FIRESTONE TIRE AND RUBBER COMPANY, ET AL., PETITIONERS V. RICHARD BRUCH, ET AL., ETC. No. 87-1054 In the Supreme Court of the United States October Term, 1988 On Writ Of Certiorari To The United States Court Of Appeals For The Third Circuit Brief For The United States As Amicus Curiae Supporting Respondents TABLE OF CONTENTS Questions Presented Interest of the United States Statement Summary of argument Argument: 1. Benefit denials by employer-controlled administrators of unfunded employee benefit plans should be reviewed without deference to the administrator's interpretation of the terms of the plan A. Congress's purpose in enacting ERISA are advanced if unfunded, employer-controlled employee benefit plans are interpreted as contracts bargained at arms' length B. Neither the common law of trusts nor experience with LMRA trusts supports the use of the arbitrary and capricious standard in this case C. ERISA itself does not mandate deference to an employer's interpretation of the terms of an unfunded employee benefit plan D. A "flexible" arbitrary and capricious standard is not a viable alternative to de novo review of benefit decisions made by biased administrators of unfunded plans II. Former employees who were plan participants are entitled to obtain copies of plan documents upon request Conclusion QUESTIONS PRESENTED 1. Whether the court of appeals correctly concluded that in reviewing denials of benefits under Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1132(a)(1)(B), a court should interpret the terms of the relevant employee benefit plan without deference to the employer's construction in cases involving unfunded plans administered by employers. 2. Whether former employees are entitled to obtain information about employee benefit plans maintained by their former employer pursuant to Section 104(b)(4) of ERISA, 29 U.S.C. 1024 (b)(4). INTEREST OF THE UNITED STATES The Secretary of Labor, along with participants and beneficiaries of employee benefit plans, enforces the fiduciary standards and the reporting and disclosure requirements imposed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. (& Supp. IV) 1001 et seq. 29 U.S.C. 1132(a). This case requires the Court to determine, first, the appropriate standard of judicial review of benefit determinations made by ERISA fiduciaries and, second, who is entitled to obtain information about a plan covered by the statute. Because these issues implicate the Secretary's ability to ensure fair and impartial plan administration and compliance with ERISA's requirements, the Secretary has a substantial interest in this case. STATEMENT 1. In November 1980, petitioner Firestone Tire & Rubber Company sold five of its plants, together comprising its Plastics Division, to the Occidental Petroleum Corporation's Hooker Chemical Division. Occidental acquired the five plants as going concerns, and most of the approximately 500 salaried employees at those plants continued in their same positions as Occidental employees, without interruption and at the same rates of pay. /1/ Pet. App. A4, A45. Construing its termination pay plan, which provided severance pay to the employees out of Firestone's general assets rather than from a separate fund, Firestone denied severance pay to the employees who transferred to Occidental. It reasoned that no "reduction in work force" (which triggered severance pay under Firestone's plan) occurred when the Plastics Division was sold as an ongoing operation. Id. at A4, A26-A27, A48. /2/ In addition, some of Firestone's former employees requested but were denied information concerning Firestone's employee benefit plans on the ground that they were no longer participants in the plans (id. at A5, A71). 2. Six former Firestone (now Occidental) employees filed this class action in the United States District Court for the Eastern District of Pennsylvania, alleging that Firestone improperly withheld severance pay due under the termination pay plan (Pet. App. A4, A45-A46). /3/ Three of the named plaintiffs also alleged that Firestone's administrators unlawfully failed to disclose benefit plan information upon request (id. at A3, A5, A39, A46, A69). The suits were brought pursuant to Section 502(a)(1) of ERISA, 29 U.S.C. 1132(a)(1), which provides that a participant or beneficiary of an employee benefit plan may bring a civil action "(A) for the relief provided for in subsection (c) of this section," which provides a penalty of up to $100 a day for failure to provide requested information, and "(B) to recover benefits due to him under the terms of his plan." The district court granted Firestone's motion for summary judgement (Pet. App. A45-A73). The court limited its review of the denial of termination benefits "to determining whether the administrator's actions were arbitrary and capricious" (id. at A47), and concluded that Firestone's decision not to pay termination benefits satisfied this test (id. at A56). The district court also denied the named plaintiffs' claims that Firestone had improperly refused to provide the information they had requested (Pet. App. A70-A72. It recognized that "Section 104(b)(4) of ERISA, 29 U.S.C. Section 1024(b)(4), imposes a duty on a plan administrator to respond to written requests for information about the plan" (id. A70). But, the court noted, under Section 104(b)(4) the plaintiffs were entitled to information only if they were participating in the plan, and a "participant" is "any employee or former employee * * * who is or may become eligible to receive a benefit of any type from an employee benefit plan" (29 U.S.C. 1002(7)). The court concluded that the three employees were not participants because they did not work for Firestone at the time that they requested the information and were not entitled to benefits (Pet. App. A71-A72. 3. The court of appeals reversed on both issues, and remanded for further proceedings (Pet. App. A1-A44). It concluded that Firestone's decisions that the terms of its termination pay plan did not require it to pay benefits to its former employees should not be reviewed under the arbitrary and capricious standard, but rather should be reviewed de novo by the court. /4/ Acknowledging that most courts have reviewed ERISA benefit determinations under the limited arbitrary and capricious standard (id. at A8-A9), the court noted that some courts actually applied a more rigorous test (though retaining the "arbitrary and capricious" label) when the plan administrator possessed an interest adverse to the benefit claimants (id. at A11-A13). The court of appeals also observed that the arbitrary and capricious review standard derived from cases involving employee benefit trusts established under Section 302(c)(5) of the Labor-Management Relations Act of 1947 (LMRA), 29 U.S.C. 186(c)(5), which in turn followed common-law trust principles (Pet. App. A14-A21). The court found those precedents inapposite because trust law limits judicial review of trustee actions only if no conflict of interest or improper motive exists and because the LMRA more concretely assures impartial administration by requiring equal numbers of labor and management trustees to manage employee benefit plans (id. at A15, A21). By contrast, the Firestone termination pay plan was both unfunded and wholly controlled by company nominees (id. at A21), so that "every dollar saved by the administrator on behalf of his employer is a dollar in Firestone's pocket" (id. at A22). In those circumstances, the court concluded "that both common sense and the principles of trust law" precluded application of a "presumption that the plan administrator was impartial" (id. at A24). Since the benefits were part of the bargain in return for which employees provided their services to Firestone, the court concluded that Firestone's decision not to pay termination benefits should be reviewed under "the principles governing construction of contracts between parties bargaining at arms' length" (id. at A25). Under that approach, the court explained, a reviewing court should utilize the traditional rules of contract interpretation to determine, from common trade usage, past practice under the benefit plan at issue, and other relevant evidence, the contracting parties' intention as to the issue at hand and, if that intention is not discernible, "the court should adopt the most reasonable understanding of the term' (id. at A28-A31 (footnote omitted)). Because the district court had not approached the question in that way, /5/ but had instead deferred to Firestone's interpretation, the court of appeals remanded. The Third Circuit also rejected the district court's conclusion that respondents were not "participants" entitled to request benefit plan information and recover damages for nondisclosure (Pet. App. A39-A43). The court observed that limiting participant status to persons presently covered by a plan or actually entitled to benefits equates standing to claim benefits with ultimate entitlement to receive those benefits (id. at A41). Such an interpretation, in the court's opinion, conflicts with Congress's intent to provide claimants with enough information "to make their own decisions on how best to enforce their rights" (id. at A43). The court therefore concluded that the right to request and receive information about an employee benefit plan "most sensibly extend(s) both to people who are in fact entitled to a benefit under the plan and to those who claim to be but in fact are not" (id. at A42). SUMMARY OF ARGUMENT I. Congress in ERISA did not specify the standard of review in benefit claims disputes, but instead directed the federal courts to develop a body of federal common law governing those claims. In a case involving an unfunded employee benefit plan administered by the employer, the objectives of the statute are best served by resolving questions of plan interpretation under established principles of contract interpretation, rather than by affirming decisions of the employer-administrator unless arbitrary and capricious. That approach comports with two of ERISA's primary objectives -- insulating benefit decisions from the self-interest of employers and ensuring that employees who qualify for benefits actually receive them. Where benefits are paid out of the employer's general assets, it is unfair to employees to defer to the employer's interpretation of the terms of the plan. Firestone, like the courts that have reviewed employers' decisions under the arbitrary and capricious standard, nevertheless contends that it is appropriate to borrow common law trust rules, as was done in cases involving LMRA trusts, and defer to its interpretation even though it is biased. Trust analogies are plainly inapposite here, however, since Firestone established no seperate body of trust assest to pay severance benefits, and the common law of trusts does not support application of the arbitrary and capricious standard to administrators' decisions in that instance. ERISA's own reliance on trust principles is selective, and in no way suggests that Congress intended that a highly deferential standard be applied here. Cases arising under Section 302(c)(5) of the LMRA are doubly inapposite, since, besides the presence of a trust in those cases, the LMRA mandates impartial administrators. Firestone's arguments that ERISA itself compels review under the arbitrary and capricious standard are wholly without merit. Nothing in ERISA grants administrators complete discretion in making benefits decisions. Furthermore, review under the arbitrary and capricious standard in cases involving unfunded plans administered by employers would be ironic in that employees would be worse off than they were before ERISA was enacted. Nor is it appropriate to apply a "flexible" arbitrary and capricious standard, whose rigor varies on an ad hoc basis with the appearance of bias on the part of the administrator. That approach would only create confusion as to the proper standard of review. Since there is no good reason to defer to an employer's construction of the terms of an employee benefit plan when it is paying benefits out of its own pocket, this Court should not endorse the arbitrary and capricious standard at all in cases involving unfunded plans administered by employers. II. The court of appeals also correctly concluded that Firestone should have given the three named plaintiffs the information they requested, since Section 104(b)(4) states that information about employee benefit plans must be provided "upon written request of any participant." The statutory definition of "participant", 29 U.S.C. 1002(7), as including present and former employees who are or may become eligible for benefits, is broadly encompassing. We agree with the court of appeals that it makes sense to read Section 104(b)(4) to allow any employee or former employee who "claims to be" entitled to benefits to obtain information upon request. That contruction fulfills Congress's intent in enacting ERISA's disclosure provisions, which are meant to provide access to complete information about the terms of employee benefit plans. In contrast, Firestone's construction -- which allows plan administrators to deny access to information based solely on the administrator's determination that the individual is not entitled to benefits -- plainly undermines Congress's purpose in enacting the disclosure provisions. There is no basis for Firestone's contention that a broad construction of "participant" will impose costly burdens on employee benefit plans. Section 104(b)(4) expressly provides that plan administrators may make a "reasonable charge" for providing information. In addition, the Secretary of Labor has by regulation distinguished between Section 104(b)(4) and ERISA's provisions requiring automatic disclosure of information about employee benefit plans without charge and without request. The Secretary has reasonably determined that plan administrators need not provide such automatic disclosure to former employees whom plan administrators determine to have no vested right to benefits, while also concluding that former employees are entitled under Section 104(b)(4) to certain information upon request. ARGUMENT I. BENEFIT DENIALS BY EMPLOYER-CONTROLLED ADMINISTRATORS OF UNFUNDED EMPLOYEE BENEFIT PLANS SHOULD BE REVIEWED WITHOUT DEFERENCE TO THE ADMINISTRATOR'S INTERPRETATION OF THE TERMS OF THE PLAN A. Congress's Purposes In Enacting ERISA Are Advanced If Unfunded, Employer-Controlled Employee Benefit Plans Are Interpreted As Contracts Bargained At Arms's Length Section 502(a)(1)(B) of ERISA, 29 U.S.C. 1132(a)(1)(B), authorizes any participant in or beneficiary of an employee benefit plan covered by the Act to bring a civil action "to recover benefits due to him under the terms of his plan." Although the statute does not specify the applicable standard of review or otherwise set substantive standards for the resolution of disputes over benefits, the Conference Report explained that "(a)ll such actions * * * are to the regarded as arising under the laws of the United States in similar fashion to those brought under section 301 of the Labor-Management Relations Act of 1947." H.R. Conf. Rep. 93-1280, 93d Cong., 2d Sess. 327 (1974). This Court, in Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456 (1957), construed Section 301 to require the federal courts to "fashion from the policy of our national labor laws" a federal common law governing the interpretation of collective bargaining agreements. We submit, therefore, that the Report's reference to Section 301 of the LMRA, 29 U.S.C. 185, was a direction to the courts to fashion a body of federal common law to govern review of benefit claim denial. Other portions of "ERISA's legislative history indicate() that * * * 'a body of Federal substantive law will be developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans'" (Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 24 n.26 (1983), quoting 120 Cong. Rec. 29942 (1974) (remarks of Sen. Javits)), and this Court has recognized that federal courts are to develop a "federal common law of rights and obligations under ERISA-regulated plans" (Pilot Life Ins. Co. v. Dedeaux, No. 85-1043 (Apr. 6, 1987), slip op. 15). Thus, the task of determining the appropriate standard of review in benefit actions under Section 502(a)(1)(B) has been assigned to the courts. This Court's decision should be determined "by looking at the policy of the legislation and fashioning a (standard) that will effectuate that policy" (Textile Workers Union v. Lincoln Mills, 353 U.S. at 457). One of Congress's primary goals in enacting ERISA was to assure that every employee who becomes eligible for a benefit under an employee benefit plan "actually will receive it." Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 375 (1980). /6/ To that end, the Act imposes on benefit plan fiduciaries, who "control and manage" the plan (29 U.S.C. 1102(a)(1)), strict standards of loyalty and care. Central States, Southeast & Southwest Areas Pension Fund v. Central Transp., Inc., 472 U.S. 559, 570 (1985). These fiduciary standards include, most notably, a duty to act "solely in the interest of the participants and beneficiaries" for the "exclusive purpose" of paying benefits and defraying administrative costs "in accordance with the documents and instruments governing the plan" (29 U.S.C. 1104(a)(1)). They are intended to "specifically insulate the (plan) from the employer's interest." NLRB v. Amax Coal Co., 453 U.S. 322, 333 (1981). As the court of appeals concluded, in the context of an unfunded benefit plan administered by the employer, a standard of review that focuses de novo on the terms of the plan best achieves the statutory goals of insulating employee benefit plans from employers' interests and ensuring that employees who become eligible for benefits receive them. Testing the issue in this manner, as one would any matter of contractual interpretation, is also consistent with federal labor policy, under which employee benefits are viewed as "'wages * * * or other conditions of employment'" to be negotiated in a labor-management contract. See Inland Steel Co. v. NLRB, 170 F.2d 247, 253-254 (7th Cir. 1948) (citation omitted), cert. denied, 336 U.S. 960 (1949) (holding that such benefits are a mandatory subject of collective bargaining under the National Labor Relations Act); see generally Allied Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971). /7/ It is illogical to assume that the administrator of an unfunded plan whose benefits are paid from the employer's assets will function with the same impartiality as a neutral trustee of a funded plan, since the administrator's employer will sustain a financial loss with every award of benefits. Despite Firestone's insistence (Br. 31) that self-interest played no role in its denial of respondents' claims, and whether or not it did in this case, the members of this Court need not "close (their) eyes as judges to what (they) must perceive as men." People ex rel. Alpha Portland Cement Co. v. Knapp, 230 N.Y. 48, 63, 129 N.E. 202, 208 (1920), cert. denied, 256 U.S. 702 (1921). Accordingly, the Court should decide, in exercising its federal common law powers under Section 502(a), to require courts to resolve questions about the meaning of the terms of employee benefit plans without deferring to the employer's construction in such cases. /8/ B. Neither The Common Law Of Trusts Nor Experience With LMRA Trusts Supports The Use Of The Arbitrary And Capricious Standard In This Case In applying the arbitrary and capricious standard in ERISA benefits cases, /9/ the federal courts of appeals have typically relied uncritically on standards developed for reviewing trustee action at common law or in connection with employee benefit funds established under Section 302(c)(5) of the LMRA. /10/ By contrast, the court of appeals in this case, for the first time, evaluated the theoretical and practical underpinnings of the arbitrary and capricious standard in light of the statutory objectives. As the court concluded, that standard has no place in actions brought to recover benefits under unfunded, employer-administered plans. Neither the rationales of earlier courts nor petitioners' arguments justify a standard according deference to the employer's construction of the terms of a plan in such circumstances. The trust analogies on which other courts and Firestone so heavily rely (Br. 11-12) are wholly inapt to an unfunded benefit plan. /11/ To begin with, there is no historical reason to apply a trust-law standard to a plan like Firestone's because it is obviously not a trust since no source of benefit payments exists separately from the employer's own operating funds. See, e.g., Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1214 (8th Cir.) ("(f)unding implies the existence of a res separate from the ordinary assest of the corporation"), cert. denied, 454 U.S. 968 and 1084 (1981). As a result, there is no identifiable and segregated trust property and, perforce, no trustee with both legal title and an equitable duty to deal with such property for the benefit of others. Without these incidents, a trust relationship does not exist. Restatement (Second) of Trusts (1959) Section 2; Bogert, supra note 11, Sections 1, 111. The unfunded plan sponsor has only a contractual obligation to pay benefits from any available source. See Restatement Sections 13, 74 comment a; Bogert Section 17. /12/ An employer who has set up a segregated fund devoted exclusively to the payment of benefits feels no direct effect from each specific benefi payment decision, whereas unfunded plans draw their benefits, dollar for dollar, from the employer's funds. /13/ Only the existence of a distinct trust fund tangibly insulates the benefits decisions of a plan administrator who is controlled by the employer from the employer's ordinary business decisions. /14/ The loose standard of review is also inappropriate because the absence of a separate, identified source of benefits fundamentally alters the trustee's task under a funded plan of "provid(ing) benefits to as many intended employees as is economically possible while protecting the financial stability of the (plan)." See Elser v. IAM National Pension Fund, 684 F.2d 648, 656 (9th Cir. 1982), cert. denied, 464 U.S. 813 (1983). Unlike a funded plan's trustee, whose decision must "balance() the interests of present claimants against the interests of future claimants" (see Struble v. New Jersey Brewery Employees' Welfare Trust Fund, 732 F.2d 325, 333 (3d Cir. 1984)), /15/ the administrator of an unfunded plan necessarily chooses between the interests of individual plan beneficiaries on the one hand and the employer's desire to hold down business expenses on the other. This latter choice has little in common with an unbiased trustee's making of tradeoffs between various interests of different plan beneficiaries. /16/ Although Congress in enacting ERISA manifested an intent to "codif(y) and make() applicable * * * certain principles developed in the evolution of the law of trusts" (emphasis added), ERISA's drafters also understood that ordinary trust principles are often "insufficient to adequately protect the interests of plan participants and beneficiaries." S. Rep. 93-127, 93d Cong., 1st Sess. 29 (1973); H.R. Rep. 93-533, 93d Cong., 1st Sess. 11-12 (1973). /17/ Recognizing that employee benefit plans, covering hundreds or thousands of participants, are "quite different from the (customary private) trust both in purpose and in nature," the drafters expected the courts to interpret fiduciary principles "bearing in mind the special nature and purposes of employee benefit plans intended to be effectuated by the Act" (ibid.). Thus, Congress contemplated only selective adoption of trust rules "with modifications appropriate for employee benefit plans" (id. at 13). Judicial experience with employee benefit trusts under Section 302(c)(5) of the LMRA is also totally inapposite. First, LMRA plans are necessarily cast in "trust" form, thus insulating sponsoring employers from the cost of each benefit payment. Second, such trusts are managed not by employer nominees, but by a board consisting of equal numbers of labor and management representatives with an impartial umpire to decide matters when the two trustee groups are deadlocked. See NLRB v. Amax Coal Co., 453 U.S. at 328-329. These structural arrangements provide participants in LMRA plans with tangible and realistic guarantees against biased decisionmaking that are totally absent in the case of an unfunded, employer-administered ERISA plan. C. ERISA Itself Does Not Mandate Deference To An Employer's Interpretation Of The Terms Of An Unfunded Employee Benefit Plan Firestone claims (Br. 9-11, 15-17) that the conferral of decision-making authority on plan fiduciaries, and Congress's rejection of proposals to impose federal agency review and arbitration procedures as limits on that authority, require deferential judicial review of the meaning of employee benefit plans in reviewing benefit denials pursuant to Section 502(a)(1)(B). /18/ Firestone argues from Section 402(a) of ERISA, 29 U.S.C. 1102(a), stating that a plan must list "one or more named fiduciaries who * * * shall have authority to control and manage the operation and administration of the plan," and from 29 U.S.C. 1002(21), stating that "a person is a fiduciary with respect to a plan to the extent * * * he exercises any discretionary authority," for the proposition that administrators of employee benefit plans have discretionary authority to make benefit decisions. It does not follow, however, that because persons exercising discretionary authority are fiduciaries, fiduciaries always exercise discretion. ERISA did not grant administrators unbounded discretionary authority over benefits decisions, but rather sought to make them substantially accountable for their decisions. Section 402(a)(1) provides: "Every employee benefit plan shall be established and maintained pursuant to a written instrument. Such instrument shall provide for one or more named fiduciaries who jointly or severally shall have authority to control and manage the operation and administration of the plan." The Conference Report explained the purpose of Section 402(a) by stating that "(a) written plan is to be required in order that every employee may, on examining the plan documents, determine exactly what his rights and obligations are under the plan" and that fiduciaries must be named "so the employees may know who is responsible for operating the plan" (H.R. Conf. Rep. 93-1280 at 297). As noted above (note 7, supra), pre-ERISA courts generally reviewed benefit decisions under contract principles. Given ERISA's fundamental goal of correcting "the abuses and shortcomings * * * found to exist in the private (employee benefit) system" (120 Cong. Rec. 29928 (1974) (remarks of Sen. Williams)), it would be ironic indeed to construe its adoption of fiduciary standards to somehow diminish the accountability that already existed for employers operating unfunded employee benefit plans. Thus, the overall purposes of the Act are better served by permitting reviewing courts to apply contract principles in determining, under Section 502(a)(1)(B), whether "benefits are due * * * under the terms of the plan." /19/ D. A "Flexible" Arbitrary And Capricious Standard Is Not A Viable Alternative To De Novo Review Of Benefit Decisions Made By Biased Administrators Of Unfunded Plans Firestone contends (Br. 30-32) that a "flexible" arbitrary and capricious standard provides adequate protection against improprieties in plan administration. They rely on Seventh and Ninth Circuit decisions in which those courts, while adhering to the arbitrary and capricious rubric, have permitted more searching review when there is reason to suspect partiality in plan benefit determinations. /20/ These cases suggest "(t)he existence of a sliding scale in judicial review of ERISA trustees' decisions * * * (that) give(s) less deference to a decision the more the trustees' impartiality can fairly be questioned" (Van Boxel v. Journal Co. Employees' Pension Trust, 836 F.2d 1048, 1053 (7th Cir. 1987)). By expanding the judicial inquiry in the face of obvious "danger signals," this more elastic standard seeks to avoid the more absurd results that may occur if the decisions of blatantly biased administrators are examined under the arbitrary and capricious standard. See, e.g., Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir. 1984), cert. denied, 474 U.S. 865 (1985) (employer's denial of benefits "made in the course of, and could have been infected by," its flagrant and wholesale violations of ERISA). At the outset, it is unclear what is meant by a "flexible" arbitrary and capricious standard, if it is not the imposition of a more rigorous standard of review -- in the manner of the court below -- based on existing conflicts of interest. The Seventh Circuit's formulation allows the reviewing court to eliminate deference altogether in some cases. Van Boxel v. Journal Co. Employees' Pension Trust, 836 F.2d at 1052-1053 (when trustees "have a serious conflict of interest, the proper deference to give their decisions may be slight, even zero," and the court will interpret the plan documents for itself). The Ninth Circuit accords "less deference" when the circumstances of the benefit decision impose a significant conflict of interest on the plan administrator. Dockray v. Phelps Dodge Corp., 801 F.2d 1149, 1152 (1986); Jung v. FMC Corp., 755 F.2d 708, 711-712 (1985). Since the propriety of the decision is the issue to which the standard of review must be applied, it must be the appearance of such a conflict of interest rather than the conclusion that a decision resulted from bias that triggers closer judicial scrutiny. And any presumption of correctness to benefit decisions made in the face of a disincentive to paying benefits runs the risk of upholding decisions in which the interests of plan participants and beneficiaries were sacrificed to the employer's self-interest. The inherent nature of the conflict faced by the employer-administrators of unfunded plans entails an unqualified rule of no deference in cases involving unfunded plans administered by employers. Any alternative would sow confusion in the courts and foster inconsistent enforcement of benefit rights under these plans; principles on contract interpretation are a well-established and clearly-developed body of law. /21/ II. FORMER EMPLOYEES WHO WERE PLAN PARTICIPANTS ARE ENTITLED TO OBTAIN COPIES OF PLAN DOCUMENTS UPON REQUEST The court of appeals also reached the correct result when it held that Firestone should have provided information about its employee benefit plans to the three named plaintiffs upon request, pursuant to Section 104(b)(4) of ERISA, 29 U.S.C. 1024(b)(4). That provision states that "upon written request of any participant," the plan administrator shall furnish various specified information, including, among other items, the plan description, the latest annual report, and "instruments under which the plan is established or operated." /22/ Firestone refused to provide information about its termination pay plan to two of the named plaintiffs, Smolinski and Schade, on the ground that they were no longer Firestone employees when they requested the information and hence were not "participants" in that plan. Similarly, Firestone denied Bruch's request for information about its stock purchase plan on the ground that it had paid him his vested interest in the plan and his unvested interests were forfeited when Occidental purchased the Plastics Division and he went to work for it. Pet. App. A71-A72. Section 3(7), 29 U.S.C. 1002(7), broadly defines "participant" as "any employee or former employee * * * who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer." Contrary to Firestone (Br. 34-37), this language does not limit participant status to individuals who have a vested interest in the plan or whose employment status assures them of future benefits. Firestone confuses participation in a plan with entitlement to benefits. Moreover, the statutory definition specifically includes individuals who "may become eligible" for benefits. And employees presently covered by a plan are plainly participants even if they have no legal right to benefits until their interest vests or the specified contingency for benefit payment actually occurs. Congress's inclusion of present and former employees who are or may become eligible for benefits /23/ was an effort to be broadly encompassing in defining the class of plan "participants." As a comprehensive remedial statute enacted to protect employee benefit rights, ERISA should be construed liberally to effectuate its purposes. Brink v. DaLesio, 667 F.2d 420, 427 (4th Cir. 1981); Brock v. Self, 632 F. Supp. 1509, 1520 (W.D. La. 1986); Eaton v. D'Amato, 581 F. Supp. 743, 746 (D.D.C. 1980). See Tennessee Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597 (1944) (legislation protecting the rights of working people "must not be interpreted or applied in a narrow, grudging manner"). Thus, we agree with the court of appeals that the definition of "participant" should be construed to encompass those who claim eligibility for present or future benefits. Any former employee who requests information about an employee benefit plan in which he participated because he thinks he might be entitled to benefits must be given the information even if a return to work for the former employer is not possible. /24/ As the court of appeals stated (Pet. App. A41-A42), that is how "participant" must be read in other provisions of ERISA, such as Section 502(a)(1)(B), which authorizes participants to bring suit claiming entitlement to benefits. It is undisputed that the plaintiffs were authorized to bring suit under Section 502(a)(1)(B) seeking benefits under Firestone's termination pay plan because they claimed to be entitled to benefits, even though the provision authorizes "participants" to bring suit rather than persons who "claim to be participants." ERISA's drafters considered effective communication of plan contents to affected employees an "important issue" to be addressed in the Act (S. Rep. 93-127 at 11; H.R. Rep. 93-533 at 8). The drafters found the "generalized" disclosure requirements of the predecessor Welfare and Pension Plans Disclosure Act (WPPDA) to be "insufficient" and that "(c)hanges * * * in scope and detail" would be needed (S. Rep. 93-127 at 27; H.R. Rep. 93-533 at 11). /25/ The resulting legislation established "a more particularized form of reporting" that would enable an individual to know "exactly where he stands with respect to the plan -- what benefits he may be entitled to, what circumstances may preclude him from obtaining benefits, what procedures he must follow to obtain benefits, and who are the persons to whom the management and investment of his plan funds have been entrusted" (ibid.) Thus, by design, ERISA's disclosure requirements supplement the statute's fiduciary standards by arming individuals "with enough information to enforce their own rights as well as the obligations owed by the fiduciary to the plan in general" (ibid). Access to information is at least as important to a former employee who is unclear about the impact of his change in employment on current or future benefit rights as it is for either a current employee or an individual whose rights have vested. If mandatory disclosure of plan terms and conditions is as limited as Firestone contends, a significant number of workers who have participated in employee benefit plans may forever remain in the dark about their "stand(ing) with respect to the plan" (S. Rep. 93-127 at 27; H.R. Rep. 93-533 at 11) solely because of their change in employment status. Most importantly, those individuals will be left at the mercy of the plan administrators who, by refusing to provide requested information based on the administrators' view of former employees' rights, can effectively deprive them of the means of ascertaining for themselves the extent of their rights and, if necessary, pursuing enforcement action in the courts. Nothing could be farther from Congress's intent in enacting ERISA's disclosure requirements. /26/ Firestone contends (Br. 40-42) that a broad reading of "participant" will impose costly burdens on employee benefit plans. That fear is not justified. In providing that former employees may obtain information upon request, Section 104(b)(4) expressly provides that administrators may make a "reasonable charge." /27/ As to the requirements of Sections 104(b)(1) and (3), 29 U.S.C. 1024(b)(1) and (3), that there be periodic distribution of various sorts of information, without charge and without request, /28/ those "automatic" disclosure requirements have been construed by the Secretary of Labor not to apply every person defined as a "participant" by Section 3(7) of the Act. /29/ By June 1975, less than a year after ERISA was enacted, the Secretary had promulgated proposed disclosure regulations and received comments on them. /30/ The Secretary noted fears that administrators would be required to provide information "without charge and without written request" to many persons, such as "former employees who had no vested benefits when they left the employment." 40 Fed. Reg. 24649 (1975). Observing that the language of Section 101(a), 29 U.S.C. 1021(a), which governs the Section 104(b) automatic disclosure requirements, refers not to "participants" but to "participants covered under the plan," the Secretary concluded that "Congress provided a ground for distinguishing between the class of all participants included within the meaning of section 3(7) of the Act and the class of participants who are entitled to receive copies of plan documents without charge and without request" (40 Fed. Reg. 24649 (1975)). /31/ The Secretary drew such a distinction in the regulations. Under 29 C.F.R. 2520.104b-1(c), distribution of plan documents without charge and without request need only be made to a narrower group of "participants covered under the plan." As defined in 29 C.F.R. 2510.3-3(d)(2)(i), an individual ceases to be a participant covered by a welfare benefit plan when he becomes "ineligible to receive any benefit under the plan even if the contingency for which such benefit is provided should occur" and he is "not designated by the plan as a participant." Thus, plan administrators need not automatically provide plan documents to former employees whom plan administrators determine not to be eligible for benefits. /32/ At the same time that the Secretary narrowed the class of participants who must be provided information without charge and without request, he noted that other pariticipants would be entitled to inspect plan documents pursuant to Section 104(b)(2), 29 U.S.C. 1024(b)(2), and obtain documents "upon written request at a reasonable charge under section 104(b)(4) of the Act and proposed Section 2520.104b-30" (40 Fed. Reg. 24649 (1975)). Indeed, anticipating this case, the Secretary noted that the broader class of participants -- which he had just noted included former employees like the three named plaintiffs -- would be able to obtain information about the plan "in the event of a dispute between an employee of an employer maintaining the plan and plan officials as the the employee's status as a participant covered under the plan" (ibid.). The statutory interpretations contained in the Secretary of Labor's regulations, adopted contemporaneously with the legislation, are entitled to "controlling weight" so long as they are reasonable and not inconsistent with the plain language of the statute. Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837, 843-844 (1984); see NLRB v. United Food & Commercial Workers Union, No. 86-594 (Dec. 14, 1987), slip op. 10 n.20, 12; Udall v. Tallman, 380 U.S. 1, 16 (1965). The narrower regulatory definition of "participants covered under the plan" to whom automatic disclosure is required, which the Secretary adopted soon after ERISA went into effect, is a reasonable accommodation of ERISA's competing interests in providing access to information, on the one hand, and avoiding excessively burdensome administrative requirements, on the other. Therefore, the Third Circuit's approach to respondents' requests for plan information, which is consistent with the Secretary's authoritative interpretation of the Act, should be upheld. CONCLUSION The judgment of the court of appeals should be affirmed. Respectfully submitted. CHARLES FRIED Solicitor General DONALD B. AYER Deputy Solicitor General CHRISTOPHER J. WRIGHT Assistant to the Solicitor General GEORGE R. SALEM Solicitor of Labor CHARLES I. HADDEN Deputy Associate Solicitor JEFFREY A. HENNEMUTH Attorney Department of Labor AUGUST 1988 /1/ There is an unresolved disagreement as to whether the benefits provided by Occidental are comparable to the benefits provided by Firestone (Pet. App. A30). /2/ Unaware that its termination pay plan was governed by ERISA, Firestone did not have in place a formal "claims procedure" as mandated by 29 U.S.C. 1133, and did not comply with the Act's reporting and disclosure requirements (Pet. App. A26). /3/ The plaintiffs also asserted claims with respect to Firestone's vacation, retirement, and stock purchase plans, which have been resolved (Pet. App. A5-A6 n.2, A46). /4/ The court also rejected the former employees' contention that ambiguous plan terms should be construed strictly against the employer and in favor of plan beneficiaries (id. at A3, A24-A25). It thus concluded that "there should be deference to neither the plan administrator's nor the participants' construction of plan terminology" (id. at A3). /5/ The court of appeals noted, in particular, that it was not clear whether common trade practice favored Firestone's interpretation or that of its former employees, that the parties disputed what Firestone's past practice had been and what it had previously told employees, and that the district court had not determined whether there was a significant difference in the employees' compensation from Occidental (Pet. App. A30). /6/ While Nachman Corp. involved a pension plan, ERISA's rules on reporting, disclosure, and fiduciary responsibility, which are designed to ensure that participants receive the benefits they have earned, apply to all "employee benefit plans," including welfare plans as well as pension plans. Central States, Southeast & Southwest Areas Pension Fund v. Central Transp. Inc., 472 U.S. 559, 569 n.9 (1985); 29 U.S.C. (& Supp. IV) 1002(3), 1021-1031, 1101-1114. And Section 502(a)(1)(B) does not distinguish between pension plans and welfare plans in authorizing suits "to recover benefits" due to employees. /7/ Before ERISA was passed in 1974, employee benefit plans, other than those administered as trusts at common law or under the LMRA, were generally treated as contract obligations on the part of the employer, See, e.g., Phelps Dodge Corp. v. Brown, 112 Ariz. 179, 540 P.2d 651 (1975); Frietzsche v. First Western Bank & Trust Co., 168 Cal. App. 2d 705, 336 P.2d 589 (1959); Ellis v. Emhart Mfg., 150 Conn. 50, 191 A.2d 546 (1963); Sigman v. Rudolph Wurlitzer Co., 57 Ohio App. 4, 11 N.E.2d 878 (1937); Strickland v. American Bakery & Confectionery Workers Union, 527 P.2d 10 (Okla. 1974); Rose City Transit Co. v. City of Portland, 271 Or. 588, 533 P.2d 339 (1975); Jacoby v. Grays Harbor Chair & Mfg., 77 Wash. 2d 911, 468 P.2d 666 (1970). Accord Erich v. GAF Corp., 110 N.J. 230, 540 A.2d 518, 522 (1988) (observing that the " 'principles of contractual construction' " applied by the Third Circuit in this case are "similar to the standard of review that would be applicable under state law" (citation omitted)). See also Note, Pension Plans and the Rights of the Retired Worker, 70 Colum. L. Rev. 909, 910, 916-922 (1970). In such cases, the reviewing court examined the employee's benefit claim as it would any other contract allegation, looking to the terms of the plan and other mainfestations of the parties' intent and deciding whether benefits were payable without deferring to either party's construction of the terms of the contract. Firestone maintains (Br. 25 n.22) that pre-ERISA decisions applied an arbitrary and capricious standard, but many of the cases they cite involved trusts and are therefore inapposite. See Van Pelt v. Berefco, Inc., 60 Ill. App. 2d 415, 208 N.E.2d 858 (1965); Reese v. Administrative Comm. of the Profit Sharing Trust, 218 Cal. App. 2d 646, 32 Cal. Rptr. 818 (1963); Going v. Southern Mill Employees' Trust, 281 P.2d 762 (Okla. 1955); Kloman v. Doctors Hospital, Inc., 76 A.2d 782 (D.C. 1950). While the other cited decisions concerned unfunded plans, the terms of the plans that the courts sought to enforce gave the employers or their handpicked administrators "sole and exclusive" power to determine benefit eligibility; there is no such provision in Firestone's plan, and such a provision would not be enforceable under ERISA (see note 11, infra). Moreover, to avoid unconscionable results courts sometimes construed the plans in cases where administrators had unbounded discretionary authority to permit claims that particular benefit denials were unreasonable or in bad faith. See, e.g., Gitelson v. Du Pont, 17 N.Y.2d 46, 215 N.E.2d 336, 268 N.Y.S.2d 11 (1966); Garner v. Girard Trust Bank, 442 Pa. 166, 275 A.2d 359 (1971). /8/ Firestone argues (Br. 29) that there should be evidence that a particular decision in fact resulted from bias before the courts question an administrator's interpretation of the terms of a plan. But instances of biased intent may not always be subject to proof. Moreover, the standard of review is the means by which the employer's decision is to be evaluated, not the conclusion to be drawn upon determining that the employer acted improperly. /9/ See, e.g., Jestings v. New England Tel. & Tel. Co., 757 F.2d 8 (1st Cir. 1985); Miles v. New York State Teamsters Conference Pension & Retirement Fund, 698 F.2d 593 (2d Cir.), cert. denied, 464 U.S. 829 (1983); Rosen v. Hotel & Restaurant Employees & Bartenders Union, 637 F.2d 592 (3d Cir.), cert. denied, 454 U.S. 898 (1981); Berry v. Ciba-Geigy Corp., 761 F.2d 1003 (4th Cir. 1985); Dennard v. Richards Group, Inc., 681 F.2d 306 (5th Cir. 1982); Moore v. Reynolds Metals Co. Retirement Program for Salaried Employees, 740 F.2d 454 (6th Cir. 1984), cert. denied, 469 U.S. 1109 (1985); Pokratz v. Jones Dairy Farm, 771 F.2d 206 (7th Cir. 1985); Central Hardware Co. v. Central States, Southeast & Southwest Areas Pension Fund, 770 F.2d 106 (8th Cir. 1985), cert. denied, 475 U.S. 1108 (1986); Dockray v. Phelps Dodge Corp., 801 F.2d 1149 (9th Cir. 1986); Peckham v. Board of Trustees, 653 F.2d 424 (10th Cir. 1981); Anderson v. Ciba-Geigy Corp., 759 F.2d 1518 (11th Cir.), cert. denied, 474 U.S. 995 (1985); Maggard v. O'Connell, 671 F.2d 568 (D.C. Cir. 1982). /10/ See, e.g., Music v. Western Conference of Teamsters Pension Trust Fund, 712 F.2d 413, 418 (9th Cir. 1984); Dennard v. Richards Group, Inc., 681 F.2d 306, 313 (5th Cir. 1982); Wardle v. Central States, Southeast & Southwest Areas Pension Fund, 627 F.2d 820, 824 (7th Cir. 1980), cert. denied, 449 U.S. 1112 (1981); Bayles v. Central States, Southeast & Southwest Areas Pension Fund, 602 F.2d 97, 99-100 (5th Cir. 1979); Bueneman v. Central States, Southeast & Southwest Areas Pension Fund, 572 F.2d 1208, 1209 (8th Cir. 1978); Riley v. MEBA Pension Trust, 570 F.2d 406, 410 (2d Cir. 1977). Some recent decisions from other circuits have called into question the appropriateness of the "arbitrary and capricious" standard under ERISA. See, e.g., Van Boxel v. Journal Co. Employees' Pension Trust, 836 F.2d 1048, 1052 (7th Cir. 1987) (noting that the courts borrowed rules developed in cases involving LMRA trust "apparently without the courts' noticing that employers often held the whip hand in ERISA trusts," and that "(t)ransposed to the ERISA setting, the arbitrary and capricious standard may be inapt, a historical mistake, or a mechanical application from different settings"); Shull v. State Machinery Co. Employees Profit Sharing Plan, 836 F.2d 306, 307 (7th Cir. 1987) (noting "a growing restiveness in cases where the trustees seem not to be true neutrals in the disputes they are called on to resolve"); Varhola v. Doe, 820 F.2d 809, 813 (6th Cir. 1987) ("(w)ere we writing on a clean slate, we might well be persuaded that (a) stricter standard of review should apply"). And at least one appellate decision has left open the possibility of a different standard of review when an administrator's overall actions display hostility to the statutory scheme. Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th Cir. 1984) ("(w)e do not decide that (the arbitrary and capricious standard) is the only applicable standard of review when ERISA's provisions have been flouted in such a wholesale and flagrant manner"), cert. denied, 474 U.S. 865 (1985). Notwithstanding this questioning, none of these courts has actually abandoned the arbitrary and capricious standard, finding the issue too "well-settled" in precedent. See, e.g., Varhola, 820 F.2d at 813; Jung v. FMC Corp., 755 F.2d 708, 711 (9th Cir. 1985). /11/ Petitioners' basic assumption (Br. 12, 28-29) that traditional trust law principles always require judicial deference to a trustee's interpretation of trust terms is not well founded. While trust principles make a deferential standard appropriate for review of a trustees's exercise of discretionary powers (Restatement (Second) of Trusts (1959) Section 187; G. Bogert & G. Bogert, The Law of Trusts and Trustees Section 560 at 193-208 (rev. 2d ed. 1980) (hereinafter Bogert)), the trustee has only those powers, discretionary or otherwise, that the trust instrument or operation of law confers (Restatement Sections 186, 187 comment a; Bogert Section 551). Ordinarily, the courts interpret trust instruments "in the light of all the circumstances and such other evidence of the intention of the settlor * * * as is not inadmissible" (Restatement Section 4 comment d; Bogert Section 182 at 255). Although a particular trustee may be granted power to construe disputed or doubtful terms and such interpretations will not be disturbed if reasonable (Bogert Section 559 at 169-171), a trustee lacking such authority may be obliged to seek judicial instructions to avoid committing a breach of trust (id. at 162-168; Restatement Section 201 comment b). And, as the court of appeals noted (Pet. App. A15, citing Restatement Section 187, comment g), even where a matter has been committed to a trustee's discretion, a court will not defer to the trustee's judgment if it appears that the trustee's decision resulted from bias. In any event, language in a plan document purporting to give biased administrators unbounded discretion to decide what the terms of a plan mean (and there appears to be no such language in Firestone's termination pay plan) would not be enforceable under ERISA. Exculpatory language in plan documents "purport(ing) to relieve a fiduciary from responsibility or liability" is expressly "void as against public policy" (29 U.S.C. 1110(a)). Similarly, language granting biased administrators unfettered discretion to determine who would receive benefits would be in tension with ERISA's judicial review and disclosure provisions. The disclosure provisions are designed so that a plan participant will know "exactly where he stands" (S. Rep. 93-127, 93d Cong., 1st Sess. 27 (1973); H.R. Rep. 93-533, 93d Cong., 1st Sess. 11 (1973)), and participants cannot really know where they stand if biased administrators have discretionary authority, to which courts must defer, to construe plan terms. /12/ Firestone's reliance (Br. 12 & n.9) on Section 403(a) of ERISA, 29 U.S.C. 1103(a), to blur the distinction between funded and unfunded plans is misplaced. Although that section provides that the assets of employee benefit plans "shall be held in trust by one or more trustees," the provision assumes that a particular plan has assets. Where the plan benefits are payable (as in the case of Firestone's severance pay plan) from the sponsoring employer's own general assets, no "plan assets" exist. See 44 Fed. Reg. 50363, 50365 (1979) (preamble to proposed regulations relating to definition of plan assets and to establishment of trust). Accordingly, ERISA has imposed no "trust" on the source of Firestone's severance pay benefits. /13/ Establishment of a trust also imposes on the plan administrator a duty to preserve and protect that benefit fund for the special purposes of the trust. See Restatement Section 176; Bogert Section 582. ERISA's requirement that all plan administrators act "solely in the interest of the participants and beneficiaries" (29 U.S.C. 1104(a)(1)) does not require the administrator of an unfunded plan to devote any part of the employer's moneys exclusively to the payment of benefits. Also, the statute's prohibition against inurement of plan assets to the employer's benefit (29 U.S.C. 1103(c)(1)), and the prohibitions against certain conflict-of-interest transactions involving the plan and its assets (29 U.S.C. 1106, 1107), have no meaning if a plan does not acquire or hold any assets. /14/ If an employer has seriously underfunded a benefit trust, or a particular interpretation of the plan could require the employer to make additional contributions, a trustee subject to control by the employer might not have adequate insulation from the employer's financial interest. The proper standard of review in such a situation is not presented by this case, however. /15/ See also Adams v. New Jersey Brewery Employee's Pension Trust Fund, 670 F.2d 387, 397 (3d Cir. 1982) ("(p)artly because of these conflicting obligations, trustees are given broad discretion to act"); Rueda v. Seafarers International Union, 576 F.2d 939, 942 (1st Cir. 1978) ("we review for arbitrariness in light of the trustees' responsibility to all potential beneficiaries"). /16/ In cases challenging the apparently self-serving decisions of employer-fiduciaries on non-benefit issues, the courts have accorded those decisions no deference, considering de novo whether the fiduciaries' actions violated ERISA's strict standard of fiduciary loyalty to plan participants and beneficiaries. E.g., Struble v. New Jersey Brewery Employees' Welfare Trust Fund, 732 F.2d at 333 (employer-appointed trustees vote to give refunded health insurance premiums to the employers so as to reduce their future contributions to the plan); Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983), cert. denied, 467 U.S. 1251 (1984) (corporate directors serving as plan administrators purchase corporation stock for more than adequate consideration); Donovan v. Bierwirth, 680 F.2d 263 (2d Cir.), cert. denied 459 U.S. 1069 (1982) (corporate officers serving as plan trustees reject, during a takeover bid, a tender offer for corporation stock held by the plan but instead purchase more stock). /17/ Firestone also notes Br. 17-19) that the legislative histories of the LMRA and the Welfare and Pension Plans Disclosure Act (WPPDA) exhibit congressional reliance on traditional fiduciary principles to safeguard employee benefit plans. This is irrelevant, however, because ERISA's drafters thought those statutes inadequate in important respects. See S. Rep. 93-127 at 4 (the LMRA was "not intended to establish nor does it provide standards for * * * fiduciary conduct," and the WPPDA was "wholly lacking in substantive fiduciary standards"); H.R. Rep. 93-533 at 4 (same). Indeed, ERISA's drafters viewed the Act as a "major departure" from existing law. H.R. Rep. 93-533 at 3; see also S. Rep. 93-127 at 35 (ERISA "remove(s) jurisdictional and procedural obstacles which in the past appear to have hampered effective enforcement of fiduciary responsibilities"); H.R. Rep. 93-533 at 17 (same). /18/ Firestone further contends (Br. 19-20) that Congress's failure, in 1982, to enact legislation to require de novo review in all ERISA benefit cases somehow demonstrates its adherence to the arbitrary and capricious standard. This overlooks the well-established rule that "'the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one.'" Mackey v. Lanier Collections Agency & Service, Inc., No. 86-1387 (June 17, 1988), slip op. 13 (citation omitted); United States v. Price, 361 U.S. 304, 313 (1960). See also Pierce v. Underwood, No. 86-1512 (June 27, 1988), slip op. 13 ("it is the function of the courts and not the Legislature * * * to say what an enacted statute means"). Indeed, since the bill in question was never even reported from the committee, its failure is an even less reliable indicator of Congress's views. See Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381-382 n.11 (1969); Fogarty v. United States, 340 U.S. 8, 13-14 (1950). To whatever extent the failure to enact an across-the-board de novo review standard may be deemed relevant, it does not suggest that Congress then viewed such a standard as always inappropriate. It is just as plausible to assume that Congress was not persuaded to impose a single standard of review applicable in all cases, but instead left the matter for common law development by the courts, and that the committee fail to report the bill for that reason. /19/ We would caution, however, against applying contract principles that might undermine other statutory objectives. For example, the plaintiffs have argued that employer-drafted benefit plans should be treated as contracts of adhesion, with ambiguities construed strictly against the drafter. Although this rule finds some support in pre-ERISA case law (see, e.g., Frietzsche, 168 Cal. App. 2d at 706-707, 336 P.2d at 590; Sigman, 57 Ohio App. at 5-7, 11 N.E.2d at 879), the Third Circuit's treatment of the unfunded plan as a contract negotiated at arms' length adequately protects benefit rights, while at the same time avoiding an incentive to litigation that could exhaust plan resources and, indeed, defeat ERISA's intent to encourage the establishment of employee benefit plans. That approach is also consistent with national labor policy, which, as noted (page 10, supra), views employee benefits as mandatory subjects of collective bargaining and establishes a framework for arms'-length negotiation between employers and employees. /20/ See, e.g., Van Boxel, 836 F.2d at 1053 ("careful judicial scrutiny" appropriate when company-appointed trustees denied a pension claim that was predicated on the claimant's years of work for an adversary union); Dockray v. Phelps Dodge Corp., 801 F.2d at 1152 (less deferecne due to a company administrator's denial of benefits to employees involved in a long and unusually bitter strike against the company; Jung v. FMC Corp., 755 F.2d at 711-712 (employer's denial of severance pay to the salaried employees of a former division is entitled to "less deference" because it "avoids a very substantial outlay"). See also Maggard v. O'Connell, 671 F.2d 568, 571-572 (D.C. Cir. 1982) (judicial review of benefit denial requires a "stern hand and flinty eye" when there are "'danger signals rebutting 'the presumption of agency regularity'"). /21/ Firestone suggests (Br. 27 n.26) that use of a contract standard of review would conflict with appellate decisions holding that a jury trial is not available in ERISA benefit actions. The two issues, however, are not directly linked. While some courts have observed that a jury trial may be incompatible with the application of trust principles under ERISA, and with the arbitrary and capricious standard in particular (see Berry v. Ciba-Geigy Corp., 761 F.2d at 1006-1007 (4th Cir.); In re Vorpahl, 695 F.2d 318, 321 (8th Cir. 1982); Calamia v. Spivey, 632 F.2d 1235, 1237 (5th Cir. 1980); Wardle, 627 F.2d at 829-830 (7th Cir.)), the principal focus of the jury trial decisions has been on the equitable nature of the relief sought, not the standard of review involved (see, e.g., Katsaros v. Cody, 744 F.2d 270, 278 (2d Cir.), cert. denied, 469 U.S. 1072 (1984) ("plaintiffs seek equitable relief in the form of removal and restitution as distinguished from damages for wrongdoing or non-payment of benefits")). In addition, some courts have suggested that a legal remedy (with a right to jury trial) may exist even under trust law when the trustee has an immediate and unconditional obligation to pay all the claimed benefits. See In re Vorpahl, 695 F.2d at 322 n.6; Wardle, 627 F.2d at 829 (both citing Restatement (Second) of Trusts Section 198(1)). Whether a jury trial is available in a benefit denial case is not a question presented here. /22/ Section 104(b)(4) provides: "The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence." /23/ There is no basis in the language of Section 3(7) for the Fifth Circuit's conclusion that "the 'may become eligible' language was intended to apply only to current employees" (Nugent v. Jesuit High School, 625 F.2d 1285, 1287 (1980); see Jackson v. Sears, Roebuck & Co., 648 F.2d 225, 228 (1981)), a position Firestone endorses (Br. 33 n.30). Since the statute provides that "any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit" is a "participant," it is plain that the phrase "may become eligible," which is separated by 19 words (including "former employee") from the word "employee," does not relate only to the word "employee." The Second and Ninth Circuits have taken the position that a former employee remains a "participant" if he "may become eligible" for benefits as a result of returning to covered employment in the future. See Kuntz v. Reese, 785 F.2d 1410, 1411 (9th Cir.), cert. denied, 479 U.S. 916 (1986); Saladino v. ILGWU National Retirement Fund, 754 F.2d 473, 476 (2d Cir. 1985); Weiss v. Sheet Metal Workers Local No. 544 Pension Trust, 719 F.2d 302, 304 (9th Cir. 1983), cert. denied, 466 U.S. 972 (1984). Those courts, however, require that the former employee demonstrate a "reasonable expectation" or "significant probability" of returning to work under the plan. That additional burden is not sensible since a former employee may not be able to determine whether it is in his economic interest to resume his former employment unless he knows the extent of his rights under the plan. Therefore, in the absence of information about the plan, it would be impossible to know whether there was a significant probability that he would attempt to return to his former employer. /24/ There may be former employees whose claimed entitlements to benefits have no connection with their past employment. For example, a former employee who had never participated in a stock plan might request information about that plan because he thought he might be owed benefits. None of the present plaintiffs fall in that category, however, and the Court need not here determine what obligations, if any, would be owed to such a person. /25/ While "participant" was defined by the WPPDA in virtually the same terms as in ERISA (see Welfare and Pension Plans Disclosure Act, Pub. L. No. 85-836, Section 3(a)(6), 72 Stat. 998 (1958)), the WPPDA's disclosure requirements and enforcement provisions applied only to participants and beneficiaries "covered under the plan" (Section 5(a), 9(b), 72 Stat. at 999, 1002), thereby providing a limitation not found in Sections 104(b)(4) and 502(c), the corresponding provisions of ERISA. The Fifth Circuit based its limited view of ERISA disclosure rights (see note 23, supra)) on its prior decision in Golden v. Kentile Floors, Inc., 512 F.2d 838, 849-850 (1975), which arose under the WPPDA, without noting the difference in the language or that Congress had found the WPPDA's disclosure provisions deficient. /26/ Firestone's contention that there is no need for employers to respond to former employees' requests for information about employee benefit plans because they may "obtain a far broader range of information in the course of any ensuing litigation" (Br. 42) obviously misses the mark. Congress enacted Section 104(b) so that an employee would know "where he stands" (S. Rep. 93-127 at 27; H.R. Rep. 93-533 at 11) without filing suit. /27/ The Secretary has promulgated a regulation providing that a charge "is reasonable if it is equal to the actual cost per page to the plan for the least expensive means of acceptable reproduction, but in no event may such charge exceed 25 cents per page" (29 C.F.R. 2520.104b-30(b)). /28/ Section 104(b)(1) requires administrators to provide participants with a copy of the summary plan description and a summary of any material modification of the plan terms. Section 104(b)(3) requires administrators to send copies of annual statements describing the plan's assets and liabilities, along with a summary of the plan's receipts and disbursements from the prior plan year. /29/ Moreover, an annual summary report as required by Section 104(b)(3) need not be distributed to participants in a "totally unfunded welfare plan" such as Firestone's termination pay plan (29 C.F.R. 2520.104b-10(g)(1)). /30/ The Secretary of Labor has authority to prescribe regulations that "(s)he finds necessary or appropriate to carry out the provisions of (Title I of ERISA)," including its reporting and disclosure requirements. 29 U.S.C. 1135. /31/ In Section 502(c)(1), 29 U.S.C. 1132(c)(1), Congress authorized a penalty of up to $100 per day for failure "to comply with a request for any information which such administrator is required by this sub-chapter to furnish to a participant." It thus created a penalty for violatons of Section 104(b)(4), involved here, but not for failure to comply with Section 104(b)'s automatic disclosure provisions, although it provides for equitable relief (see 29 U.S.C. 1132(a)(3)). /32/ Firestone misunderstands the regulations when it cites (Br. 35-36) the definition in Section 2510.3-3(d)(2)(i) in support of its contention that it did not have to provide information to the three named plaintiffs. Under the distinction drawn by the regulations, Firestone was not required to send them the information described in Section 104(b)(1) and (3), such as any material change in the terms of the plan, because they are not "participants covered under the plan." However, they are "participants" and are entitled to information upon request pursuant to Section 104(b)(4) and may enforce that right under Section 502(a)(1)(A) and obtain the penalty (up to $100 per day) provided in Section 502(c)(1).