Holliday v. Xerox Corp., 83-1058

• Decision Date: 25 April 1984
• Docket Number: No. 83-1058,83-1058
• Citation: 732 F.2d 548
• Parties: 5 Employee Benefits Ca 1705 Robert G. HOLLIDAY, on behalf of himself and all other persons similarly situated, Plaintiff-Appellant, v. XEROX CORPORATION, Xerox Corporation Profit Sharing Retirement Plan, and Xerox Corporation Retirement Income Guaranty Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 548

732 F.2d 548

5 Employee Benefits Ca 1705

Robert G. HOLLIDAY, on behalf of himself and all other persons similarly situated, Plaintiff-Appellant, v. XEROX CORPORATION, Xerox Corporation Profit Sharing Retirement Plan, and Xerox Corporation Retirement Income Guaranty Plan, Defendants-Appellees.

No. 83-1058.

United States Court of Appeals Sixth Circuit.

Argued March 7, 1984.

Decided April 25, 1984.

James E. Brenner, argued, William V. Lewis, Fischer, Franklin, Ford, Simon & Hogg, Detroit, Mich., for plaintiff-appellant.

Linda O. Goldberg, Miller, Canfield, Paddock, Stone, Detroit, Mich., Alfred H. Hoddinott, Jr., argued, Stamford, Conn., for defendants-appellees.

Before MERRITT and KRUPANSKY, Circuit Judges, WEICK, Senior Circuit Judge.

MERRITT, Circuit Judge.

This is an ERISA case. Many years ago, Xerox began establishing with company funds two pension fund accounts for each employee, neither of which provided for a uniform employee minimum pension floor. The first account, labeled the "optional account," is subject to limited encroachment prior to retirement; and the second, labeled the "retirement account," is reserved solely for retirement. Both are used to purchase annuities upon the retirement of the employee. More recently, Xerox decided to fill a gap by establishing a third pension program, called the Retirement Income Guarantee Plan (RIGP), ensuring that each employee would receive the greater of the income from his retirement account or a minimum pension each year. Under the formula devised for the new program, the annuity payments made under the retirement account, but not the payments made from the optional account, are included within the guaranteed minimum and are subtracted as a setoff in order to arrive at the amount of benefits to which a retiree is entitled.

Because some employees--those formerly employed by companies acquired by Xerox by mergers--had at the time of merger deposited their existing pension accounts in the Xerox optional or encroachment account, Xerox transferred the funds so deposited by merged employees from this account to the retirement account so that pension payments derived from these transferred funds would be used as an offset against the guaranteed payments created under the new minimum payment program.

The question presented is whether the transfer of funds from one pension account to another within the company's pension plan, and the subsequent use of those funds as a setoff in calculating the retirement income owed to employees under the new guaranteed minimum retirement income plan, violates the provisions of the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1103(c)(1) (1976 & Supp. IV 1980), which prohibits an employer from misapplying pension fund assets for its own benefit. ¹

In this interlocutory appeal under Rule 54(b), Fed.R.Civ.P., and 28 U.S.C. Sec. 1292(b), plaintiff Robert G. Holliday contests the decision of the District Court dismissing one count of his six-count class action, and in the alternative granting a partial summary judgment to defendants Xerox Corporation and two of its affiliated pension funds. The District Court held that Xerox did not violate ERISA when it transferred funds between the two accounts. 555 F.Supp. 51 (E.D.Mich.1982). We agree that the transfer and subsequent use of those funds as a setoff in calculating the retirement income owed to Xerox employees under a new minimum retirement income plan did not result in a prohibited benefit to Xerox under ERISA. We therefore affirm the decision of the District Court.

Plaintiff contends that Xerox's transfer of the funds from the optional accounts of the employees of the acquired company employees to the retirement accounts, and the subsequent setoff of those funds under RIGP, operates to "benefit" Xerox in violation of ERISA. ERISA was enacted in order to deal with the problems faced by retired persons who were left without pension income, either because they were not "vested" or guaranteed in a pension plan, or because the assets or the plan had been dissipated. The legislative history of the Act reveals that Congress' main concern was with "improving the fairness and effectiveness of qualified retirement plans" so that "individuals who have spent their careers in useful and socially productive work will have adequate incomes to meet their needs when they retire." H.R.Rep. No. 807, 93rd Cong., 2d Sess. 8, reprinted in 1974 U.S.Code Cong. & Ad.News, 4639, 4670, 4676-77.

To ensure that employees who participate in pension plans "actually receive benefits and do not lose their benefits as a result of unduly restrictive forfeiture provisions or failure of the pension plan to accumulate and retain sufficient funds to meet its obligations," id. at 4677, ERISA establishes minimum rules for employee participation, see 29 U.S.C. Secs. 1051-61 (1976 & Supp. IV 1980); fiduciary standards for plan trustees, see id. Secs. 1101-04; and an insurance program for situations where pension plans terminate with insufficient funds, see id. Secs. 1341-48. At the same time, recognizing that pension plans are voluntarily created by employers, Congress intended to "avoid making these standards so tough that they will actually discourage the creation of new pension plans" since "[t]he purchase of this pension legislation is not to establish an ideal pension plan, but rather, to set up certain minimum standards to assure that all workers receive the pension benefits that they have earned." 119 Cong.Rec. 30,041 (1973) (remarks of Senator Bentsen).

The provision of ERISA at issue here states that "the assets of a [pension] plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to the participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan." 29 U.S.C. Sec. 1103(c)(1) (Supp. IV 1980). Plaintiffs urge that Xerox violated this provision by transferring funds to the retirement account and then providing that they be offset against the RIGP benefit, because in so doing, Xerox reduced the amount of money it would have to contribute to fund RIGP. According to plaintiffs, ERISA does not contemplate that employers will set off potential income from private pension funds against the amount owed to the employee by the same employer under a separate pension fund. Moreover, plaintiffs argue, ERISA prohibits employers from taking any actions with regard to pension plans which, however...