Mead Corporation v. Tilley/Dissent Stevens
Justice STEVENS, dissenting.
Perhaps the Court is prudent to await the advice of the Solicitor General before deciding the principal question presented by this case. As presently advised, however, I am persuaded that the Court of Appeals reached the right conclusion, even though I agree with the Court that § 4044(a)(6) is not itself a source of retirement benefits.
In my opinion the early retirement benefits that respondents seek are contingent liabilities that under both ERISA and the Plan must be satisfied before plan assets revert to the employer. Section 4044(d) of ERISA provides that residual assets of a plan may revert to the employer only if three conditions are satisfied, including that "all liabilities of the plan to participants and their beneficiaries have been satisfied" and "the plan provides for such a distribution in these circumstances." 29 U.S.C. § 1344(d). Under the Plan, "[a]ny surplus remaining in the Retirement Fund, due to actuarial error, after the satisfaction of all benefit rights or contingent rights accrued under the Plan, . . . shall . . . be returnable to [Mead]." App. 63 (Plan, Art. XIII, § 4(f)). The term "liabilities," not defined in ERISA itself, is given meaning by a parallel provision in the Internal Revenue Code, 26 U.S.C. § 401(a)(2), which long has been interpreted to require a qualified plan to satisfy both contingent and fixed obligations before any of the plan's assets are diverted to any purpose other than the exclusive benefit of employees and their beneficiaries.  Thus, as I understand it, the question in this case is whether early retirement benefits are contingent liabilities under ERISA or the Plan. The answer, I believe, is yes.
Respondents have far more than an expectancy interest in early retirement benefits. Although the benefits may not be "accrued" in the ERISA sense, respondents have earned them under the Plan by serving over 30 years with Mead, and their right to payment is contingent only upon their election to retire after reaching age 62.  Cf. Blessitt v. Retirement Plan for Employees of Dixie Engine Co., 848 F.2d 1164, 1174, n. 22 (CA11 1988) ("[A]n employee is entitled to expect that early retirement provisions in a plan will not be deleted by amendment shortly before the employee qualifies"). Their position is similar to that of those employees whose rights to earned benefits prior to ERISA were frustrated by backloaded accrual schedules and abrupt plan terminations. Respondents' rights have been frustrated by the unilateral action of petitioner. It was precisely to prevent such pre-emptive actions depriving employees with long years of employment of their anticipated retirement benefits that Congress passed ERISA. See Nachman Corp. v. Pension Benefit Guaranty Corporation, 446 U.S. 359, 374-375, 100 S.Ct. 1723, 1731-1733, 64 L.Ed.2d 354 (1980). Petitioner was required both by IRS rulings and by prudent actuarial practice to accumulate the funds necessary to pay early retirement benefits.  It is reasonable to require it to take account of the contingent rights to those benefits of employees who have satisfied the years of service requirement. I would construe contingent rights or liabilities to include respondents' rights to early retirement benefits upon reaching age 62. Accordingly, I would affirm the judgment of the Court of Appeals.
^1 "The term 'liabilities' as used in section 401(a)(2) includes both fixed and contingent obligations to employees. For example, if 1,000 employees are covered by a trust forming part of a pension plan, 300 of whom have satisfied all the requirements for a monthly pension, while the remaining 700 employees have not yet completed the required period of service, contingent obligations to such 700 employees have nevertheless arisen which constitute 'liabilities' within the meaning of that term. It must be impossible for the employer (or other nonemployee) to recover any amounts other than such amounts as remain in the trust because of 'erroneous actuarial computations' after the satisfaction of all fixed and contingent obligations." Treas.Reg. § 1.401-2(b)(2), 26 CFR § 1.401-2(b)(2) (1988).
In explaining the statutory provisions of the Pension Protection Act, Pub.L. 100-203, Title IX, §§ 9302-9504, 101 Stat. 1330-333 to 1330-382, Congress in 1987 expressed a similar understanding that, under present law, a plan may be voluntarily terminated only "if it has sufficient assets to pay all benefit commitments under the plan" and that all benefits include "all fixed and contingent liabilities to plan participants and beneficiaries." H.R.Conf.Rep. No. 100-495, pp. 879, 884 (1987), U.S.Code Cong. & Admin.News 1987, pp. 2313-1, 2313-1625.
^2 The Plan provides:
"(b) If a participant with thirty (30) or more years of Credited Service elects to retire on or after he attains sixty-two (62) years of age, he shall be entitled to the Retirement Income provided under Section 1 of Article V without any reduction of benefits." App. 39 (Plan, Art. V, § 2(b)).
^3 Under IRS rulings, if a plan has an early retirement benefit, the plan actuary is required to take the possibility of early retirement into account in deriving reasonable actuarial assumptions. See Rev.Rul. 78-331, 1978-2 Cum.Bull. 158; Internal Revenue Service Manual, Actuarial Guidelines Handbook, reprinted in 1 CCH Pension Plan Guide ¶ 3565, Ch. 520 (1986). See also R. Osgood, Law of Pensions and Profit-Sharing § 3.4.4, p. 96 (1984); 4 S. Young, Pension and Profit-Sharing Plans § 18.06, pp. 18-121 (1988); 5 id., § 22[B].03, p. 22B.48.