John Hancock Mut. Life Ins. Company v. Harris Trust & Savings Bank

PETITIONER: John Hancock Mut. Life Ins. Company
RESPONDENT: Harris Trust & Savings Bank
LOCATION: Pomona Police Department

DOCKET NO.: 92-1074
DECIDED BY: Rehnquist Court (1993-1994)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 510 US 86 (1993)
ARGUED: Oct 12, 1993
DECIDED: Dec 13, 1993

Christopher J. Wright - as amicus curiae, supporting the Petitioner
Howard G. Kristol - on behalf of the Petitioner
Lawrence Kill - on behalf of the Respondent

Facts of the case


Media for John Hancock Mut. Life Ins. Company v. Harris Trust & Savings Bank

Audio Transcription for Oral Argument - October 12, 1993 in John Hancock Mut. Life Ins. Company v. Harris Trust & Savings Bank

William H. Rehnquist:

We'll hear argument now in No. 92-1074, John Hancock Mutual Life Insurance Company v. the Harris Trust and Savings Bank.

Mr. Kristol.

Howard G. Kristol:

Mr. Chief Justice, and may it please the Court:

This case arises out of the purchase by a purchase... the purchase by a pension plan of an insurance policy to provide guaranteed annuities to plan participants and beneficiaries.

Under the provisions of the contract, the premiums paid are paid into John Hancock's general account and become part of Hancock's general corporate assets.

The fundamental issue in this case is whether Hancock's general corporate assets are also to be considered assets of the plan.

Hancock unquestionably exercises authority and control over the management of its own corporate assets.

If any of those assets are also deemed to be plan assets, then Hancock would be a fiduciary under ERISA and under ERISA's fiduciary rules would be required to manage its corporate assets, or at least a part of them, solely in the interest of the plan's participants and beneficiaries.

Congress specifically addressed contracts issued by insurance companies to pension plans in ERISA section 401(b)(2), and that section can be found at page A-94 of the Appendix to the Petition.

It is referenced there as 29 U.S. Code section 1101(b)(2).

In substance, that section states that in the case of a guaranteed benefit policy issued to a plan, the contract itself is a plan asset, but the insurance company's assets are not plan assets.

The Second Circuit concluded in this case, the GAC 50, the contract in issue, is, in part at least, a guaranteed benefit policy within the meaning of section 401(b)(2), and that Hancock is not a fiduciary to the extent that guaranteed benefits have already been purchased by the trustee under the contract.

That court went on to hold, however, that Hancock should be considered to be a fiduciary with respect to what the court referred to as the contract's free funds.

William H. Rehnquist:

The contract's what?

Howard G. Kristol:

Free funds, Your Honor.

William H. Rehnquist:

Free funds.

Howard G. Kristol:

Free funds.

Hancock and the Government take the position that Hancock is not a fiduciary at all with respect to its corporate assets because Harris Trust, as the plan trustee, has at all times had the right under GAC 50 to purchase additional guaranteed benefits to the full extent of the contract's so-called free funds.

The contract in its entirety, therefore, is a guaranteed benefit policy under section 401(b)(2).

Antonin Scalia:

Or... well, that's not quite accurate.

Isn't... what you could say with entire accuracy is to the extent the contract provides for benefits, it provides for guaranteed benefits.

Howard G. Kristol:

No, I'm not sure I would agree with that formulation, Justice Scalia.

Antonin Scalia:

Well, what is in the free fund may not ultimately be used to provide benefits at all, right?

It's up to--

Howard G. Kristol:

That is correct.

Well, I think that they would ultimately--

Antonin Scalia:

--So, it is not... it is clearly not providing guaranteed benefits.

But on the other hand, if it's not providing guaranteed benefits it's providing no benefits at all.

Howard G. Kristol:

--No, I don't agree with that, Justice Scalia.

I think that the contract itself, all of the funds held under the contract, whether they stay with John Hancock or are ultimately taken out of the contract by the plan trustee, would ultimately be used for benefits for participants and beneficiaries.