Opinion ID: 693407
Heading Depth: 3
Heading Rank: 1

Heading: The Purchase of Annuities from ELIC

Text: 98 Plaintiffs next contend that the district court erred in granting Defendants' summary judgment motion on Plaintiffs' claim that certain transactions were prohibited transactions within the meaning of ERISA Sec. 406, 29 U.S.C. Sec. 1106. 13 The first transaction at issue involved Defendants' purchase of annuities from ELIC. Plaintiffs asserted that this purchase constituted a prohibited transaction because Defendants selected ELIC in order to maximize their recovery of surplus plan assets, and therefore constituted a transfer for the benefit of a party in interest or self-dealing. 99 This court rejected this same argument in Waller v. Blue Cross of Cal., 32 F.3d 1337, 1346 (9th Cir.1994): 100 [P]urchasing replacement annuities as part of a plan termination even with such alleged infirmities is not the kind of transaction Sec. 406 prohibits. As we explained in M & R Inv. Co.: 101 The party-in-interest prohibitions [under Sec. 406(a) ] act to insure arm's-length transactions by fiduciaries of funds subject to ERISA. A transaction with a party in interest is prohibited under the presumption that it is not arm's-length. The result is a broad per se prohibition of transactions ERISA implicitly defines as not arm's-length. 102 685 F.2d at 287. In other words, the transaction, itself, should communicate the breach. ERISA, however, permits the transaction that forms the basis for plaintiffs' Sec. 406 claim--the purchase of annuities as part of a plan termination. See 29 U.S.C. Sec. 1341(b)(3)(A)(i). Plaintiffs do not allege that either Executive Life or Provident is a party in interest. Absent such an allegation, we fail to see how purchasing annuities to terminate plaintiffs' Plan constitutes a per se violation of ERISA, even if accomplished through an infirm bidding process or for improper purposes. For the same reason, we also reject plaintiffs' Sec. 406(b) claim. 103 Id. (quoting M & R Inv. Co., Inc. v. Fitzsimmons, 685 F.2d 283, 287 (9th Cir.1982)). The district court correctly found that the purchase of annuities from ELIC was not a prohibited transaction under ERISA Sec. 406, 29 U.S.C. Sec. 1106. 104