Supreme Court of the United States

Hughes Aircraft Co. v. Jacobson

January 25, 1999525 U.S. 432

Summary

Justice Thomas, writing for a unanimous Court, held that Hughes’ amendments to its defined benefit pension plan did not violate ERISA. Participants had rights to their accrued benefits, not to the plan’s surplus, and using surplus assets to pay benefits under a new noncontributory structure did not violate the vesting or anti-inurement provisions. Amending the plan was a settlor function rather than a fiduciary act, and incidental benefits to Hughes did not make the amendments sham transactions. The amendments also did not terminate the plan, and the common-law wasting trust theory could not support respondents’ termination claim. The Court reversed the Court of Appeals’ judgment reinstating the claims. There were no separate opinions.

Holding

  • Participants’ rights to surplus assets under ERISA’s vesting provisions.. The amendments did not violate ERISA’s vesting requirements because participants retained their accrued benefits and had no entitlement to the defined benefit plan’s surplus, including surplus attributable to their contributions.
  • Use of surplus assets to fund the new benefit structure under ERISA’s anti-inurement provision.. Using surplus assets to pay benefits under the noncontributory structure did not violate the anti-inurement provision or create a second plan.
  • Whether amendments to a contributory pension plan are fiduciary acts.. Hughes did not act as a fiduciary when it amended the plan, so respondents’ fiduciary-duty claims failed.
  • Whether incidental benefits to Hughes established a sham transaction.. Respondents failed to establish a sham transaction based on reduced labor costs or other incidental benefits Hughes received from the amendments.
  • Whether the amendments terminated the plan or justified termination under the wasting trust doctrine.. The amendments did not terminate the plan, and the wasting trust doctrine could not sustain respondents’ termination claim.

Docket 97-1287

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