Court Opinion

ID: 3018863
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:19:55.301813+00
Date Added: 2024-06-11T18:11:33.862741
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
      ___________

      No. 96-3045
      ___________

Hawkeye National Life Insurance          *
Company,                                 *
                                         *
              Plaintiff,                 *
                                         *
       v.                                *
                                         *
AVIS Industrial Corporation; Edgerton *
Forge, Inc.,                             *
                                         *   Appeal and Cross-Appeal from the
              Appellants,                *   United States District Court for the
                                         *   Southern District of Iowa.
Steel Technologies, Inc.; Midwest        *
Plating and Chemical Corporation,        *
                                         *
              Defendants,                *
                                         *
Metal Polishers, Buffers, Platers and    *
Allied Workers International Union;      *
Metal Polishers, Buffers, Platers and    *
Allied Workers International Union,      *
Local 15; Metal Polishers, Buffers,      *
Platers and Allied Workers International *
Union, Local 24; Metal Polishers,        *
Buffers, Platers and Allied Workers      *
International Union, Local 301; Metal *
Polishers, Buffers, Platers and Allied   *
Workers International Union, Local 305, *
                                         *
              Appellees.                 *
      __________

      No. 96-3097
      __________

Hawkeye National Life Insurance          *
Company,                                 *
                                         *
              Plaintiff,                 *
                                         *
       v.                                *
                                         *
AVIS Industrial Corporation; Edgerton *
Forge, Inc.,                             *
                                         *
              Appellees,                 *
                                         *
Steel Technologies, Inc.; Midwest        *
Plating and Chemical Corporation,        *
                                         *
              Defendants,                *
                                         *
Metal Polishers, Buffers, Platers and    *
Allied Workers International Union;      *
Metal Polishers, Buffers, Platers and    *
Allied Workers International Union,      *
Local 15; Metal Polishers, Buffers,      *
Platers and Allied Workers International *
Union, Local 24; Metal Polishers,        *
Buffers, Platers and Allied Workers      *
International Union, Local 301; Metal *
Polishers, Buffers, Platers and Allied   *
Workers International Union, Local 305, *
                                         *
              Appellants.                *

                                        -2-
                                  ___________

                           Submitted: March 12, 1997
                               Filed: July 28, 1997
                                 ___________

Before MAGILL1 and MURPHY, Circuit Judges, and GOLDBERG,2 Judge.
                           ___________

MAGILL, Circuit Judge.

    Hawkeye National Life Insurance Company (Hawkeye), the
administrator of the Metal Polishers, Buffers, Platers
and Allied Workers International Union Pension Plan
(Plan), brought this declaratory judgment action under
the Employee Retirement Income Security Act (ERISA), 29
U.S.C. §§ 1001-1461 (1994 & Supp. 1995). Hawkeye seeks
declaratory relief for its decision to distribute the
Plan’s remaining assets to AVIS Industrial Corporation
(AVIS) and Edgerton Forge, Inc. (Edgerton).        In its
action for declaratory relief, Hawkeye named AVIS,
Edgerton, Steel Technologies, Inc. (Steel Technologies),
and Midwest Plating and Chemical Corporation (Midwest)
(collectively, the employers) as defendants.            In
addition, Hawkeye named as defendants the various local
chapters of the Metal Polishers, Buffers, Platers, and
Allied Workers International Union (collectively, the
Union) to which the Plan participants, the employees,
belong. Hawkeye filed a motion for summary judgment in

      1
       The Honorable Frank J. Magill was an active judge at the time this case was
submitted and assumed senior status on April 1, 1997, before the opinion was filed.
      2
        THE HONORABLE RICHARD W. GOLDBERG, Judge, United States Court
of International Trade, sitting by designation.

                                        -3-
which AVIS and Edgerton joined.     After unsuccessfully
arguing that consideration of Hawkeye’s summary judgment
motion should be deferred, the Union filed a cross-motion
for summary judgment, seeking a declaratory judgment that

                           -4-
the remaining Plan assets should inure to the benefit of
Plan participants. Ruling that 29 U.S.C. § 1103(c)(1)
(1994) barred distribution of the remaining Plan assets
to one or more Plan employers, the district court granted
the Union’s cross-motion for summary judgment and denied
Hawkeye’s motion for summary judgment. AVIS and Edgerton
appeal, and the Union cross-appeals. We affirm in part,
reverse in part, and remand.

                           I.

    The Plan was established in 1971 as a multiemployer
employee benefit plan. The employers that took part in
the Plan were Edgerton, Steel Technologies, Midwest,
North Vernon Forge, Inc. (North Vernon Forge), and North
Vernon Steel Products, Inc. (North Vernon Steel). At all
times relevant to this appeal, Hawkeye served as the Plan
administrator, and Bruce & Bruce Company (Bruce & Bruce)
served as the consulting actuary for the Plan. Pursuant
to § 8.5(b) of the Plan, Hawkeye has the authority “to
construe and interpret the Plan . . . .”            Metal
Polishers,   Buffers,    Platers   and   Allied   Workers
International Union Pension Plan, as amended (Jan. 1,
1986) (Plan) § 8.5(b), reprinted in Appellants’ App. at
38.   In addition, the Plan provides that the Union,
Hawkeye, and each of the employers are fiduciaries of the
Plan “with respect to the specific responsibilities of
each for Plan administration . . . .”       Plan § 2.19,
reprinted in Appellants’ App. at 12.

    AVIS never contributed to or took part in the Plan.
However, according to the affidavit of AVIS’s chief
financial officer, Carol J. Mineart, AVIS acquired three

                           -5-
employers that were part of the Plan: Edgerton, North
Vernon Steel, and North Vernon Forge. Carol J. Mineart
Aff. (Apr. 18, 1996) at ¶¶ 3-4, reprinted in Appellants’
App. at 71-72. Mineart also testified that AVIS assumed
all the liabilities of the acquired companies, including
each employer’s obligations under the Plan. Id. at ¶ 5,
reprinted

                          -6-
in Appellants’ App. at 72. Consequently, according to
Mineart, AVIS is the successor in interest to these three
companies. Id. at ¶ 3, reprinted in Appellants’ App. at
71.3

    The Plan was funded entirely by the employers. See
Plan § 7.6, reprinted in Appellants’ App. at 36.
Collective bargaining agreements that each employer
reached with the Union specified the amount of each
employer’s contributions.      Id.     According to the
provisions of the Plan, these contributions were
determined at least in part by the actuarial calculations
of Bruce & Bruce. Pursuant to the Plan, Bruce & Bruce
was   to   calculate   the  Plan’s   expected   actuarial
requirements and, based on these calculations, make
recommendations as to the contributions that the
employers should be required to make in order to insure
that the Plan remained fully funded.     See Plan § 7.2,
reprinted in Appellants’ App. at 35. As provided by the
Plan, each employee’s benefits were based on the length
of that employee’s service as well as the monthly pension
rate set forth in the applicable collective bargaining
agreement reached between the employers and the Union.
See Plan §§ 2.1, 2.22, 5.1, reprinted in Appellants’ App.
at 10, 13, 21.

    Over time, the individual employers withdrew from the
Plan: Midwest withdrew on March 21, 1985; Steel

      3
        In their brief, AVIS and Edgerton further explain that “North Vernon Forge and
North Vernon Steel Products no longer have any corporate status; they were dissolved
as corporate entities in connection [with] their acquisition by AVIS. Edgerton
continues to exist as a wholly-owned subsidiary of AVIS; [Edgerton’s] participation
in this appeal arises solely out of this capacity.” Appellants’ Br. at 6 n.5.

                                        -7-
Technologies withdrew on June 24, 1988; and North Vernon
Forge and Edgerton both withdrew on August 31, 1988. As
a result, as of August 31, 1988, North Vernon Steel was
the sole remaining employer in the Plan. On December 31,
1989, sixteen months later, North Vernon Steel also
withdrew from the Plan.      With North Vernon Steel’s
withdrawal, the Plan as a whole terminated.

                          -8-
    Under the terms of the Plan, the withdrawal of each
employer resulted in a partial termination of the Plan.
See Plan § 12.2, reprinted in Appellants’ App. at 43.
With each withdrawal, the Plan required Hawkeye and Bruce
& Bruce to “allocate and segregate for the benefit of the
affected Participants with respect to which the Plan is
being terminated the proportionate interest of such
Participants in the Pension Fund.” Id. The Plan further
required that such segregated funds “be liquidated (after
provision is made for the expenses of liquidation) by the
payment or provision for the payment of [employee]
benefits” in a specified order of preference.      Plan §
12.3, reprinted in Appellants’ App. at 43.

    In addition to insuring that Plan liabilities were
paid in the event of a partial termination, the Plan also
specified how assets remaining in the Plan were to be
distributed. Specifically, § 12.6 provided that:

    In no event shall the Employer receive any
    amounts from the Pension Fund upon termination
    of the Plan, except that, and notwithstanding
    any other provision of the Plan:

    (a) The Employer shall receive such amounts,
        if any, as may remain after the
        satisfaction of all liabilities of the
        Plan and arising out of any variations
        between actual requirements and expected
        actuarial requirements, and

    (b) The amount, if any, received by the
        Employer   does   not contravene any
        provision of law.

                           -9-
Plan § 12.6, reprinted in Appellants’ App. at 44. The
Plan further provided that, if the withdrawing employer
expressly elected not to receive such surplus amounts,
those amounts would be distributed to Plan participants
of the withdrawing employer as long as the Plan as a
whole remained fully funded.     See Amendment to Metal
Polishers,   Buffers,    Platers   and   Allied   Workers
International Union Pension Plan, as amended (June 6,
1988) (Plan Amendment) § D, reprinted in Appellants’ App.
at 47.

                          - 10 -
    The chief actuary for Bruce & Bruce, S.A. Vora,
testified that “Bruce and Bruce . . . made all
determinations of the benefits to be paid to participants
of the withdrawing employers.” S.A. Vora Aff. (Jan. 17,
1996) at ¶ 21, reprinted in Appellants’ App. at 68. More
importantly, Vora testified that “[p]ayment or provision
for payment of those benefits as determined by Bruce and
Bruce [was] made for all participants in the Plan.” Id.
at ¶ 22, reprinted in Appellants’ App. at 68.

    In    addition,   Vora   testified    regarding   the
distribution of Plan assets attributable to specific
employers. Vora testified that, after Midwest Plating
withdrew, “there were no assets remaining in the Plan
attributable to Midwest Plating.” Id. at ¶ 5, reprinted
in Appellants’ App. at 66. Vora further testified that,
when Steel Technologies withdrew, “Steel Technologies
elected not to receive any portion of the Pension Fund,”
even though there were assets remaining that were
attributable to Steel Technologies.        Id. at ¶ 10,
reprinted in Appellants’ App. at 67.       Instead, Steel
Technologies desired to allocate those remaining assets
to its employees. Id. at ¶ 7, reprinted in Appellants’
App. at 66. Finally, Vora testified that Edgerton, North
Vernon Forge, and North Vernon Steel did not elect, as
provided by the Plan, to forego receipt of any amounts
from the Plan.     Id. at ¶¶ 16, 18, 20, reprinted in
Appellants’ App. at 67-68. Therefore, in accordance with
the provisions of the Plan, these employers are still
eligible to receive a distribution of the residual assets
attributable to them. See Plan Amendment § D, reprinted
in Appellants' App. at 47.

                          - 11 -
    The senior vice president and actuary of Hawkeye,
Edward Cowman, also testified regarding the termination
of the Plan. Cowman, like Vora, testified that Bruce &
Bruce “made determinations of which assets should be
allocated and segregated for the benefit of participants
of each employer when that employer withdrew from the
Plan.”   Edward Cowman Aff. (Dec. 21, 1995) at ¶ 3,
reprinted in Appellants’ App. at 2. In addition, Cowman,
like Vora, testified that Hawkeye “has paid, or made
provision for payment of, participant benefits and
appropriate    administrative   expenses   upon   [P]lan
termination.” Id. at ¶ 7, reprinted in Appellants’ App.
at 2. Finally,

                          - 12 -
according to Cowman, “[t]he Plan continues to hold
residual assets with a value of $293,340.00 as of
September 30, 1995.”      Id. at ¶ 8, reprinted in
Appellants’ App. at 3. It is these assets that gave rise
to the instant dispute.

     On January 17, 1995, Hawkeye filed its action for
declaratory relief in the district court and then later
amended its complaint on February 8, 1996.        In its
amended complaint, Hawkeye requested a declaratory
judgment that: (1) “the Plan has been terminated and that
benefits for all Plan participants have been properly
paid or provided for;” (2) “all Plan assets remaining
after payment of, or provision for, all benefits to
participants and appropriate administrative expenses,
shall be distributed to Avis and Edgerton Forge pursuant
to the terms of the Plan;” (3) “Avis, Edgerton Forge, or
such other recipient of the residual assets of the Plan
as the Court may determine, shall indemnify and hold
Plaintiff harmless from any claim to those assets
asserted on behalf of Plan participants;” and (4) “the
costs and expenses incurred by the Plaintiff as Plan
Administrator and for prosecuting this action and
obtaining this declaratory judgment are properly deducted
from   those   residual   Plan  assets   as   appropriate
administrative expenses under the terms of the Plan . .
. .” Amend. Compl. (Feb. 8, 1996) at 9.

    In October 1995, the Union submitted a set of
interrogatories to Hawkeye, requesting information
regarding how employer contributions were determined, how
retirement benefits were calculated, and how Plan assets
came to exceed Plan liabilities. In response to these

                          - 13 -
interrogatories, Hawkeye sought to defer its obligation
to answer the interrogatories. Hawkeye first submitted
a motion for an extension of time that was granted by the
magistrate judge handling this action.      Hawkeye then
submitted a motion for a protective order to the
magistrate judge; this motion was also granted.      As a
result of the magistrate judge’s decisions, Hawkeye was
not obligated to respond to the Union’s interrogatories
until April 1, 1996.

                          - 14 -
    On January 19, 1996, prior to responding to the
Union’s interrogatories, Hawkeye filed a motion for
summary judgment.       On February 9, 1996, AVIS and
Edgerton subsequently joined in Hawkeye’s motion for
summary judgment.     On February 12, 1996, the Union
submitted a motion to defer judgment on Hawkeye’s motion
for summary judgment, arguing that Hawkeye must respond
to the Union’s interrogatories before Hawkeye’s summary
judgment motion could be heard. On March 8, 1996, the
magistrate judge denied the Union’s motion, holding that
the Union “[had] not established good cause to require
the discovery sought prior to ruling on the motion for
summary judgment.”    Order (Mar. 8, 1996) at ¶ 4.     In
response to the magistrate judge’s ruling, the Union
filed a motion in district court to vacate the magistrate
judge’s order.   On April 10, 1996, the district court
denied the Union’s motion. Order (Apr. 10, 1996) at 1.

    On March 26, 1996, the Union filed an opposition
brief to Hawkeye’s summary judgment motion as well as a
cross motion for summary judgment. On June 14, 1996, the
district court granted the Union’s cross motion for
summary judgment and denied Hawkeye’s motion for summary
judgment. Mem. Op. (June 14, 1996) at 19.

    The district court held that Hawkeye’s interpretation
of the Plan as allowing for the distribution of residual
assets to AVIS and Edgerton contravened 29 U.S.C.
§ 1103(c)(1) and therefore that Hawkeye’s interpretation
of the Plan constituted an abuse of discretion. Mem. Op.
at 18-19. In support of its holding, the district court
reasoned that § 1103(c)(1) provides generally that assets
of a plan cannot be distributed to employers but must be

                          - 15 -
held for the exclusive benefit of plan participants.   Mem.
Op. at 16-17. In addition, the district court rejected
Hawkeye’s argument that 29 U.S.C. § 1344(d)(1) (1994)
provided an exception to § 1103(c)(1) under which assets
could be distributed to AVIS and Edgerton. Mem. Op. at 17-
18. The district court explained that:

                           - 16 -
    Section 1344(d)(1) provides for the distribution
    of residual assets of a single-employer plan.
    29 U.S.C. § 1344. However, in the present case,
    it is undisputed that the Plan is a multi-
    employer plan.     As such, the exception to
    Section   1103[(c)(1)]   provided   in   Section
    1344(d)(1) does not apply.

Mem. Op. at 17-18 (note omitted).       Accordingly, the
district court granted the Union’s motion for summary
judgment, ruling that the Plan’s remaining assets must be
distributed to Plan participants. Id. at 19.

    The district court subsequently entered an order
providing for the distribution of the Plan’s residual
assets to Plan participants. Specifically, the district
court ordered that:

    1.   Residual assets in the Plan shall be
         distributed to Participants who were
         employees of North Vernon Forge, Inc.,
         Edgerton Forge, Inc. and North Vernon
         Steel Products, Inc. at the times of
         their   respective   withdrawals  from
         participation in the Plan.

    2.   The Actuary should apply the provisions
         of Section 12.6 of the Plan, as amended,
         as if the employers had elected not to
         receive the assets remaining after
         payment or provision for payment of the
         defined benefits, such that the residual
         assets attributable to each of North
         Vernon Forge, Inc., Edgerton Forge, Inc.
         and North Vernon Steel Products, Inc.
         determined as stated in paragraph 12.2
         will be allocated among the Participants
         of each such Participating Employer as

                           - 17 -
of the date of determination of the
residual assets based upon the present
value of the accrued benefit of each
such     Participating     Employer’s
Participants determined on the revised
benefit formula if the formula of
computing benefits, as of the date of
such     determination,      is    not
discriminatory.

                 - 18 -
    3.   Any   residual  assets   allocated to
         Participants who cannot be located
         should be escheated under applicable
         state unclaimed property laws.

Consent Order Amending Judgement (July 23, 1996) at 2
(emphasis in original).

    On July 1, 1996, the Union filed a motion for
attorney’s fees. The district court denied the Union’s
motion for attorney’s fees on September 4, 1996.

    AVIS and Edgerton now appeal the district court’s
grant of summary judgment to the Union and the district
court’s denial of Hawkeye’s motion for summary judgment.
The Union brings a protective cross-appeal and appeals
the denial of attorney’s fees.

                          II.

    On appeal, we review de novo the district court’s
grant of summary judgment to the Union. See McCormack v.
Citibank, N.A., 100 F.3d 532, 537 (8th Cir. 1996).
Summary judgment is proper only if the record, viewed in
the light most favorable to the nonmoving party, presents
no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Id.; see also
Fed. R. Civ. P. 56(c). Furthermore, where an appeal from
an order denying the appellant’s motion for summary
judgment is raised together with an appeal from an order
granting the appellee’s cross motion for summary
judgment, we may enter an order directing that summary
judgment be granted in favor of the appellant if the
record presents no genuine issue of material fact and the

                          - 19 -
appellant is entitled to judgment as a matter of law.
Mohahan v. County of Chesterfield, Virginia, 95 F.3d
1263, 1265 (4th Cir. 1996); see Talley v. United States
Postal Serv., 720 F.2d 505, 508 (8th Cir. 1983) (“The
appellate court may decide an issue without remand . . .
when the facts with respect to a particular issue are
undisputed.”).

                          - 20 -
    Because   the   Plan      gives      Hawkeye   discretionary
authority to interpret the Plan, we review Hawkeye’s
interpretation   of   Plan        provisions     for  abuse   of
discretion. See Hutchins v. Champion Int’l Corp., 110
F.3d 1341, 1344 (8th Cir. 1997); Cash v. Wal-Mart Group
Health Plan, 107 F.3d 637, 640-41 (8th Cir. 1997); see
also Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,
115 (1989). Under the abuse of discretion standard, we
may not invalidate Hawkeye’s interpretation of the Plan
unless its interpretation is unreasonable. Hutchins, 110
F.3d at 1344.    “An interpretation is reasonable if a
reasonable person could have reached a similar decision,
given the evidence before him.”             Id. (quotations and
citation omitted)(emphasis in original).

    In order to determine whether a plan administrator’s
interpretation of a plan is reasonable, this Court
considers:

      1) whether the interpretation is consistent with
      the   goals of the plan; 2) whether the
      interpretation renders any language in the plan
      meaningless or makes the plan internally
      inconsistent; 3) whether the interpretation
      conflicts    with   ERISA;    4)   whether   the
      interpretation has been consistent; and 5)
      whether the interpretation is contrary to the
      clear language of the plan.

Id.

    In the instant case, Hawkeye has concluded that the
Plan calls for the distribution of the Plan’s remaining
assets to AVIS and Edgerton.       The district court,

                             - 21 -
however, found that Hawkeye’s interpretation contravenes
29 U.S.C. § 1103(c)(1) and is therefore unreasonable.
See Mem. Op. at 18.

    Section 1103(c)(1), which is also known as the anti-
inurement or exclusive benefit rule, provides generally
that “the assets of a plan shall never inure to the
benefit of any employer and shall be held for the
exclusive purposes of providing benefits to participants
in the plan and their beneficiaries and defraying
reasonable expenses of

                          - 22 -
administering the plan.”       29 U.S.C. § 1103(c)(1).
Because § 1103(c)(1) widely proscribes the distribution
of plan assets to employers, the district court denied
Hawkeye’s summary judgment motion. See Mem. Op. at 18-
19.   The district court instead granted the Union’s
motion for summary judgment, ruling that, pursuant to
§ 1103(c)(1), the Plan’s remaining assets must go to Plan
participants.    See Mem. Op. at 18-19.      The central
question raised by AVIS and Edgerton on appeal is
therefore whether Hawkeye can, consistently with the
terms of the plan as well as the law, distribute the
Plan’s remaining assets to one or more Plan employers.

    On appeal, AVIS and Edgerton argue that: (1) the
Plan’s remaining assets are not assets of the Plan and
therefore distribution of the residual assets to one or
more Plan employers is not barred by § 1103(c)(1); and
(2) although the Plan started as a multiemployer plan, it
was   a single-employer plan upon termination and
consequently distribution of the residual assets to one
or more Plan employers fits within the exception to §
1103(c)(1) provided by 29 U.S.C. § 1344(d)(1). AVIS and
Edgerton therefore argue that the district court’s grant
of summary judgment to the Union should be reversed
because the district court’s conclusion that § 1103(c)(1)
bars distribution of the Plan’s remaining assets to one
or more Plan employers is erroneous. AVIS and Edgerton
further argue that this Court should direct the district
court to enter an order granting Hawkeye’s motion for
summary judgment.

    We agree with AVIS’s and Edgerton’s argument in part
and hold that the district court erred in granting the

                          - 23 -
Union’s motion for summary judgment. However, we reject
AVIS’s and Edgerton’s invitation to direct the district
court to enter an order granting Hawkeye’s motion for
summary judgment.

                           A.

    AVIS and Edgerton first assert that § 1103(c)(1)
expressly prohibits only “assets of a plan” from inuring
to the benefit of an employer. 29 U.S.C. § 1103(c)(1).

                          - 24 -
Drawing on this assertion, AVIS and Edgerton argue that
the Plan’s remaining assets are not “assets of a plan”
within the meaning of § 1103(c)(1). Thus, according to
AVIS and Edgerton, because § 1103(c)(1) prohibits only
assets of a plan from inuring to the benefit of employers
and because the Plan’s remaining assets are not assets of
a plan, § 1103(c)(1) does not bar Hawkeye from
distributing the Plan’s remaining assets to one or more
Plan employers.    We reject this argument because we
conclude that the Plan’s remaining assets are assets of
a Plan within the meaning of § 1103(c)(1).

    To address AVIS’s and Edgerton’s argument, we must
first recognize that, when the employers funded the Plan,
their contributions became assets of the Plan. See Plan
§ 7.5, reprinted in Appellants’ App. at 35 (“All
contributions made by the Employer under this Plan shall
be paid to, and deposited in, the Pension Fund.”). We
must also recognize that the Plan’s remaining assets--the
assets to which AVIS and Edgerton lay claim--are merely
the assets left in the Plan after Hawkeye paid or
provided for Plan liabilities.      As such, the Plan’s
remaining assets are residual assets of the Plan, and the
source of these residual assets is the Plan assets.

    Although ERISA does not explicitly define residual
assets as “assets of a plan” for purposes of §
1103(c)(1), Congress has impliedly recognized in 29
U.S.C. § 1344 that residual assets constitute a subset of
assets of a plan. As a subset of plan assets, residual
assets are therefore assets of a plan within the meaning
of both § 1344 and § 1103(c)(1). See Gozlon-Peretz v.
United States, 498 U.S. 395, 407-08 (1991) (“It is not

                          - 25 -
uncommon to refer to other, related legislative
enactments when interpreting specialized statutory
terms,” since Congress is presumed to have “legislated
with reference to” those terms.).
    The only time that the term “residual assets” appears
in ERISA is in § 1344, a provision dealing with the
termination of single-employer plans. Section 1344 first
provides that, “[i]n the case of the termination of a
single-employer plan, the plan administrator shall
allocate the assets of the plan (available to provide
benefits) among

                          - 26 -
the participants and beneficiaries” in a statutorily-
mandated order of priority. 29 U.S.C. § 1344(a) (1994)
(emphasis added). Section 1344(d)(1) then provides that,
subject to certain limitations, “any residual assets of
a single-employer plan may be distributed to the employer
. . . .” 29 U.S.C. § 1344(d)(1) (emphasis added).

    By requiring that plan assets be used to pay plan
liabilities before any residual assets can be distributed
to an employer, § 1344's framework for the distribution
of plan assets suggests that Congress understood residual
assets to be, as the term implies, any assets of a plan
remaining after the plan’s liabilities have been
satisfied. Plan assets must first be used to pay plan
liabilities, and only then can the plan assets remaining-
-the residual assets--be distributed to the employer.
Thus, because the assets of a plan are the source of
residual assets, Congress has impliedly recognized in §
1344 that residual assets are merely a subset of assets
of a plan and that residual assets are therefore a form
of plan assets. Cf. 29 C.F.R. § 4041.2 (1996) (defining
residual assets, for purposes of single-employer plan
terminations, to mean “the plan assets remaining after
all benefit liabilities and other liabilities of the plan
have been satisfied” (emphasis added)). Therefore, the
anti-inurement rule of § 1103(c)(1), which prohibits
assets of a plan from inuring to the benefit of
employers, also prevents residual assets of a plan from
inuring to the benefit of an employer.

                           B.

                          - 27 -
    AVIS and Edgerton next argue that distribution of
residual Plan assets to one or more Plan employers fits
within the exception to § 1103(c)(1) found in 29 U.S.C.
§ 1344(d)(1). We agree in part and hold that the portion
of any residual Plan assets attributable to North Vernon
Steel may be distributed to North Vernon Steel or its
successor in interest.

                          - 28 -
    Section 1344(d)(1) provides a limited exception to
the anti-inurement rule of § 1103(c)(1). Specifically,
§ 1344(d)(1) provides that, with the exception of a
plan’s   residual  assets  that   come  from  employee
contributions,

    any residual assets of a single-employer plan
    may be distributed to the employer if--

            (A) all liabilities of the plan to
        participants and their beneficiaries
        have been satisfied,

            (B) the distribution does not
        contravene any provision of law, and

            (C) the plan provides for such a
            distribution in these
         circumstances.

29 U.S.C. § 1344(d)(1).

    The district court found that, because the Plan was
a multiemployer plan and because § 1344(d)(1) expressly
applies only to single-employer plans, the Plan’s
residual assets could not be distributed to AVIS and
Edgerton pursuant to § 1344(d)(1). Mem. Op. at 17-18.
On appeal, AVIS and Edgerton counter that, although the
Plan was formed as a multiemployer plan, the Plan was a
single-employer plan when it terminated.        AVIS and
Edgerton point out that, for the sixteen months prior to
the termination of the Plan, North Vernon Steel was the
only employer in the Plan.     As a result, according to
AVIS and Edgerton, the district court erred in concluding
that the Plan was a multiemployer plan upon termination

                          - 29 -
and erred in concluding that the exception to the anti-
inurement rule found in § 1344(d)(1) did not apply.

    For purposes of ERISA plan terminations, a plan is
either a multiemployer plan or a single-employer plan.
A multiemployer plan is defined as a plan:

                         - 30 -
          (A) to which more                  than     one    employer       is
      required to contribute,

          (B) which is maintained pursuant to one or
      more collective bargaining agreements between
      one or more employee organizations and more than
      one employer, and

          (C) which satisfies such other requirements
      as the Secretary of Labor may prescribe by
      regulation,4

      except that, in applying this paragraph--

          (i)   a   plan   shall  be   considered   a
      multiemployer plan on and after its termination
      date if the plan was a multiemployer plan under
      this paragraph for the plan year preceding such
      termination, and

         (ii) for any plan year which began before
    September 26, 1980, the term “multiemployer
    plan” means a plan described in section 414(f)
    of title 26 as in effect immediately before such
    date . . . .
29 U.S.C. § 1301(a)(3) (1994). By contrast, a single-
employer plan is any defined-benefit plan that is not a
multiemployer plan. See 29 U.S.C. § 1301(a)(15) (1994).
    Upon termination and for the sixteen-month period
preceding termination, the Plan did not meet the
requirements    of   either   §    1301(a)(3)(A)  or  §
1301(a)(3)(B)--the    two   essential   elements  of  a
                   5
multiemployer plan. Because only North Vernon Steel was

      4
       The Secretary of Labor has not prescribed any further requirements for a plan
to be defined as a multiemployer plan. See 29 C.F.R. § 4001.2 (1996).
      5
       Indeed, these two requirements, § 1301(a)(3)(A) and § 1301(a)(3)(B), constitute
the only elements that distinguish a multiemployer plan from a single-employer plan

                                        - 31 -
required to contribute to the Plan upon termination and
for the sixteen-month period preceding termination, the
Plan did not meet § 1301(a)(3)(A)’s requirement that more

because the Secretary of Labor has not prescribed any further requirements pursuant
to the powers granted in § 1301(a)(3)(C). See 29 C.F.R. § 4001.2.

                                      - 32 -
than one employer be required to contribute.           In
addition, during this same period, the Plan was
maintained pursuant to a collective bargaining agreement
with only one employer. Consequently, the Plan did not
meet § 1301(a)(3)(B)’s requirement that the governing
collective bargaining agreement be formed with “more than
one employer . . . .” 29 U.S.C. § 1301(a)(3)(B).

    Furthermore, § 1301(a)(3)(C) does not dictate that
the Plan was a multiemployer plan on and after
termination. Under § 1301(a)(3)(C)(i), “a plan shall be
considered a multiemployer plan on and after its
termination date if the plan was a multiemployer plan
under this paragraph for the plan year preceding such
termination . . . .” 29 U.S.C. § 1301(a)(3)(C)(i). In
the instant case, the Plan’s official plan year ran from
January 1 through December 31.        See Plan § 2.29,
reprinted in Appellants' App. at 14. During the entire
1989 plan year, the Plan did not meet the requirements of
either § 1301(a)(3)(A) or § 1301(a)(3)(B). In addition,
the Plan did not meet the requirements of either §
1301(a)(3)(A) or § 1301(a)(3)(B) for four of the twelve
months of the 1988 plan year.     Consequently, when the
Plan terminated on December 31, 1989, the Plan had not
been a multiemployer plan for the plan year preceding
termination. The Plan had not been a multiemployer plan
for any portion of the 1989 year, and it had only been a
multiemployer plan for eight months of the 1988 plan
year, but not for the 1988 plan year. For this reason,
§ 1301(a)(3)(C)(i) does not dictate that the Plan was a
multiemployer plan on and after termination.           In
addition, since a plan year beginning before September

                          - 33 -
26, 1980 is not at issue in the present        action,   §
1301(a)(3)(C)(ii) is not applicable.

    Because the Plan did not meet either of the two
requisites of a multiemployer plan for the sixteen months
prior    to   termination    and   because    neither   §
1301(a)(3)(C)(i) nor § 1301(a)(3)(C)(ii) dictate that the
Plan is to be considered a multiemployer plan, the Plan
could not have been and therefore was not a multiemployer
plan when it

                          - 34 -
terminated.    As a result, because any defined benefit
plan6 that is not a multiemployer plan is by definition a
single-employer plan, see 29 U.S.C. § 1301(a)(15), the
Plan was a single-employer plan when it terminated.
Thus, although the Plan was formed as a multiemployer
plan, the Plan converted to a single-employer plan. Cf.
29 U.S.C. § 1412 (1994) (allowing for the transfer of
assets and liabilities from a multiemployer to a single-

      6
       The Union argues that the Plan was not a defined benefit plan, but rather a
defined contribution plan. We reject this argument as meritless.

      In general, an ERISA plan can either be a defined contribution plan or a defined
benefit plan. Under 29 U.S.C. § 1002(34), a defined contribution plan is defined as

      a pension plan which provides for an individual account for each
      participant and for benefits based solely upon the amount contributed to
      the participant’s account, and any income, expenses, gains and losses, and
      any forfeitures of accounts of other participants which may be allocated
      to such participant’s account.

29 U.S.C. § 1002(34) (1994). Conversely, a defined benefit plan is generally defined
as any pension plan that is not a defined contribution plan. See 29 U.S.C. § 1002(35)
(1994). Thus, individual accounts for each participant and benefits based solely upon
such accounts distinguish defined contribution plans from defined benefit plans.

       In the instant case, the Plan does not provide for “an individual account for each
participant . . . .” 29 U.S.C. § 1002(34). Moreover, Plan benefits are not “based solely
upon the amount contributed to the participant’s account . . . .” Id. Instead, the Plan
was entirely funded by employers, and Plan benefits were calculated by multiplying a
participant’s years of service by a monthly pension rate set forth in the collective
bargaining agreement reached between Plan employers and the Union. See Plan §§
2.1, 2.22, 5.1, reprinted in Appellants’ App. at 10, 13, 21. Because the Plan has neither
of the requisite features of a defined contribution plan, the Plan is not a defined
contribution plan but is instead a defined benefit plan. Accordingly, we reject the
Union’s argument to the contrary.

                                         - 35 -
employer plan); 29 U.S.C. § 1413 (1994) (allowing for the
partitioning of a multiemployer plan).

                          - 36 -
    We can find no provision of ERISA that would prevent
a plan from converting from a multiemployer to a single-
employer plan in this way. Instead, § 1301(a)(3)(C)(i)
impliedly recognizes that a plan that starts as a
multiemployer plan may become a single-employer plan by
the time of its termination.          See 29 U.S.C. §
1301(a)(3)(C)(i) (“[A] plan shall be considered a
multiemployer plan on and after its termination date if
the plan was a multiemployer plan under this paragraph
for the plan year preceding such termination . . . .”).
Moreover, § 12.2 and § 12.3 of the Plan expressly provide
for the sequenced withdrawal of employers that resulted
in the conversion of the Plan from a multiemployer to a
single-employer plan. See Ryan v. Federal Express Corp.,
78 F.3d 123, 127 (3d Cir. 1996) (noting that “[t]he
Supreme Court has emphasized the primacy of plan
provisions absent a conflict with the statutory policies
of ERISA” (quotations and citations omitted)); cf.
Bollman Hat Co. v. Root, 112 F.3d 113, 118 (3d Cir. 1997)
(“[T]he policies underlying ERISA generally counsel
reliance on unambiguous plan language.”). Accordingly,
we agree with AVIS and Edgerton that the district court
erred in holding that the Plan was a multiemployer plan
upon termination and in holding that the exception to the
anti-inurement rule found in § 1344(d)(1) did not apply
for that reason.

    Although we agree with AVIS and Edgerton that the
Plan was a single-employer plan upon termination, we
still must consider each of the remaining requirements of
§ 1344(d)(1).     For a distribution of assets to be
excepted from the anti-inurement rule of § 1103(c)(1), §
1344(d)(1) also requires that: (1) the assets to be

                          - 37 -
distributed must be residual assets, see 29 U.S.C. §
1344(d)(1); (2) the residual assets must not come from
employee contributions, see 29 U.S.C. § 1344(d)(1),(3);
(3) the distribution of residual assets to any one or
more employer must “not contravene any provision of law,”
29 U.S.C. § 1344(d)(1)(B); and (4) “the plan provides for
such a distribution         . . . .”        29 U.S.C. §
1344(d)(1)(C).

    The record before us, viewed in the light most
favorable to AVIS and Edgerton, indicates that all Plan
liabilities have been paid or provided for and that only
residual

                          - 38 -
assets remain. In addition, it is undisputed that none
of the residual assets of the Plan came from employee
contributions.    The Union argues, however, that the
distribution of residual assets to one or more Plan
employers meets neither § 1344(d)(1)(B)’s requirement
that the distribution not contravene a provision of law
nor § 1344(d)(1)(C)’s requirement that the Plan provides
for such distribution.

    1. Contravention of Law

    In its cross-appeal, the Union argues that 29 U.S.C.
§ 186(c) (1994) prohibits plan administrators from
distributing a plan’s residual assets to employers.
Hence, the Union concludes that distribution of residual
Plan assets to one or more Plan employers would
contravene § 186(c) as well as § 1344(d)(1)(B).

    To understand § 186(c), we must first consider 29 U.S.C.
§ 186(a) (1994). Section 186(a) widely proscribes the
transfer of money or other items of value from employers
to labor organizations, see 29 U.S.C. § 186(a), and §
186(c) provides certain exceptions to the general
proscription found in § 186(a).       In particular, as
relevant here, § 186(c) provides that:

    The provisions of [§ 186] shall not be
    applicable . . . (5) with respect to money or
    other thing of value paid to a trust fund
    established      by    such    [labor     union]
    representative, for the sole and exclusive
    benefit of the employees of such employer, and
    their families and dependents . . . Provided,
    [t]hat . . . such payments are held in trust for

                           - 39 -
    the purpose of paying . . . for the benefit of
    employees, their families and dependents, for .
    . . pensions on retirement or death of employees
    . . . and . . . such payments as are intended to
    be used for the purpose of providing pensions or
    annuities for employees are made to a separate
    trust which provides that the funds held therein
    cannot be used for any purpose other than paying
    such pensions or annuities . . . .

29 U.S.C. § 186(c) (emphasis in original).

                          - 40 -
    The Union seizes on the last phrase of the excerpted
portion of § 186(c) to argue that residual assets of the
Plan cannot be distributed to one or more Plan employers.
The Union argues that, because “the funds held [in a
pension plan] cannot be used for any purpose other than
paying such pensions or annuities,” 29 U.S.C. § 186(c)(5)
(emphasis added), the Plan’s residual assets must be
distributed to Plan participants.

    Section 186(c)(5), however, was never intended to
prohibit a plan administrator from distributing residual
plan assets to an employer.     Instead, § 186(a) and §
186(c) serve an entirely different purpose.       Congress
carefully crafted § 186(a) and § 186(c) to allow
employers to contribute to pension plans yet, at the same
time, prevent employers from unduly influencing labor
organizations or their representatives. Congress wanted
to insure that employers did not exert undue influence on
labor unions by using plan assets to bribe labor
representatives   or   by   funneling   money   to   labor
organizations through pension plans.          See Toyota
Landscaping Co. v. Southern Cal. Dist. Council of
Laborers, 11 F.3d 114, 117-18 (9th Cir. 1993); Roark v.
Boyle, 439 F.2d 497, 501 (D.C. Cir. 1970).

    In the instant case, Hawkeye does not intend to
transfer assets to a labor organization or its
representatives but instead intends merely to distribute
residual Plan assets to one or more Plan employers. Such
a transfer in no way raises the concern that § 186 was
designed to address--the potential that an employer will
use   pension    funds   to   unduly    influence   labor
organizations. For this reason, we hold that § 186(c)(5)

                           - 41 -
does not apply to Hawkeye’s intended distribution of
residual assets to one or more Plan employers.
Accordingly, we reject the Union’s argument that
distribution of the Plan’s residual assets to one or more
Plan   employers   violates   §   186(c)   as   well   as
§ 1344(d)(1)(B).

                          - 42 -
    2. Terms of the Plan

    The Union argues that, even if the distribution of
residual Plan assets to one or more Plan employers does
not contravene a provision of law, the terms of the Plan
prohibit such a distribution. Hence, under the Union’s
argument, distribution of residual Plan assets to one or
more Plan employers would contravene § 1344(d)(1)(C)’s
requirement   that   the  Plan   provide   for  such   a
distribution.

    More specifically, the Union argues that distribution
of residual Plan assets to one or more Plan employers
would contravene § 12.6(a) of the Plan. Section 12.6(a)
provides that “[t]he Employer shall receive such amounts,
if any, as may remain after the satisfaction of all
liabilities of the Plan and arising out of any variations
between actual requirements and expected actuarial
requirements . . . .”      Plan § 12.6(a), reprinted in
Appellants’ App. at 44. According to the Union, there
could be no variation between actual requirements and
expected   actuarial   requirements   because   actuarial
calculations were not performed under the Plan.

    We reject the Union’s argument because, viewed in the
light most favorable to AVIS and Edgerton, the record
indicates that actuarial calculations were performed
under the Plan. Although the Plan required the employers
to finance the Plan at the levels set forth in the
collective bargaining agreement that each employer
reached with Union representatives, see Plan § 7.6,
reprinted in Appellants' App. at 36, the Plan also
provided that these levels were to be determined at least

                           - 43 -
in part by the actuarial calculations of the Plan
actuary, Bruce & Bruce.   See Plan § 7.2, reprinted in
Appellants' App. at 35.      The Union has offered no
evidence indicating that these calculations were not
performed.
    Moreover, the Plan provided that the Plan’s actual
requirements were calculated independently of expected
actuarial requirements.      Actual requirements were
calculated by multiplying each participant’s years of
service by the monthly pension rate set forth

                         - 44 -
in the collective bargaining agreement that applied to
that   participant.      In   contrast,   the   actuarial
calculations that Bruce & Bruce was obligated to perform
required Bruce & Bruce to estimate the future needs of
the Plan.     As a result, under the Plan, expected
actuarial requirements would almost inevitably vary from
actual requirements. Thus, we conclude that § 12.6 of
the Plan provides for the distribution of residual assets
to a Plan employer.

    Although we have addressed all of the arguments
raised by the parties with respect to the Union’s motion
for summary judgment, at least one issue remains.
Neither § 1344(d)(1) nor § 12.6 of the Plan provide for
the   distribution of residual assets to multiple
employers, as Hawkeye seeks to do.         Instead, each
provision calls for the distribution of residual assets
to “the employer.”      For this reason, we hold that
residual Plan assets may be distributed to either North
Vernon Steel, the last employer to withdraw from the
Plan, or North Vernon Steel’s successor in interest, but
not to any other Plan employer.       We also hold that
Hawkeye may only distribute to North Vernon Steel or its
successor in interest those residual Plan assets that are

                          - 45 -
attributable to North Vernon Steel.7    Any Plan assets
remaining after such distribution shall inure to the

      7
        We note that our result is not inconsistent with the primary purpose of ERISA:
“‘the protection of individual pension rights . . . .’” Roth v. Sawyer-Cleator Lumber
Co., 61 F.3d 599, 602 (8th Cir. 1995) (quoting H.R. Rep. No. 93-533, at 1 (1974),
reprinted in 1974 U.S.C.C.A.N. 4639, 4639).

       Several courts have recognized that a per se rule awarding residual or surplus
assets to plan participants and beneficiaries does not necessarily promote ERISA’s
goals. These courts have recognized that awarding residual assets to participants and
beneficiaries may undermine the financial stability of pension plans by penalizing
employers for overfunding plans and thereby providing an incentive for employers to
underfund plans so as to avoid losing residual assets upon termination of the plan. In
addition, these courts have recognized that a per se rule awarding residual assets to
participants may provide participants with a benefit for which they have not bargained.
See, e.g., Borst v. Chevron Corp., 36 F.3d 1308, 1322 (5th Cir. 1994), cert. denied 115
S. Ct. 1699 (1995); Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1190 (7th Cir.
1994); Chait v. Bernstein, 835 F.2d 1017, 1027 (3d Cir. 1987); Financial Insts.
Retirement Fund v. Office of Thrift Supervision, 766 F. Supp. 1302, 1308 (S.D.N.Y.
1991), aff’d by 964 F.2d 142 (2d Cir. 1992).

      In the instant case, distribution of the residual assets to the Plan’s participants
would, in contravention of ERISA’s underlying goals, provide the participants with an
undeserved windfall and penalize the employers for conscientiously funding the Plan.

                                         - 46 -
benefit of           the     Plan’s       participants          pursuant        to     §
1103(c)(1).

                                         III.

    For the foregoing reasons, we reverse the district
court’s grant of summary judgment to the Union.
Furthermore, given that no information appears in the
record that would allow us to conclude what portion, if
any, of the remaining assets are residual assets
attributable to North Vernon, at least one genuine issue
of material fact remains with respect to Hawkeye’s motion
for summary judgment.       Accordingly, we affirm the
district court’s denial of Hawkeye’s motion for summary
judgment. Finally,
we remand this case to the district court for further
proceedings in accordance with this opinion.8

      8
      In its cross-appeal, the Union argues that the district court erred in denying its
motion for attorney’s fees. Because we conclude that the Union is not entitled to
summary judgment, we also hold that the district court did not err in denying the
Union’s motion for an award of attorney’s fees.

       The Union also argues in its cross-appeal that the district court erred in denying
the Union’s motion to vacate the magistrate judge’s March 8, 1996 order. According
to the Union, the district court erred because the magistrate judge should have granted
the Union’s motion to defer Hawkeye’s motion for summary judgment. The Union
argues that the magistrate judge should have deferred a ruling on summary judgment
until Hawkeye responded to the interrogatories submitted by the Union. Because we
conclude that summary judgment was not properly granted and because the protective
order allowing Hawkeye to avoid answering the Union’s interrogatories has since
expired, the Union’s argument is moot. Accordingly, we decline to address this issue.

                                         - 47 -
A true copy.

    Attest:

        CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                     - 48 -