Settlor Function Case at Supreme Court

The Supreme Court has decided to review a case decided on the issue of what constitute settlor functions. The ERISA fiduciary duties do not apply to actions taken by the plan sponsor in its capacity as employer/sponsor, which raises the question of where the line gets drawn.

In Beck v. PACE International Union, the court will look at the dividing line in the context of of plan terminations. The Bankruptcy Court, District Court and 9th Circuit held that the employer's decision to terminate was a settlor function, but that all steps in implementing that decision were made under the fiduciary duty rules. The employer had decided to terminate the plans by buying annuities to fund the entire accrued benefit and distributing the surplus resulting from that purchase to the participants, ignoring a suggestion by the union that the plans be merged into a multiemployer plan. The holding was that the ERISA fiduciary duties required that the employer review the merger alternative and that it had failed to do so adequately.

Arguing that fiduciary duties do not apply to the implementation of settlor decisions is not for the faint of heart. However, the facts here are much more complex, and it seems pretty clear that the employer and the fiduciaries fully met their obligations, and then some. A decision from the Supreme Court may tell us more about how to do a plan termination than it does about fiduciary duties.

Since the case is going to generate a decision by the Supreme Court, a full analysis is premature. If you want more detail, you can find it at:

http://www.lawmemo.com/sct/05/Beck/