LOCATION: National Treasury Employees Union
DOCKET NO.: 87-1868
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: United States Court of Appeals for the Fourth Circuit
CITATION: 490 US 714 (1989)
ARGUED: Feb 22, 1989
DECIDED: Jun 05, 1989
Clifford L. Harrison - on behalf of Respondents
Patrick F. McCartan - on behalf of Petitioner
Facts of the case
Media for Mead Corporation v. Tilley
Audio Transcription for Oral Argument - February 22, 1989 in Mead Corporation v. Tilley
William H. Rehnquist:
We'll hear argument next in No. 87-1868, Mead Corporation against Tilley.
Mr. McCartan, you may proceed whenever you're ready.
Patrick F. McCartan:
Thank you, Mr. Chief Justice, and may it please the Court:
This case presents two questions for consideration by the Court.
The first and principal question is whether upon termination of a pension plan the Employee Retirement Income Security Act of 1974, ERISA, requires the payment of subsidized early retirement benefits before any surplus plan assets may revert to the employer.
We submit that ERISA imposes no such requirement.
But if the Court should disagree, then it would be necessary for the Court to decide whether the court below, the Fourth Circuit Court of Appeals, abused its discretion in reaching and deciding the damage issue, when that issue was not considered by the district court and was not raised, briefed or argued in the court of appeals.
The factual background against which the Court will decide this question is relatively simple.
The Respondents are six former salaried employees of the Petitioner, of the Lynchburg Foundry Company, formerly a previously... excuse me, a wholly-owned subsidiary of the Petitioner.
They were participants in a salaried employees retirement plan, which was a tax-qualified, single employer, defined benefit plan funded entirely by Mead.
Under the terms of the plan, normal retirement benefits became payable at age 65.
Employees became entitled to actuarially reduced early retirement benefits at age 55.
And employees became entitled to subsidized early retirement benefits if they had attained age 62 and completed 30 years of service at the time they severed their employment with Petitioner.
This benefit was subsidized in the sense that there was no actuarial reduction for the early commencement for the benefits.
In 1983, Petitioner sold the foundry, severed the employment of the Respondents, and terminated the plan.
Employees who had satisfied the requirements for receiving normal or subsidized early retirement benefits, received those benefits.
All employees who were ineligible for such benefits received their normal retirement benefit, payable at age 65, based upon their completed years of service on the date of plan termination.
In other words, the actuarial value of the normal retirement benefit.
The Respondents were in this latter group.
Five had completed 30 years of service but had not attained age 62.
One had 28 years of service and was only age 61 at the time of plan termination.
Prior to the actual termination of the plan, Mead requested and received from the Pension Benefit Guaranty Corporation a Notice of Sufficiency of Assets.
The IRS subsequently issued a favorable determination letter indicating the termination of the plan did not affect its tax-qualified status.
Having satisfied all liabilities of the plan, Mead then took a reversion of approximately $10.7 million, as provided by the terms of the plan.
This suit followed, Respondents claiming that Mead should have paid subsidized early retirement benefits before any surplus plan assets could revert to the Petitioner.
On cross-motions for partial summary judgment, the district court held that the Petitioner was not required to make payment of such benefits because they were not accrued benefits within the meaning of ERISA and the Respondents had not satisfied all terms and conditions of the plan.
The Fourth Circuit reversed, holding that upon plan termination, ERISA required payment of these subsidies even if those benefits were not accrued benefits within the meaning of the statute and even though Respondents had not satisfied all conditions under the plan for the receipt of such benefits.
For its sole statutory authority, the court of appeals relied on Section 4044(a)(6) of ERISA, which ranks the order in which assets must be allocated upon plan termination among six categories, the last being the payment of all other benefits under the plan.
In construing this category to create a substantive right to recover subsidized early retirement benefits, the court below relied upon Amato against Western Union, where the Second Circuit that Congress did not intend to limit this allegation category to accrued benefits within the meaning of the statute.
But, instead, intended that, if assets were available, they should be paid to meet the participant's benefit expectations under the plan.