Beck v. Pace International Union

Background

Crown Paper, an employer that sponsored multiple single-employer defined-benefit pension plans, filed for bankruptcy. PACE International Union represented workers in those plans and proposed merging the Crown plans into PACE’s multiemployer pension fund. Crown instead bought annuities to satisfy benefits and recovered a $5 million surplus for the estate. PACE sued, saying Crown’s plan administrators violated their legal duty to participants by not seriously considering the merger. Lower courts sided with PACE until the Supreme Court granted review.

Reasoning

The Court framed the question as whether merging into a multiemployer plan is a lawful method to terminate a single-employer plan under ERISA’s termination rules. The relevant statute lists buying annuities and making lump-sum distributions as the methods for standard termination. The Court deferred to the Pension Benefit Guaranty Corporation’s view that merger is treated elsewhere in the law and is not a form of termination. The Court stressed differences: annuities sever ERISA obligations and can allow sponsors to reclaim surplus, while merger keeps assets under ERISA and can prevent employer reversions. For those reasons the Court concluded merger is not a permitted termination, so Crown did not breach its duty.

Real world impact

Employers can rely on annuity purchases or lump sums to end single-employer plans without treating merger as a termination route. Unions cannot force a merger as the statutory termination method, and plan participants’ risks differ under merger versus annuitization. The case reverses the Ninth Circuit and returns the case for further proceedings consistent with this ruling.