Legal Document

525 U.S. 432119 S.Ct. 755142 L.Ed.2d 881 HUGHES AIRCRAFT CO. v. JACOBSON(97-1287)105 F.3d 1288 and 128 1305, reversed. SUPREME COURT OF THE UNITED STATES No. 97 1287 COMPANY, et al., PETITIONERS STANLEY I. JACOBSON al. ON WRIT CERTIORARI TO APPEALS FOR NINTH CIRCUIT [January 25, 1999] Justice Thomas delivered the opinion of Court. 1 Five retired beneficiaries a defined benefit plan, subject to terms Employee Retirement Income Security Act 1974 (ERISA), 88 Stat. 832, as amended, 29 U.S.C. § 1001 seq., filed class action lawsuit against their former employer, Hughes Aircraft Company (Hughes), Non-Bargaining Plan (Plan). They claim that violated ERISA by amending provide for an early retirement program noncontributory structure. The Ninth Circuit held may prohibit these amendments. We reverse. 2 * According complaint, has provided its employees since 1955. Prior 1991, required mandatory contributions from all participating employees, in addition any made Hughes.1 Section 3.1 defines Hughes' funding obligations: "The cost Benefits under Plan, extent not Participants shall be [Hughes] less than such amounts, at times, Enrolled Actuary certify necessary, fund ." 3 In addition, §3.2 provides fall below "amount necessary maintain qualified status comply with applicable legal requirements." But §6.2 gives "the right suspend time," so long doing does "create 'accumulated deficiency' " ERISA.2 4 By 1986, result employer employee investment growth, Plan's assets exceeded actuarial or present value accrued benefits almost $1 billion. light this surplus, suspended 1987, which it resumed. Pursuant contribution requirement remains operational. 5 Two amendments are litigation. 1989, established significant additional certain eligible active employees. Subsequently, again amended that, effective January 1, new participants could contribute would thereby receive fewer benefits. Existing members continue opt treated participants. obligations created constitute only use other paying pre-existing original contributory substantially exceed minimum amount needed current future 6 1992, respondents on behalf who had contributed become designated contributing District Court granted motion dismiss complaint failure state claim. A divided panel 105 (1997), 1305 (1998). majority concluded 1991 amendment have terminated two plans: one consisting Distinguishing Lockheed Corp. Spink, 517 882 (1996), concerning plan funded solely contributions, act triggered ERISA's fiduciary provisions. also thought were structure vested interest surplus. 7 Accordingly, Appeals alleged six causes complaint. Specifically, claimed prohibition using employees' vested, nonforfeitable meet depleting surplus §203, 1053(a). further argued anti-inurement prohibition, §403(c)(1), 1103(c)(1), benefiting itself expense Respondents breached duties three ways: 1989 outside purposes §404(a)(1)(D), 1104(a)(1)(D); create §406(a)(1)(D), 1106(a)(1)(D); those never §404, 1104. Finally, termination §4044(d)(3)(A), 1344(d)(3)(A), requires residual distributed beneficiaries. 8 dissenting judge properly dismissed He reasoned affect availability plan's pool cannot characterized termination; interpreted Spink stand proposition trigger duties; observed do 9 majority's decision is tension our where we pension provisions," U.S., 891, Circuits' decisions. See, e.g., Brillinger General Elec. Co., 130 61 (CA2 1997), cert. pending, 1834; American Flint Glass Workers Union Beaumont 62 574 (CA3 1995); Malia 23 828 (CA3), denied, 513 956 (1994); Johnson Georgia-Pacific Corp., 19 1184 (CA7 1994); Phillips Bebber, 914 F.2d 31 (CA4 1990)(per curiam). certiorari, 523 __ (1998), now II 10 Our review claims recognized us interpret number As case statutory construction, analysis begins language statute." Estate Cowart Nicklos Drilling 505 469, 475 (1992). And clear answer, ends there well. See Connecticut Nat. Bank Germain, 503 249, 254 11 Respondents' vested-benefits proceed erroneous assumption they which, respect claim, was used exclusively Hughes. These fail because did rights own benefit. 12 To understand why no essential recognize difference between plans plans, Hughes'. employers 'the employer's fixed receives whatever level his will provide.' Nachman Pension Benefit Guaranty Corporation, 446 359, 364, n. (1980) (quoting Alabama Power Co. Davis, 431 581, 593, 18 (1977)). "provides individual account each participant based upon participant's account." §3(34); 1002(34). "[U]nder definition, can insufficiency funds cover promised benefits," Nachman, supra, 5, beneficiary entitled dedicated account. 13 hand, consists general rather accounts. Such "as name implies, employee, retirement, periodic payment." Commissioner Keystone Consol. Industries, Inc., 508 152, 154 (1993); see Mead Tilley, 490 714, 717 (1989); §3(35), 1002(35). asset combination both. §204(c); 1054(c). typically bears entire risk short consequences must underfunding shortfall occur investments. Connolly 211, 232 (1986) (O'Connor, J., concurring); J. Mamorsky, Law §8.04 Conversely, if overfunded, reduce contributions. 363, 18) (noting adjusted necessary' benefits). 14 reflects borne employer. Given obligation make up shortfall, member particular composes part pool. Instead, benefits, known "accrued benefits." That term, individual's determined [and ordinarily is] expressed form annual commencing normal age." §3(23)(A), 1002(23)(A).3 order prevent subsequent downward adjustment member's amount, greater (1) (2) derived employee's accumulated rate statute. §204(c)(2)(B); 1054(c)(2)(B); 1002(23)(A); §204(c)(2)(C), 1054(c)(2)(C). floor, generally benefit," actual experience entitlement. Since decline alter similarly entitlement share even partially attributable growth 15 Therefore, vesting requirements met "if nonforfeitable," assuming limited percentage depending years service. §203(a)(1) (2), 1053(a)(1) (2). provision "sets after accruing specified service." Teamsters Daniel, 439 551, 569 (1979). Otherwise, "level benefits" private parties, Government." Alessi Raybestos-Manhattan, 451 504, 511 (1981). Hence, concern items return definition benefit." §§3(23)(A), 203(a); 1002(23)(A), Assuming provided, section implicated. deprived Indeed, when implemented structure, permitted existing switch into allege ever withdrawn otherwise interests members, meritless. 16 contend assets, creation sole exclusive benefit, violation provision. This provides, relevant part: 17 "[T]he [except statute] inure providing defraying reasonable expenses administering plan." §403(c)(1); 1103(c)(1). makes clear, focuses whether pay participants, without distinguishing either old more structures same opposed dispute purpose Furthermore, satisfied continuing provisions assure adequately funded. §6.2; §302; 1082. words, impermissibly add Plan. pre-exising matter law de facto (both preamendment postamendment) draw single, unsegregated assets. broad authority amend Curtiss-Wright Schoonejongen, 514 73, 78 (1995), nowhere suggests creating creates second plan.4 Because exists beneficiaries, #167;403(c)(1). B Each respondents' duty inapplicable conclusion follows considered require conditioning payments participants' release employment-related prohibited transaction §406(a). 885. explained that: 20 "Plan sponsors category fiduciaries. said welfare '[e]mployers free ERISA, reason time, adopt, modify, terminate plans.' When undertake actions, fiduciaries, but analogous settlors trust." Id., 890 Curtiss-Wright, (citations omitted)). 21 reasoning applied both "pension plans" "welfare plans," "[t]he distinction persons exercising over" different types plans. 891. applies equal force over type plan. holding turn, thought, being simple plain statute defining distinction. id., 891; §404(a), 1104(a) (specifying "fiduciary plan"). Rather, turned constituted exercise duty. not. 22 here fiduciary, although happens contribute. general, concerns composition design implicate consist actions administration 890. simply implicated Hughes, acting settlor, regarding what how calculated. Shaw Delta Air Lines, 463 85, 91 (1983) (describing mandate "employers proscribe discrimination benefits").5 settlor's powers include ability directly foreclosed Spink's exception, "[p]lan fiduciaries." attempt circumvent arguing amounted sham transaction. argue effectively increasing wages through increased incentives including reduced labor costs spending down obligations. noted passing "merely transaction, meant disguise unlawful transfer party might question." 895, 8. Even duty, incidental conferred impermissible It irrelevant received lower implementing amendment. "among 'incidental' thus legitimate sponsor operation attracting retaining deferred compensation, settling avoiding strikes, compensation wages, turnover, reducing likelihood lawsuits encouraging been laid off depart voluntarily." 893 894 (citation omitted). 24 Receipt constitutes breach improper inurement violate ERISA. find somehow forestall employers' efforts implement large, concerned "ensur[ing] left emptyhanded once guaranteed them 887, depriving thereto. sum, failed show labored engaged C 25 court petitioners plainly spells out circumstances terminates. entitled, "[e]xclusive means termination," provides: 26 "Except proceedings instituted [Pension Corporation] 1342 title, single-employer standard subsection (b) distress (c) section." §4041(a)(1), set forth 1341(a)(1). 27 Subsections ways voluntarily 1341(b) (c); Corporation LTV 496 633, 638 639 (1990). Based statute, avenues voluntary termination. (explaining Congress "says says there"). 28 concede occurred, nevertheless worked common-law theory wasting trust. Under common law, trust whose accomplished, continuation frustrate intent. A. Scott, Trusts §§334, 337, 337.8 (4th ed. 1989); G. Bogert, Trustees §§1002, 1007 (2d rev. 1983). fails. initial matter, "comprehensive reticulated statute," 361, "enormously complex detailed," Mertens Hewitt Associates, 248, 262 (1993), should supplemented extra-textual remedies, doctrines advocated respondents. Guidry Sheet Metal Fund, 493 365, 376 (1990) "[a]s courts loath announce equitable exceptions legislative prohibitions unqualified text"). Although offer "starting point" some situations, give way inconsistent purposes." Varity Howe, 516 489, 497 (1996). Application doctrine context appear 30 apply extremely doubtful here. concede, date amendment, accepting thousands accrue Simply put, construed enfeebled membership dwindled mere remnant longer administration. salvage *** 32 judgment therefore 33 ordered. Notes 34 1. arrangement commonly referred "contributory," compared "noncontributory." S. Bruce, Claims 1993). confused "defined plan" §3(34), 35 2. "accumulated deficiency" excess total charges (beginning first year applies) credits or, less, alternative years." §302(a)(2), 1082(a)(2). 36 3. contrast, benefit" balance §3(23)(B); 1002(23)(B). 37 4. consistent Government pronouncements area. For example, Internal Revenue Service promulgated treasury regulation income tax purposes, "single merely "plan several distinct structures." Treas. Reg. §1.414(l) 1(b)(1)(i), CFR 1.414(l) 1(b)(1)(i) "[a] 'single plan' if, ongoing basis, available covered Ibid.; 2520.102 ("[A]n various classes beneficiaries"). 38 5. suggest regarded cosettlors corpus. However, making akin settlor responsible §1, p. (rev. 2d 1984) (footnote omitted; emphasis deleted) ("The person intentionally come existence"). Certainly,

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