Legal Issues in Terminations of Single-Employer Pension Plans: Beck v. PACE International Union

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

The Beck v. PACE International Union case concerned the decision by an employer in bankruptcy
proceedings to terminate its pension plans. The employer, which was both plan sponsor and
administrator, had the option of terminating the plans by buying annuities for plan participants
and beneficiaries or by merging the plans with a multiemployer plan. It chose the annuity option.
At issue in Beck was whether the employer breached the fiduciary duty owed under the Employee
Retirement Income Security Act (ERISA) to plan participants and beneficiaries by failing to
adequately consider the merger proposal. The Supreme Court found that the employer did not
breach its fiduciary duty in failing to consider PACE’s merger proposal, because merger is not a
permissible form of plan termination under ERISA. This report discusses the Beck case and will
be updated as events warrant.

Backgr ound ............................................................................................................................... 1
Breach of Fiduciary Duty....................................................................................................1
Beck v. PACE International Union............................................................................................2
Facts of the Case.................................................................................................................2
Lower Court Opinions........................................................................................................3
Supreme Court....................................................................................................................4
Concluding Observations....................................................................................................5
Author Contact Information............................................................................................................5

Under the Employee Retirement Income Security Act of 1974 (ERISA), a single-employer ¹
defined benefit pension plan may be terminated at the employer’s discretion. If a plan’s assets ²
are sufficient to meet its benefit liabilities, this process is called a “standard termination.” The
plan administrator initiates a standard termination by giving written notice to affected parties,
reporting information about the plan’s assets and benefit liabilities to the Pension Benefit
Guaranty Corporation (PBGC), and informing the participants and beneficiaries of the benefits
due them. The PBGC then looks at the information to determine whether the criteria for a
standard termination have been met.
If the PBGC approves the termination, the next step is for the plan administrator to distribute the
plan’s assets to its participants and beneficiaries in order to provide the benefits due them. ERISA
§ 4041(b)(3) requires that these distributions be done through the purchase of annuities from a
commercial insurer or by other means that fully provide the benefits and are permissible under ³
the plan’s terms and PBGC regulations. If any assets remain after the distribution, they may be
given back to the employer sponsoring the plan so long as all liabilities to participants and
beneficiaries have been satisfied and the reversion is permissible by law and under the plan ⁴
terms.
ERISA requires that a plan fiduciary act “solely in the interest of the participants and
beneficiaries” and “for the exclusive purpose” of providing benefits and defraying reasonable ⁵
administrative expenses. A fiduciary must act “with the care, skill, prudence, and diligence” of a
prudent person “acting in a like capacity and familiar with such matters would use in the conduct ⁶
of an enterprise of a like character and with like aims.”
Under ERISA, a “fiduciary” includes anyone who “exercises any discretionary authority or
discretionary control respecting management of [a] plan or exercises any authority or control
respecting management or disposition of its assets” or “has any discretionary authority or ⁷
discretionary responsibility in the administration of such plan.” These activities do not include
plan design or business decisions, which include decisions to adopt, modify, or terminate a

¹^De^fⁱ^ne^{d be}^ne^f^{it pla}ⁿ^{s a}^r^e^th^ose^w^h^e^r^e^pa^rtic^ipaⁿ^{ts a}^r^e^prom^ise^d^a^spe^cⁱ^fⁱ^e^d^f^u^ture^be^ne^f^{it, w}^h^ic^{h is tra}^d^itio^na^lly^aⁿ
^a^nnui^ty^be^gⁱ^nning^a^t^r^e^tir^e^m^eⁿ^t.
²^ER^I^S^A^{§ 4}⁰⁴¹⁽^b⁾^;²⁹^U^.^S.C^.^§¹³⁴¹⁽^b⁾^.^For^m^o^r^e^inf^o^r^m^a^{tion o}ⁿ^pe^ns^io^{n p}^l^aⁿ^te^r^m^ina^tions^,^s^e^e^C^R^S^R^e^por^t
^R^S²²⁶²^4,^The^Pe^nsi^oⁿ^Be^ne^{fit G}^uaraⁿ^ty^Cor^pora^tioⁿ^an^{d Si}^ng^le^-Employ^e^r^Plaⁿ^Te^rminati^ons^,^by^J^e^nnif^e^r^Stam^aⁿ^a^nd
^Er^ik^a^L^unde^r^.
³^{29 U}^.^S.C^.^§¹³⁴¹⁽^b)⁽³⁾^.
⁴^ER^I^S^A^{§ 4}⁰⁴⁴⁽^d⁾^;²⁹^U^.^S.C^.^§¹³⁴⁴⁽^d⁾^.^A^r^e^v^e^r^s^{ion is}^s^u^bje^c^t^to^t^a^x^a^t^a^20%^r^a^te^{, w}^h^ic^{h is}^inc^r^e^a^s^e^d^to^50%^if^the
^e^m^p^l^o^y^{er d}^o^e^{s n}^o^t^t^a^{ke cert}^aⁱⁿ^actⁱ^oⁿ^s^s^u^ch^{as est}^a^b^lⁱ^s^hiⁿ^g^{a qu}^alⁱ^fⁱ^e^d^rep^l^acemen^t^p^l^an.^In^t^e^rⁿ^al^Reven^u^e^Co^d^e^§
⁴⁹⁸^0.
⁵^{29 U}^.^S.C^.^§¹¹⁰⁴⁽^a⁾⁽¹⁾^.
⁶^Id^.
⁷^{29 U}^.^S.C^.^§¹⁰⁰²⁽²¹⁾^.

pension plan.⁸ However, the implementation of the decision to terminate a plan is a decision that ⁹
implicates a fiduciary responsibility to the plan participants and beneficiaries.
There are two basic issues in Beck regarding whether the defendant employer breached ERISA’s
fiduciary duty requirements. The first issue is whether ERISA permits a merger as a means of
plan termination. This is a key question because the employer could not have breached any
fiduciary duty it may have owed under ERISA if it could not have legally chosen to terminate the
plan by merger. In addition, if ERISA does not permit a plan to terminate by merger, the employer
may not have had access to the reversion. No section in ERISA explicitly provides that a standard
termination may occur by merging the terminating plan with a multiemployer plan. Furthermore,
the ERISA section that addresses plan mergers between single-employer and multiemployer ¹⁰
plans, ERISA § 4232, does not speak to single-employer plan terminations. Thus, the question
raised by Beck is whether ERISA § 4041(b)(3), which provides that plan assets must be
distributed in a standard termination in the form of annuities, or by means that “in accordance
with the provisions of the plan and any applicable regulations, otherwise fully provide all benefit ¹¹
liabilities under the plan,” permits the distribution to occur through a plan merger.
The second issue is whether the decision to choose the merger option is a discretionary
administrative decision subject to ERISA’s fiduciary obligations or is a plan design or business
decision not subject to such obligations. Prior to Beck, it does not appear that any court had
addressed whether the decision to terminate a plan by merger implicates ERISA’s fiduciary duty
standards. However, several federal courts of appeals have held outside the scope of plan
terminations that no fiduciary duty arises when a plan sponsor chooses to merge a pension plan ¹²
with another plan.

In 2000, Crown Vantage, Inc. and Crown Paper Co. (collectively referred to as “Crown”) filed for
Chapter 11 bankruptcy. At that time, Crown was the sponsor and plan administrator for 17
pension plans covering its hourly workers, 12 of which were overfunded. In the bankruptcy
proceedings, the PBGC filed proofs of claims for the liabilities it would assume under ERISA’s

⁸^Se^e^L^o^c^k^he^e^d^C^o^r^p^{. v}^.^Spiⁿ^k^,⁵¹⁷^U^.^S.⁸^82;^H^u^g^h^e^s^Aⁱ^r^c^r^a^f^t^C^o^{. v}^.^J^a^c^obs^on,⁵^{25 U}^.^S.⁴³^{2 (}¹⁹⁹⁹⁾^.
⁹^Se^e^L^a^r^s^{on v}^.^N^o^r^t^hr^op^C^o^r^p^.,²¹^F.3^d¹¹^{64 (}^D^.C^{. C}ⁱ^r^.¹⁹⁹⁴⁾^{; W}^a^lle^r^v^.^B^l^ue^C^r^os^s^,³²^F.3^d¹³^{37 (}⁹^th^Cⁱ^r^.¹⁹⁹⁴⁾^.
¹⁰^{29 U}^.^S.C^.^§¹⁴¹²⁽^f⁾⁽³⁾^.^T^h^is^s^e^c^t^{ion c}^ontaⁱ^ns^a^lis^t^of^r^e^quir^e^m^e^{nts tha}^t^m^u^s^t^be^m^e^{t by}^a^m^e^r^g^e^r^or^t^r^aⁿ^s^f^e^r^of^as^s^e^ts
^{or lia}^bi^litie^{s be}^tw^e^eⁿ^a^m^u^ltie^m^p^loy^e^{r pla}ⁿ^a^{nd a}^sing^le^-e^m^p^lo^y^e^{r p}^l^aⁿ^{. T}^h^e^se^c^tion^ha^{s tw}^{o prov}^isio^{ns de}^a^ling^w^ith
^plaⁿ^te^rm^ina^tions:⁽¹⁾^{it re}^q^u^ire^s^t^h^a^t^a^m^u^ltie^m^p^lo^y^e^{r pla}ⁿ^re^m^a^{in lia}^ble^to^the^P^B^G^C^if^th^e^plaⁿ^traⁿ^sf^e^r^{s its lia}^bilitie^s
^t^o^{a si}ⁿ^g^l^e^-em^p^l^o^{yer p}^l^an^t^h^at^t^e^r^mⁱⁿ^at^es^wⁱ^t^hⁱⁿ⁶⁰^m^oⁿ^t^h^s^o^f^t^h^{e t}^r^an^sf^{er an}^d⁽²^{) requ}ⁱ^r^{es an}^y^t^r^an^{sfer “i}ⁿ^coⁿⁿ^ectⁱ^oⁿ
^w^ith”^a^m^u^ltie^m^p^lo^y^e^{r pla}ⁿ^te^rmⁱⁿ^a^tio^{n c}^o^m^p^ly^w^{ith P}^B^G^C^re^quir^e^m^e^{nts e}^s^ta^blishe^{d to}^re^duc^e^risk^{to t}^h^e^c^o^rp^ora^tio^n.
¹¹^ER^I^S^A^{§ 4}⁰⁴¹⁽^b⁾⁽³⁾^;^{29 U}^.^S.C^.^{§ 1}³⁴¹⁽^b⁾⁽³⁾^.
¹²^Se^e^Ma^lia^v^.^G^e^{n. Ele}^c^.^C^o^.,²³^F^.^3d⁸²^8,⁸³^{4 (}³^rd^Ci^r^.¹⁹⁹⁴^{) (w}^h^e^{re t}^h^{e co}^u^r^t^st^at^ed^t^h^at^“^[^e]^f^f^o^rt^{s by}^an^em^p^l^o^y^{er t}^o
^m^e^r^g^e^t^w^{o pe}^ns^ion^plaⁿ^s^doⁿ^o^{t i}ⁿ^v^o^k^e^the^fⁱ^duc^ia^r^y^duty^pr^ov^is^ions^of^ER^I^S^A^.^Suc^h^du^tie^s^doⁿ^o^t^a^tta^c^h^to^busⁱⁿ^e^s^s^th
^de^cⁱ^sⁱ^ons^r^e^la^te^{d t}^o^m^odifⁱ^c^a^tion^of^the^de^sⁱ^gⁿ^of^a^pe^nsⁱ^on^plaⁿ^”⁾^;^Sutte^r^v^.^B^A^{SF C}^o^r^p^.,⁹⁶^{4 F}^.²^d⁵^56,⁵⁶^{2 (}⁶^Cir.
¹⁹⁹^{2) (w}^he^re^the^c^o^{urt sta}^t^e^d^tha^t^the^p^l^aⁿ^sp^ons^or’s^“^d^e^cⁱ^sion^to^m^e^rg^e^the^tw^{o pla}ⁿ^{s ... c}^l^e^a^r^ly^c^onstitute^d^the
^e^s^ta^blis^hm^eⁿ^{t or}^a^m^eⁿ^d^m^eⁿ^{t of}^a^pe^ns^io^{n p}^l^aⁿ^aⁿ^{d is}^t^h^e^r^e^f^or^e^a^bu^sⁱ^ne^s^s^de^cⁱ^sⁱ^{on t}^h^a^t^s^h^ou^ld^not^be^ov^e^r^turⁿ^e^d^by^the
^c^our^{t i}ⁿ^t^h^e^a^b^s^e^nc^e^of^vⁱ^ola^tio^{n o}^f^s^t^a^t^e^or^f^e^de^r^a^{l law}^”⁾^.

plan insurance termination program¹³ if it was forced to take over the company’s pension plans.
Because the liabilities were worth millions of dollars, the bankruptcy court saw the PBGC’s ¹⁴
claims as problematic for the Chapter 11 plan confirmation.
In 2001, Crown’s board of directors decided to look at the possibility of terminating the plans
under a standard termination. As part of this effort, they sought bids for annuities that would be
used to make the final distribution of benefits to plan participants and beneficiaries. A few months
later, PACE International Union, which was the union for Crown’s hourly workers, suggested that
Crown’s plans merge with the PACE Industrial Union Management Pension Fund (PIUMPF), a
multiemployer pension plan for PACE union members. PACE thought the merger would be
beneficial for Crown’s workers because PIUMPF would provide additional benefits and an
established dispute resolution program.
In the following months, attorneys from Crown and PACE discussed the merger and exchanged a
draft merger agreement. Crown’s board was informed of the merger proposal and agreed to
compare the options of purchasing annuities and merging once it received the final annuity bids.
Shortly thereafter, Crown’s board met to look at the final annuity bids, which were set to expire
the next day, and learned that the PBGC had agreed to release its claims if Crown purchased the
annuities. The board then decided to buy the annuities in order to terminate the 12 overfunded
plans. Because the plans were overfunded, there was an estimated $5 million reversion to Crown.
The other five plans became the responsibility of a prior plan sponsor’s successor.
PACE and two plan participants then sought a preliminary injunction to prevent Crown from
terminating the plans. They alleged that Crown had violated its fiduciary duty under ERISA by
failing to adequately consider the merger proposal.
The bankruptcy court held in favor of PACE, finding that (1) the decision of whether to purchase
annuities or merge the plans was a fiduciary decision, and that (2) Crown had breached its
fiduciary obligations to plan participants and beneficiaries in failing to adequately consider
PACE’s merger proposal. The U.S. District Court for the Northern District of California affirmed ¹⁵
the bankruptcy court’s decision in relevant part. The Ninth Circuit, in affirming the decision of
the district court, found that merger into a multiemployer plan can be a means of terminating a
pension plan under ERISA. It also held that the Crown directors had breached their fiduciary ¹⁶
duty. In evaluating the merits of the breach of fiduciary duty claim, the court noted that Crown
did not have a duty to use the fund’s assets to the “beneficiaries’ optimum benefit” and that a
reversion, under certain circumstances, is acceptable. However, the court pointed to the findings

¹³^For^m^o^r^e^inf^o^r^m^a^{tion o}ⁿ^the^ins^u^r^a^nc^e^te^r^m^ina^tion^pr^og^r^a^m^,^s^e^e^C^R^{S R}^e^por^t⁹⁵^-¹^18,^Pe^nsio^{n Be}^ne^{fit Guar}^anty
^C^o^r^por^atio^n:^A^Fac^t^She^e^t^,^by^J^{ohn J}^.^T^opole^s^kⁱ^.
¹⁴^Ch^ap^t^e^r¹¹^b^aⁿ^k^rup^t^cyⁱ^s^coⁿ^sⁱ^d^ered^t^o^b^e^{a “reo}^rganⁱ^zatⁱ^o^n,^{” i}ⁿ^w^hⁱ^c^h^a^d^e^b^t^o^r^m^a^y^re^st^ru^ct^u^r^{e i}^t^s^d^e^b^t^acco^rdⁱⁿ^{g t}^o
^a^c^our^t-^a^p^pr^ov^e^d^plaⁿ^{. G}^e^ne^r^a^lly^,^the^de^btor^isⁱⁿ^c^h^a^r^g^e^of^the^r^e^or^g^a^niz^a^{tion pr}^oc^e^s^s^,^bu^{t c}^r^e^d^it^or^s^a^{nd c}^e^r^taⁱⁿ^ot^he^r
^pa^r^tie^s^c^aⁿ^ha^v^e^a^v^o^ic^e^{in the}^f^o^r^m^a^{tion of}^a^C^h^a^p^te^r¹¹^plaⁿ^of^r^e^or^g^a^niz^a^tion.^T^h^e^P^B^G^C^{, w}^h^eⁿ^takⁱ^ng^ov^e^r^a
^p^eⁿ^sⁱ^oⁿ^pl^an^f^r^o^m^an^e^m^p^l^o^y^{er i}ⁿ^{a Ch}^ap^t^e^r¹¹^b^aⁿ^k^ru^pt^cy^p^r^o^ceedⁱⁿ^g,ⁱ^s^con^sⁱ^d^ered^t^o^b^e^credⁱ^t^o^r^.
¹⁵^Be^c^k^v^.^P^A^{CE Int’l U}ⁿ^ion^,²⁰⁰³^U^.^{S. D}ⁱ^s^t^{. L}^E^X^IS²²^83,^N^o^{. C}⁰²^-¹⁴⁰⁷^MH^P^(N^.D^{. Ca}^l.^J^a^n..¹⁰^{, 2}⁰⁰³^{). A}^m^ong
^othe^r^t^h^ing^s^{, t}^h^e^c^o^ur^{t a}^l^s^o^he^ld^th^a^t^P^A^C^E^di^d^not^ha^v^e^s^t^a^nding^t^o^br^ing^a^c^l^aⁱ^m^unde^r^ER^I^S^A^.^S^{ee i}^d^{. a}^t^*^10-^15.
¹⁶^B^{eck v.}^P^A^C^E^Iⁿ^t^’^l^Uni^o^n,⁴²^{7 F.}³^d⁶⁶⁸⁽⁹^th^Cⁱ^r^.²⁰⁰⁵⁾^.^T^h^e^Nⁱⁿ^t^h^Cⁱ^r^c^{uit C}^our^t^of^A^ppe^a^l^s^r^e^m^a^nde^{d the}^c^a^s^e^on
^the^is^s^u^e^of^w^h^e^t^he^r^P^A^C^E^s^houl^{d ha}^v^e^s^t^a^ndi^ng^to^the^B^a^nk^r^u^ptc^y^C^our^t.^S^{ee i}^d^.^at⁶⁷^9.

of the bankruptcy court and held that there was evidence indicating that Crown was focused on an ¹⁷
“improper set of interests.” The court agreed with the lower court’s findings that Crown
breached its fiduciary duty by failing to prioritize the participant’s interests and also by failing to ¹⁸
make an investigation of the plan’s investment options.
In reversing the decision of the lower court, the Supreme Court did not focus on whether Crown’s ¹⁹
decision to purchase an annuity instead of merging the pension plans was a fiduciary decision.
Instead, the Supreme Court found that Crown did not breach its fiduciary duty in failing to
consider PACE’s merger proposal, because merger is not a permissible form of plan termination
under ERISA.
In its decision, the Supreme Court looked at the language of Section 4041(b)(3) of ERISA, under
which plan assets must be distributed in a standard termination in the form of annuities, or by
means that “in accordance with the provisions of the plan and any applicable regulations,
otherwise fully provide all benefit liabilities under the plan.” PACE had argued that mergers
could fall within this “otherwise” language, as the merger of assets into the multiemployer plan
could fulfill plan benefit obligations. The Court however, sided with the PBGC’s interpretation of
the section, that merger should be viewed as “an alternative to (rather than an example of) plan ²⁰
termination.” The Court also pointed out that Congress had not expressly provided for merger as
a means of plan termination.
In support of its position, the Court provided three ways in which ERISA treats merger and
termination differently. First, the Court explained that if a plan terminates through the purchase of
annuities, ERISA ceases to apply to both the employer and the remaining plan assets. A merger on ²¹
the other hand “represents a continuation, rather than a cessation of the ERISA regime.” The
Court pointed out that had the plans been merged into the larger multiemployer plan, that Crown
could still be subject to ERISA’s requirements if it employed plan participants.
Second, in a standard termination, ERISA allows an employer to recover surplus amounts not
necessary to pay plan liabilities. Had Crown merged the plan, it would not have been able to take
back those assets, due to ERISA’s anti-inurement provision, which prohibits employers from
obtaining a reversion “in the absence of termination.” The Court found that it was reasonable for
the PBGC to refuse to recognize a termination mechanism that did not allow for the receipt of
these funds, as authorized by law.

¹⁷^Id^{. a}^t⁶⁷^8.
¹⁸^T^h^e^Se^c^r^e^t^a^r^y^o^f^L^a^{bor f}^ile^{d a}ⁿ^a^m^ic^{us brie}^f^w^{ith the}^Ni^nth^Circ^uit^{in su}^pp^ort^of^a^pe^titio^{n f}^o^{r re}^he^a^r^ing^.^Brie^f^f^o^r
^A^mⁱ^c^us^{, N}^o^s^.⁰³^-¹⁵³⁰³^{, 0}³^-¹⁵⁵³^{31 (}⁹^th^Ci^r.²⁰⁰⁵^).^T^h^{e S}^ecret^ary^argu^ed^t^h^at^t^h^{e d}^eci^si^on^t^o^t^e^rmⁱⁿ^at^{e o}^r^m^e^r^g^{e t}^h^e
^C^r^ow^{n pla}ⁿ^w^a^s^{not s}^u^bje^c^t^t^o^E^R^I^S^A^’^s^fⁱ^duc^ia^r^y^oblig^a^tio^ns^{. I}^t^a^ppe^a^r^s^the^P^B^G^C^a^l^s^o^f^ile^{d a}ⁿ^a^m^ic^us^br^ie^f^{in w}^h^ic^h
ⁱ^t^argu^ed^t^h^at^m^e^r^g^er^w^a^{s n}^o^t^{a p}^e^rmⁱ^s^si^b^l^{e m}^e^an^{s t}^o^acco^m^p^lⁱ^s^h^{a st}^an^d^a^rd^t^e^rmⁱⁿ^atⁱ^oⁿ^un^d^e^{r E}^R^I^S^A^.^Se^e^P^e^titi^on^f^o^r^th
^W^r^{it of}^Ce^rtiora^{ri a}^t¹⁴^{, Be}^c^k^v^.^PA^{CE Int’l Unio}^n,⁴²^{7 F}^.³^d⁶⁶⁸⁽⁹^Cⁱ^r^.²⁰⁰⁵⁾^,^c^e^r^{t. gra}ⁿ^te^d^,¹²⁷^S.^{Ct. 1}¹⁴⁴^{, (J}^aⁿ^.
^{19, 20}⁰⁷⁾^.
¹⁹^B^{eck v.}^P^A^C^E^In^t^e^rna^tⁱ^o^na^l^Uⁿⁱ^oⁿ^,¹²⁷^{S. C}^t^.²³¹⁰⁽²⁰⁰⁷⁾^.
²⁰^Id^.^at²³¹⁷^.^T^h^{e Co}^u^r^t^no^t^e^{d t}^h^atⁱⁿ^o^r^d^e^{r t}^o^fⁱⁿ^d^f^o^r^P^A^CE^,ⁱ^t^w^o^u^l^d^h^a^{ve t}^o^d^eci^d^e^t^h^at^m^e^rg^er^w^a^s^an^accep^t^a^b^l^e
^m^e^thod^of^plaⁿ^te^r^m^ina^tion^.^T^h^e^Supr^e^m^e^C^our^{t e}^x^pr^e^s^s^e^{d its}^r^e^lu^c^t^aⁿ^c^e^{not t}^o^de^f^e^r^{to the}^P^B^G^C^{, a}^{nd t}^h^a^t^“^t^{o a}ⁿ^s^w^e^r
^the^s^e^que^s^tio^ns^w^itho^u^{t t}^h^e^vⁱ^e^w^{s of}^the^a^g^eⁿ^cⁱ^e^s^r^e^s^pons^ible^f^o^r^eⁿ^f^o^r^c^ing^ER^I^S^A^,^w^{ould be}^t^o^e^m^ba^r^k^upo^{n a}^v^o^y^a^g^e
^w^{ithout a}^c^o^m^p^a^s^s^.^”^I^d^{. (}^qu^otⁱⁿ^g^M^e^{ad C}^o^r^p^.^v^.^Ti^lle^y^{, 4}^{90 U.}^S.⁷²^{6, 1}⁽¹⁹⁸⁹^{) (in}^t^e^r^na^{l q}^u^o^t^a^tio^{n m}^a^r^k^{s om}^itte^d).
²¹^B^eck^{, 12}^{7 S.}^C^t^{. a}^t²³¹⁹^.

Third, the Court pointed to the structure of ERISA as evidence that merger was not to be included
as a permissible means of termination. The Court explained that provisions dealing with merger
are contained in a different set of statutory sections that maintain different rules and procedures.
While PACE had argued that a company could, theoretically, follow both the rules for merger and
termination, the Court found this reasoning flawed. Accordingly, the Court held that merger is not
a permissible method of terminating a single-employer defined benefit plan.
The Beck case has been considered a narrow decision, in part because, as commentators have
pointed out, the facts of the case, a determination of whether to terminate a plan through merger, ²²
is a “unique situation.” In addition, while the lower courts addressed whether the decision to
purchase annuities or merge the plans was a fiduciary decision, the court acknowledged this issue,
but focused on an “antecedent question,” namely, whether merger is a permissible form of plan
termination under ERISA. Thus, questions may still remain as to the scope of fiduciary duty
following a decision to terminate a pension plan. It has also been noted that the Beck case did not
foreclose the possibility that pension plans can be terminated in ways other than an annuity or a ²³
lump-sum payment.
^J^eⁿⁿⁱ^fe^r^St^a^m^aⁿ ^Erik^{a Lun}^d^er
^L^e^gⁱ^s^l^at^iv^{e A}^t^torn^e^y^S^u^pervⁱ^s^or^y^L^e^gⁱ^s^l^atⁱ^v^{e A}^t^t^o^rⁿ^e^y
^j^s^ta^m^aⁿ^@^cr^s.lo^c.g^o^v^{, 7-}²⁶¹⁰^el^uⁿ^d^er^@^c^rs^.l^oc.g^ov^{, 7-}⁴⁵³⁸

²²^Se^e^Jo^{-el J.}^M^e^y^e^r,^A^t^t^o^rn^{eys Sa}^{y B}^{eck R}^u^lⁱⁿ^g^oⁿ^P^l^an^Merg^{ers i}^s^Na^rro^{w bu}^t^H^a^{s F}ⁱ^du^ci^a^r^{y Impl}ⁱ^c^a^tⁱ^oⁿ^s^{, P}^e^ns^ioⁿ
^a^{nd B}^e^ne^f^its^D^a^ily^{Vol. 7}^,^N^o^.¹¹⁶⁽^J^uⁿ^e¹⁸^,²⁰⁰⁷⁾^.
²³^Id^.