that context and not, as in this instance, to a surplus derived from superior negotiating performance or bargaining experience. CIGNA and ILCO negotiated the IIP sale, the terms of which included the transfer of $ 8.7 million from CIGNA to ILCO to fund the IIP Plan. As in Malia, all of plaintiffs' accrued benefits are fully funded and are protected under the merged plan. Denying plaintiffs the $ 3.7 million in no way diminishes the benefits to which plaintiffs are entitled as a result of their past employment. They are not, however, entitled to the surplus assets that inured to ILCO not by favorable actuarial or investment experience but instead from favorable bargaining during the sales negotiations with CIGNA -- or even, as plaintiffs allege, from terminating plaintiffs' employment for the purpose of obtaining the $ 3.7 million surplus.
This allegation is contained in count VI of plaintiffs' amended complaint. It alleges that defendants terminated plaintiffs' employment with ILCO in order to prevent plaintiffs from attaining their "right to benefit from the full amount transferred from the CIGNA Plan to the IIP Plan." (Compl. P 111). Plaintiffs assert that defendants thus violated Section 510 of ERISA, which provides that it is unlawful for any person to discharge or discriminate against a participant for the purpose of interfering with the attainment of any right to which the participant is entitled or may become entitled under an employee benefit plan. 29 U.S.C. § 1140 (emphasis added). The short answer to plaintiffs' assertion is that § 1140 refers to vested rights, not to those rights that might become vested by future events. Harsh as this result may be, the fact is that plaintiffs had no guarantee of continued employment with ILCO. They could be terminated for any cause or no cause without remedy. They could be terminated, with the result that they were deprived of the opportunity to accrue more benefits through additional years of service, and still have no remedy. Because plaintiffs are not entitled under ERISA to a share of the surplus assets, it follows that their termination did not interfere with the attainment of any "right" to the surplus, and defendants' motion for judgment on the pleadings of count VI must therefore be granted.
B. ERISA's "Exclusive Benefits" Clause
Plaintiffs allege that defendants violated ERISA's "exclusive benefits" clause, 29 U.S.C. §§ 1103(c)(1) and 1104 (a)(1)(A), by accumulating the $ 3.7 million surplus assets for ILCO's own benefit rather than holding them "exclusively for the purpose of providing benefits to plan participants and their beneficiaries." (Compl. P 53). Malia did not address these specific ERISA provisions or discuss whether they prohibited reversion of surplus assets to an employer.
The Third Circuit had previously addressed the issue, however, in Chait v. Bernstein, which involved a partial termination of a benefit plan. 835 F.2d 1017, 1020, 1023 (3d Cir. 1987). While the ILCO Plan in this case is ongoing and has not partially terminated, Chait is instructive nonetheless. The court pointed out that the "exclusive benefits" clause is standard language appearing in every ERISA plan pursuant to ERISA section 403(c)(1), 29 U.S.C. § 1103(c)(1). Id. at 1023. The Third Circuit held that a plan's "exclusive benefit" language standing alone cannot be read as prohibiting reversion of plan surplus to the employer. Id. See also, Borst v. Chevron, 36 F.3d 1308, 1316-17 (5th Cir. 1994) (neither ERISA nor Internal Revenue Code requires distribution of surplus assets upon partial termination of a plan; employees' rights to portion of surplus assets must rest on some provision of plan itself). Plaintiffs have not alleged any additional provision of the IIP or ILCO Plans that would prohibit ILCO's retention of the surplus assets. As a matter of law, defendants have not breached their fiduciary duty to plaintiffs by retaining the surplus and defendants' motion for judgment on the pleadings of count I must be granted.
Under prevailing caselaw, plaintiffs are not entitled to the $ 3.7 million surplus assets in the ILCO Plan. Defendants' termination of plaintiffs' employment with ILCO did not, therefore, interfere with plaintiffs' attainment of the surplus and defendants' motion for partial judgment on the pleadings of count VI must therefore be granted. Because ERISA's "exclusive benefits" clause, without more, does not prohibit reversion of a plan surplus to an employer, defendants did not breach their fiduciary duty to plaintiffs by retaining the surplus within the ILCO Plan. Defendants' motion for judgment on the pleadings of count I must therefore be granted.
An appropriate order follows.
AND NOW, this 16th day of March, 1995, it is hereby ordered that defendant's motion for partial judgment on the pleadings of count I and count VI of plaintiffs' amended complaint is GRANTED. Judgment is entered for defendants on counts I and VI.
BY THE COURT: