Opinion ID: 679507
Heading Depth: 3
Heading Rank: 2

Heading: Prohibition of Amendments Decreasing Employee Rights

Text: 52 Plaintiffs extend their argument that the A & B Plan did not allow reversion of surplus assets to the employer, claiming that the language of the Plan also prohibited amendments creating a right of reversion in the employer. 23 53 The amendment provision of the A & B Plan stated as follows: 54 The Board of Directors reserves the right at any time and from time to time to modify or to amend, in whole or in part, any or all of the provisions of the Plan, provided that: 55 (a) No modification or amendment may be made which will deprive any person of any benefit under the Plan which has accrued on or prior to the time of such modification or amendment, and 56 (b) No such modification or amendment shall make it possible for any part of the Trust Fund to be used for, or diverted to, purposes other than for the exclusive benefit of participants and retired participants, or their beneficiaries under the Plan. (Emphasis added.) 57 Other courts have held that exclusive benefit language in a plan does not, by itself, prevent an employer from amending a plan to allow reversion of surplus assets. In Chait, although the plan contained a provision similar to that in the Gulf Plan, the Third Circuit determined that the language of the plan did not prohibit a reversionary amendment. Chait, 835 F.2d at 1022-26. 24 The court held that a vested employee who has fully received his vested benefits cannot rely on the 'exclusive benefit' language, standing alone, to prevent an amendment reverting surplus plan assets to the employer. Id. at 1018. See also Outzen v. Federal Deposit Ins. Corp., 948 F.2d at 1186, 1187 (allowing reversion amendment despite exclusive benefit language, stating [t]he cases which allow reversion as well as those which preclude it all dictate that strong, express prohibitory language is necessary to block employer recapture of surplus pension funds in a defined benefit plan); Wilson v. Bluefield Supply Co., 819 F.2d at 461-465 (allowing reversion of surplus assets despite exclusive benefit language in plan); Washington-Baltimore Newspaper Guild Local 35, 555 F.Supp. at 260-262; In re C.D. Moyer Co. Trust Fund, 441 F.Supp. at 1131-32. 58 Thus, a defined benefit plan must generally contain language other than the exclusive benefit phrase in order to preclude an amendment providing for employer reversion. For example, in Bryant v. Int'l Fruit Products Co., Inc., 793 F.2d 118, 123 (6th Cir.), cert. denied, 479 U.S. 986, 107 S.Ct. 576, 93 L.Ed.2d 579 (1986), the Sixth Circuit held that an amendment to a defined benefit plan purporting to allow employer reversion was ineffective in light of strong plan language expressly prohibiting such an amendment. The plan contained, in addition to the standard exclusive benefit phrase limiting amendment, the phrase [i]n no event and under no circumstances shall any contributions to this Trust by the Employer, nor any of the Trust Estate or the income therefrom, revert to or be repaid to the Employer. Bryant, 793 F.2d at 120 (quoting agreement) (emphasis added). The court found this language to be a unique, unequivocal prohibition against employer recapture of any contributions to the plan. Id. at 123. Language in the handbook distributed to plan participants supported the Bryant court's conclusion: 59 Funds paid into the trust can never be refunded to the Company and are for the exclusive benefit of the employees under the Trust.... It is definitely provided that the funds paid into the Trust are for your exclusive benefit and can never, under any circumstances, revert to the Company. Id. (quoting handbook) (emphasis added). 60 We conclude that the language of the A & B Plan prohibiting amendments other than for the exclusive benefit of the participants does not, by itself, preclude an amendment expressly allowing reversion to the employer. Furthermore, as discussed above, the language of the Plan impliedly allowed such a reversion. 25 61 The policies underlying ERISA support our conclusion. 62 Employers will continue to fund their plans under ERISA guidelines, but will not be penalized for overfunding in 'an abundance of caution' or as a result of a miscalculation on the part of an actuary. Thus, employees will continue to be protected to the extent of their specific benefits, but will not receive any windfalls due to the employer's mistake in predicting the amount necessary to keep the Plan on a sound financial basis. In re C.D. Moyer Co. Trust Fund, 441 F.Supp. at 1132-33. 26 63 Plaintiffs have received their expected benefits. An award of surplus assets, in light of Plan provisions inferentially and now expressly allowing employer reversion, would result in a windfall to the plaintiffs and would encourage defendants to fund the Chevron Plan more cautiously, to the potential detriment of present and future participants and their beneficiaries. 64