Changing the Rules of the Game: Pension Plan Terminations and Early Retirement Benefits

This Note examines whether early retirement benefits are included among the liabilities that an employer must satisfy before that employer can receive a reversion of excess assets. Part I reviews the background of plan terminations and how they affect early retirement benefits. It also discusses the general structure of ERISA. Part II examines the controversy surrounding whether ERISA’s definition of “accrued benefits” includes early retirement benefits. ERISA requires that employees receive all of their accrued benefits before the employers receive any reversions. However, the circuits have disagreed as to whether early retirement benefits are accrued benefits and, therefore, covered by this requirement. Even if early retirement benefits are not accrued benefits, an alternative theory suggests that the distribution requirements of section 4044(a)(6) require payment of those benefits to employees. Part III analyzes the requirements of ERISA section 4044(a)(6). Section 4044(a) establishes a priority scheme for distribution of assets upon plan termination. The distribution scheme is composed of six categories, the last of which allocates assets “to all other benefits under the plan.” The circuits are split as to whether category six of section 4044(a) covers employees’ benefit expectations including early retirement benefits. Part IV explores the public policy considerations relevant to the issue of whether BRISA should require employers to pay early retirement benefits prior to receiving a reversion of excess assets.