Document: 510 U.S. 86 JOHN HANCOCK MUTUAL LIFE INSURANCE CO.v.HARRIS TRUST AND SAVINGS BANK, as trustee of the SPERRY MASTER RETIREMENT NO. 2 No. 92-1074. Supreme Court United States. Argued October 12, 1993. Decided December 13, Petitioner John Hancock Mutual Life Insurance Company (Hancock) and respondent Harris Trust Savings Bank (Harris), current a corporation's retirement plan, are party to Group Annuity Contract 50 (GAC 50), an agreement type known "participating group annuity." Under such contract, insurer commingles with its general corporate assets deposits received secure retiree benefits, does not immediately apply those purchase annuities. During life however, amounts credited deposit account may be converted into stream guaranteed benefits for individual retirees. Funds in excess that have been so referred "free funds." Dissatisfied over inability gain access GAC 50's free funds, filed this suit pursuant to, inter alia, Employee Retirement Income Security Act 1974 (ERISA), alleging is managing "plan assets," therefore subject ERISA's fiduciary standards administration 50. responded undertaking fits within ERISA provision, 29 U. S. C. § 1101(b)(2)(B), excludes from assets" "guaranteed benefit policy," defined insurance policy or contract "to extent [it] provides amount which by insurer." The District granted summary judgment on claims, holding it was respect any portion Reversing part, Appeals held policy" exclusion did cover no guarantee payments fixed rates return. Held: Because funds Hancock's actions regard their management disposition must judged against standards. Pp. 94-110. (a) import pertinent provisions, read whole light statute's broad purpose protecting reasonably clear. In contrast other provisions creating unqualified exemptions reach, Congress specifically instructed, words limitation used closely contained: exercising authority control under obtained "solely" reason issuance "an contract" "the guaranteed," even then exemption applies only extent" benefits. 94-97. (b) rejects contention that, because reserved States primary responsibility regulating industry, requirement act "solely interest of. . participants beneficiaries exclusive providing benefits," 1104(a)(1)(A)(i) (emphasis added), yield conflicting state-law requirements consider of, maintain equity among, all contractholders, creditors, shareholders. McCarran-Ferguson Act—which provides, among things, federal "Act. .. shall construed supersede [state] law enacted business unless relates insurance"—does support contention, since provision obviously "relat[e] insurance." Moreover, although state laws concerning insurer's "regulat[e] insurance" saving clause—which instructs "shall exempt. person law... regulates insurance," 1144(b)(2)(A)—state accounts also can "relate [an] employee plan" encompassing preemption clause, directs statute State insofar they relate plan," 1144(a). There solid basis believing Congress, when designed ERISA, intended fundamentally alter traditional analysis. Thus, leaves room complementary dual regulation, calls supremacy two regimes cannot harmonized accommodated. 97-101. (c) holds To determine whether qualifies policy, each component bears examination. A if allocates investment risk insurer. Cf., e. g., SEC v. Benefit Ins. Co., 387 202. Such allocation present genuine aggregate payable plan beneficiaries, indisputably certain at issue. As contract's reasonable rate return provide mechanism convert them set contract. While another different features, might satisfy these requirements, not; indeed, provided real would funds. 101-106. (d) declines follow Labor Department's view obligations do relation contracts like 1975 interpretive bulletin assertedly expressing originally scope now attributed it, expressly addressed question regarding prohibited transaction rules, mention elaborate upon applicability explain how asset reconciled Congress' choice more limited ("to that") formulation. 1992, Department apparently had firm position communicate, declined file brief Appeals, citing need fully implications issues. This will accord deference view, since, reading statutory mean nothing than "if," has exceeded available ambiguity. 106-110. 970 F. 2d 1138, affirmed. GINSBURG, J., delivered opinion Court, REHNQUIST, BLACKMUN, STEVENS, SCALIA, SOUTER, JJ., joined. THOMAS, dissenting opinion, O'CONNOR KENNEDY, joined, post, p. 111. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR SECOND CIRCUIT Howard G. Kristol argued cause petitioner. With him briefs were Robert M. Peak, Rosalie A. Hailey, Richard J. Scarola. Christopher Wright amicus curiae urging reversal. Acting Solicitor General Bryson, Deputy Kneedler, Judith E. Kramer, Allen H. Feldman, Nathaniel I. Spiller, Elizabeth Hopkins. Lawrence Kill respondent. B. Berringer.* JUSTICE GINSBURG Court. 1 case presents issue construction— stated (ERISA) govern company's conduct annuity contracts. Fiduciary status generally attends assets." statute, contains comprehensive definition Our task bounds asset" categorization, prescribed polic[ies]." before us arises context between defendant-petitioner plaintiff-respondent Sperry Rand Corporation Plan.1 Pursuant Harris, receives Plan. asserts responsibility. maintains "Guaranteed trade term originating industry; invention placed there "provides 88 Stat. 875, 1101(b)(2)(B). 3 kind "deposit annuity."2 type, applied annuities; instead, commingled assets, balances reflect overall experience. 4 We certiorari, 507 983 (1993), resolve split Courts just described. Second Circuit we review administered bear yet 1143-1144 (1992). agree bind accordingly affirm court's judgment. 5 * parties refer 50). Initially, simple deferred purchased annuities, employees eligible 6 Since origination 1941, transformed amendments. By time litigation commenced, included following features. Assets liabilities recorded (for book-keeping purposes) accounts—the "Pension Administration Fund" "Liabilities Fund," liabilities. segregated, however; part pool account, out pays costs operation satisfies policyholders creditors. See Agreed Statement Facts ¶¶ 11-19, App. 85-86; Brief 7-9; see McGill & Grubbs 492 (describing accounts); id., 552 contracts). agreed allocate Pension Fund pro rata gains losses attributable ¶ 11, 85, fall below January 1, 1968, level, 27, 88. 7 conversion way. Upon request Plan Administrator, full payment designated entitled; attendant liability adding amount, Hancock, Liabilities Fund.3 event added caused "Minimum Operating Level"—the plus contingency cushion five percent—to exceed accumulated Fund, "active" "accumulation" phase terminate automatically. event, annuities previously 50, itself back 33, 36-37, 42, 89-91. 8 administered, ways. connection, use funds" describe Minimum Level (105 percent needed benefits). 1977, right direct pay "nonguaranteed benefits" These monthly pay-as-you-go basis; nonguaranteed sense obligated make i. e., balance Level. 9 Additionally, 1979 again 1981, permitted transfer portions "rollover" procedures. 78, 96. Finally, 1988, amendment allowed $50 million without triggering "asset liquidation adjustment," converting book value transferred market value. 10 fact various methods effect withdrawals original method—conversion benefits—is currently Harris' rights. May 1982, gave notice longer payments. 82-87, 97-98. And 1981 refused requests transfers using 79, 11 last exercised accumulations 1977. 81, 97. contends, denies, price inflated incorporation artificially low assumptions. 12 One means remains demand entirety Fund. taken course entails adjustment regards undervaluing plan's share account. sum, removed June 1982 1988. period increased dramatically result continuing positive experience, experience absence offsetting increase additional 13 commenced action July 1983, contending, breached denying realistic entirety, insurer" meaning accorded 14 September 1989, motion 722 Supp. 998 (SDNY 1989). thereafter dismissed remaining tort claims. 767 1269 (1991). On appeal, reversed part. determined guarantees one derived [GAC 50], times other, portion" 2d, 1143. "were fixed, but instead fluctuation based performance." Id., 1144. concluded, return." Ibid. ruled instructed satisfied. II 15 Is administers 50? answer question, examine first language governing guided "a single sentence member sentence, look[ing] law, object policy." Pilot Co. Dedeaux, 481 41, 51 (1987), quoting Kelly Robinson, 479 36, 43 (1986) (internal quotation marks omitted). described 1104(a)(1): discharge duties 16 and— 17 "(A) of: 18 "(i) ." 19 20 (i) he exercises discretionary respecting 1002(21)(A) added). 21 "assets" undefined except 1101(b)(2), reads relevant part: 22 "In issued insurer, deemed include not, solely 23 turn, 24 includes surplus separate account." 1101(b)(2)(B).4 25 Although mellifluous, help fulfill broadly protective purposes,5 commodiously imposed persons whose affect receive. (defining who "exercises [a plan's] assets"); R. Conf. Rep. 93-1280, 296 (1974) (the "fiduciary rules plans affecting interstate commerce"). regime6 markedly confined: 1101(b)(2)(B) applies. 26 contrast, elsewhere spoke qualification. For example, exempted "any security" registered company. 1101(b)(1) Similarly, company company" trust. 1103(b)(2) Notably, "any" that" so. Comment, Insurers Beware: Account Activities Subject Companies Obligations, Nw. L. Rev. 803, 833-834 (1994). inclined, generally, tight schemes kind, see, Commissioner Clark, 489 726, 739-740 (1989) (when qualified exception, "usually read[s] exception narrowly order preserve [policy]"), Phillips, Inc. Walling, 324 490, 493 (1945) (cautioning extending plainly unmistakably terms"), used, contain exclusion. B 27 joined some amici, raises threshold objection. contracts, asserts, pose irreconcilable conflicts regulatory regimes. requires fiduciaries and. beneficiaries." 1104(a) interests creditors shareholders," "maintain constituencies." Goldberg Altman 477.7 head off conflicts, yield, regulation industry. satisfied deferral both advocates attributes lawmakers. Instead, hold, 28 refers Act, 59 amended, 1011 et seq., provides: "The insurance, every engaged therein, several business." 1012(a). 30 "No invalidate, impair 1012(b). 31 But points out, "ERISA, particular, Amicus Curiae 23, n. 13.8 surrender exclusively preclude application ibid. More problematic clauses itself, preserving, preemption, insurance. clause hereafter plan." "saving clause," [not] exempt relieve banking, securities." 1144(b)(2)(A). thus also, "which regulat[e] 32 "`are model legislative drafting,'" Life, S., 46, Metropolitan Massachusetts, 471 724, 739 (1985), history sparse, 745-746. case, Supp., 1003-1004, discern displaced, "where [that] stands obstacle accomplishment purposes objectives Congress," occurs. Silkwood Kerr-McGee Corp., 464 238, 248 (1984).9 33 note ascribe discrete office clause" "reaffirm[s] Act's reservation States." 31; 744, (saving "appears States"; "serve same utilize similar language"). recognizes, "dual impossibility[;] [m]any complementary, conflict, principles require yield." 13.10 34 resisting argument preemptive, mindful failed pass, scheme. Senate's proposed version excluded reach rules.11 Instead enacting Senate draft, indeed "settled [insurance industry] expectations," 111, adopted containing limitation. directed words, discarded draft. Cf. Russello States, 16, 23-24 (1983) deletes limiting language, "it presumed intended").12 35 Persuaded shielded prescriptions virtue placement proceed decided: C 36 qualification exclusion, Seventh Circuit's lead, Peoria Union Stock Yards Penn 698 320, 324-327 (1983), seek guidance Court's decisions construing ordered Securities 1933. 48 75, 77c(a)(8) (excluding "[a]ny endowment optional contract"). 37 Variable America, 359 65 (1959), observed concept `insurance' involves risk-taking company," least fraction amounts." 71. variable annuity, held, "insurance entire policyholder inasmuch "benefit vary success [insurer's] 69, "greater less, depending wisdom 70. 38 Thereafter, 202 (1967), could considered nonexempt during accumulation phase, once contractually payouts began. issue, paid premiums issuer fund—called "Flexible Fund"—invested primarily common stocks. At maturity either withdraw cash his proportionate fund (which specified value), fixed-benefit policy. ultimately receive fluctuated according results; "insurer promises serve agency allow experience," 208, serving investment, rather function, 39 approach—division parts examination component—appears well suited matter hand "benefits guaranteed." Analyzing way, find 40 much dispute. active, entries actually made fit squarely "guaranteed" category. Furthermore, active end, amount. 41 then, nub controversy, phase. Between 1977 first, furnished called "nonguaranteed"; undisputed, entailed "amount 1101(b)(2)(B); supra, 92. extent, exemption. option misfit. 42 key respects, Flexible examined Benefit. one, depended manager. until occurrence event—contract exercise 50—the borne contractholder. Confronting bearing stated: pension trustees buy payout; turned [the insurer] manage discretion, modest income guaranty. If hired advisor given sell securities discretion [ERISA], essentially what th[is] Union, 327. 44 "[t]o [Hancock] engages return, seems should responsibility." 45 urges funds—and hence, contract—GAC for" guaranteed, "Harris `free funds' future addition 26; Mack Boring Parts Meeker Sharkey Moffitt, Actuarial Consultants New Jersey, 930 267, 273 (CA3 1991) (statute's phrase contracted immediately; enough "at finite point future"). 46 Logically pursued, regime long thereunder benefits.13 say "if" benefits; said provides. Using limitation, recognized something declared unavailable extent. 47 Tellingly decline level. 91. substantial fluctuations "modest guaranty" found insufficient Union. convertible 92, 3. combination, features future. It true irrelevant, pleads, uniformly uses word "benefits" plans. 25; Boring, ("benefits" beneficiaries; sponsors defeating exclusion); 482. confinement "benefits," perfectly compass beneficiaries— plan—does more, provided; price, undeniably benefits—payments beneficiaries—attributable zero. 117, (contending renders immaterial insurer). meet prescription. 49 hold beneficiaries. funds"—funds benefits—these indicators key: mix not. Indeed, conclude, Circuit, III pressed amici deserves consideration. supported adhered consistently 50.14 "`the thoroughness evident consideration, validity reasoning, consistency earlier later pronouncements, factors give power persuade, lacking control.'" 39, Skidmore Swift 323 134, 140 (1944); Chevron Natural Resources Defense Council, Inc., 467 837, 843-844 (1984). place reliance early 52 "If issues places consideration assets. Therefore, subsequent involving transaction." Interpretive Bulletin 75-2, Fed. Reg. 31598 (1975), CFR 2509.75-2(b) 53 passage confront, namely, participating clear statement But, second quoted shows, 75-2 "whether [under 1106] 2509.75-2.15 mention, let alone on, grounding 1101's exemption, nor speak pronouncement, any, duty prescriptions. 54 textual "certain [can considered] purposes," 1145, and, accordingly, suppose 75-2's contexts. 26-27. Nothing 2509.75-2 (1992), sets forth position, otherwise alerts reader scrutiny.16 Had Its silence indication pronouncement it.17 55 note, too, unable comply assistance very case; informed after requesting receiving extension time, precludes our foreseeable frame.'" 1141. recognize difficulties faced, complexity constant evolution practices reflected case. simply prepared communicate. 56 grapple here difficult due precisely supporting Estate Cowart Nicklos Drilling 505 469, 476 (1992) ("If Director asked defer new interpretation, circumstances interpretation formulated litigation.") original). suffices recall, again, Legislature Public Employees System Ohio Betts, 158, 171 ("no interpretations odds plain itself"). accept pleas Chevron. recognizes ranking "added legal protections plans, imposes restrictions law." 25-26. warns 57 disruptions [of companies contracts] significant, terms administrative changes forced undertake (e. segregation plan-related segmented accounts, re-allocation operating policyholders) considerable exposure ensuing brought others breaches." 25. 58 concerns, dispositive weight. insurers' views presented Congress18 body adjust statute. Burnet Coronado Oil Gas 285 393, 406 (1932) (Brandeis, dissenting); Di Santo Pennsylvania, 34, (1927) dissenting). relief facilitate compliance thereby reducing forecasts. 60 reasons stated, 61 Affirmed. Notes: Briefs ofamici reversal York al. Abrams, Attorney York, Jerry Boone, General, Scott Harshbarger, Massachusetts; American Council James Jorden, Stephen Goldberg, Perry Ian Cone, Waldemar Pflepsen, Jr., Barnsback, W. Kraus, Phillip Stano; Theodore Groom, Saxon, William Hanrahan, Flanagan, Raymond D'Amico. affirmance Certain Senators Representatives Metzenbaum, se; Association Retired Persons Cathy Ventrell-Monsees, Joan Wise, Mary Ellen Signorille, Edgar Pauk; Western Conference Teamsters Song, Brigid Carroll Anderson, Timothy St. Clair Smith. undergone number name form initially made; convenience, employer-corporation's name, descriptions D. Grubbs, Fundamentals Private Pensions 551-564 (6th ed. 1989) (hereinafter Grubbs); Altman, Case Nonapplication Insurers' Assets, Tort 475, 478-482 Altman) calculation established, effect, stream. associated entitlement calculated 1972, altered Hancock. 90 noted never industry lexicon." supply term's See,e. Massachusetts Morash, 490 107, 112-113 (1989); 732 (1985). observes continued well-being security millions dependents directly affected [employee plans]" declares "desirable.. disclosure safeguards establishment, operation, 1001(a). Section 1101(b) Investment 1940." N. Y. Law 4224(a)(1) (McKinney 1985) (prohibiting unfair discrimination contractholders); 275, (noting regulations requiring insurers treat contractholders fairly equitably). 492-494. attention "deliberately expansive" character inPilot 45-46 (1987). No decision itself. See,e.g., FMC Corp.v. Holliday, 498 52, (1990) (ERISA-covered policies governed law; self-insured ERISA); 746-747 (same). SeeChicago Bd. Options Exchange, Connecticut 713 254, 260 (CA7 1983) ("That onus companies. intent pre-empted laws."); 998, 1004 ("dual comports clauses, save statutes assume ab initio"). "employee fund" exclude "premium[s], subscription charges, retained carrier established maintained carrier," control, management, moneys property 4, 93d Cong., 1st Sess., §§ 502(17)(B), (25), reprinted Subcommittee Committee Welfare, 94th Legislative History 147, 150 (Comm. Print 1976). After (Amdt. 496, Sept. 17, 1973), "Fiduciary Standards" streamlined "funds Amdt. 511,id., 1451. failure pass blanket counsels allseparate implying necessarily resembles rejected inSEC (1967). Benefit, protected somewhat through promise deposited 205, 10. "guarantee net reduces substantially holder, assumption create definition. basic difference degree insured recognized." 211 (citation shares enforcement Treasury. C.§ 1204(a) subsection title published Code Federal Regulations, "Interpretive relating transactions." noteworthy Secretary express grant transactions, 1104's provisions. 1108 lengthy rulemaking proceeding, promulgate, 1986, 41278 (1986), 2510.3-101 Again, contained setting. Department, comment, "note[d] dealing being here." (1986). observed, home whether, particular Thus 1986 publication enlightening 19-64 (listing hundreds individuals organizations, including representatives, testifying deliberations ERISA). representatives constantly sought asAmici 13-14. whom Justice KENNEDY join, dissenting. $332 billion Insurance, 1993 Fact Book Update 27. Today, abruptly overturns settled expectations deeming subjecting (ERISA). I 401(b)(2) not—as petitioner contends—exclude coverage, making depend allocated ante, 106, proposes test little enacted. shifts risk, my "provide payouts—that is, Accordingly, respectfully dissent. interpreting begin, construction, statute,"Estate 475 "says says there," Nat. Germain, 503 249, 254 Unlike base understanding dissimilar 1933, 101-104, whole, readily examining terms. First, ordinary natural meaning. Smith 508 223, 228 (1993). Looking "no future." Ante, 105. takes disbursed That speech. When document "most natural[ly]" "commonly understood" "`make for.'" Rake Wade, 464, 473, 474 (1993) (interpreting section Bankruptcy "`each secured claim [reorganization] plan'") Black's Dictionary 1224 1990) "provide" make, procure, furnish use, prepare"). participant vested, makes Consultants, ("Section 401(b)(2)(B) face, immediately, requirement. Rather, `provided' future").1 suggests, easily vested participants." familiar 1001(c), knew vesting 1012(a), 411 (1988 IV). required for.2 "amount" guaranteed. participants, ("[T]he `benefit,' beneficiaries"). concludes reference of" 106. cites neither good cause. Given individuals, standing most naturally owed individual. If, hand, total paid. hardly consistent focus 96, 5; 1001(c). combined guarantee, inquiry nature whole. demanded citation 320 1983), "lead," 101, sees insurer—that really contract[s] payout." 327.3 reaching result, driven gloss demanding "examination component" 102. nowhere mentioned payouts, returns despite obvious superiority conveying ascribes text. benefits—that participants. derives extratextual sources lead divorced language. begins analysis 401(b)(2), discussion cases decided 74, amended. looks "investment covered 77b, 77c(a)(8). 202, 204-205, Were disputed contract," useful meets test. Here, denies all. concededly irrelevant distinct source distills "risk loss" premise, "as whole," "Congress receive." Even true, resort understandings behind suggests contrary Bank, 253-254; Park 'N Fly, Dollar 469 189, 194 (1985) (statutory construction [the] accurately expresses purpose"). text gives think meant protect impose whenever faced possibility loss. assumption, whole" plans' investments mutual 1101(b)(1); (1974). Obviously, significant investments, imposing them, connection remote. performance influence depleted sooner. cases, Whether earns 2% 20%, loses 20% benefits.4 short, guaranteed" returned contributions insulate accomplish goal. Of course, correctly observes, 104-105. allows committed falls outside exception. Once controlled risk. difficulty ensures purchasing come "provid[ing] entirety. Only assumes, does, critical narrowly. effort radically alters applicable See, (concerning transactions); (same).5 understanding, up managed theoretically policies, accordance obligations, potentially incompatible rules. 17. Most relationship relationship. Pittsburgh, 776 1174, 1177 (generally, contract"); Hampshire Foxfire, 820 489, 497 (ND Cal. 1993) (implied covenant faith fair California law). discriminate policyholders. 1985). deems beneficiaries" 1104(a)(1), host requirements. demands position: "Whenever ensure treating equitably, runs violating requirements." attempts limit funds—it dubs "`plan assets,'" 106—the extends farther. identifiable all, accounting entry books. hence "management," ibid., depends line business. 43, reaction today's able segregate specific themselves liable past actions.6 significantly disrupt transactions fund. 1104, 1106. both. (applying subsections (b)(1) (b)(2) "[f]or part," Part comprises 1101-1114). concerns alleged violations sections. Amended Complaint 40, 58. Among innocent stock employers lease building owned employers, goods services employers. Hearings 93-406 Standards House Education Labor, 390-391 (1975) (testimony Assistant Labor). large sold thousands suddenly restricted contracting corresponding require. 391. intend suggest weight practical effects (and customers, stand lose presumably offered them). considerations Congress. surely serious far-reaching ruling likely counsel caution compel closer commanded reaches. discussed I,supra, believe mandate result. Application outlined above prior relatively straightforward. pre-1977 form, retired, regardless termination, 137, contingency. stood guarantee. remained pretextual disguise vehicle. Apart withdrawal charge, way 1269, 1274-1275 1991).7 why arose. squandered expect run-of-the-mill breach grown beyond parties' expectations. unhappy bargain struck discovered get cheaper better elsewhere, 1273-1274, posed obstacles moving uncommitted Terminating "repurchase" already repurchase assumptions earned annuity. 33-34, 89, 90-91 (2½-3% 1968; 5% 1968).8 late 1970's compared prevailing rates, correspondingly high terminating "prohibitively expensive." Respondent 5. Withdrawing mentioned, adjustment. complicated, discontinued automatic "Non-Guaranteed Benefits." 80, 82, 96-97. Proper resolution amendment. courts discuss relevance opportunity instance, remand. IV "`provides responsibility.'" 104 (quoting 1144 (CA2 1992)). Perhaps should. disrupts nearly years buyers sellers command Trust, argues "provided 15, avoid phrase. describing states contractprovided annual Certainly, say—and mean—that purchased. Common usage dictate phrase: 1968 Giving seeante, 104-105, "in entirety" implicitly acknowledges, potential misconstruction results, misreading for," misunderstanding that." below, infra, 117-118, completely sure, (through purchase, annuities) invested contractAnte, Sperry's specifies entitled. 119, 121. fell zero terminated, 105-106, entitled pay. 1132(a). reason, wrong suggest, do, reversing leave pensioners unprotected ERISA. Senator Metzenbaum Amici 15. "trapped" unwise trap own making. Those far persuade mistakes misjudgments. logic protection. underChevron 837 Rejecting Labor's adopting extreme approach. especially lower appears desire, claims understating 29, 30, 55-56, 58-60. possible ascertaining violated rollover occasions reduce 1274-1275. 77, 96 "artificially assumptions,"ante, 93, amended 1968. 105, 100, 101. refusing amend take changed conditions. 40(b),

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