King v. National Human Resource Committee, Inc., 218 F.3d 719 (7^th Cir. 2000)-Following the bankruptcy of their former employer, EWI, Inc., and purchase of its assets by Tecumseh Metal Products, Inc., a large group of union employees alleged violations of ERISA in the handling of their 401(k) plan. This court affirmed the district court's summary judgment against the employees. The purchase agreement provided for Tecumseh to assume the union contract, to maintain a defined contribution 401(k) plan, to receive the account balances for the union members participating in the EWI plan, and to transfer the balances to a plan established by Tecumseh for the funds or to an already existing plan.

This court first dispensed with, for lack of evidence, the plaintiffs' allegations of self-dealing in violation of 29 U.S.C. § 1103(c)(1), which says that the assets of a plan "shall never inure to the benefit of any employer  . . ."  Next, it found no violation of 29 U.S.C. §1103(d), which deals with duties upon the termination of a plan and provides that upon termination the plan shall distribute the assets in accordance with the terms of the plan. The employees claimed that they should have received their funds so that they could invest them as they pleased when the employer terminated the plan. The court pointed out there had been a "spin-off" to a new plan, rather than a plan termination. Spin-offs and transfers of assets from one qualified plan to another are allowed under both the Internal Revenue Code and ERISA. See 26 U.S.C. § 414(I), 26 C.F.R. § 1.414(I)-1, and 29 U.S.C. § 1058.

Finally, this court found that defendants did not violate their fiduciary duties under 29 U.S.C. § 1104 in their selection of a new plan and in their investment decisions.  The defendants' delays were justified since the defendants lacked crucial information through no fault of their own. Furthermore, the defendants' decision to invest plan assets in a money market fund could "hardly be classified as irresponsible."  In any event, the district court was correct in proclaiming "no harm, no foul": The employees suffered no damages, in that they fared better in the money market funds than they would have in the individual investments they had previously chosen.