Court Opinion

ID: 2962216
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:54:18.984834+00
Date Added: 2024-06-11T15:01:31.462070
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 91-1542                             RONALD W. CATERINO, ET AL.,                               Plaintiffs, Appellants,                                          v.                                J. LEO BARRY, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Edward F. Harrington, U.S. District Judge]                                               ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                            Cyr and Stahl, Circuit Judges.                                           ______________                                 ____________________            Anthony  M.  Feeherry with  whom  Marie  P. Buckley  and  Goodwin,            _____________________             _________________       ________        Procter & Hoar were on brief for appellants.        ______________            Randall E. Nash with whom  James T. Grady and Grady and Dwyer were            _______________            ______________     _______________        on brief for appellees.                                 ____________________                                  November 12, 1993                                 ____________________                                         -1-                       BREYER,  Chief Judge.  For more than thirty years,                                ___________             New  England employees of United Parcel Service ("UPS") have             participated  in the  New  England  Teamsters  and  Trucking             Industry  Pension Fund (the  "Teamsters Pension Fund").   In             1986,  a group  of  those employees  decided they  wanted to             leave  the  Teamsters  Pension Fund.    They  hoped (through             collective bargaining) to secure their employer's assistance             in setting up a separate  pension fund covering only UPS New             England employees.                         The employees failed to  bring about the  creation             of a separate  fund.  And, they blame  the Teamsters Pension             Fund trustees for that failure.  In particular, they believe             that the trustees have thwarted their efforts to negotiate a             plan  switch, not through direct opposition, but by refusing             to permit a transfer of any Teamsters Pension Fund assets to             any  new pension fund  that they,  together with  UPS, might             create.   They brought  this lawsuit  against the  trustees,             claiming,  in relevant part,  that the trustees'  refusal to             transfer  assets violates  various  laws, including  certain             provisions of the Employee Retirement Income Security Act of             1974 (ERISA).  See 29 U.S.C.    1104(a)(1), 1414(a).                            ___                       After a  trial, the  district court  found in  the             trustees' favor.   The employees now appeal.   They argue in             essence  that  the  trustees, in  refusing  to  transfer any             assets to a newly created  fund, have violated the fiduciary             obligations that  ERISA imposes upon  them.  We can  find no             such violation, however; and, we  affirm the judgment in the             trustees' favor.                                          I                                      Background                                      __________                                          A                              The Teamsters Pension Fund                              __________________________                       The  large, multiemployer  Teamsters Pension  Fund             pools  contributions from  nearly two  thousand New  England             firms.   Eight trustees  (four Teamster  representatives and             four  employer representatives)  manage the  fund, investing             the pooled money  and paying guaranteed monthly  benefits to             employees  who  retire.    We  have  read  the  record  with             considerable care to  try to understand, from  the testimony             and documents,  as well  as the  briefs,  how the  Teamsters             Pension  Fund  works.   Based  on our  understanding  of the             record, we describe its significant features as follows.                       First,  employers contribute to the fund at a rate             that, in 1986, varied, among employers, between 36 cents and             $1.66 per employee  working hour.  The  precise rate depends             upon  the  results  of local  collective  bargaining.   Each                                         -3-                                          3             employer pays the collective-bargained hourly rate for every                                                                    _____             hour  that  any  employee works,  whether  the  employee who                         ___             performs the  work is young or old,  part-time or full-time,             temporary or long-term.                       Second,  a retiring  employee  receives a  pension             benefit  in  an amount  defined  by a  schedule  that varies             benefits  depending primarily upon  the employee's length of             service  and upon his, or her, employer's contribution rate.             The schedule thus pays the  same pension to two retirees who             have worked for  the same number of years  for employers who             contribute  at the  same rate.    In 1986,  for example,  an             employee  who worked for  twenty-five years for  an employer             who contributed  $1.66 per hour  (UPS' actual rate  in 1986)             would  receive a  pension of  $900 per  month.   The benefit             schedule  imposes a minimum length  of service (ten years as             of 1986, lowered  to five in 1990); no  employee is entitled             to  any pension  benefits until  he has worked  the minimum,             i.e., until his Fund  benefits have "vested."   The schedule             appears to set a maximum  length of service as well (twenty-             five or thirty years, depending on retirement age).  Once an             employee  works the maximum number of years, additional work             done does not entitle him to any additional benefit.                                         -4-                                          4                       It is  important to understand  that the Teamsters             Pension  Fund (like most "defined benefit" pension plans and             unlike  "defined contribution" plans  such as those  of many             university employees)  does not guarantee any  employee that                                         ___             he  will receive  a  pension that  exactly reflects  all the                                                _______             contributions  made  on behalf  of that  particular employee                                                _________________________             over the years  (plus the investment income  associated with             those contributions).  As  we have just said, an  individual             employee who works  more than  the maximum  number of  years             loses the benefit  of some contributions made in  respect to             some of  his work  hours.  More  important, an  employee who             leaves  covered employment  before  his  Fund benefits  vest             loses the  benefit of all  contributions made in  respect to                                   ___             his work.  Less obviously, employees who are young also lose             the benefit of some contributions.  For example, an employee             who  works a certain  number of years,  say fifteen, between             the ages of forty  and fifty-five (and then quits)  receives             no more upon his  retirement at sixty-five than  an employee             who works the  same fifteen years between the  ages of fifty             and sixty-five; yet the contributions  made on behalf of the             first employee  are likely more valuable, for  they have had             more time to accrue investment income before retirement age.                                         -5-                                          5                       This  lack of  a  perfect fit  between  individual             contributions   and   individual    benefits   may   reflect             administrative considerations.  It may, for example, reflect             a judgment  not to  create discrepancies  in benefit  levels                         ___             that turn solely upon the relation between investment market             performance and the time that  an individual's contributions             are made.  But, the  most important reason for the imperfect             fit,  as the  Ninth Circuit  has  pointed out,  is that  the             "excess"  contributions made in respect to some workers help             to assure that all workers  (who work a reasonable number of                            ___             years)  will  have a  decent  pension.   "A  modern  defined             benefit pension plan pools contributions for all workers . .             . to  provide reasonable  pensions for  workers who  satisfy             reasonable eligibility  standards.  The  formula necessarily             assumes  [inter alia]  that the  pensions  of a  significant                       __________             number  of employees may  never vest."   Phillips  v. Alaska                                                      ________     ______             Hotel and Restaurant  Employees Pension Fund, 944  F.2d 509,             ____________________________________________             517 (9th Cir. 1991) (citation omitted), cert. denied, 112 S.                                                     _____ ______             Ct. 1942  (1992); see  also Local 144  Nursing Home  Pension                               _________ ________________________________             Fund v. Demisay, 113 S.  Ct. 2252, 2260 (1993) (Stevens, J.,             ____    _______             concurring) ("That  some  portion of  [some defined  benefit             plan employees']  contributions will go  to benefit  [other]             employees  .  .  .  is,  of  course,  in  the  nature  of  a                                         -6-                                          6             multiemployer  plan.   Such  plans  .  .  . pool[]  employer             contributions for  the joint  benefit  of all  participating             employees.").                         At  the same time,  the plan retains  an important             connection between  an individual's  contributions and  that             individual's benefits.   By tying benefit levels to years of             service and  employer  contribution rates,  the  Fund  still             ensures that those employees who do not get the full benefit             of  contributions  made on  their  behalf get  much  of that                                                            ____             benefit (at least if their pension rights have vested).                       Third,   the   Teamsters   Pension   Fund   is   a             multiemployer plan.   The  fact that  it is  "multiemployer"             means  the fund  is large,  thereby  permitting trustees  to             diversify investment risks and also lowering  administrative             costs   per   pension  dollar.      Moreover,  multiemployer             "reciprocity"   permits  a  worker  to  change  jobs,  among             participating employers,  without losing the benefit of past             contributions.                       Finally,  the Teamsters  Pension  Fund contains  a             special feature  -- a "no asset  transfer" rule -- which the             UPS employees now challenge.  That rule says:                       If any employee or group of employees  .                       . .  shall cease  to be  covered by  the                       Fund  for  any reason  whatsoever,  they                       shall  not be  entitled  to receive  any                                         -7-                                          7                       assets  of the  Fund or  portion thereof                       nor shall the Trustees  be authorized to                       make any transfer of assets on behalf of                       such employees.             New  England Teamsters and  Trucking Industry  Pension Fund,             Agreement and Declaration  of Trust, Article XII,  section 9             (1958).   According to the trustees, this seemingly absolute             prohibition  is  modified  by  the  Trust  Agreement's  next             section.   That section  requires the trustees  to interpret             and apply the Agreement                       so  as to be in full compliance with all                       applicable provisions of  law, including                       the Employee Retirement  Income Security                       Act of 1974, as amended.             New England  Teamsters and  Trucking Industry  Pension Fund,             Restated Agreement and  Declaration of  Trust, Article  XII,             section 10 (1982).                                          B                                      This Case                                      _________                       In 1986,  a group  of UPS  employees learned  that             they  could dramatically improve the level of their pensions             were  they, with UPS, to withdraw from the Teamsters Pension             Fund and  create their  own single-employer  plan.   That is             because, as confirmed in the findings of the district court,             UPS  employs a relatively large number of temporary workers,             for whom the company contributes for every hour  worked, but                                         -8-                                          8             who leave  the New  England trucking  industry before  their             pensions  vest.   The UPS  workforce also  includes a  large             percentage  of younger  workers.   Thus,  UPS' contributions             made  on  behalf  of its  employees  contain  a higher-than-             average  amount of  "excess" contributions.   The  Teamsters             Pension  Fund,  being  a  multi-employer fund,  spreads  the             benefits of such excess contributions among all participants             in the Fund.   In a single-employer plan,  the UPS employees             realized, they would not  have to share their  "excess" with             others.   And unshared, UPS' $1.66 per hour contribution, as                           ________             of 1986, could  buy pensions of $2600 per  month (instead of             $900  per  month) for  UPS  employees who  retired  from UPS             service after twenty-five  years.  Alternatively, UPS,  in a             single-employer  plan, could fund the $900 per month pension             for employees retiring after 25 years with a contribution of             less  than 70 cents  (rather than $1.66)  for every employee             hour worked.                       The UPS  employees' brief  explains what  happened             after  they learned of  the potential benefits  of a single-             employer plan:   "In an  effort to remedy  their inequitable             treatment  within the Teamsters  Fund, the  UPS Participants             repeatedly  petitioned  their  union  leaders  to  negotiate             [through  collective bargaining  with UPS management]  for a                                         -9-                                          9             separate pension plan on their behalf" -- a plan, the record             indicates,  that  the  employees  assumed  would  involve  a             transfer  of some portion  of Teamsters Pension  Fund assets             and liabilities to  the new fund.   "However," the employees             add,  "the UPS Participants' efforts to negotiate a separate             UPS pension  plan [were]  thwarted by  the provision in  the             Teamster   Fund's  governing   documents  which   absolutely             prohibits  any  transfer of  assets  .  . .  ."   Brief  for             Plaintiffs-Appellants at 10.                       "Thwarted" in  their efforts  to take assets  from             the  Teamsters Pension  Fund, and  thereby,  in their  view,             "thwarted" in their efforts to bring about the creation of a             new fund, the UPS employees filed suit against the trustees.             They asked  the court  either (1) to  order the  trustees to             create special  benefit levels within  the Teamsters Pension             Fund for UPS participants (to  reflect, in whole or in part,             their  favorable actuarial  status), or  (2)  to loosen  the             prohibition  on asset  transfers,  thereby,  in their  view,             making it possible for them  to negotiate a plan switch with             UPS management.   They argued that the  trustees' failure to             do one or the other violated various provisions of the Labor             Management Relations  Act (LMRA), 29  U.S.C.   141  et seq.,                                                                 __ ____             and of ERISA.   As we have said, after a trial, the district                                         -10-                                          10             court  entered judgment for the trustees.  The employees now             appeal that judgment.                       The UPS employees have  simplified their claims on             appeal.  They have abandoned their demand that  the trustees             create  a special  level of  benefits  within the  Teamsters             Pension Fund.  They focus  instead upon the trustees'  rule-             based refusal to permit any transfer of assets to a new UPS-             only fund.                       The  passage of  time  has  also  simplified  this             appeal.  The Supreme Court has recently decided a case which             we awaited  before deciding  this appeal,  namely Local  144                                                               __________             Nursing  Home  Pension Fund  v.  Demisay,  113 S.  Ct.  2252             ________________________________________             (1993).   Demisay involved  LMRA- and ERISA-based challenges                       _______             to  a refusal, by trustees  of a multiemployer pension plan,             to transfer  assets to another  plan.  In its  decision, the             Court  barred   the  LMRA-based  claims   on  jurisdictional             grounds, but it remanded  (without deciding) the ERISA-based             claims.   As a  result of that  decision, the  UPS employees             concede that they  "can no longer pursue a  claim for relief             under [the applicable section of] the LMRA."                                         -11-                                          11                       The  UPS  employees  now  pursue  their  remaining             claim, namely  that  the  trustees'  rule-based  refusal  to             transfer assets violates ERISA.                                         -12-                                          12                                          II                                       Standing                                       ________                       We  begin with  the trustees'  assertion  that the             employees  lack standing.   They concede that  the employees             may  bring an  ERISA  action if  they  have been  "adversely             affected by the  act or  omission of  any party .  . .  with             respect to  a  multiemployer plan."   29  U.S.C.    1451(a).             They  claim, however,  that  the  employees  have  not  been             "adversely  affected"  by  the  asset  transfer  prohibition             principally   because,   in   the   trustees'   view,   "UPS             participants  could  receive  the same  level  of  [pension]             benefits  with or  without a  transfer  of assets  to a  new                                _______             single-employer fund."  Brief for Defendants-Appellees at 34             (emphasis  added).  Insofar  as we understand  this somewhat             counter-intuitive argument, we cannot agree with it.                        In   evaluating  the   argument,   we  have   kept             separately  in mind two  different groups of  UPS employees.             In the first group are those employees who, were a switch to             occur,  would not yet have any vested Teamsters Pension Fund                                            ______             rights but who will keep working for several years after the             switch (e.g., a UPS employee  who worked, say, four years at             the time of the  switch, and continues to work for more than             an additional year).  Both  sides agree that a new, UPS-only                                         -13-                                          13             pension plan  would need  to give these  employees (whom  we             shall call "not-yet-vested employees") full credit for their             past years of  Teamsters-Pension-Fund-related service (e.g.,             the plan  would need  to give  the four-year  employee fully             vested,  five-year, rights after one more additional year of             work).  Everyone  also agrees, however,  that the "no  asset             transfer" rule means that the new fund would be left without             any  assets to  pay for  these  past service  credits.   The             ___             employees'  counsel   estimates  the   "loss   of  the   UPS             Participants'  unvested benefits" (which we take to mean the             cost  of these  past service  credits)  at approximately  $5             million.  Brief  for Plaintiffs-Appellants at  10 n.1.   The             trustees' figures, if  anything, appear to place  the figure             higher.                        In  the second group are those employees who, were             a switch  to  occur, would  already have  vested rights  (we                                         _______             shall  call  them  "already-vested  employees").    Everyone             agrees  that a  new, UPS-only  fund  would not  have to  pay                                                        ___             pensions  reflecting  the  past years  of  service  of these             already-vested  employees, for  those  pension rights  would                                             _____             remain the  legal  responsibility of  the Teamsters  Pension             Fund. (In practice,  the old fund pays  supplemental pension             benefits directly to the employee after retiring.)   Since a                                         -14-                                          14             new fund  would not  have to pay  for these  employees' past             years of service, it  would not need assets to  help it make             any  such  payments.   And,  thus,  the  new fund  would  be             somewhat  indifferent to the  presence of the  trustees' "no             asset transfer" rule.   The employees recognize  this point,             which is why they suggest they would ultimately ask only for             the approximately $5 million --  or some portion thereof  --             they claim it  would cost to pay the past service credits of             the not-yet-vested employees.                 ______________                       With this distinction  in mind, we have  turned to             the  trustees' "no standing" argument.  The argument depends             upon a table  (entitled "Transfer of Assets  and Liabilities             Vs. No Transfer -- Hancock  Numbers") that seems designed to             show   that,  if  asset   transfers  were  permissible,  the             following would  occur: (1)  the new  fund would assume  all             pension liability for  the already-vested employees;  (2) it                                        ______________             would  obtain assets  from the  old  fund to  help pay  that             (already-vested employee)  liability; but,  (3) for  reasons             having  to do with  the inadequate funding  of the Teamsters             Pension Fund as  a whole, these assets would  fall far short             of  the  amount   needed  to  pay  for   the  already-vested             employees; (4) the  asset shortfall (in respect  to already-             vested  employees) would more  than outweigh any  benefit to                                         -15-                                          15             the new fund through its  obtaining a share of the (roughly)             $5  million of  assets  in  respect  to  the  not-yet-vested                                                           ______________             employees'  pensions;   (5)  the   rules  related  to   UPS'             "withdrawal liability" (a  complicated statutory requirement             that employers  who leave a  multiemployer plan  pay a  fair             share of the fund's overall deficit) would then somehow even             things out,  so that UPS  would be neither better  nor worse             off with a transfer of assets than without one.                       The  problem  with  the table  is  that  we cannot             understand the   reasoning that underlies it.   The trustees             nowhere explain why a new  fund could not request a transfer             only  of  assets  related to  not-yet-vested  benefits  (and             ____             simply  not   bother  with   a  transfer   of  assets,   and             liabilities,  related to vested benefits).   And, so long as             the  employees limit their request  in this, or some similar             way, it  seems plain to us that a rule blocking the transfer             of any  assets means a  poorer fund.  We  assume, therefore,             that the employees  have standing,  and we  proceed on  that             basis.                                         III                          Fiduciary Obligations Under ERISA                          _________________________________                  The UPS employees' basic argument is that the trustees,             in maintaining a "no asset transfer" rule, have violated the                                         -16-                                          16             fiduciary obligations that  ERISA imposes upon them.   Those             obligations are "strict."   NLRB v. Amax Coal  Co., 453 U.S.                                         ____    ______________             322, 332  (1981).  The trustees must  discharge their duties             "with  respect to  a  [multiemployer]  plan  solely  in  the             interest of the participants and beneficiaries and . . . for             the exclusive purpose of providing  benefits to participants             and beneficiaries,"  and  they must  do  so "with  []  care,             skill,  prudence, and  diligence."   See ERISA, 29  U.S.C.                                                    ___             1104(a)(1);  see also id.   1106 (describing other fiduciary                          ___ ____ ___             duties  of trustees).   At  the same  time, where,  as here,             there is no claim of trustee self-dealing or the like, we do             not simply substitute our judgment for that of the trustees.             We review the trustees' decision at a distance.  See Mahoney                                                              ___ _______             v. Board of  Trustees, 973 F.2d 968, 970-73  (1st Cir. 1992)                __________________             (refusing to apply  close scrutiny to a pension fund trustee             decision even  where mild  self-dealing  was involved);  cf.                                                                      ___             Unocal Corp. v. Mesa Petroleum  Co., 493 A.2d 946, 958 (Del.             _____________   ___________________             1985)  ("[U]nless  it is  shown  by a  preponderance  of the             evidence  that the  [fiduciaries'] decisions  were primarily             based  on perpetuating themselves  in office, or  some other             breach of fiduciary  duty such as fraud,  overreaching, lack             of  good  faith,  or  being uninformed,  a  Court  will  not             substitute  its judgment  for that of  the [fiduciaries].").                                         -17-                                          17             The decision to maintain a "no asset transfer" rule requires             the  trustees  to  balance  obligations  that  run  both  to                                                                 ____             employees who  may wish to leave  the fund and to  those who                                                        ___             wish to stay.  As is well-established, courts set aside this             type of trustee management decision only if it is "arbitrary             and capricious in  light of the trustees'  responsibility to             all   potential   beneficiaries."     Clearly   v.   Graphic                                                   _______        _______             Communications  Int'l  Union   Supplemental  Retirement  and             ____________________________________________________________             Disability Fund, 841 F.2d  444, 449 (1st Cir.  1988) (citing             _______________             other First Circuit cases on point).                       We  cannot say that the trustees' decision here is             arbitrary.   In reaching this conclusion, we have considered             two possible arguments.  The first (implicit in much of what             the UPS  employees say) is  that the Teamsters  Pension Fund             has treated them  unfairly while they  have remained in  the             Fund by not giving them  higher pension benefits than  other             employee    groups    with    less    favorable    actuarial             characteristics.  On this view, the sole fact that they were             earning (as  of 1986)  a $900 pension  when they  could have                                                               _____             been earning a $2600 pension had the  Fund treated them as a             separate actuarial group demonstrates this unfairness.  And,             arguably,  this  "unfair"  treatment warrants  some  special             transfer of assets should they leave the Fund.                                         -18-                                          18                       The  problem  with  this  argument  is  that   the             discrepancy  between $900  and $2600  does  not, by  itself,                                                         ___             indicate  that   the  Teamsters  Pension  Fund  treated  the             employees unfairly (and  nor have the employees  offered any             other evidence of  unfair treatment while in the  Fund).  As             discussed above, see supra pp.  6-7, multiemployer, defined-                              ___ _____             benefit pension  funds  provide their  participants a  whole             cluster  of  benefits,  most  notably,  a  guaranteed decent             pension for all  longtime workers.   And  as also  discussed             above, such  funds do  this largely  by collecting  "excess"             contributions in respect             to  certain kinds  of employees  such  as temporary  workers             (whose  benefits  never  vest),  young workers,  and  super-             longterm   employees,   and   by   sharing   these    excess             contributions  with all the employees  in the fund, not just                                 ___             with  the  employees  of  employers  who  paid  the  excess.             Accordingly,  a  basic  objective of  these  funds  would be             undermined  if  every employee  group (such  as UPS)  with a             disproportionate  share of  excess contributions  (and there             may be many others) wanted special pension levels to reflect             that fact.  It is thus no coincidence that, according to the             findings of the  district court, no other  regional Teamster             pension  fund  provides  special  benefits  for  actuarially                                         -19-                                          19             favorable employee groups, and only one non-Teamster fund in             the entire country does so.                       In  short, UPS and  its employees could  have quit             the Teamsters Pension Fund at any time, but so  long as they             stayed  --  and  enjoyed   the  guaranteed,  mobile  pension             benefits  the Fund provides -- there seems nothing obviously             unfair in denying them special (e.g., $2600)  benefits.  The             UPS employees, by abandoning on appeal their demand for such             benefits, seem,  in effect, to  concede the point.   (We add             that, on appeal, the UPS employees also seem to suggest that             a new  fund would  not be  entitled to  an amount of  assets             anywhere near as large as  the amount that would reflect the             UPS employees' "excess" contribution.)                        The  second basic argument  that the trustees have             acted arbitrarily focuses  on the "no  transfer" rule.   The             employees argue that if they quit the Teamsters Pension Fund             (because they no longer, in  the future, want to share their             excess  contributions),  the  rule would  prevent  them,  as             explained  in  the  standing section,  supra  Part  II, from                                                    _____             getting any assets to help  pay for the past service credits                     ___             of the not-yet-vested employees.  And, it would prevent  the             new  fund  from getting  such  assets  even though  UPS  has             dutifully made contributions into the old fund on  behalf of                                         -20-                                          20             these same employees.  This,  they say, is unfair.  The  UPS             employees  concede,  again  as  mentioned  in  the  standing             section, that the "no transfer  rule" is a wash with respect             to already-vested employees and, to that extent, the rule is                ______________             not  unfair.   They  also  recognize that,  as  long as  the             ___             Teamsters  Pension Fund  has liabilities  in  excess of  its             assets, they might not be entitled to get funds to cover all                                                                      ___             of the past service credits of not-yet-vested employees; yet             they say they are entitled to funds  to cover at least some.                                                                    ____                       Can the  trustees' decision  not to  transfer even             one dime of the Fund's assets attributable to not-yet-vested             pension  rights (keeping  those assets  for  the benefit  of             other  non-UPS   participants)  be   considered  reasonable?             Although we find  the question a  difficult one, we  believe             the  answer is  "yes" --  at least  in  the absence  of some             special circumstance that  the record here does  not reveal.             In arriving at this conclusion, we  fully recognize that the             trustees'  blanket  refusal  operates  in  practice  like  a             penalty for withdrawing from the  Fund -- a penalty somewhat             similar  to the  penalties  bank  customers  pay  for  early             withdrawals  from   CDs  and   the  like,   but  a   penalty             nonetheless.   Whether such a penalty is reasonable depends,                                         -21-                                          21             in our view,  upon whether it serves a  legitimate deterrent             purpose,  upon whether  the participants  in  the fund  know             about it  in advance, and upon  its size in relation  to its             function.                       The   penalty's   deterrent   function   here   is             legitimate.   Multiemployer,  defined-benefit pension  plans             almost inevitably produce some actuarially-favored, and some             actuarially-disfavored, groups.   Such plans  have a  strong             interest in discouraging actuarially-favored employee groups             from withdrawing.  For the employees left behind, withdrawal             means,  among other  things,  a  smaller fund,  consequently             greater  investment costs and risks, and fewer employers for             whom those employees  can work without losing  their accrued             years of  service.  Those  left behind, moreover,  also lose             the  benefit of  sharing  the departing  employer's "excess"             contributions,  say, those  related to  temporary employees.             Some departing employees, we should remind them, would be in             the same  situation had  personal circumstances  earlier led             them to  switch to actuarially-disfavored employers.   Also,             departing  employees, up until  the time of  departure, have             enjoyed  the benefits  of  the  large  fund  that  departure             disincentives have helped to maintain.                                         -22-                                          22                       Moving  to   the  next  inquiry,   we  think  that             employees  leaving the Fund might reasonably expect to incur             some such departure penalty (not to be confused, by the way,             with  "withdrawal liability,"  mentioned  supra pp.  14-15).                                                       _____             The governing  document of  the Teamsters  Pension Fund  has             contained  the "no asset  transfer" clause since  the Fund's             creation.  More  importantly, the penalty concerns  the loss             of  a special  kind  of  asset, namely  the  loss of  assets             related to not-yet-vested contributions.   And, participants             in many  pension funds  normally lose  such assets  entirely             when they  leave fund-covered  employment prior  to vesting.             Departing  employees  leave Teamsters  Pension  Fund-covered             employment whether  they quit  the industry  or whether,  by             switching  plans, they and their employer leave the Teamster             Pension Fund.   Of course, the two activities  -- quitting a             job and switching plans -- are not the same.  But,  they are             closely  enough   related  to   make  the   penalty  of   an             unsurprising kind (and, of course, from the point of view of             the remaining participants,  the effect of departure  is the             same).                       It  also  seems  to  us  that  the  size  of   the             withdrawal  penalty  is  relatively  modest.    The   record             suggests  that the  employees can  take  advantage of  their                                         -23-                                          23             actuarially favorable position by leaving the Teamster  Fund             even without an asset transfer, albeit not quite to the same             ______________________________             degree.   In absolute terms, we have  already mentioned that             the employees  appear to  value the  not-yet-vested employee             liability  at roughly  $5  million;  we  have  also  already             mentioned  that the employees  recognize that they  would be             entitled,  the Teamsters Pension  Fund being in  debt, to an             amount  of assets  to  cover  only some,  not  all, of  this                                                ____             liability -- i.e., an  amount less than $5  million, perhaps             much  less.  (Our  own crude calculations,  based on figures             from the trustees' table, puts  the amount at $3.7 million.)             Whatever  the  exact figure,  it  is a  fairly  small amount             compared  to other amounts such as UPS' annual contributions             ($18 million dollars as of 1986, according to the employees'             actuaries) or  the "withdrawal liability"  UPS would  likely             have  to pay  upon departure  (in  the tens  of millions  of             dollars, again as of 1986).                       Finally, if the "no asset transfer" rule costs the             new fund too much, there is  a safety valve.  The  employees             can  automatically entitle  themselves to  a  share of  fund             assets should the  matter become so critically  important to             them that they take the  drastic step of changing collective                                         -24-                                          24             bargaining representatives (i.e., of leaving the Teamsters).             See ERISA, 29 U.S.C   1415(a).             ___                       Ultimately,  the   weighing  of   the  conflicting             interests here at  issue -- those of  departing employees in             obtaining the nonvested share of assets versus those of most             fund participants in discouraging departures -- is up to the             trustees  (who reflect the  interests both of  employers and             the   employees,   through   their   collective   bargaining             representatives).  The question is close  enough so that, in             our view,  the ultimate  weighing is not  up to  the courts.             The treatment  of the  departing employees  (that they  must             forfeit unvested  rights) is  not so unfair  as to  make the             rule arbitrary.   We do  not say that  any rule that  blocks                                                    ___             asset  transfers is  reasonable, nor  that  the present  "no             transfer"  rule  is  reasonable in  all  circumstances.   We                                                 ___             simply  say that the  record before us  does not demonstrate             that it  is arbitrary as applied to the circumstances before             us.  Thus, we do not find a violation of the basic fiduciary             obligations that ERISA imposes upon trustees.                                          IV                                ERISA Section 4234(a)                                _____________________                                         -25-                                          25                       The  UPS employees also  claim that the  "no asset             transfer" rule violates  ERISA section 4234(a),  which says,             in relevant part, that                       [a]   transfer   of    assets   from   a                       multiemployer plan to another plan shall                       comply with  asset-transfer rules  which                       shall  be adopted  by the  multiemployer                       plan and which . . . do not unreasonably                       restrict the transfer of plan assets  in                       connection  with  the transfer  of  plan                       liabilities.             29 U.S.C.    1414(a).  They argue (1) that  the provision is             applicable  to the instant case, (2)  that the trustees have             failed to "adopt[]" any "asset-transfer rules," and (3) that             any such  rules they  might have  adopted are  "unreasonably             restrict[ive]."                         The  trustees do  not  agree  that  the  provision             applies  to this  case.   Specifically,  they argue  that it             applies only where a fund's trustees intend to transfer some             of  its liabilities  -- not  the situation  here --  and the             question is  whether, or to  what extent, the  trustees must             allow assets to accompany the transferred liabilities.  This             is the interpretation  of the statute that the Third Circuit             has endorsed, and with which, for the reasons stated in that             opinion, we  agree.   See Vornado, Inc.  v. Trustees  of The                                   ___ _____________     ________________             Retail Store Employees' Union  Local 1262, 829 F.2d  416 (3d             _________________________________________             Cir. 1987).                                         -26-                                          26                       Even assuming that the provision applies, however,             we cannot accept the employees' claim that the trustees have             failed to  "adopt[]" any  "asset-transfer rules."   The  "no             asset  transfer" is  itself a  rule  about asset  transfers.                                  ______             Moreover, that rule  is not quite as absolute  as it sounds,             for the trustees acknowledge that, if ERISA's fiduciary duty             rules require them to transfer assets, the rule permits them             to comply.   The  Trust Agreement  itself,  in Article  XII,             section 10, says  that they  must do  so.  See  supra p.  8.                                                        ___  _____             Further, the  asset transfer prohibition, as so interpreted,             is not "unreasonably restrict[ive]," for the very reasons we             have set forth in Part III, supra.                                         _____                       For  the  reasons  stated,  the  judgment  of  the             district court is  Affirmed.                                Affirmed                                ________                                         -27-                                          27