Beck v. PACE International Union
PACE International Union intervened in a Chapter 11 bankruptcy proceeding after the insolvant parties, Crown Vantage, Inc. and Crown Paper Co., decided to terminate Crown’s pension plans through the purchase of an annuity, rather than by merging the plans into a multiemployer plan sponsored by PACE. PACE alleged that Crown's directors breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA), by failing to fully consider the proposed merger. The bankruptcy court agreed and issued a preliminary injunction ordering Crown to maintain the residual assets — approximately $5 million — in the plan in an interest-bearing account pending a final decision on the allocation of the assets.
The Ninth Circuit Court of Appeals affirmed, holding that under ERISA and its regulations, merger into a multiemployer plan is not a prohibited means of terminating a pension plan, and that the bankruptcy court did not err in concluding that Crown breached its fiduciary duties by failing to consider thoroughly PACE’s proposal and discharge its duties “solely in the interest of the participants and beneficiaries.”
Question Presented:
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.
