Opinion ID: 726590
Heading Depth: 3
Heading Rank: 1

Heading: Did the LTD Plan Terminate?

Text: 31 The LTD Plan summary is not ambiguous in requiring that the LTD Plan terminate before any benefits vest in plaintiffs. Even assuming health premium payment benefits could vest for disabled employees in the LTD Plan, if the plan did not terminate, defendants are free to modify its terms. Plaintiffs argue that the LTD Plan terminated with respect to them when the Imprimis division was sold to Seagate and the latter assumed identical obligations to the plan participants. 8 Defendants characterize the change as a modification under 29 U.S.C § 1022(a)(2), (b), which sets out an SPD's notification requirements in cases of material modification. We conclude that the Control Data/Ceridian LTD Plan terminated with respect to plaintiffs upon the sale of the Imprimis division. 32 As part of the sale of the Imprimis division, the parties agreed that Seagate would become responsible for the payment of long-term disability benefits under the Control Data LTD Plan, and that Control Data's liability would terminate, except for payments of premiums on behalf of LTD participants on disability. Pursuant to this agreement, Control Data transferred funds to Seagate in an amount equal to the present value of the projected disability benefits determined as of the closing date payable with respect to Imprimis Employees listed on Attachment. Thereafter, Seagate established the Seagate Technology, Inc. Long Term Disability Plan for Imprimis employees previously covered by the Control Data Corporation Long Term Disability Plan. The Control Data LTD Plan specifically states that the Plan shall terminate as to a particular Employer upon the giving of notice by such Employer to the Trustee, executed in the manner of an amendment. The plan also provides: Upon termination of the Plan, the Trustee shall continue to hold the Trust Assets and make distribution thereof at the times and in the manner heretofore provided, until the Trust Assets are depleted thereby. 33 ERISA provides strict obligations and procedures regarding termination of pension plans, 29 U.S.C. §§ 1103(d)(1), 1341, 1342, but provides no guidelines to determine when a plan terminates. See In re Syntex Fabrics, Inc. Pension Plan, 698 F.2d 199, 203 (3d Cir.1983) (suggesting that a plan terminates when the employer's obligation to fund the plan ceases, [and] employees can no longer accrue benefits). The Syntex factors are grounded in the essential purposes of ERISA: to prevent an employee from losing accrued, vested benefits in the event the employer terminated the pension plan. Nachman, 446 U.S. at 374-75, 100 S.Ct. at 1732-33. With respect to termination of a welfare plan, ERISA only requires that [t]he assets of a welfare plan which terminates shall be distributed in accordance with the terms of the plan, except as otherwise provided in the regulations of the Secretary. 29 U.S.C. § 1103(d)(2). Because ERISA welfare plans do not need to vest or be funded, the rules underlying terminating a pension benefit plan have little application. Unfortunately, there is a scarcity of guidance on questions of welfare plan termination. The two cases cited by plaintiffs for partial plan terminations both involve pension plan obligations, where in order to maintain a tax qualified plan, termination triggers specific ERISA obligations regarding accrued benefits. See Gluck v. Unisys Corp., 960 F.2d 1168 (3d Cir.1992); Kreis v. Charles O. Townley, M.D. & Assoc., P.C., 833 F.2d 74 (6th Cir.1987). 9 Partial terminations, determined for the tax aspects of ERISA plans, do not automatically determine partial terminations for ERISA purposes. Chait v. Bernstein, 835 F.2d 1017, 1020 (3d Cir.1987). 34 Although it is unclear whether the trustee of the Control Data LTD Plan was properly notified that the plan was terminating, the facts that new trustees were appointed to a replacement plan instituted by Seagate, that Seagate became the administrator of the new plan, that Control Data transferred money to fund the new plan, and that after the transfer Seagate assumed all of Control Data's obligations with respect to disability plan participants, together suggest that the Control Data LTD Plan terminated. 10 See In re Syntex Fabrics, 698 F.2d at 203; see also Myron v. Trust Co. Bank Long Term Disability Benefit Plan, 522 F.Supp. 511, 516 (N.D.Ga.1981) (disability plan terminated when plan funding was changed from one insurance company to another), aff'd, 691 F.2d 510 (11th Cir.1982), cert. denied, 462 U.S. 1119, 103 S.Ct. 3086, 77 L.Ed.2d 1348 (1983). Essential features of an ERISA plan include a procedure for establishing and carrying out a funding policy for the plan and procedures for the operation and administration of the plan. 29 U.S.C. § 1102(b). After the sale of Imprimis none of these provisions remained of the Control Data LTD Plan as far as plaintiffs were concerned; the responsibilities for funding and administering plaintiffs' disability benefits shifted to the Seagate LTD Plan. Given the facts of this case, the Control Data LTD Plan terminated with respect to Imprimis division employees when Control Data was released from its obligation to fund the plan with respect to those employees and the employees could look to the Seagate LTD Plan for benefits. 11 35