Opinion ID: 109975
Heading Depth: 2
Heading Rank: 1

Heading: Investment of Money

Text: An employee who participates in a noncontributory, compulsory pension plan by definition makes no payment into the pension fund. He only accepts employment, one of the conditions of which is eligibility for a possible benefit on retirement. Respondent contends, however, that he has invested in the Pension Fund by permitting part of his compensation from his employer to take the form of a deferred pension benefit. By allowing his employer to pay money into the Fund, and by contributing his labor to his employer in return for these payments, respondent asserts he has made the kind of investment which the Securities Acts were intended to regulate. In order to determine whether respondent invested in the Fund by accepting and remaining in covered employment, it is necessary to look at the entire transaction through which he obtained a chance to receive pension benefits. In every decision of this Court recognizing the presence of a security under the Securities Acts, the person found to have been an investor chose to give up a specific consideration in return for a separable financial interest with the characteristics of a security. See Tcherepnin, supra (money paid for bank capital stock); SEC v. United Benefit Life Ins. Co., 387 U. S. 202 (1967) (portion of premium paid for variable component of mixed variable-and fixed-annuity contract); Variable Annuity Life Ins. Co., supra (premium paid for variable-annuity contract); Howey, supra (money paid for purchase, maintenance, and harvesting of orange grove); SEC v. C. M. Joiner Leasing Corp., 320 U. S. 344 (1943) (money paid for land and oil exploration). Even in those cases where the interest acquired had intermingled security and nonsecurity aspects, the interest obtained had to a very substantial degree elements of investment contracts . . . . Variable Annuity Life Ins. Co., supra, at 91 (BRENNAN, J., concurring). In every case the purchaser gave up some tangible and definable consideration in return for an interest that had substantially the characteristics of a security. In a pension plan such as this one, by contrast, the purported investment is a relatively insignificant part of an employee's total and indivisible compensation package. No portion of an employee's compensation other than the potential pension benefits has any of the characteristics of a security, yet these noninvestment interests cannot be segregated from the possible pension benefits. Only in the most abstract sense may it be said that an employee exchanges some portion of his labor in return for these possible benefits. [12] He surrenders his labor as a whole, and in return receives a compensation package that is substantially devoid of aspects resembling a security. His decision to accept and retain covered employment may have only an attenuated relationship, if any, to perceived investment possibilities of a future pension. Looking at the economic realities, it seems clear that an employee is selling his labor primarily to obtain a livelihood, not making an investment. Respondent also argues that employer contributions on his behalf constituted his investment into the Fund. But it is inaccurate to describe these payments as having been on behalf of any employee. The trust agreement used employee man-weeks as a convenient way to measure an employer's overall obligation to the Fund, not as a means of measuring the employer's obligation to any particular employee. Indeed, there was no fixed relationship between contributions to the Fund and an employee's potential benefits. A pension plan with defined benefits, such as the Local's, does not tie a qualifying employee's benefits to the time he has worked. See n. 3, supra. One who has engaged in covered employment for 20 years will receive the same benefits as a person who has worked for 40, even though the latter has worked twice as long and induced a substantially larger employer contribution. [13] Again, it ignores the economic realities to equate employer contributions with an investment by the employee.