Lockheed v. Spink

• Citation: 517 U.S. 882,135 L.Ed.2d 153,116 S.Ct. 1783
• Decision Date: 10 June 1996
• Docket Number: 95809
• Parties: LOCKHEED CORP. et al. v. SPINK
• Court: United States Supreme Court

517 U.S. 882

116 S.Ct. 1783

135 L.Ed.2d 153

LOCKHEED CORP. et al.

v SPINK

Certiorari to the United States Court of Appeals for the Ninth Circuit.

No. 95-809.

Supreme Court of the United States

Argued April 22, 1996

Decided June 10, 1996

Syllabus ^*

Because respondent Spink was 61 when petitioner Lockheed Corporation reemployed him in 1979, he was excluded from participation in Lockheed's retirement plan (Plan), as was then permitted by the Employee Retirement Income Security Act of 1974 (ERISA). Section 9203(a)(1) of the Omnibus Budget Reconciliation Act of 1986 (OBRA) repealed ERISA's age-based exclusion provision, and Section(s) 9201 and 9202 amended ERISA and the Age Discrimination in Employment Act of 1967 (ADEA), respectively, to prohibit age-based benefit accrual rules. To comply with OBRA, Lockheed made Spink and other previously excluded employees Plan members, but made clear that they would not receive credit for their pre-1988 service years. Lockheed subsequently added to the Plan two programs offering increased pension benefits to employees who would retire early in exchange for their waiver of any employment claims against Lockheed. Not wishing to waive any ADEA or ERISA claims, Spink declined to participate and retired without earning the extra benefits. He then filed suit, alleging among other things that Lockheed and respondent board of directors members violated ERISA by amending the Plan to create the retirement programs, that respondent Retirement Committee members violated ERISA by implementing the amended Plan, and that the OBRA amendments to ERISA and the ADEA required that Spink's pre-1988 service years be counted toward his benefits. The District Court dismissed the complaint for failure to state a claim, but the Court of Appeals reversed in relevant part. In finding the Plan amendments unlawful under ERISA Section(s) 406(a)(1)(D)--which prohibits a fiduciary from causing a plan to engage in a transaction that transfers plan assets to, or involves the use of plan assets for the benefit of, a party in interest--the court decided that there was no need to address Lockheed's status as a fiduciary. It also found that Lockheed's refusal to credit Spink with his pre-1988 service years violated the OBRA amendments, which the court decided applied retroactively.

Held:

1. ERISA Section(s) 406 does not prevent an employer from conditioning the receipt of early retirement benefits upon plan participants' waiver of employment claims. Pp. 4-13.

(a) Unless a plaintiff shows that a fiduciary caused the plan to engage in the allegedly unlawful transaction, there can be no Section(s) 406(a)(1) violation warranting relief. Cf. Peacock v. Thomas, 516 U. S. ___, ___. Thus, the Court of Appeals erred by not asking whether fiduciary status existed in this case before finding a Section(s) 406(a)(1)(D) violation. Pp. 5-6.

(b) Lockheed and the board of directors, as plan sponsors, were not acting as fiduciaries when they amended the Plan. Given ERISA's definition of fiduciary and the applicability of the duties attending that status, the rule that this Court announced with respect to the amendment of welfare benefit plans in Curtiss-Wright Corp. v. Schoonejongen, 514 U. S. ___, applies equally to the amendment of pension plans. Thus, when employers or other plan sponsors adopt, modify, or terminate pension plans, they do not act as fiduciaries, id., ___, but are analogous to settlors of a trust. Pp. 7-9.

(c) It is not necessary to decide whether the Retirement Comittee members acted as fiduciaries, because their payment of benefits pursuant to the terms of an otherwise lawful plan was not a ``transaction'' prohibited by Section(s) 406(a)(1)(D). That section does not in direct terms include an employer's payment of benefits. And the "transactions" prohibited by other provisions of Section(s) 406(a) generally involve uses of plan assets that are potentially harmful to the plan. The payment of benefits conditioned on performance by plan participants cannot reasonably be said to share that characteristic. Pp. 9-13.

2. OBRA Section(s) 9201 and 9202(a) do not apply retroactively to require Lockheed to use pre-1988 service years in calculating Spink's benefits. Congress expressly provided, in OBRA Section(s) 9204(a)(1), that the amendments to ERISA and the ADEA would be effective with respect to plan years beginning on or after January 1, 1988. Since the amendments' temporal effect is manifest on the statute's face, "there is no need to resort to judicial default rules," Landgraf v. USI Film Products, Inc., 511 U. S. ___, ___, and inquiry is at an end. Pp. 13-15. 60 F. 3d 616, reversed and remanded.

Thomas, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Stevens, O'Connor, Scalia, Kennedy, and Ginsburg, JJ., joined, and in all but Part III-B of which Souter and Breyer, JJ., joined. Breyer, J., filed an opinion concurring in part and dissenting in part, in which Souter, J., joined.

Justice Thomas delivered the opinion of the Court.

In this case, we decide whether the payment of benefits pursuant to an early retirement program conditioned on the participants' release of employment-related claims constitutes a prohibited transaction under the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U. S. C. Section(s) 1001 et seq. We also determine whether the 1986 amendments to ERISA and the Age Discrimination in Employment Act of 1967 (ADEA), 81 Stat. 602, as amended, 29 U. S. C. Section(s) 621 et seq., forbidding age-based discrimination in pension plans apply retroactively.

I.

Respondent Paul Spink was employed by petitioner Lockheed Corporation from 1939 until 1950, when he left to work for one of Lockheed's competitors. In 1979, Lockheed persuaded Spink to return. Spink was 61 years old when he resumed employment with Lockheed. At that time, the terms of the Lockheed Retirement Plan for Certain Salaried Individuals (Plan), a defined benefit plan, excluded from participation employees who were over the age of 60 when hired. This was expressly permitted by ERISA. See 29 U. S. C. Section(s) 1052(a)(2)(B) (1982 ed.).

Congress subsequently passed the Omnibus Budget Reconciliation Act of 1986 (OBRA), Pub. L. 99-509, 100 Stat. 1874. Section 9203(a)(1) of OBRA, 100 Stat. 1979, repealed the age-based exclusion provision of ERISA, and the statute now flatly mandates that "[n]o pension plan may exclude from participation (on the basis of age) employees who have attained a specified age." 29 U. S. C. Section(s) 1052(a)(2). Sections 9201 and 9202 of OBRA, 100 Stat. 1973-1978, amended ERISA and the ADEA to prohibit age-based cessations of benefit accruals and age-based reductions in benefit accrual rates. See 29 U. S. C. Section(s) 1054(b)(1)(H)(i), 623(i)(1).

In an effort to comply with these new laws, Lockheed ceased its prior practice of age-based exclusion from the Plan, effective December 25, 1988. As of that date, all employees, including Spink, who had previously been ineligible to participate in the Plan due to their age at the time of hiring became members of the Plan. Lockheed made clear, however, that it would not credit those employees for years of service rendered before they became members.

When later faced with the need to streamline its operations, Lockheed amended the Plan to provide financial incentives for certain employees to retire early. Lockheed established two programs, both of which offered increased pension benefits to employees who would retire early, payable out of the Plan's surplus assets. Both programs required as a condition of the receipt of benefits that participants release any employment-related claims they might have against Lockheed. Though Spink was eligible for one of the programs, he declined to participate because he did not wish to waive any ADEA or ERISA claims. He then retired, without earning any extra benefits for doing so.

Spink brought this suit, in his individual capacity and on behalf of others similarly situated, against Lockheed and several of its directors and officers. Among other things, the complaint alleged that Lockheed and the members of the board of directors violated ERISA's duty of care and prohibited transaction provisions, 29 U. S. C. Section(s) 1104(a), 1106(a), by amending the Plan to create the retirement programs. Relatedly, the complaint alleged that the members of Lockheed's Retirement Committee, who implemented the Plan as amended by the board, violated those same parts of ERISA. The complaint also asserted that the OBRA amendments to ERISA and the ADEA required Lockheed to count Spink's pre-1988 service years toward his accrued pension benefits. For these alleged ERISA violations, Spink sought monetary, declaratory, and injunctive relief pursuant to Section(s) 502(a)(2) and (3) of ERISA's civil enforcement provisions, 29 U. S. C. Section(s) 1132(a)(2), (3). Lockheed moved to dismiss the complaint for failure to state a claim, and the District Court granted the motion. 60 F. 3d 616 (1995). The Court of Appeals held that the amendments to

The Court of Appeals for the Ninth Circuit reversed in relevant part. the Plan were unlawful under ERISA Section(s) 406(a)(1)(D), 29 U. S. C. Section(s) 1106(a)(1)(D), which prohibits a fiduciary from causing a plan to engage in a transaction that transfers plan assets to a party in interest or involves the use of plan assets for the benefit of a party in interest. The court reasoned that because the amendments offered increased benefits in exchange for a release of employment claims, they constituted a use of Plan assets to "purchase" a significant benefit for Lockheed. 60 F. 3d, at 624. Though the court found a violation of Section(s) 406(a)(1)(D), it decided that there was no need to address Lockheed's status as a fiduciary. Id., at 623, n. 5. In addition, the Court of Appeals agreed with Spink that Lockheed had violated the OBRA amendments by...