LOCKHEED CORP. ET AL. v. SPINK
No. 95-809
Supreme Court of the United States
Argued April 22, 1996—Decided June 10, 1996
517 U.S. 882
Gordon E. Kirscher argued the cause for petitioners. With him on the briefs were David E. Gordon, Kenneth E. Johnson, Kenneth S. Geller, and Ralph A. Hurvitz.
Theresa M. Traber argued the cause for respondent. With her on the brief was Bert Voorhees.*
JUSTICE THOMAS delivered the opinion of the Court.
In this case, we decide whether the payment of benefits pursuant to an early retirement program conditioned on the participants’ release of employment-related claims constitutes a prohibited transaction under the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended,
I
Respondent Paul Spink was employed by petitioner Lockheed Corporation from 1939 until 1950, when he left to work
*Briefs of amici curiae urging reversal were filed for the ERISA Industry Committee by Michael E. Horne and John M. Vine; for the Equal Employment Advisory Council by Douglas S. McDowell and Ellen Duffy McKay; and for the New England Legal Foundation by William J. Kilberg, Peter H. Turza, Paul Blankenstein, Mark Snyderman, and Stephen S. Ostrach.
Briefs of amici curiae urging affirmance were filed for the American Association of Retired Persons by Cathy Ventrell-Monsees and Mary Ellen Signorille; for the Enginеers and Scientists Guild, Lockheed Section, by Stuart Libicki; and for the National Employment Lawyers Association by Stephen R. Bruce, Ronald Dean, and Jeffrey Lewis.
Briefs of amici curiae were filed for the American Academy of Actuaries et al. by Lauren M. Bloom; and for the Chamber of Commerce of the United States by Hollis T. Hurd, Stephen A. Bokat, and Robin S. Conrad.
Congress subsequently passed the Omnibus Budget Reconciliation Act of 1986 (OBRA), Pub. L. 99-509, 100 Stat. 1874. Section 9203(a)(1) of OBRA, 100 Stat. 1979, repealed the age-based exclusion provision of ERISA, and the statute now flatly mandates that “[n]o pension plan may exclude from participation (on the basis of age) employees who have attained a specified age.”
In an effort to comply with these new laws, Lockheed ceased its prior practice of age-based exclusion from the Plan, effective December 25, 1988. As of that date, all employees, including Spink, who had previously been ineligible to participate in the Plan due to their age at the time of hiring became members of the Plan. Lockheed made clear, however, that it would not credit those employees for years of service rendered before they became members.
When later faced with the need to streamline its operations, Lockheed amended the Plan to provide financial incentives for certain employees to retire early. Lockheed established two programs, both of which offered increased pension benefits to employees who would retire early, payable out of the Plan‘s surplus assets. Both programs required as a condition of the receipt of benefits thаt participants release any employment-related claims they might have against Lockheed. Though Spink was eligible for one of the pro-
Spink brought this suit, in his individual capacity and on behalf of others similarly situated, against Lockheed and several of its directors and officers. Among other things, the complaint alleged that Lockheed and the members of the board of directors violated ERISA‘s duty of care and prohibited transaction provisions,
The Court of Appeals for the Ninth Circuit reversed in relevant part. 60 F. 3d 616 (1995). The Court of Appeals held that the amendments to the Plan were unlawful under
II
Nothing in ERISA requires employers to establish employee benefits plans. Nor does ERISA mandate what kind of benefits employers must provide if they choose to have such a plan. Shaw v. Delta Air Lines, Inc., 463 U. S. 85, 91 (1983); Alessi v. Raybestos-Manhattan, Inc., 451 U. S. 504, 511 (1981). ERISA does, however, seek to ensure that employees will not be left emptyhanded once employers have guaranteed them certain benefits. As we said in Nachman Corp. v. Pension Benefit Guaranty Corporation, 446 U. S. 359 (1980), when Congress enacted ERISA it “wanted to . . . mak[e] sure that if a worker has been promised a defined pension benefit upon retirement and if he has fulfilled whatever conditions are required to obtain a vested benefit—he actually will receive it.” Id., at 375. Accordingly, ERISA tries to “make as certain as possible that pension fund assets [will] be adequate” to meet expected benefits payments. Ibid.
To increase the chances that employers will be able to honor their benefits commitments—that is, to guard against the possibility of bankrupt pension funds—Congress incorporated several key measures into ERISA. Section 302 of ERISA sets minimum annual funding levels for all covered plans, see
Congress enacted § 406 “to bar categorically a transaction that [is] likely to injure the pension plan.” Commissioner v. Keystone Consol. Industries, Inc., 508 U. S. 152, 160 (1993). That section mandates, in relevant part, that “[a] fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect . . . transfer to, or use by or for the benefit of a party in interest, of any assets of the plan.”
III
Section 406(a)(1) regulates the conduct of plan fiduciaries, placing certain transactions outside the scope of their lawful authority. Whеn a fiduciary violates the rules set forth in § 406(a)(1), § 409 of ERISA renders him personally liable for any losses incurred by the plan, any ill-gotten profits, and other equitable and remedial relief deemed appropriate by the court. See
A
We first address the allegation in Spink‘s complaint that Lockheed and the board of directors breached their fiduciary
This rule is rooted in the text of ERISA‘s definition of fiduciary. See
We see no reason why the rule of Curtiss-Wright should not be extended to pension benefit plans. Indеed, there are compelling reasons to apply the same rule to cases involving both kinds of plans, as most Courts of Appeals have
Lockheed acted not as a fiduciary but as a settlor when it amended the terms of the Plan to includе the retirement programs. Thus, § 406(a)‘s requirement of fiduciary status is not met. While other portions of ERISA govern plan amendments, see, e. g.,
Spink also alleged that the members of Lockheed‘s Retirement Committee who implemented the amended Plan violated § 406(a)(1)(D). As with the question whether Lockheed and the board members can be held liable under ERISA‘s fiduciary rules, the Court of Appeals erred in holding that the Retirement Committee members violated the prohibited transaction section of ERISA without making the requisite finding of fiduciary status. It is not necessary for us to decide the question whether the Retirement Committee members acted as fiduciaries when they paid out benefits according to the terms of the amended Plan, however, because we do not think that they engaged in any conduct prohibited by § 406(a)(1)(D).
The “transaction” in which fiduciaries may not cause a plan to engage is one that “constitutes а direct or indirect . . . transfer to, or use by or for the benefit of a party in interest, of any assets of the plan.”
Section 406(a)(1)(D) does not in direct terms include the payment of benefits by a plan administrator. And the surrounding provisions suggest that the payment of benefits is
According to Spink and the Court of Appeals, however, Lockheed‘s early retirement programs were prohibited transactions within the meaning of § 406(a)(1)(D) because the required release of employment-related claims by participants created a “significant benefit” for Lockheed. 60 F. 3d, at 624. Spink concedes, however, that аmong the “incidental” and thus legitimate benefits that a plan sponsor may receive from the operation of a pension plan are attracting and retaining employees, paying deferred compensation, settling or avoiding strikes, providing increased compensation without increasing wages, increasing employee turnover, and reducing the likelihood of lawsuits by encouraging employees
We do not see how obtaining waivers of emplоyment-related claims can meaningfully be distinguished from these admittedly permissible objectives. Each involves, at bottom, a quid pro quo between the plan sponsor and the participant: that is, the employer promises to pay increased benefits in exchange for the performance of some condition by the employee. By Spink‘s admission, the employer can ask the employee to continue to work for the employer, to cross a picket line, or to retire early. The execution of a release of claims against the employer is functionally no different; like these other conditions, it is an act that the employee performs for the employer in return for benefits. Certainly, there is no basis in § 406(a)(1)(D) for distinguishing a valid from an invalid quid pro quo. Section 406(a)(1)(D) simply does not address what an employer can and cannot ask an employee to do in return for benefits. See generally Alessi v. Raybestos-Manhattan, Inc., 451 U. S., at 511 (ERISA “leaves th[e] question” of the content of benefits “to the private parties creating the plan. . . . [T]he private parties, not the Government, control the level of benefits“).6 Furthermore, if an еmployer can avoid litigation that might result from laying off an employee by enticing him to retire early, as Spink concedes, it stands to reason that the employer can also protect itself from suits arising out of
In short, whatever the precise boundaries of the prohibition in § 406(a)(1)(D), there is one use of plan assets that it cannot logically encompass: a quid pro quo between the employer and plan participants in which the plаn pays out benefits to the participants pursuant to its terms. When § 406(a)(1)(D) is read in the context of the other prohibited transaction provisions, it becomes clear that the payment of benefits in exchange for the performance of some condition by the employee is not a “transaction” within the meaning of § 406(a)(1). A standard that allows some benefits agreements but not others, as Spink suggests, lacks a basis in § 406(a)(1)(D); it also would provide little guidance to lower courts and those who must comply with ERISA. We thus hold that the payment of benefits pursuant to an аmended plan, regardless of what the plan requires of the employee in return for those benefits, does not constitute a prohibited transaction.8
Finally, we address whether §§ 9201 and 9202(a) of OBRA, which amended respectively the ADEA and ERISA to prohibit age-based benefit accrual rules, apply retroactively.9 Two Terms ago, we set forth the proper approach for determining the retroactive effect of a statute in Landgraf v. USI Film Products, 511 U. S. 244 (1994). We stated that “[w]hen a case implicates a federal statute enacted after the events in suit, the court‘s first task is to determine whether Congress has expressly prescribed the statute‘s proper reach.” Id., at 280. Thus, we must determine whether Congress has plainly delineated the temporal scope of the OBRA amendments to ERISA and the ADEA.
Section 9204(a)(1) of OBRA, 100 Stat. 1979, expressly provides that “[t]he amendments made by sections 9201 and 9202 shall apply only with respect to plan years beginning on or after January 1, 1988, and only to employees who have 1 hour of service in any plan year to which such amendments apply.”
Notwithstanding the clarity of § 9204(a)(1), the Court of Appeals believed that the text of §§ 9201 and 9202(a) require retroactive application of the benefit accrual rules. To deny an employee credit for service years during which he was excluded from the plan based on age, even though that exclusion was lawful at the time, the Court of Appeals reasoned, is to reduce the rate of benefits accrual for that employee.10 60 F. 3d, at 620. When Congress includes a provision that specifically addresses the temporal effect оf a statute, that provision trumps any general inferences that might be drawn from the substantive provisions of the statute. See generally Morales v. Trans World Airlines, Inc., 504 U. S. 374, 384 (1992); Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 228-229 (1957). Even if it were proper to disregard the express time limitations in § 9204(a)(1) in favor of more general language, §§ 9201 and 9202(a) cannot bear the weight of the Court of Appeals’ construction. A reduction in total benefits due is not the same thing as a reduction in the rate of benefit accrual; the former is the final outcome of the calculation, whereаs the latter is one of the factors in the equation.
The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
I join the Court‘s opinion except for its conclusion in Part III-B that “the payment of benefits pursuant to an amended plan, regardless of what the plan requires of the employee in return for those benefits, does not constitute a prohibited transaction.” Ante, at 895. The legal question addressed in Part III-B is a difficult one, which we need not hеre answer and which would benefit from further development in the lower courts, where interested parties who are experienced in these highly technical, important matters could present their views. Accordingly, I would follow the suggestion of the Solicitor General that the Court not reach the issue in this case.