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Major Energy: Pension Plan Modifications

Major Energy has decided to adopt a new pension plan. Under the new plan, Major Energy owners will benefit greatly, but the employees will be significantly less well off than under the present plan, even though the owners of Major Energy inform the employees that the whole purpose of the plan is to make the employees better off. Major Energy's characterization of the effects of the change:
Answer

A.is legal, as long as the new plan is funded at level substantially equivalent to HIPAA standards.

B. does not violate section 404(a) of ERISA, as interpreted by the U.S. Supreme Court in Varity Corp. v. Howe, since it does not amount to a permanent termination of the availability of a pension benefits plan.

C.violates section 404(a) of ERISA, as interpreted by the U.S. Supreme Court in Varity Corp. v. Howe.

D. violates section 404(a) of ERISA, which prohibits any modification to a pension benefit plan once the first employee has enrolled in the plan.

Solution Preview

C. violates section 404(a) of ERISA, as interpreted by the U.S. Supreme Court in Varity Corp. v. Howe.

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Solution Summary

This solution provides the correct answer with explanation to the Major Energy pension plan question presented.

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