High Court Backs Plan Termination Option

The U.S. Supreme Court ruled Monday, June 11, that corporate pension plan sponsors are free to terminate their plans even if the union representing a company’s workers offers to merge the company’s plans with the union’s multiemployer plans.

At issue in the case, Beck v. PACE International Union, was PACE’s 2001 offer to merge 17 of the pension plans of Crown Paper Co. and its parent, Crown Vantage Inc.—which were liquidating assets in Chapter 11 bankruptcy proceedings at the time—with the union’s Taft-Hartley PACE Industrial Union Management Pension Fund. Crown’s board rejected the union’s offer, opting instead to purchase an $84 million annuity that would result in the company getting a $5 million surplus after satisfying its obligations to plan participants and beneficiaries.

The bankruptcy court sided with the union, arguing that Crown had a fiduciary duty under ERISA to consider PACE’s merger offer. In a 2005 decision, the U.S. Court of Appeals in San Francisco also backed the union. But in its decision today, the high court held that Crown’s decision to terminate its plans did not breach its ERISA fiduciary duties.

“Merger is not a permissible form of plan termination under ERISA,” the high court said in a decision written by Justice Antonin Scalia.

Filed by Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.