Erisa and the Limits of Equity

Abstract

As we approach the third decade of the Employee Retirement Income Security Act (ERISA)' era, to what extent is it fair to say that ERISA is a statute that sounds in equity? What difference does the answer make in terms of the statute's success in reforming the delivery of employee benefits? If we confine our consideration of the first question to the language and history of the statute, the answer is straightforward: Congress borrowed heavily from equity. ERISA section 4032 requires that assets of employee benefit plans be held in trust. Sections 404, 405, and 406' impose equity-based fiduciary duties on persons exercising control of plan assets or discretionary control of plan management, and section 4094 creates liability for breach of such duties. Section 5025 authorizes participants, beneficiaries, fiduciaries, and the Department of Labor to bring civil suits to obtain equitable relief appropriate to enforce the provisions of the legislation and of employee benefit plans. Measuring the actual impact of ERISA's debt to equity on the delivery of employee benefit plans is considerably more problematic. ERISA's version of equity includes a rule of prudence and a rule requiring plan fiduciaries to discharge their obligations for the sole purpose of providing benefits to participants and their beneficiaries (the exclusive purpose rule). Such rules have failed to provide a satisfactory, or at least complete, framework for resolving basic and recurring statutory issues.' For example, may a pension plan accept a reduced rate of return in favor of investments that create employment opportunities for participants? May a court award punitive damages to a participant wrongfully denied benefits? What standard should courts use in reviewing a denial of benefits? Such questions raise straightforward policy issues concerning the delivery of employee benefits. Yet ERISA pushes courts into responding to such questions by applying rules developed under equity, shunting into the background issues of benefits policy.