Opinion ID: 778983
Heading Depth: 3
Heading Rank: 2

Heading: Hancock's Refusal to Revalue Plan Liabilities

Text: 57 Hancock next argues that its refusal to revalue the Plan's liabilities did not constitute a breach of its fiduciary duties because (1) the manner in which the LOF was calculated is specified in the Contract and it had no fiduciary duty to renegotiate that provision; (2) the LOF was the contractual reserve for the guaranteed portion of the Plan's funds and thus exempt from ERISA's fiduciary duty obligations; and (3) computation of the LOF does not involve any management or disposition of Plan assets and is therefore not within the scope of its fiduciary duties. We agree with Hancock in all respects. The 1968 amendment required that the Plan be maintained at 105% of the LOF. The LOF for pre-1968 cancelled annuities was calculated using interest rate assumptions of 2.5% or 3%, depending on when the benefits were first guaranteed, and using the 1937 Standard Annuity and 1951 Group Annuity Mortality Tables. Judgment Opinion, 122 F.Supp.2d at 450. Because interest rates had drastically increased since 1968, these assumed rates of return had the effect of significantly overstating the Plan's liabilities. Sperry requested that Hancock change its method for calculating the LOF and Hancock refused. Id. at 452. The district court found that Hancock's refusal to revalue the LOF constituted a breach of its fiduciary duties under ERISA. Id. at 460. We disagree. 58 Just as Hancock had no fiduciary duty to permit Sperry to withdraw free funds in an extra-contractual manner, it likewise had no fiduciary duty to revalue the LOF merely because such revaluation would benefit Sperry. For the same reasons discussed in Part II.A. supra, Hancock did not breach its fiduciary duties by adhering to the bargained-for terms of the Contract rather than gratuitously granting Sperry's request. 59 Second, the LOF is the contractual reserve for the pension benefit obligations guaranteed by Hancock; in other words, the LOF provision specifies the precise amount that Hancock is required to pay to beneficiaries regardless of the performance of the Plan. The district court's ruling ignores this important legal distinction. As discussed at length in the previous opinions in this case, ERISA expressly exempts from the fiduciary obligations it imposes the management of guaranteed funds. See, e.g., Second Circuit, 970 F.2d at 1143-46. For this independent reason, Hancock could not have breached a fiduciary duty to Sperry in refusing to revalue the LOF, because that calculation pertained to the guaranteed portion of the Plan and therefore no such duty ever arose. 60 Third, Hancock's refusal to revalue the LOF did not trigger ERISA's fiduciary obligations because computation of the LOF does not implicate the management or disposition of a pool of assets. Georgia-Pacific Corp., 19 F.3d at 1189. As discussed above, rather than exercising any discretionary authority over the Plan, Hancock merely chose to adhere to contractual terms that are not inconsistent with ERISA's fiduciary duty obligations. Because Hancock had no fiduciary duty to agree to Sperry's request to revalue the LOF, Hancock could not be in breach of that duty. 61 We therefore conclude that Hancock's refusal to revalue the LOF did not constitute a breach of ERISA's fiduciary obligations. 62