Terminating Pension Plans under ERISA
Whether a pension plan sponsor’s decision to terminate a plan by purchasing an annuity, rather than to merge the pension plan with another, is a plan sponsor decision not subject to ERISA’s fiduciary obligations.
NCLC urged the Supreme Court to overturn a Ninth Circuit decision holding that a pension plan sponsor breached its fiduciary obligations under ERISA in determining to terminate a plan by purchasing an annuity rather than merging the pension plan with a multiemployer pension plan, as urged by the union. NCLC argued that if the Ninth Circuit’s decision were allowed to stand it would expose employers, whether in or out of bankruptcy, to fiduciary liability for business decisions regarding the creation, modification or termination of an employee benefit plan and would undermine and weaken the protections that the Pension Benefit Guaranty Corporation provides to employers.
The Supreme Court agreed with NCLC and reversed the Ninth Circuit decision. The high court held that merger is not a permissible method of terminating a single-employer defined-benefit pension plan.
Amicus brief filed 3/5/07. Moot court held 4/20/07. Oral argument held 4/24/07. Decided 6/11/07.