Cite as: 517 U. S. 882 (1996)
Opinion of the Court
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).
895
Page: Index Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 NextLast modified: October 4, 2007