Beck v. Pace International Union

(Slip Opinion) OCTOBER TERM, 2006 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

BECK, LIQUIDATING TRUSTEE OF ESTATES OF CROWN

VANTAGE, INC., ET AL. v. PACE INTERNATIONAL

UNION ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT

No. 05–1448. Argued April 24, 2007—Decided June 11, 2007
Respondent PACE International Union represented employees covered
by single-employer defined-benefit pension plans sponsored and ad
ministered by Crown, which had filed for bankruptcy. Crown re
jected the union’s proposal to terminate the plans by merging them
with the union’s own multiemployer plan, opting instead for a stan
dard termination through the purchase of annuities, which would al
low Crown to retain a $5 million reversion after satisfying its obliga
tions to plan participants and beneficiaries. The union and
respondent plan participants (hereinafter, collectively, PACE) filed
an adversary action in the Bankruptcy Court, alleging that Crown’s
directors had breached their fiduciary duties under the Employee Re
tirement Income Security Act of 1974 (ERISA), 29 U. S. C. §1001 et
seq., by neglecting to give diligent consideration to PACE’s merger
proposal. The court ruled for PACE, and petitioner bankruptcy trus
tee appealed to the District Court, which affirmed in relevant part, as
did the Ninth Circuit. The Ninth Circuit acknowledged that the deci
sion to terminate a pension plan is a business decision not subject to
ERISA’s fiduciary obligations, but reasoned that the implementation
of a termination decision is fiduciary in nature. It then determined
that merger was a permissible termination method and that Crown
therefore had a fiduciary obligation to consider PACE’s merger pro
posal seriously, which it had failed to do.
Held: Crown did not breach its fiduciary obligations in failing to con
sider PACE’s merger proposal because merger is not a permissible
form of plan termination under ERISA. Section §1341(b)(3)(A) pro
2 BECK v. PACE INT’L UNION

Syllabus

vides: “In . . . any final distribution of assets pursuant to . . . standard
termination . . . , the plan administrator shall . . . (i) purchase irrevo
cable commitments from an insurer to provide all benefit liabilities
under the plan, or . . . (ii) in accordance with the provisions of the
plan and any applicable regulations, otherwise fully provide all bene
fit liabilities under the plan.” The parties agree that clause (i) refers
to the purchase of annuities, and that clause (ii) allows for lump-sum
distributions. These are by far the most common distribution meth
ods. To decide that merger is also a permissible method, the Court
would have to disagree with the Pension Benefit Guaranty Corpora
tion (PBGC), the entity administering the federal insurance program
that protects plan benefits, which takes the position that
§1341(b)(3)(A) does not permit merger as a method of termination be
cause merger is an alternative to (rather than an example of) plan
termination. The Court has traditionally deferred to the PBGC when
interpreting ERISA. Here, the Court believes that the PBGC’s policy
is based upon a construction of the statute that is permissible, and
indeed the more plausible.
PACE argues that §1341(b)(3)(A)(ii)’s residual provision referring to
an asset distribution that “otherwise fully provide[s] all benefit li
abilities under the plan” covers merger because annuities (covered by
§1341(b)(3)(A)(i)) are an example of a permissible means of
“provid[ing] . . . benefit liabilities,” and merger is the legal equivalent
of annuitization. Even assuming that PACE is right about the mean
ing of the word “otherwise,” the clarity necessary to disregard the
PBGC’s considered views is lacking for three reasons. First, termi
nating a plan through purchase of annuities formally severs ERISA’s
applicability to plan assets and employer obligations, whereas merg
ing the Crown plans into PACE’s multiemployer plan would result in
the former plans’ assets remaining within ERISA’s purview, where
they could be used to satisfy the benefit liabilities of the multiem
ployer plan’s other participants and beneficiaries. Second, although
ERISA expressly allows the employer to (under certain circum
stances) recoup surplus funds in a standard termination, §1344(d)(1),
(3), as Crown sought to do here, merger would preclude the receipt of
such funds by reason of §1103(c), which prohibits employers from
misappropriating plan assets for their own benefit. Third, merger is
nowhere mentioned in §1341, but is instead dealt with in an entirely
different set of statutory sections setting forth entirely different rules
and procedures, §§1058, 1411, and 1412. PACE’s argument that the
procedural differences could be reconciled by requiring a plan sponsor
intending to use merger as a termination method to follow the rules for
both merger and termination is condemned by the confusion it would
engender and by the fact that it has no apparent basis in ERISA.
 Cite as: 551 U. S. ____ (2007) 3

Syllabus

Even from a policy standpoint, the PBGC’s construction of the statute
is eminently reasonable because termination by merger could have
detrimental consequences for the participants and beneficiaries of a
single-employer plan, as well as for plan sponsors. Pp. 4–14.
427 F. 3d 668, reversed and remanded.

SCALIA, J., delivered the opinion for a unanimous Court.
 Cite as: 551 U. S. ____ (2007) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES
_________________

No. 05–1448
_________________

JEFFREY H. BECK, LIQUIDATING TRUSTEE OF THE
ESTATES OF CROWN VANTAGE, INC. AND
CROWN PAPER COMPANY, PETITIONER
v. PACE INTERNATIONAL UNION ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

[June 11, 2007]

JUSTICE SCALIA delivered the opinion of the Court.
We decide in this case whether an employer that spon
sors and administers a single-employer defined-benefit
pension plan has a fiduciary obligation under the Em
ployee Retirement Income Security Act of 1974 (ERISA),
88 Stat. 829, as amended, 29 U. S. C. §1001 et seq., to
consider a merger with a multiemployer plan as a method
of terminating the plan.
I
Crown Paper and its parent entity, Crown Vantage (the
two hereinafter referred to in the singular as Crown),
employed 2,600 persons in seven paper mills. PACE
International Union, a respondent here, represented
employees covered by 17 of Crown’s defined-benefit pen
sion plans. A defined-benefit plan, “as its name implies, is
one where the employee, upon retirement, is entitled to a
fixed periodic payment.” Commissioner v. Keystone Con-
sol. Industries, Inc., 508 U. S. 152, 154 (1993). In such a
plan, the employer generally shoulders the investment
2 BECK v. PACE INT’L UNION

Opinion of the Court

risk. It is the employer who must make up for any defi
cits, but also the employer who enjoys the fruits (whether
in the form of lower plan contributions or sometimes a
reversion of assets) if plan investments perform beyond
expectations. See Hughes Aircraft Co. v. Jacobson, 525
U. S. 432, 439–440 (1999). In this case, Crown served as
both plan sponsor and plan administrator.
In March 2000, Crown filed for bankruptcy and pro
ceeded to liquidate its assets. ERISA allows employers to
terminate their pension plans voluntarily, see Pension
Benefit Guaranty Corporation v. LTV Corp., 496 U. S. 633,
638 (1990), and in the summer of 2001, Crown began to
consider a “standard termination,” a condition of which is
that the terminated plans have sufficient assets to cover
benefit liabilities. §1341(b)(1)(D); id., at 638–639. Crown
focused in particular on the possibility of a standard ter
mination through purchase of annuities, one statutorily
specified method of plan termination. See
§1341(b)(3)(A)(i). PACE, however, had ideas of its own. It
interjected itself into Crown’s termination discussions and
proposed that, rather than buy annuities, Crown instead
merge the plans covering PACE union members with the
PACE Industrial Union Management Pension Fund
(PIUMPF), a multiemployer or “Taft-Hartley” plan. See
§1002(37). Under the terms of the PACE-proposed agree
ment, Crown would be required to convey all plan assets
to PIUMPF; PIUMPF would assume all plan liabilities.
Crown took PACE’s merger offer under advisement. As
it reviewed annuitization bids, however, it discovered that
it had overfunded certain of its pension plans, so that
purchasing annuities would allow it to retain a projected
$5 million reversion for its creditors after satisfying its
obligations to plan participants and beneficiaries. See
§1344(d)(1) (providing for reversion upon plan termination
where certain conditions are met). Under PACE’s merger
proposal, by contrast, the $5 million would go to PIUMPF.
 Cite as: 551 U. S. ____ (2007) 3

Opinion of the Court

What is more, the Pension Benefit Guaranty Corporation
(PBGC), which administers an insurance program to
protect plan benefits, agreed to withdraw the proofs of
claim it had filed against Crown in the bankruptcy pro
ceedings if Crown went ahead with an annuity purchase.
Crown had evidently heard enough. It consolidated 12 of
its pension plans1 into a single plan, and terminated that
plan through the purchase of an $84 million annuity.
That annuity fully satisfied Crown’s obligations to plan
participants and beneficiaries and allowed Crown to reap
the $5 million reversion in surplus funds.
PACE and two plan participants, also respondents here
(we will refer to all respondents collectively as PACE),
thereafter filed an adversary action against Crown in the
Bankruptcy Court, alleging that Crown’s directors had
breached their fiduciary duties under ERISA by neglecting
to give diligent consideration to PACE’s merger proposal.
The Bankruptcy Court sided with PACE. It found that the
decision whether to purchase annuities or merge with
PIUMPF was a fiduciary decision, and that Crown had
breached its fiduciary obligations by giving insufficient
study to the PIUMPF proposal. Rather than ordering
Crown to cancel its annuity (which would have resulted in
a substantial penalty payable to Crown’s annuity pro
vider), the Bankruptcy Court instead issued a preliminary
injunction preventing Crown from obtaining the $5 million
reversion. It subsequently approved a distribution of that
reversion for the benefit of plan participants and benefici
aries, which distribution was stayed pending appeal.2
——————
1 Crown’s various other pension plans are not at issue in this case.
2 PACE now suggests that it would have been willing to agree to a
merger in which Crown kept its surplus funds. Brief for Respondents
17, n. 7. But this is belied not only by the terms of the proposed merger
agreement, but by the fact that PACE actively sought and obtained a
preliminary injunction freezing Crown’s $5 million reversion. The
Bankruptcy Court having rejected PACE’s request to undo the annuity
4 BECK v. PACE INT’L UNION

Opinion of the Court

Petitioner, the trustee of the Crown bankruptcy estates,
appealed the Bankruptcy-Court decision to the District
Court, which affirmed in relevant part, as did the Court of
Appeals for the Ninth Circuit. The Ninth Circuit ac
knowledged that “the decision to terminate a pension plan
is a business decision not subject to ERISA’s fiduciary
obligations,” but reasoned that “the implementation of a
decision to terminate” is fiduciary in nature. 427 F. 3d
668, 673 (2005). It then determined that merger was a
permissible means of plan termination and that Crown
therefore had a fiduciary obligation to consider PACE’s
merger proposal seriously, which it had failed to do. Peti
tioner thereafter sought rehearing in the Court of Appeals,
this time with the support of the PBGC and the Depart
ment of Labor, who agreed with petitioner that the Ninth
Circuit’s judgment was in error. The Ninth Circuit held to
its original decision, and we granted certiorari. 549 U. S.
___ (2007).
II
Crown’s operation of its defined-benefit pension plans
placed it in dual roles as plan sponsor and plan adminis
trator; an employer’s fiduciary duties under ERISA are
implicated only when it acts in the latter capacity. Which
hat the employer is proverbially wearing depends upon
the nature of the function performed, see Hughes Aircraft
Co., supra, at 444, and is an inquiry that is aided by the
common law of trusts which serves as ERISA’s backdrop,
see Pegram v. Herdrich, 530 U. S. 211, 224 (2000); Lock-
heed Corp. v. Spink, 517 U. S. 882, 890 (1996).
It is well established in this Court’s cases that an em
——————
contract, PACE has provided no reason for pursuing this litigation
other than to obtain the $5 million that remained after Crown satisfied
its benefit commitments. Moreover, as PACE concedes, whether the
parties would have agreed to a merger arrangement that did not
include the $5 million is “speculation.” Tr. of Oral Arg. 42.
 Cite as: 551 U. S. ____ (2007) 5

Opinion of the Court

ployer’s decision whether to terminate an ERISA plan is a
settlor function immune from ERISA’s fiduciary obliga
tions. See, e.g., ibid.; Curtiss-Wright Corp. v. Schoonejon
gen, 514 U. S. 73, 78 (1995). And because “decision[s]
regarding the form or structure” of a plan are generally
settlor functions, Hughes Aircraft Co., 525 U. S., at 444,
PACE acknowledges that the decision to merge plans is
“normally [a] plan sponsor decisio[n]” as well. Brief for
Respondents 13, n. 5, 20–21; see also Malia v. General
Electric Co., 23 F. 3d 828, 833 (CA3 1994) (holding that
employer’s decision to merge plans “d[id] not invoke the
fiduciary duty provisions of ERISA”). But PACE says that
its proposed merger was different, because the PIUMPF
merger represented a method of terminating the Crown
plans. And just as ERISA imposed on Crown a fiduciary
obligation in its selection of an appropriate annuity pro
vider when terminating through annuities, see 29 CFR
§§2509.95–1, 4041.28(c)(3) (2006), so too, PACE argues,
did it require Crown to consider merger.
The idea that the decision whether to merge could
switch from a settlor to a fiduciary function depending
upon the context in which the merger proposal is raised is
an odd one. But once it is realized that a merger is simply
a transfer of assets and liabilities, PACE’s argument
becomes somewhat more plausible: The purchase of an
annuity is akin to a transfer of assets and liabilities (to an
insurance company), and if Crown was subject to fiduciary
duties in selecting an annuity provider, why could it
automatically disregard PIUMPF simply because PIUMPF
happened to be a multiemployer plan rather than an
insurer? There is, however, an antecedent question. In
order to affirm the judgment below, we would have to
conclude (as the Ninth Circuit did) that merger is, in the
first place, a permissible form of plan termination under
ERISA. That requires us to delve into the statute’s provi
sions for plan termination.
6 BECK v. PACE INT’L UNION

Opinion of the Court

ERISA sets forth the exclusive procedures for the stan
dard termination of single-employer pension plans.
§1341(a)(1); Hughes Aircraft Co., supra, at 446. Those
procedures are exhaustive, setting detailed rules for, inter
alia, notice by the plan to affected parties, §1341(a)(2),
review by the PBGC, §1341(b)(2)(A), (C), and final distri
bution of plan funds, §1341(b)(2)(D), §1344. See generally
E. Veal & E. Mackiewicz, Pension Plan Terminations 43–
61 (2d ed. 1998) (hereinafter Veal & Mackiewicz). At issue
in this case is §1341(b)(3)(A), the provision of ERISA
setting forth the permissible methods of terminating a
single-employer plan and distributing plan assets to par
ticipants and beneficiaries. Section 1341(b)(3)(A) provides
as follows:
“In connection with any final distribution of assets
pursuant to the standard termination of the plan un
der this subsection, the plan administrator shall dis
tribute the assets in accordance with section 1344 of
this title. In distributing such assets, the plan admin
istrator shall—
“(i) purchase irrevocable commitments from an in
surer to provide all benefit liabilities under the plan,
or
“(ii) in accordance with the provisions of the plan
and any applicable regulations, otherwise fully pro
vide all benefit liabilities under the plan. . . .”
The PBGC’s regulations impose in substance the same
requirements. See 29 CFR §4041.28(c)(1). Title 29
U. S. C. §1344, which is referred to in §1341(b)(3)(A), sets
forth a specific order of priority for asset distribution,
including (under certain circumstances) reversions of
excess funds to the plan sponsor, see §1344(d)(1).
The parties to this case all agree that §1341(b)(3)(A)(i)
refers to the purchase of annuities, see 29 CFR §4001.2
(defining “irrevocable commitment”), and that
 Cite as: 551 U. S. ____ (2007) 7

Opinion of the Court

§1341(b)(3)(A)(ii) allows for lump-sum distributions at
present discounted value (including rollovers into individ
ual retirement accounts). As PACE concedes, purchase of
annuity contracts and lump-sum payments are “by far the
most common distribution methods.” Brief for Respon
dents 45; see also Veal & Mackiewicz 72–73 (“The basic
alternatives are the purchase of annuity contracts or some
form of lump-sum cashout”). To affirm the Ninth Circuit,
we would have to decide that merger is a permissible
method as well.3 And we would have to do that over the
objection of the PBGC, which (joined by the Department of
Labor) disagrees with the Ninth Circuit, taking the posi
tion that §1341(b)(3)(A) does not permit merger as a
method of termination because (in its view) merger is an
alternative to (rather than an example of) plan termina
tion. See Brief for United States as Amicus Curiae 8, 17–
30. We have traditionally deferred to the PBGC when
interpreting ERISA, for “to attempt to answer these ques
tions without the views of the agencies responsible for
enforcing ERISA, would be to embar[k] upon a voyage
without a compass.” Mead Corp. v. Tilley, 490 U. S. 714,
722, 725–726 (1989) (internal quotation marks omitted);
see also LTV Corp., 496 U. S., at 648, 651. In reviewing
the judgment below, we thus must examine “whether the
——————
3 We would not have to decide that question of statutory interpreta

tion if Crown’s pension plans disallowed merger. Any method of
termination permitted by §1341(b)(3)(A)(ii) must also be one that is “in
accordance with the provisions of the plan.” Crown thus could have
drafted its plan documents to limit the available methods of termina
tion, so that merger was not permitted. Petitioner argued below that
Crown had done just that. Though the District Court concluded that
the plan terms allowed for merger, App. to Pet. for Cert. 47, the Ninth
Circuit declined to consider the plan language because it held that
petitioner had failed to preserve the argument in the Bankruptcy
Court. Petitioner did not seek certiorari on the factbound issues of
waiver and plan interpretation, and we accordingly do not address
them here.
8 BECK v. PACE INT’L UNION

Opinion of the Court

PBGC’s policy is based upon a permissible construction of
the statute.” Id., at 648.4
We believe it is. PACE has “failed to persuade us that
the PBGC’s views are unreasonable,” Mead Corp., supra,
at 725. At the outset, it must be acknowledged that the
statute, with its general residual clause in
§1341(b)(3)(A)(ii), is potentially more embracing of alter
native methods of plan termination (whatever they may
be) than longstanding ERISA practice, which appears to
have employed almost exclusively annuities and lump-
sum payments. But we think that the statutory text need
not be read to include mergers, and indeed that the PBGC
offers the better reading in excluding them. Most obvi
ously, Congress nowhere expressly provided for merger as
a permissible means of termination. Merger is not men
tioned in §1341(b)(3)(A), much less in any of §1341’s many
subsections. Indeed, merger is expressly provided for in
an entirely separate set of statutory sections (of which
more in a moment, see infra, at 11–13). PACE neverthe
——————
4 PACE argues that the PBGC took an inconsistent approach in sev

eral opinion letters from the 1980’s concerning the applicability of
certain joint guidelines for asset reversions during complex termination
transactions. See App. to Brief in Opposition 6a–9a (Opinion Letter
85–11 (May 14, 1985)); id., at 10a–13a (Opinion Letter 85–21 (Aug. 26,
1985)); id., at 14a–16a (Opinion Letter 85–25 (Oct. 11, 1985)). But
insofar as the PBGC’s consistency is even relevant to whether we
should accord deference to its presently held views, none of those letters
so much as hints that the PBGC treated merger as a permissible form
of plan termination. In fact, to the extent they even speak to the
question, they clearly show the opposite. In Opinion Letter 85–25, for
example, the PBGC explained that the joint guidelines for asset rever
sions did not apply to “a transfer [of assets and liabilities] from a
single-employer plan to an ongoing multiemployer plan followed by the
termination of the single-employer plan.” App. to Brief in Opposition
15a (emphasis added). By characterizing the proposed transaction as
one that took place in two separate steps (merger and then termina
tion), this letter fully contemplated that merger was not an example of
plan termination.
 Cite as: 551 U. S. ____ (2007) 9

Opinion of the Court

less maintains that merger is clearly covered under
§1341(b)(3)(A)(ii)’s residual clause, which refers to a dis
tribution of assets that “otherwise fully provide[s] all
benefit liabilities under the plan.” By PACE’s reasoning,
annuities are covered under §1341(b)(3)(A)(i); annuities
are—by virtue of the word “otherwise”—an example of a
means by which a plan may “fully provide all benefit
liabilities under the plan,” §1341(b)(3)(A)(ii); and there
fore, “at the least,” any method of termination that is the
“legal equivalent” of annuitization is permitted, Brief for
Respondents 23. Merger, PACE argues, is such a legal
equivalent.
We do not find the statute so clear. Even assuming that
PACE is right about “otherwise”—that the word indicates
that annuities are one example of satisfying the residual
clause in §1341(b)(3)(A)(ii)—we still do not find mergers
covered with the clarity necessary to disregard the PBGC’s
considered views. Surely the phrase “otherwise fully
provide all benefit liabilities under the plan” is not with
out some teeth. And we think it would be reasonable for
the PBGC to determine both that merger is not like the
purchase of annuities in its ability to “fully provide all
benefit liabilities under the plan,” and that the statute’s
distinct treatment of merger and termination provides
clear evidence that one is not an example of the other.
Three points strike us as especially persuasive in these
regards.
First, terminating a plan through purchase of annuities
(like terminating through distribution of lump-sum pay
ments) formally severs the applicability of ERISA to plan
assets and employer obligations. Upon purchasing annui
ties, the employer is no longer subject to ERISA’s multitu
dinous requirements, such as (to name just one) payment
of insurance premiums to the PBGC, §1307(a). And the
PBGC is likewise no longer liable for the deficiency in the
event that the plan becomes insolvent; there are no more
10 BECK v. PACE INT’L UNION

Opinion of the Court

benefits for it to guarantee. The assets of the plan are
wholly removed from the ERISA system, and plan partici
pants and beneficiaries must rely primarily (if not exclu
sively) on state-contract remedies if they do not receive
proper payments or are otherwise denied access to their
funds. Further, from the standpoint of the participants
and beneficiaries, the risk associated with an annuity
relates solely to the solvency of an insurance company,
and not the performance of the merged plan’s investments.
Merger is fundamentally different: it represents a con
tinuation rather than a cessation of the ERISA regime. If
Crown were to have merged its pension plans into
PIUMPF, the plan assets would have been combined with
the assets of the multiemployer plan, where they could
then be used to satisfy the benefit liabilities of partici
pants and beneficiaries other than those from the original
Crown plans. Those assets would remain within ERISA’s
purview, the PBGC would maintain responsibility for
them, and if Crown continued to employ the plan partici
pants it too would remain subject to ERISA. Finally, plan
participants and beneficiaries would have their recourse
not through state-contract law, but through the ERISA
system, just as they had prior to merger.
Second, in a standard termination ERISA allows the
employer to (under certain circumstances) recoup surplus
funds, §1344(d)(1), (3), as Crown sought to do here. But
ERISA forbids employers to obtain a reversion in the
absence of a termination: “A valid plan termination is a
prerequisite to a reversion of surplus plan assets to an
employer.” App. to Brief in Opposition 15a (PBGC Opin
ion Letter 85–25 (Oct. 11, 1985); see also Veal &
Mackiewicz 164–165. Crown could not simply extract the
$5 million surplus from its plans, nor could it have done so
once those assets had transferred to PIUMPF. This would
have run up against ERISA’s anti-inurement provision,
which prohibits employers from misappropriating plan
 Cite as: 551 U. S. ____ (2007) 11

Opinion of the Court

assets for their own benefit. See §1103(c). Consequently,
we think the PBGC was entirely reasonable in declining to
recognize as a form of termination a mechanism that
would preclude the receipt of surplus funds, which is
specifically authorized upon termination.5
Third, the structure of ERISA amply (if not conclusively)
supports the conclusion that §1341(b)(3)(A)(ii) does not
cover merger. As noted above, merger is nowhere men
tioned in §1341, and is instead dealt with in an entirely
different set of statutory sections setting forth entirely
different rules and procedures. Compare §1058 (general
merger provision), §1411 (mergers between multiemployer
plans), and §1412 (mergers between multiemployer and
single-employer plans) with §1341 (termination of single-
employer plans), §1341a (termination of multiemployer
plans); see generally Veal & Mackiewicz 31–40 (describing
merger as an alternative to plan termination). Section
1058, the general merger provision, in fact quite clearly
contemplates that merger and termination are not one and
the same, forbidding merger “unless each participant in
the plan would (if the plan then terminated) receive a
benefit immediately after the merger . . . which is equal to
or greater than the benefit he would have been entitled to
receive immediately before the merger . . . (if the plan had
——————
5 This inability to recover surplus funds through a merger could not

be remedied, as PACE now suggests, by structuring the transaction so
that Crown provided to PIUMPF only assets sufficient to cover plan
liabilities (effectively creating a spinoff from Crown’s plans and merg
ing that spinoff plan with PIUMPF). Under that arrangement, Crown
could indeed obtain the $5 million reversion—not, however, by reason
of the merger-called-termination, but only by subsequent termination of
the residual plan. See, e.g., App. to Brief in Opposition 14a–16a (PBGC
Opinion Letter 85–25 (Oct. 11, 1985)) (describing such a sequence of
transactions). This falls short of rendering the merger a termination
permitting recovery of surplus funds. That a transfer of assets can
occur in anticipation of a future termination does not render that
transfer itself a termination.
12 BECK v. PACE INT’L UNION

Opinion of the Court

then terminated).” (Emphasis added.)
As for the different rules and procedures governing
termination and merger: Most critically, plans seeking to
terminate must provide advance notice to the PBGC, as
well as extensive actuarial information. §1341(b)(2)(A).
The PBGC has the authority to halt the termination if it
determines that plan assets are insufficient to cover plan
liabilities. §1341(b)(2)(C). Merger, by contrast, involves
considerably less PBGC oversight, and the PBGC has no
similar ability to cancel, see Brief for United States as
Amicus Curiae 24. And the rules governing notice to the
PBGC are either different or nonexistent. Section 1412,
the provision governing merger between a single and
multiemployer plan (the form of merger contemplated by
PACE’s proposal) makes no mention of early notice to the
PBGC. And while mergers between multiemployer plans
do require 120-days advance notice, §1411(b)(1), this still
differs from the general notice provision for termination of
single-employer plans, which requires notice to the PBGC
“[a]s soon as practicable” after notice is given to affected
parties, §1341(b)(2)(A). Relatedly, §1341(a)(2) also re
quires that, in a standard termination, written notice to
plan participants and beneficiaries include “any related
additional information required in regulations of the
[PBGC].” Those regulations require, among other things,
that the plan inform participants and beneficiaries that
upon distribution, “the PBGC no longer guarantees . . .
plan benefits.” 29 CFR §4041.23(b)(9). (This requirement
of course has no relevance to a merger, because after a
merger the PBGC continues to guarantee plan benefits.)
PACE believes that these procedural differences can be
ironed over rather easily. It insists:
“Many plan mergers take place without intent to ter
minate a plan; in those cases, the requirements for
plan merger can be followed without consulting the
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Opinion of the Court

requirements for plan termination. Conversely, many
plan terminations take place without an associated
merger; in those cases there is no need to consult the
requirements for mergers. But if a plan sponsor in
tends to use merger as a method of implementing a
plan termination, it simply must follow the rules for
both merger and termination.” Brief for Respondents
36.
PACE similarly explains that while the PBGC does not
approve “ordinary merger[s],” PBGC approval would be
necessary when a merger is designed to terminate a plan.
Id., at 37. The confusion invited by PACE’s proposed
framework is alone enough to condemn it. How could a
plan be sure that it was in one box rather than the other?
To avoid the risk of liability, should it simply follow both
sets of rules all of the time? PACE’s proposal is flawed for
another reason as well: It has no apparent basis in the
statute. The separate provisions governing termination
and merger quite clearly treat the two as wholly different
transactions, with no exception for the case where merger
is used for termination.
For all of the foregoing reasons, we believe that the
PBGC’s construction of the statute is a permissible one,
and indeed the more plausible. Crown did not breach its
fiduciary obligations in failing to consider PACE’s merger
proposal because merger is not a permissible form of
termination. Even from a policy standpoint, the PBGC’s
choice is an eminently reasonable one, since termination
by merger could have detrimental consequences for plan
beneficiaries and plan sponsors alike. When a single-
employer plan is merged into a multiemployer plan, the
original participants and beneficiaries become dependent
upon the financial well-being of the multiemployer plan
and its contributing members. Assets of the single-
employer plan (which in this case were capable of fully
14 BECK v. PACE INT’L UNION

Opinion of the Court

funding plan liabilities) may be used to satisfy commit
ments owed to other participants and beneficiaries of the
(possibly underfunded) multiemployer plan. The PBGC
believes that this arrangement creates added risk for
participants and beneficiaries of the original plan, particu
larly in view of the lesser guarantees that the PBGC
provides to multiemployer plans, compare §1322 with
§1322a. See Brief for United States as Amicus Curiae 29,
and n. 11. For employers, the ill effects are demonstrated
by the facts of this very case: by diligently funding its
pension plans, Crown became the bait for a union bent on
obtaining a surplus that was rightfully Crown’s. All this
after Crown purchased an annuity that none dispute was
sufficient to satisfy its commitments to plan participants
and beneficiaries.
* * *
We hold that merger is not a permissible method of
terminating a single-employer defined-benefit pension
plan. The judgment of the Court of Appeals is reversed,
and the case is remanded for further proceedings consis
tent with this opinion.
It is so ordered.