Opinion ID: 3034505
Heading Depth: 3
Heading Rank: 3

Heading: Permissibility of Merger as a Means of

Text: Termination under ERISA The bankruptcy court did not explicitly determine whether ERISA permits merger into a multiemployer plan as a means of terminating a single employer plan. Instead, the court assumed that this was permissible, finding “[t]he decision whether to annuitize the plans or merge them into PIUMPF was . . . a discretionary act” subject to fiduciary duties. Because the bankruptcy court’s interpretation of ERISA is a question of law, our review is de novo. Mathews v. Chevron Corp., 362 F.3d 1172, 1178 (9th Cir. 2004); Olshan, 356 F.3d at 1083. 14642 BECK v. PACE INT’L UNION [2] As Crown argues, ERISA § 4041(a)(1), 29 U.S.C. § 1341(a)(1), provides that the exclusive means of terminating a single-employer pension plan are: 1) institution of termination proceedings by the corporation under 29 U.S.C. § 1342; 2) standard termination under § 1341(b); and 3) distress termination under § 1341(c). The termination effected in this case was a standard termination. A standard termination requires that, “when the final distribution of assets occurs, the plan is sufficient for benefit liabilities.” 29 U.S.C. § 1341(b)(1)(D). So long as the PBGC does not issue a notice of noncompliance, the plan administrator must distribute the assets. Id. § 1341(b)(2)(D); 29 C.F.R. §§ 4041.21(a), 4041.28(a), (c). [3] ERISA § 4041(b)(3), 29 U.S.C. § 1341(b)(3), sets forth the method for “final distribution of assets” for standard terminations. The assets are to be allocated according to the priorities listed in 29 U.S.C. § 1344. Next, the statutory section at issue in this case states: In distributing such assets, the plan administrator shall—
insurer to provide all benefit liabilities under the plan, or
and any applicable regulations, otherwise fully provide all benefit liabilities under the plan. § 1341(b)(3)(A) (emphasis added). Thus, ERISA explicitly provides for alternative means of terminating a pension plan. The implementing regulations are consistent: The plan administrator must, in accordance with all applicable requirements under the Code and ERISA, distribute plan assets in satisfaction of all plan beneBECK v. PACE INT’L UNION 14643 fits by purchase of an irrevocable commitment from an insurer or in another permitted form. 29 C.F.R. § 4041.28(c)(1) (emphasis added). Thus, the purchase of an irrevocable commitment from an insurer is not a requirement; other methods of termination are permitted as long as they are sufficient to cover plan liabilities. [4] Crown emphasizes that ERISA § 4041, 29 U.S.C. § 1341, and ERISA § 4232, 29 U.S.C. § 1412, which controls transfers between multiemployer and single-employer plans, are two “wholly separate sections of the statute,” neither of which expressly permits mergers as a means of termination. Yet, as the district court persuasively reasoned, both 29 U.S.C. §§ 1341 and 1412 are included within ERISA Title IV, which covers the topic of “Plan Termination Insurance.” Section 1412 falls under Subtitle E of Title IV, “Special Provisions for Multiemployer Plans.” It would have been logical for Congress to place § 1412 within Title IV of ERISA because, as appellees Miller and Macek argue, one practical effect of a merger or complete transfer is that at least one pension plan will cease to exist. [5] Crown cites Brotherhood of Railroad Trainmen v. Baltimore & Ohio Railroad Co., 331 U.S. 519, 528-29 (1947), and Scarborough v. Office of Personnel Management, 723 F.2d 801, 811 (11th Cir. 1984), for the proposition that a statute’s titles and headings cannot “limit the plain meaning of the text.” Those cases, however, dealt with unambiguous statutory language. By contrast, where the statutory language is ambiguous, titles and headings may be used to clarify the meaning of statutory text. See Natural Res. Def. Council v. EPA, 915 F.2d 1314, 1321 (9th Cir. 1990). Here, the statutory language is unclear: whether Congress intended to permit mergers into multiemployer plans as a means of termination under 29 U.S.C. § 1341(b)(3)(A) is uncertain. Consideration of the placement of titles and headings clarifies the statutory 14644 BECK v. PACE INT’L UNION text and supports the conclusion that mergers are a permissible means of termination. Crown also argues that 29 U.S.C. § 1412(f)(3), which involves transfers between or mergers of multiemployer and single-employer plans, supports its argument that terminations are distinct from transfers between single and multiemployer plans. Section 1412(f)(3) states: No transfer to which this section applies, in connection with a termination described in section 1341a(a)(2) of this title, shall be effective unless the transfer meets such requirements as may be estab- lished by the corporation to prevent an increase in the risk of loss to the corporation. Section 1341a refers to terminations of multiemployer plans. The text of § 1412(f)(3) implies that a transfer between a single and multiemployer plan can be “in connection with a termination” (albeit the termination of a multiemployer plan). Thus, § 1412(f)(3) fails to support Crown’s argument that termination and merger into a multiemployer plan are mutuallyexclusive actions. Finally, Crown argues that a merger into a multiemployer plan does not constitute a “distribution” under 29 U.S.C. § 1341(b)(3). The terms “distribution” or “distribute” are not expressly defined in either ERISA or its implementing regulations. See 29 U.S.C. §§ 1002, 1301; 29 C.F.R. § 4041.2. Dictionary definitions of “distribute” include: “to divide among several or many: deal out; apportion esp. to members of a group or over a period of time: allot”; “dispense, administer”; and “to give out or deliver esp. to the members of a group.” WEBSTER’S THIRD NEW INT’L DICTIONARY (1993). These definitions do not support the exclusion of mergers into multiemployer plans as a means of termination. As appellees Miller and Macek argue, the purchase of irrevocable commitments from an insurer to provide all benefit liabilities under the plan, BECK v. PACE INT’L UNION 14645 pursuant to 29 U.S.C. § 1341(b)(3), such as the annuity to be provided by Hartford Life in this case, does not appear to satisfy the distribution requirement any more than would a merger into a multiemployer plan. Both scenarios would involve a series of payments to plan beneficiaries over time, rather than a lump-sum payment at the time of termination. [5] In sum, the text of ERISA § 4041 and its implementing regulations is ambiguous at best and neither explicitly nor implicitly prohibits merger into a multiemployer plan as a means of termination of a pension plan. As the district court determined, § 1341(b)(3) provides for alternative means of termination, so long as they are consistent with the plan provisions, applicable regulations and “otherwise fully provide all benefit liabilities under the plan.” We hold that neither the statute nor its implementing regulations preclude mergers into multiemployer plans as a method of providing such benefit liabilities. We therefore affirm the district court’s ruling on this issue.