122
HARRIS TRUST AND SAV. BANK Thomas, J., dissenting
use those funds. See 767 F. Supp. 1269, 1274-1275 (SDNY 1991).7
Indeed, that is precisely why this litigation arose. Hancock had not squandered the pension plan's funds, as one might expect in the run-of-the-mill breach of fiduciary duty case. The Pension Administration Fund, and thus the free funds, had grown beyond the parties' expectations. The pension plan, however, was unhappy with the bargain it had struck in its contract. By 1977, it had discovered that it could get cheaper guaranteed benefits and a better return on its investment elsewhere, see id., at 1273-1274, but GAC 50 posed several obstacles to moving the uncommitted funds. Terminating the contract would require the plan to "re-purchase" annuities for the benefits already guaranteed. The repurchase price set by the contract depends on assumptions concerning the interest rate that would be earned on the funds over the term of the annuity. See Agreed Statement of Facts ¶¶ 33-34, 41, App. 89, 90-91 (21/2-3% for benefits vested before 1968; 5% for those vested after 1968).8 Because those interest rates turned out by the late 1970's to be relatively low compared to prevailing market rates, the contractually determined price for purchasing the annuities was correspondingly high and the pension plan considered the option of terminating the contract to be "prohibitively expensive." Brief for Respondent 5. Withdrawing assets, as already mentioned, entailed a significant asset liquidation adjustment. Therefore, before the 1977 amendment the only other way the free funds could be used was to purchase
7 GAC 50 made no provision for the rollover mechanism that Hancock allowed the pension plan to use on several occasions to reduce the surplus in the Pension Administration Fund. See 767 F. Supp., at 1274-1275. See also Agreed Statement of Facts ¶ 77, App. 96.
8 The "artificially low interest rate assumptions," ante, at 93, in the contract were last amended in 1968. See Agreed Statement of Facts ¶¶ 105, 111, App. 100, 101. The pension plan alleged that Hancock breached its fiduciary duties by refusing to amend the contract again to take into account changed conditions. Amended Complaint ¶ 40(b), App. 58.
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