Supreme Court Offers Companies Pension Liability Relief

Employers dodged a high-powered bullet in mid-June when a unanimous Supreme Court overturned the 9th Circuit Court of Appeals' decision in Beck v. PACE International Union. The decision means companies opting to terminate an ERISA pension plan do not have to consider invitations to merge the plan with a union pension fund as an alternative to termination. Merging a plan often means the original plan sponsor forfeits any pension surpluses.

"The implications of the 9th Circuit's decision would have been pretty bad because it suggested the implementation of administrative decisions, even if they were [sponsor] functions of employers, invoked a fiduciary duty," says Heidi Winzeler, counsel at Osler Hoskin & Harcourt.

Deciding otherwise, Scalia noted, would put the court at odds with the Pension Benefit Guaranty Corporation (PBGC), which administers the federal insurance program that protects plan benefits. The PBGC's position was that ERISA didn't permit merger as a method of termination because it was in fact an alternative to termination.

"We have traditionally deferred to the PBGC when interpreting ERISA," Scalia wrote, "for to attempt to answer these questions without the view of the agencies responsible for enforcing ERISA would be to embark upon a voyage without a compass."


Julius Melnitzer

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