OCTOBER TERM, 1995
Syllabus
LOCKHEED CORP. ET AL.
v. SPINK
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
No. 95-809. Argued April 22, 1996-Decided June 10, 1996
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Act of 1986 (OBRA) repealed ERISA's age-based exclusion provision,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 §§ 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 petitioner board of directors members violated ERISA
by amending the Plan to create the retirement programs, that
petitioner 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 § 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 § 406 does not prevent an employer from conditioning
the receipt of early retirement benefits upon plan participants'
waiver of employment claims. Pp. 887-895.
883
(a) Unless a plaintiff shows that a fiduciary caused the plan to
engage in the allegedly unlawful transaction, there can be no §
406(a)(1) violation warranting relief. Cf.
Peacock v.
Thomas, 516 U.
S. 349, 353. Thus, the Court of Appeals erred by not asking
whether fiduciary status existed in this case before finding a §
406(a)(1)(D) violation. Pp.888-889.
(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. 73, 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., at 78, but are analogous to
settlors of a trust. Pp. 889-891.
(c) It is not necessary to decide whether the Retirement
Committee members acted as fiduciaries, because their payment of
benefits pursuant to the terms of an otherwise lawful plan was not
a "transaction" prohibited by § 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 § 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. 892-895.
2. OBRA §§ 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 §
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, 511 U. S. 244,
280, and inquiry is at an end. Pp. 896-897.
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 which SOUTER and BREYER, JJ., joined
as to all but Part III-B. BREYER, J., filed an opinion concurring
in part and dissenting in part, in which SOUTER, J., joined,
post, p. 898.
Gordon E. Kirscher argued the cause for petitioners.
With him on the briefs were David E. Gordon, Kenneth E. Johnson,
Kenneth S. Geller, and Ralph A. Hurvitz.
884
Richard P. Bress argued the cause for the United States as
amicus curiae urging reversal. With him on the brief were Solicitor
General Days, Assistant Attorney General Argrett, Edwin S.
Kneedler, Kenneth L. Greene,
J. Davitt McAteer, Allen H.
Feldman, and Edward D. Sieger.
Theresa M. Traber argued the cause for respondent.
With her on the brief was
Bert Voorhees. *
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. § 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. § 621
et seq., forbidding
agebased 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
*Briefs of
amici curiae urging reversal were filed for
the ERISA Industry Committee by
Michael E. Horne and
John
M. Vine; for the Equal Employment Advisory Council by
Douglas S.
McDowell and
Ellen Duffy McKay; and
for the New England Legal Foundation by
William J.
Kilberg, Peter H. Turza, Paul Blankenstein, Mark Snyderman,
and
Stephen S.Ostrach.
Briefs of
amici curiae urging affirmance were filed for
the American Association of Retired Persons by
Cathy
Ventrell-Monsees and
Mary Ellen Signorille; for the
Engineers and Scientists Guild, Lockheed Section, by
Stuart
Libicki; and for the National Employment Lawyers Association by
Stephen R. Bruce, Ronald Dean, and
Jeffrey Lewis.
Briefs of
amici curiae were filed for the American
Academy of Actuaries et al. by
Lauren M. Bloom; and for the
Chamber of Commerce of the United States by
Hollis T. Hurd,
Stephen A. Bokat, and
Robin S.
Conrad.
885
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. § 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. § 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. §§ 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 pro-
886
grams, 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. §§ 1l04(a), 1l06(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 §§ 502(a)(2) and (3) of ERISA's
civil enforcement provisions, 29 U. S. C. §§ 1132(a)(2), (3).
Lockheed moved to dismiss the complaint for failure to state a
claim, and the District Court granted the motion.
The Court of Appeals for the Ninth Circuit reversed in relevant
part.
60 F.3d
616 (1995). The Court of Appeals held that the amendments to
the Plan were unlawful under ERISA §406(a)(1)(D), 29 U. S. C. §
1l06(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 § 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
887
Appeals agreed with Spink that Lockheed had violated the OBRA
amendments by refusing to include Spink's service years prior to
1988 in determining his benefits. In so holding, the court found
that the OBRA amendments apply retroactively. See
id., at
620, n. 1. We issued a writ of certiorari, 516 U. S. 1087 (1996),
and now reverse.
II
Nothing in ERISA requires employers to establish employee
benefits plans. Nor does ERISA mandate what kind of benefits
employers must provide if they choose to have such a plan.
Shaw v.
Delta Air Lines, Inc., 463 U. S. 85, 91
(1983); Alessi v.
Raybestos-Manhattan, Inc., 451 U. S. 504, 511
(1981). ERISA does, however, seek to ensure that employees will not
be left emptyhanded once employers have guaranteed them certain
benefits. As we said in
Nachman Corp. v.
Pension Benefit
Guaranty Corporation, 446 U. S. 359 (1980),
when Congress enacted ERISA it "wanted to ... mak[e] sure that if a
worker has been promised a defined pension benefit upon
retirement-and if he has fulfilled whatever conditions are required
to obtain a vested benefithe actually will receive it."
Id.,
at 375. Accordingly, ERISA tries to "make as certain as possible
that pension fund assets [will] be adequate" to meet expected
benefits payments.
Ibid.
To increase the chances that employers will be able to honor
their benefits commitments-that is, to guard against the
possibility of bankrupt pension funds-Congress incorporated several
key measures into ERISA. Section 302 of ERISA sets minimum annual
funding levels for all covered plans, see 29 U. S. C. §§ 1082(a),
1082(b), and creates tax liens in favor of such plans when those
funding levels are not met, see § 1082(f). Sections 404 and 409 of
ERISA impose respectively a duty of care with respect to the
management of existing trust funds, along with liability for breach
of that duty, upon plan fiduciaries. See §§ 1104(a), 1109(a).
Fi-
888
nally, § 406 of ERISA prohibits fiduciaries from involving the
plan and its assets in certain kinds of business deals. See § 1106.
It is this last feature of ERISA that is at issue today.
Congress enacted § 406 "to bar categorically a transaction that
[is] likely to injure the pension plan."
Commissioner v.
Keystone Consolo Industries, Inc., 508 U. S. 152, 160
(1993). That section mandates, in relevant part, that "[a]
fiduciary with respect to a plan shall not cause the plan to engage
in a transaction, if he knows or should know that such transaction
constitutes a direct or indirect ... transfer to, or use by or for
the benefit of a party in interest, of any assets of the plan." 29
U. S. C. § 1106(a)(1)(D).1 The question here is whether this
provision of ERISA prevents an employer from conditioning the
receipt of early retirement benefits upon the participants' waiver
of employment claims. For the following reasons, we hold that it
does not.
III
Section 406(a)(1) regulates the conduct of plan fiduciaries,
placing certain transactions outside the scope of their lawful
authority. When a fiduciary violates the rules set forth in §
406(a)(1), § 409 of ERISA renders him personally liable for any
losses incurred by the plan, any ill-gotten profits, and other
equitable and remedial relief deemed appropriate by the court. See
29 U. S. C. § 1109(a). But in order to sustain an alleged
transgression of § 406(a), a plaintiff must show that a fiduciary
caused the plan to engage in the allegedly unlawful transaction.2
Unless a plaintiff can make that
1 Section 408 enumerates specific exceptions to the prohibitions
in § 406.
See 29 U. S. C. § 1l08(b). Lockheed does not argue that any of
these exceptions pertain to this case.
2 ERISA § 3(21)(A) provides: "[A] person is a fiduciary with
respect to a plan to the extent (i) he exercises any discretionary
authority or discretionary control respecting management of such
plan or exercises any authority or control respecting management or
disposition of its assets, (ii) he renders investment advice for a
fee or other compensation, direct or
889
showing, there can be no violation of § 406(a)(1) to warrant
relief under the enforcement provisions. Cf.
Peacock v.
Thomas, 516 U.
S. 349, 353 (1996) ("Section 502(a)(3) 'does not, after all,
authorize "appropriate equitable relief"
at large,
but only "appropriate equitable relief" for the purpose of
"redress[ing any] violations or ... enforc[ing] any provisions" of
ERISA''') (quoting
Mertens v.
Hewitt Associates,
508 U. S. 248,
253 (1993)). The Court of Appeals erred by not asking whether
fiduciary status existed in this case before it found a violation
of §406(a)(1)(D).3
A
We first address the allegation in Spink's complaint that
Lockheed and the board of directors breached their fiduciary
indirect, with respect to any moneys or other property of such
plan, or has any authority or responsibility to do so, or (iii) he
has any discretionary authority or discretionary responsibility in
the administration of such plan." 29 U. S. C. § 1002(21)(A).
3 Instead of pursuing this inquiry, the Court of Appeals found
that Lockheed was a "party in interest" under §
3(14)(C),
and asserted that "a party in interest who benefitted from an
impermissible transaction can be held liable under ERISA."
60 F.3d
616, 623
(CA9 1995). For that same proposition, several
Courts of Appeals have relied on statements in
Mertens v.
Hewitt Associates, 508 U. S. 248 (1993),
that "ERISA contains various provisions that can be read as
imposing obligations upon nonfiduciaries,"
id., at 253-254;
see also
id., at 254, n. 4 (citing § 406(a)), and that
"[p]rofessional service providers ... must disgorge assets and
profits obtained through participation as parties-in-interest in
transactions prohibited by §406,"
id., at 262. See,
e.
g., Reich v.
Stangl, 73 F.3d
1027, 1031-1032 (CA1O 1996), cert. pending, No. 95-1631;
Landwehr v.
DuPree, 72 F. 3d
726,733-734 (CA9
1995);
Reich v.
Compton, 57 F.3d
270, 285
(CA3 1995). Insofar as they apply to § 406(a),
these statements in
Mertens (which were in any event dicta,
since § 406(a) was not at issue) suggest liability for parties in
interest only when a violation of § 406(a) has been
establishedwhich, as we have discussed, requires a showing that a
fiduciary caused the plan to engage in the transaction in question.
The Court of Appeals thus was not necessarily wrong in saying that
"a party in interest who benefitted from an
impermissible
transaction can be held liable under ERISA" (emphasis added); but
the only transactions rendered impermissible by § 406(a) are
transactions caused by fiduciaries.
890
duties when they adopted the amendments establishing the early
retirement programs. Plan sponsors who alter the terms of a plan do
not fall into the category of fiduciaries. As we said with respect
to the amendment of welfare benefit plans in
Curtiss-Wright
Corp. v.
Schoonejongen, 514 U. S. 73 (1995),
"[e]mployers or other plan sponsors are generally free under ERISA,
for any reason at any time, to adopt, modify, or terminate welfare
plans."
Id., at 78 (citing
Adams v.
Avondale
Industries, Inc., 905 F.2d
943, 947 (CA6 1990)). When employers undertake those actions,
they do not act as fiduciaries, 514 U. S., at 78, but are analogous
to the settlors of a trust, see
Johnson v.
Georgia-Pacific Corp., 19 F.3d
1184, 1188 (CA7 1994).
This rule is rooted in the text of ERISA's definition of
fiduciary. See 29 U. S. C. § 1002(21)(A) (quoted n. 2,
supra). As the Second Circuit has observed, "only when
fulfilling certain defined functions, including the exercise of
discretionary authority or control over plan management or
administration," does a person become a fiduciary under § 3(21)(A).
Siskind v.
Sperry Retirement Program, Unisys,
47 F.3d
498, 505 (1995). "[B]ecause [the] defined functions [in the
definition of fiduciary] do not include plan design, an employer
may decide to amend an employee benefit plan without being subject
to fiduciary review."
Ibid. We recently recognized this very
point, noting that "it may be true that amending or terminating a
plan ... cannot be an act of plan 'management' or
'administration.'''
Varity Corp. v.
Howe, 516 U. S. 489, 505
(1996). As noted above, we in fact said as much in
Curtiss-
Wright, see 514 U. S., at 78, at least with respect to welfare
benefit plans.
We see no reason why the rule of
Curtiss-Wright should
not be extended to pension benefit plans. Indeed, there are
compelling reasons to apply the same rule to cases involving both
kinds of plans, as most Courts of Appeals have
891
done.4 The definition of fiduciary makes no distinction between
persons exercising authority over welfare benefit plans and those
exercising authority over pension plans. It speaks simply of a
"fiduciary with respect to a plan," 29 U. S. C. § 1002(21)(A), and
of "management" and "administration" of "such plan,"
ibid.
And ERISA defines a "plan" as being either a welfare or pension
plan, or both. See § 1002(3). Likewise, the fiduciary duty
provisions of ERISA are phrased in general terms and apply with
equal force to welfare and pension plans. See,
e. g.,
§ 1l04(a) (specifying duties of a "fiduciary ... with respect to a
plan"). See also
Shaw v.
Delta Air Lines, Inc., 463
U. S., at 91 (ERISA "sets various uniform standards, including
rules concerning ... fiduciary responsibility, for both pension and
welfare plans"). Given ERISA's definition of fiduciary and the
applicability of the duties that attend that status, we think that
the rules regarding fiduciary capacity-including the
settlor-fiduciary distinction-should apply to pension and welfare
plans alike.
Lockheed acted not as a fiduciary but as a settlor when it
amended the terms of the Plan to include the retirement programs.
Thus, § 406(a)'s requirement of fiduciary status is not met. While
other portions of ERISA govern plan amendments, see,
e.
g., 29 U. S. C. § 1054(g) (amendment generally may not
decrease accrued benefits); § 1085b (if adoption of an amendment
results in underfunding of a defined benefit plan, the sponsor must
post security for the amount of the deficiency), the act of
amending a pension plan does not trigger ERISA's fiduciary
provisions.
4 See, e. g., Siskind v. Sperry Retirement Program, Unisys,
47 F.3d
498, 505 (CA2 1995); Averhart v. US WEST Management Pension
Plan,
46 F.3d
1480, 1488 (CAlO 1994); Fletcher v. Kroger Co.,
942 F.2d
1137, 11391140 (CA7 1991); Hozier v. Midwest Fasteners, Inc.,
908 F.2d
1155, 11601162 (CA3 1990) (listing cases); Sutton v. Weirton
Steel Div. of Nat. Steel Corp.,
724 F.2d
406, 411 (CA4 1983), cert. denied, 467 U. S. 1205 (1984).
892
B
Spink also alleged that the members of Lockheed's Retirement
Committee who implemented the amended Plan violated §406(a)(1)(D).
As with the question whether Lockheed and the board members can be
held liable under ERISA's fiduciary rules, the Court of Appeals
erred in holding that the Retirement Committee members violated the
prohibited transaction section of ERISA without making the
requisite finding of fiduciary status. It is not necessary for us
to decide the question whether the Retirement Committee members
acted as fiduciaries when they paid out benefits according to the
terms of the amended Plan, however, because we do not think that
they engaged in any conduct prohibited by § 406(a)(1)(D).
The "transaction" in which fiduciaries may not cause a plan to
engage is one that "constitutes a direct or indirect ... transfer
to, or use by or for the benefit of a party in interest, of any
assets of the plan." 29 U. S. C. § 1l06(a)(1)(D). Spink reads §
406(a)(1)(D) to apply in cases where the benefit received by the
party in interest-in this case, the employer-is not merely a
"natural inciden[t] of the administration of pension plans." Brief
for Respondent 10. Lockheed, on the other hand, maintains that a
plan administrator's payment of benefits to plan participants and
beneficiaries pursuant to the terms of an otherwise lawful plan 5
is wholly outside the scope of § 406(a)(1)(D). See Reply Brief for
Petitioners 10. We agree with Lockheed.
Section 406(a)(1)(D) does not in direct terms include the
payment of benefits by a plan administrator. And the surrounding
provisions suggest that the payment of benefits is
5 As Lockheed notes, see Brief for Petitioners 13; Reply Brief
for Petitioners 7, n. 4, there is no claim in this case that the
amendments resulted in any violation of the participation, funding,
or vesting requirements of ERISA. See 29 U. S. C. §§ 1051-1061
(participation and vesting); §§ 10811086 (funding).
893
in fact not a "transaction" in the sense that Congress used that
term in § 406(a). Section 406(a) prohibits fiduciaries from
engaging the plan in the "sale," "exchange," or "leasing" of
property, 29 U. S. C. § 1l06(a)(1)(A); the "lending of money" or
"extension of credit," § 1l06(a)(1)(B); the "furnishing of goods,
services, or facilities," § 1l06(a)(1)(C); and the "acquisition ...
of any employer security or employer real property," §
1l06(a)(1)(E), with a party in interest. See also § 1l08(b)
(listing similar types of "transactions"). These are commercial
bargains that present a special risk of plan underfunding because
they are struck with plan insiders, presumably not at arm's length.
See
Commissioner v.
Keystone Consolo Industries,
Inc., 508 U. S., at 160. What the "transactions" identified in
§ 406(a) thus have in common is that they generally involve uses of
plan assets that are potentially harmful to the plan. Cf.
id., at 160-161 (reasoning that a transfer of unencumbered
property to the plan by the employer for the purpose of applying it
toward the employer's funding obligation fell within § 406(a)(1)'s
companion tax provision, 26 U. S. C. § 4975, because it could
"jeopardize the ability of the plan to pay promised benefits"). The
payment of benefits conditioned on performance by plan participants
cannot reasonably be said to share that characteristic.
According to Spink and the Court of Appeals, however, Lockheed's
early retirement programs were prohibited transactions within the
meaning of § 406(a)(1)(D) because the required release of
employment-related claims by participants created a "significant
benefit" for Lockheed. 60 F. 3d, at 624. Spink concedes, however,
that among the "incidental" and thus legitimate benefits that a
plan sponsor may receive from the operation of a pension plan are
attracting and retaining employees, paying deferred compensation,
settling or avoiding strikes, providing increased compensation
without increasing wages, increasing employee turnover, and
reducing the likelihood of lawsuits by encouraging employees
894
who would otherwise have been laid off to depart voluntarily.
Brief for Respondent 11.
We do not see how obtaining waivers of employmentrelated claims
can meaningfully be distinguished from these admittedly permissible
objectives. Each involves, at bottom, a
quid pro quo between
the plan sponsor and the participant: that is, the employer
promises to pay increased benefits in exchange for the performance
of some condition by the employee. By Spink's admission, the
employer can ask the employee to continue to work for the employer,
to cross a picket line, or to retire early. The execution of a
release of claims against the employer is functionally no
different; like these other conditions, it is an act that the
employee performs for the employer in return for benefits.
Certainly, there is no basis in § 406(a)(1)(D) for distinguishing a
valid from an invalid
quid pro quo. Section 406(a)(1)(D)
simply does not address what an employer can and cannot ask an
employee to do in return for benefits. See generally
Alessi
v.
Raybestos-Manhattan, Inc., 451 U. S., at 511 (ERISA
"leaves thee] question" of the content of benefits "to the private
parties creating the plan .... [T]he private parties, not the
Government, control the level of benefits").6 Furthermore, if an
employer can avoid litigation that might result from laying off an
employee by enticing him to retire early, as Spink concedes, it
stands to reason that the employer can also protect itself from
suits arising out of
6 Indeed, federal law expressly approves the use of early
retirement incentives conditioned upon the release of claims. The
Older Workers Benefit Protection Act, Pub. L. 101-433, 104 Stat.
983 (1990), establishes requirements for the enforceability of
employee waivers of ADEA claims made in exchange for early
retirement benefits. See 29 U. S. C. § 626(f). Of course, the
enforceability of a particular waiver under this and other
applicable laws, including state law, is a separate issue from the
question whether such an arrangement violates ERISA's prohibited
transaction rules. But absent clearer indication than what we have
in § 406(a)(1)(D), we would be reluctant to infer that ERISA bars
conduct affirmatively sanctioned by other federal statutes.
895
that retirement by asking the employee to release any
employment-related claims he may have.7
In short, whatever the precise boundaries of the prohibition in
§ 406(a)(1)(D), there is one use of plan assets that it cannot
logically encompass: a
quid pro quo between the employer and
plan participants in which the plan pays out benefits to the
participants pursuant to its terms. When § 406(a)(1)(D) is read in
the context of the other prohibited transaction provisions, it
becomes clear that the payment of benefits in exchange for the
performance of some condition by the employee is not a
"transaction" within the meaning of § 406(a)(1). A standard that
allows some benefits agreements but not others, as Spink suggests,
lacks a basis in § 406(a)(1)(D); it also would provide little
guidance to lower courts and those who must comply with ERISA. We
thus hold that the payment of benefits pursuant to an amended plan,
regardless of what the plan requires of the employee in return for
those benefits, does not constitute a prohibited transaction.8
7 Spink's
amicus the United States suggests that §
406(a)(1)(D) is not violated so long as the employer provides
benefits as compensation for the employee's labor, not for other
things such as a release of claims. See Brief for United States as
Amicus Curiae 15-16. But the Government contradicts its own
rule with the examples it gives of lawful plans. For instance, the
Government recognizes that "[a]n employer may provide increased
pension benefits as an incentive for early retirement."
Id.,
at 20. While retirement benefits themselves may be defined as
deferred wages, an
increase in retirement benefits as part
of an early retirement plan does not compensate the employee so
much for services rendered as for the distinct act of leaving the
company sooner than planned. The standard offered by the Government
is thus of little help in identifying transactions prohibited by §
406(a)(1)(D).
8 If the benefits payment were merely a sham transaction, meant
to disguise an otherwise unlawful transfer of assets to a party in
interest, or involved a kickback scheme, that might present a
different question from the one before us. Spink does not suggest
that Lockheed's payment was a cover for an illegal scheme, only
that payment of the benefits conditioned on the release was itself
violative of § 406(a)(1)(D).
896
IV
Finally, we address whether §§ 9201 and 9202(a) of OBRA, which
amended respectively the ADEA and ERISA to prohibit age-based
benefit accrual rules, apply retroactively.9 Two Terms ago, we set
forth the proper approach for determining the retroactive effect of
a statute in
Landgraf v.
USI Film Products,
511 U. S. 244 (1994). We
stated that "[w]hen a case implicates a federal statute enacted
after the events in suit, the court's first task is to determine
whether Congress has expressly prescribed the statute's proper
reach."
Id., at 280. Thus, we must determine whether
Congress has plainly delineated the temporal scope of the OBRA
amendments to ERISA and the ADEA.
Section 9204(a)(1) of OBRA, 100 Stat. 1979, expressly provides
that "[t]he amendments made by sections 9201 and 9202 shall apply
only with respect to plan years beginning on or after January 1,
1988, and only to employees who have 1 hour of service in any plan
year to which such amendments apply." 29 U. S. C. § 623 note. This
language compels the conclusion that the amendments are
prospective. For plan years that began on or after January 1, 1988,
age-based accrual rules are unlawful under the amendments; further,
only employees who have one hour of service in such a plan year are
entitled to the protection of the amendments. But for plan years
prior to the effective date, employers cannot be held liable for
using age-based accrual rules. Where, as here, the temporal effect
of a statute is manifest on its face, "there is no need to resort
to judicial default rules,"
Land-
9 Section 9203(a)(1) of OBRA, amending ERISA to prevent the
exclusion of employees of a certain age from plan participation,
applies "only with respect to plan years beginning on or after
January 1, 1988, and only with respect to service performed on or
after such date." OBRA § 9204(b), 100 Stat. 1980. The Court of
Appeals acknowledged that Lockheed fully complied with that
amendment by admitting Spink as a member of the Plan as of December
25, 1988, the first day of Lockheed's 1988 plan year.
897
graf v.
USI Film Products, supra, at 280, and
inquiry is at an end.
Notwithstanding the clarity of § 9204(a)(1), the Court of
Appeals believed that the text of §§ 9201 and 9202(a) require
retroactive application of the benefit accrual rules. To deny an
employee credit for service years during which he was excluded from
the plan based on age, even though that exclusion was lawful at the
time, the Court of Appeals reasoned, is to reduce the rate of
benefits accrual for that employee.1o 60 F. 3d, at 620. When
Congress includes a provision that specifically addresses the
temporal effect of a statute, that provision trumps any general
inferences that might be drawn from the substantive provisions of
the statute. See generally
Morales v.
Trans World
Airlines, Inc., 504 U. S. 374, 384
(1992);
Fourco Glass Co. v.
Transmirra Products
Corp., 353 U. S.
222, 228-229 (1957). Even if it were proper to disregard the
express time limitations in § 9204(a)(1) in favor of more general
language, §§ 9201 and 9202(a) cannot bear the weight of the Court
of Appeals' construction. A reduction in total benefits due is not
the same thing as a reduction in the rate of benefit accrual; the
former is the final outcome of the calculation, whereas the latter
is one of the factors in the equation.
***
The judgment of the Court of Appeals is reversed, and the case
is remanded for further proceedings consistent with this
opinion.
It is so ordered.
10 See 29 U. S. C. § 1054(b)(1)(H)(i) (OBRA § 9202(a)) (defined
benefit plan violates ERISA's benefit accrual requirements "if,
under the plan, an employee's benefit accrual is ceased, or the
rate of an employee's benefit accrual is reduced, because of the
attainment of any age"); § 623(i)(1)(A) (OBRA § 9201) (prohibiting
employers from establishing or maintaining a defined benefit plan
that "requires or permits ... the cessation of an employee's
benefit accrual, or the reduction of the rate of an employee's
benefit accrual").
898
Opinion of BREYER, J.
JUSTICE BREYER, with whom JUSTICE SOUTER joins, concurring in
part and dissenting in part.
I join the Court's opinion except for its conclusion in Part
III-B that "the payment of benefits pursuant to an amended plan,
regardless of what the plan requires of the employee in return for
those benefits, does not constitute a prohibited transaction."
Ante, at 895. The legal question addressed in Part III-B is
a difficult one, which we need not here answer and which would
benefit from further development in the lower courts, where
interested parties who are experienced in these highly technical,
important matters could present their views. Accordingly, I would
follow the suggestion of the Solicitor General that the Court not
reach the issue in this case.
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