Beck v. PACE Int’l Union, 551 U.S. 96 (2007)
Primary Holding
An employer that sponsors and administers a single-employer defined-benefit pension plan does not have a fiduciary obligation under the Employee Retirement Income Security Act (ERISA) to consider a merger with a multiemployer plan as a method of terminating the plan.
In the case of Beck v. PACE International Union, the Supreme Court decided that an employer managing a single-employer pension plan doesn't have to consider merging it with a multiemployer plan when ending the plan. This matters because it clarifies that employers have the freedom to choose how to terminate their pension plans without being forced to consider other options proposed by unions or employees. This case is relevant for consumers who are part of pension plans, as it helps define the limits of employer obligations and protects their ability to make decisions about plan management.
AI-generated plain-language summary to help you understand this case
In Beck v. PACE International Union, the underlying dispute arose from Crown Paper and its parent company, Crown Vantage, which employed approximately 2,600 individuals across seven paper mills and operated 17 defined-benefit pension plans. In March 2000, Crown filed for bankruptcy and initiated asset liquidation. As part of this process, Crown considered terminating its pension plans, specifically looking into a "standard termination" that would require sufficient assets to cover benefit liabilities. PACE International Union, representing the employees covered by these pension plans, proposed that instead of purchasing annuities for termination, Crown should merge its plans with the PACE Industrial Union Management Pension Fund (PIUMPF), a multiemployer plan. This merger would require Crown to transfer all plan assets to PIUMPF, which would assume all liabilities. The procedural history of the case began when Crown ultimately decided against PACE's merger proposal. Instead, after discovering that it had overfunded certain pension plans, Crown opted to consolidate 12 of its pension plans into a single plan and terminated it through the purchase of an $84 million annuity. This decision allowed Crown to satisfy its obligations to plan participants and beneficiaries while also retaining a projected $5 million reversion for its creditors, a benefit that would not have been available under the merger proposal. PACE contested this decision, leading to litigation that culminated in a writ of certiorari to the United States Supreme Court. The relevant background context includes the fiduciary obligations imposed by the Employee Retirement Income Security Act of 1974 (ERISA) on employers sponsoring defined-benefit pension plans. The case raised questions about whether Crown, as both the sponsor and administrator of the pension plans, had a legal duty to consider PACE's merger proposal as a viable method of plan termination. The Supreme Court's decision would clarify the extent of fiduciary responsibilities under ERISA in the context of pension plan terminations and employer decision-making.
Whether an employer that sponsors and administers a single-employer defined-benefit pension plan has a fiduciary obligation under the Employee Retirement Income Security Act of 1974 (ERISA) to consider a merger with a multiemployer plan as a method of terminating the plan.
The judgment is reversed.
- Court
- Supreme Court
- Decision Date
- April 24, 2007
- Jurisdiction
- federal
- Case Type
- landmark
- Majority Author
- Scalia
- Damages Awarded
- N/A
- Data Quality
- high
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