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KOENIG v. INTERCONTINENTAL LIFE CORP.

March 16, 1995

GEORGIA B. KOENIG, et al., on behalf of themselves and others similarly situated
v.
INTERCONTINENTAL LIFE CORP., et al.



The opinion of the court was delivered by: J. WILLIAM DITTER, JR.

 Ditter, J.

 March 16, 1995

 This ERISA action arises out of a class action lawsuit brought by former employees of the Individual Insurance Products Division of CIGNA Corporation ("IIP"). The instant matter comes before me on defendants' motion for partial judgment on the pleadings on Counts I and VI of plaintiffs' amended complaint. For the reasons stated below, their motion is granted.

 I. FACTS

 Defendant, Intercontinental Life Corporation ("ILCO"), purchased IIP from CIGNA in December, 1988. The IIP employees were entitled to benefits under CIGNA's pension plan. When CIGNA and ILCO negotiated the IIP purchase, they agreed that ILCO would continue the pension plan for IIP employees and that CIGNA would transfer assets from the CIGNA plan to a successor plan which ILCO would establish. ILCO had already established a pension plan for its employees in January, 1988.

 Pursuant to the 1988 agreement of sale, ILCO assumed control of the IIP retirement plan and established the IIP Plan, a defined-benefit plan, for former IIP employees. CIGNA transferred more than $ 8.7 million to the IIP Plan. In January, 1990, ILCO merged the IIP Plan into the ILCO Plan. *fn1"

 Count I of the amended complaint alleges that defendants have breached their fiduciary duty by operating the IIP and ILCO Plans for the benefit of ILCO and not for the exclusive benefit of the participants, in violation of 29 U.S.C. §§ 1103(c)(1) and 1104(a)(1). Count VI alleges that defendants have violated 29 U.S.C. § 1140 by terminating plaintiffs' employment with ILCO for the purpose of interfering with plaintiffs' right to benefit from the full $ 8.7 million transferred by CIGNA to the IIP Plan.

 Defendants have moved for partial judgment on the pleadings on counts I and VI, claiming that as a matter of law, plaintiffs are not entitled to the surplus assets in a defined benefit pension plan.

 II. THE $ 3.7 MILLION IN SURPLUS ASSETS

 A. Plan Participants Not Entitled to Surplus Assets

 There is no dispute that the $ 3.7 million in surplus assets are in the ILCO Plan. Plaintiffs' amended complaint alleges, "the ILCO Plan reaped a windfall in excess of $ 3,767,757" when ILCO terminated plaintiffs' employment with ILCO and "the ILCO Plan has retained the $ 3,767,757." (Compl., PP 64, 65). My opinion of March 15, 1995, does not alter the fact that the IIP Plan's funds were merged into the ILCO Plan; rather, it held only that the merger was ineffective to reduce plaintiffs' rate of future benefit accrual. Thus, the surplus funds remain in the merged ILCO Plan, which is an ongoing plan. *fn2"

 Defendants argue that recent Third Circuit caselaw holds that plan participants do not have a right to surplus assets in the context of a pension plan merger. Malia v. General Electric Co., 23 F.3d 828, 833 (3d Cir.), cert. denied, 130 L. Ed. 2d 328, 115 S. Ct. 377 (1994). See also Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1189 (7th Cir. 1994). Malia involved the disposition of $ 1.3 billion in surplus assets that existed in one pension plan which had been merged into another. 23 F.3d at 829. Plaintiffs argued that they ...


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