vested" prior to the statute. And it is clear that the normal usage in the pension field was that, even if the actual realization of expected benefits might depend on the sufficiency of plan assets, they were nonetheless considered vested. [ Footnote 27 ]
There is no evidence that Congress intended to exclude otherwise vested benefits from the insurance program solely because the employer had disclaimed liability for any deficiency in the pension fund. Indeed, there is strong evidence to the contrary. Congress understood that pension plans ordinarily contained disclaimer provisions of the sort petitioner relies on here. [ Footnote 28 ] Given that understanding, the Title
IV insurance program would have been wholly inapplicable to most pension plans. Since only the few plans in which the employer had not disclaimed liability would have been covered, the only purpose in providing any insurance at all would be to protect employees against the risk of employer insolvency. [ Footnote 29 ]
But § 4062(b)(2), 29 U.S.C. § 1362(b)(2), see n 4, supra, -- the reimbursement provision -- demonstrates that insolvency was certainly not the only focus of Congress' concern. The very fact that § 4062(b)(2) requires employers to reimburse the PBGC for the payment of insured benefits makes it clear that Congress not only was worried about plan terminations resulting from business failures, but also was concerned about the termination of underfunded plans by solvent employers. [ Footnote 30 ] Of even greater significance is the provision
limiting the amount of employer liability for reimbursement to 30% of the employer's net worth. The 30% limit plainly contemplates the situation in which the employer has disclaimed direct liability; for if the employer were directly liable to the employees for the full amount of any funding deficiency, the 30% limitation would serve no useful purpose. [ Footnote 31 ] That this 30% limit would be meaningless unless the employer has disclaimed direct liability surely demonstrates that Congress did not intend such a disclaimer to
render otherwise vested benefits "forfeitable" within the meaning of § 4022. [ Footnote 32 ]
We have previously noted the care with which Congress approached the problem of retroactivity in ERISA. See Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. at 435 U. S. 721 -722, n. 40. Congress provided that Title IV should have an increasingly severe yet carefully limited impact on employers during four successive periods of time for single-employer plans. During each of these periods, however, it extended the same insurance protection to those beneficiaries of terminated plans having vested benefits under the terms of the plans.
Title IV became effective as soon as ERISA was enacted on September 2, 1974, § 4082(a), 29 U.S.C. § 1381(a), and indeed was expressly made partially retroactive in order to provide insurance coverage to participants whose plans terminated after June 30, 1974, § 4082(b), 29 U.S.C. § 1381(b). The measure of coverage, at the outset, was the difference between the employee's vested benefits under the terms of the plan (subject to the dollar limitations in § 4022(b)(3), see n 23, supra ) and the amount that could be paid from the terminated plan's assets. However, the employer liability provision, § 4062, was not made effective at all during this initial period -- June 30 to September 2, 1974. The PBGC was thus given no right to recover any part of the insured deficiencies from employers that terminated their plans before the Act became effective. [ Footnote 33 ]
The second period lasted for 270 days after the enactment of ERISA, or until the end of May, 1975. Again, the PBGC provided insurance coverage for most underfunded nonforfeitable benefits under the terms of a pension plan terminated during this period. But two important additional provisions became effective: 4062(b), the section creating employer liability to the PBGC, and § 4004(f)(4), 88 Stat. 1009, 29 U.S.C. § 1304(f)(4). [ Footnote 34 ] The latter authorized the PBGC to waive entirely or to reduce its right to recover insurance payments from any employer who could establish unreasonable hardship in situations in which the employer was not able, as a practical matter, to continue its plan in effect. Section 4004(f)(4) unequivocally demonstrates that Congress had deliberately imposed a new liability upon an employer that terminated its plan during the first nine months of the operation of the Act. If the employer had a preexisting contractual liability, there would have been no effective way for the PBGC to mitigate it in hardship cases, since the PBGC could not stop the employees from suing the employer directly. Moreover, there would have been no need for insurance except in cases of insolvency, and, in such cases, there would have been no practical reason for mitigation, because recovery from the employer would have been impossible in any event. On the other hand, in the typical case in which the employer had protected itself from any contractual liability, the only possible source of employer liability was
There is not a word in the statute or its legislative history suggesting that Congress ever intended to outlaw the use of such clauses. [ Footnote 35 ] On the contrary, the inclusion of a limit on an employer's contingent reimbursement liability to the PBGC measured by 30% of its net worth would be inexplicable if Congress had intended to deny employers any right to place a contractual limit on their direct liability to their employees. We stress that petitioner's construction of the statute would therefore render meaningless § 4062(b)'s 30% net worth limit on the employer's contingent liability to the PBGC for all terminations occurring after January 1, 1976. In light of the careful attention paid to when various provisions were to be effective, Congress surely would have made explicit any intent to limit this important provision to a mere transitionary role. It bears emphasis that Congress declined to adopt the suggestion that corporate assets be committed to guarantee any pension obligations which exist at termination. [ Footnote 36 ] The 30% provision was designed as a softer measure. [ Footnote 37 ]
"Subject to the [dollar] limitations contained in subsection (b) [ see n 23, infra ], the [PBGC] shall guarantee the payment of all nonforfeitable benefits (other than benefits becoming nonforfeitable solely on account of the termination of a plan) under the terms of a plan which terminates at a time when section 4021 applies to it."
Like the plan described in Alabama Power Co. v. Davis, 431 U. S. 581 , 431 U. S. 593 , n. 18,
ERISA § 211(b)(2), 29 U.S.C. § 1061(b)(2). The provision for vesting of normal and early retirement rights after 10 years of service would have complied with the new standards unless, as petitioner argues, the clause disclaiming direct liability of the employer for benefits not sufficiently covered by the pension fund prevented the benefits from being "nonforfeitable" within the meaning of ERISA § 3(19), 29 U.S.C. § 1002(19). See discussion in n 10, and 446 U. S. infra, at 446 U. S. 384 -385.
MR. JUSTICE STEWART's dissenting opinion quotes at length from Art. X, § 3, the plan provision determining the order of distribution of fund assets upon termination. Post at 446 U. S. 389 -390, n. 7. Again, that provision does not purport to be a part of the definition of benefits, but simply provides a schedule for the distribution of benefits upon termination. Moreover, the dissent is quite wrong in stating that this distribution provision may have become illegal after December 31, 1975, post at 446 U. S. 390 , n. 8. If that provision has been superseded, it was by § 4044, 29 U.S.C. § 1344, see n 32, infra, which became effective on September 2, 1974.
"Perhaps the most important facts distinguishing ERISA from the Minnesota statute in Allied Structural Steel \[Co. v. Spannaus, 438 U. S. 234 ,] are those revealing the Congressional attempt to moderate the impact of the liability imposed. Title IV provisions represent a rational attempt to impose liability only to the extent necessary to achieve the legislative purpose. Congress concluded that it was necessary to insure unfunded vested benefits and established a federal corporation for that purpose. However, it was also determined that it would not be possible to maintain an effective insurance program without imposing some liability on employers. The abuses employer liability was designed to cure included terminations motivated by a desire to avoid the continued burden of funding. III Legislative History at 4741 (remarks of Sen. Williams); II Legislative History at 3382 (remarks of Rep. Gaydos). Congress was also concerned that without the risk of liability, employers might use promises of higher retirement benefits for bargaining leverage, knowing that the PBGC would be required to fulfill the promise. S.Rep. No. 93-383, I Legislative History at 1155. It was also believed that, to impose liability would cause employers to assume a more responsible funding schedule. II Legislative History at 1873 (remarks of Sen. Griffin). These first two considerations would not have been relevant in the Minnesota scheme, because no agency was established to assume primary responsibility for the payment of benefits."
"The record supporting the enactment of ERISA, wholly unlike that present in Allied Structural Steel, demonstrates that "the presumption favoring legislative judgment as to the necessity and reasonableness of a particular measure'" must be allowed to govern here. 438 U.S. at 438 U. S. 247 . . . . Turner Elkhorn Mining, 428 U.S. at 428 U. S. 18 , 428 U. S. 19 . . . ; Williamson v. Lee Optical Co., 348 U. S. 483 , 348 U. S. 488 . . . (1955). Title IV of ERISA satisfies Nachman's rights to Due Process."
See, e.g., Rescue Army v. Municipal Court, 331 U. S. 549 , 331 U. S. 568 -569.
In the text, we explain at length why a clause limiting an employer's liability does not make otherwise vested benefits forfeitable within the meaning of the Act. The dissenters do not question the validity of any part of that explanation. Since what MR. JUSTICE STEWART describes as an "asset-sufficiency limitation," post at 446 U. S. 391 , in the context of this case, is merely an example of such a clause, our explanation applies with full force to that formulation. Merely to assert that there is a "world of difference" between two forms of employer protection -- without considering whether there is any reason to believe Congress intended such a difference to govern the availability of insurance protection for employees -- is an unacceptable approach to the problem of statutory construction presented by this case. Understandably, the dissenting opinions do not suggest that there is anything in the legislative history of ERISA to support the view that the availability of insurance coverage should turn on the form of a plan provision disclaiming employer liability for unfunded benefits.
Cf., e.g., E. I. du Pont de Nemours & Co. v. Collins, 432 U. S. 46 , 432 U. S. 55 .
"MR. JUSTICE STEWART's dissent acknowledges this language from the Conference Report, post at 446 U. S. 393 , but draws an unsupportable inference from it. He emphasizes that it is only " vested retirement benefits guaranteed by the plan '" that are insured. The emphasized language was used by the Conference Committee, however, not to describe the nature of vested benefits that were to be insured under Title IV, but to distinguish the rejected narrower House provision, under which only those benefits that Title I of ERISA required to be vested would be insured. H.R.Conf.Rep. No. 93-1280, supra, at 368, 3 Leg.Hist. 4635. See also 592 F.2d at 954, n. 9. Thus, the quoted language, which tracks the language of § 4022 verbatim -- except that "vested" is used in place of "nonforfeitable" -- merely underscores the intent to insure all vested benefits."
See n 28, supra. The Internal Revenue Service has included an employer liability disclaimer clause in a model pension plan issued for guidance in drafting post-1976 plans. See CCH 1977 Pension Plan Guide Ĺš 30,782.96.
Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1301 et seq., establishes a system of insurance to cover the termination of private pension plans. Under that Title, the Pension Benefit Guaranty Corporation (PBGC) must "guarantee the payment of all nonforfeitable benefits . . . under the terms of a [covered] plan which terminates." [ Footnote 2/1 ] In turn, the PBGC may sue the company that maintained the plan for such part of the "guaranteed" payment as exceeded on the date of termination the value of the plan's assets. [ Footnote 2/2 ]
The Nachman plan was terminated on December 31, 1975, several months after Title IV had become fully applicable to pension plans such as the one maintained by the petitioner. [ Footnote 2/3 ] The issue in this case is, therefore, a narrow one: whether, "under the terms of [the Nachman] plan," the plan's participants were entitled on the date of termination to "nonforfeitable benefits" in excess of the value of the funds that were then held by the plan. [ Footnote 2/4 ]
ERISA defines a "nonforfeitable benefit" as follows: [ Footnote 2/5 ]
pension benefit or right, means a claim obtained by a participant or his beneficiary to that part of an immediate or deferred benefit under a pension plan which arises from the participant's service, which is unconditional, and which is legally enforceable against the plan. [ Footnote 2/6 ]
(Emphasis added.) [ Footnote 2/7 ]
These two provisions, neither of which was void on the date of termination, [ Footnote 2/8 ] rendered "conditional" every defined benefit set out in the plan. On termination, a participant's right to any benefit defined in dollar terms was expressly hinged on the plan's ability to pay that amount. Like any condition a plan might specifically place on a participant's entitlement to
a defined retirement benefit, this asset sufficiency condition deprived the Nachman plan's defined benefits of "nonforfeitable" status to the extent that such benefits could not be defrayed by the plan's assets. [ Footnote 2/9 ] The Court does not explain why an asset sufficiency limitation expressly set out in a pension plan is not a "condition" for purposes of determining the "nonforfeitability" of the plan's pension benefits. [ Footnote 2/10 ]
made the benefits provided by the plan "[c]onditional," nor rendered them "legally [un]enforceable against the plan." The Court is, therefore, quite correct in concluding that the sentence in question did not render "forfeitable" any of the retirement benefits provided by the Nachman plan. [ Footnote 2/11 ] What the Court misses is the world of difference between the employer disclaimer clause and the provisions in the plan that limited what the plan itself promised to provide its participants. Only the latter made the retirement benefits "forfeitable" for purposes of ERISA. [ Footnote 2/12 ]
Three aspects of ERISA's legislative history strongly support this interpretation of the statutory scheme. First, Congress discarded, on its way to passing the Act, a number of alternative definitions of the benefits to be insured, several of which, if enacted, would have read very much like the definition the PBGC has adopted, and which the Court now holds embodies Congress' true intent. [ Footnote 2/13 ] Few principles of statutory
construction are more compelling than the proposition that Congress does not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language. See Gulf Oil Corp. v. Copp Paving Co., 419 U. S. 186 , 419 U. S. 199 -200.
Second, the Conference Report, in describing the bill that finally was enacted, stated that "vested retirement benefits guaranteed by the plan . . . are to be covered" by the Act's insurance scheme. H.R.Rep. No. 93-1280, p. 368 (1974), 3 Leg.Hist. 4635. (Emphasis added.) Only a benefit that is unconditionally promised by a plan is a benefit "guaranteed" by that plan. [ Footnote 2/14 ]
involved in this case (September 2, 1974, through December 31, 1975) during which pension plans were subject to the Act's insurance program but not to its minimum vesting standards. See H.R.Conf.Rep. No. 93-1280, pp. 48, 245 (1974), 3 Leg.Hist. 4323, 4515. In discussing the Conference Committee bill, certain Members of Congress also equated "vested" rights with "nonforfeitable" rights. [ Footnote 2/15 ] But there is no reason to suppose that these statements did not refer to the post-1975 operation of ERISA, when many benefits, "vested" in the traditional sense, also became "nonforfeitable" by reason of the Act's minimum vesting standards. [ Footnote 2/16 ]
"nonforfeitable" by the terms of plans in existence on January 1, 1974; [ Footnote 2/17 ] and (2) at least 20% of the benefits required by the Act's "minimum vesting standards" to be "nonforfeitable" under the terms of plans created after January 1, 1974. [ Footnote 2/18 ]
" If, after having made provision in the above order of precedence for some but not all of the above categories, the assets then remaining in the Fund are not sufficient to provide completely for the benefits for Employees in the next category, such benefits shall be provided for each such Employee on a pro-rata basis. "
The Nachman plan -- as a "defined benefit plan," see 29 U.S.C. §§ 1002(23), (34), (35); Alabama Power Co. v. Davis, 431 U. S. 581 , 431 U. S. 593 , n. 18 -- could not, after January 1, 1976, have continued to promise its fully vested participants a "nonforfeitable" right only to that part of their "accrued benefit" which could be funded by the plan. See 29 U.S.C. §§ 1002(23), (34), (35), 1053, 1054.