Court Opinion

ID: 6928134
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:39:20.78238+00
Date Added: 2024-06-11T16:07:00.740161
License: Public Domain

STAPLETON, Circuit Judge,
concurring and dissenting:
As the court’s opinion recognizes, under § 1058 of ERISA, defendants can transfer their liability for early retirement benefits to the American Mirrex Retirement Plan and they have purported to do so. The only issue separating the parties is whether defendants have transferred sufficient assets to that plan to satisfy § 1058. Unlike my colleagues, I conclude that they have.
Section 1058 provides that a plan “may not ... transfer its assets or liabilities to any other plan ... unless each participant in the plan would (if the plan then terminated) receive a benefit immediately after the ... transfer which is equal to or greater than the benefit he would be entitled to receive immediately before the ... transfer (if the plan had then terminated).” Thus the key to understanding the requirements of § 1058 is to focus first on what benefit the participants would receive if the plan were terminated immediately prior to the transfer. That benefit, and the funding required to pay the present value of the total of all such benefits, establishes the floor of permissibility for the transfer. If each participant would receive no lesser benefit on a termination immediately after the transfer, and the funding is available immediately after to pay an amount equal to the present value of the total of all such benefits, § 1058 is satisfied and the transfer is permissible. See 26 C.F.R. § 1.414(l)-l(e)(i).
In order to determine whether a plan participant who had not yet qualified for an early retirement benefit through giving the stipulated years of service to the employer would be entitled to receive something attributable to that benefit upon a termination immediately prior to the transfer, we must look to § 1344, the section that specifies the benefits which must be provided for on a termination. The cases decided prior to the Retirement Equity Act clearly hold that an early retirement benefit is not an accrued benefit and that nothing need be provided on a termination with respect to someone who has not served the employer long enough to earn the early retirement benefit. E.g., Ashenbaugh v. Crucible, Inc., 854 F.2d 1516, 1526 (3d Cir.1988) (defining “accrued benefit” to exclude an early retirement benefit). The issue remains, however, whether the REA reversed this holding. I conclude that it did not.
Section 1054(g) provides in relevant part:
(1) The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, ...
(2) For purposes of paragraph (1), a plan amendment which has the effect of—
(A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations), or
(B) eliminating an optional form of benefit,
with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy.
It is my understanding that the early retirement benefit here at issue is retirement type subsidy and, accordingly, that it is an accrued benefit that cannot be reduced if the relevant participant can meet the conditions for the subsidy before or after an amendment. When § 1054(g) and § 1344 are read together, one finds that where a participant has qualified for an early retirement benefit prior to a termination or may thereafter qualify for that benefit by aging and giving additional service to the plan sponsor, the present value of the benefit has to be paid or set aside on termination. On the other hand, where, at the time of termination, a participant has not qualified for such a benefit and will not be able to do so in the future because the opportunity to give service to the plan sponsor will not exist, nothing need be paid *1152or set aside on termination with respect to the early retirement benefit. Thus, if a plan sponsor terminates a plan in the course of a liquidation of its business in bankruptcy, for example, it need pay nothing to a participant who has not given the sponsor sufficient service to qualify for an early retirement benefit. As I understand the plaintiffs to concede, this is the effect of our decision in Berger v. Edgewater Steel Corp., 911 F.2d 911 (3d Cir.1990).
The case before us is not materially different from the above liquidation hypothetical. Instead of liquidating and terminating its plan in connection with selling all of its assets to a third party or parties, Hoechst, in the hypothetical posed by § 1058, is terminating a portion of its plan in connection with selling the assets of one of its businesses to a third party. The employees with respect to whom the plan is being terminated are going to work for the third party and will never render the service to Hoechst that it bargained for when it created the early retirement benefit. As a result, no early retirement benefit would be payable to the plaintiffs upon a termination immediately prior to the transfer, and it is immaterial if the funds available after the transfer are insufficient to fund early retirement benefits for plaintiffs under the Hoechst plan.
As the court’s opinion acknowledges, the Royal Electric and Lear Siegler cases concur in my analysis. I acknowledge that the Holl-ingshead case does not. In the final analysis, I differ from my colleagues and the Hollingshead court because I find no help in Rev.Rul. 79-336 and Rev.Rul. 80-129 when it comes to determining whether, for purposes of § 1054(g)(2), a participant who has not, and will not in the future, give sufficient years of service to the plan sponsor to qualify for an early retirement benefit is a “participant who satisfies the conditions” of that benefit. Section 1054(g)(2) does not use the phrase “at the time of separation from service” and the referenced Revenue Rulings have nothing to do with the subject matter of § 1054(g)(2) or its companion section of the IRC, § 411.1 Sections 1054, 1058 and 1344 do, for me, clearly dictate that, in the context of termination, an early retirement benefit of the kind here involved is not accrued and need not be provided for with respect to any participant who will never be able to satisfy a minimum service to the sponsor requirement.
I agree with and join the opinion of the court in all other respects.
SUR PETITION FOR REHEARING
Oct. 6, 1993.
Before SLOVITER, Chief Judge, BECKER, STAPLETON, MANSMANN, GREENBERG, HUTCHINSON, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, LEWIS, and SEITZ, Circuit Judges.
The petition for rehearing filed by appellants and the petition for rehearing filed by appellees in the above-entitled case having been submitted to the judges who participated in the decision of this Court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petitions for rehearing are denied. Judge Becker and Judge Stapleton would have granted appellees’ petition for rehearing.

. My understanding of the application of §§ 1054, 1058 and 1344 in circumstances of this kind is, of course, consistent with Rev.Rul. 85-6 which does construe § 411.