WPC܅ 2lB#Yc Z#|oolbookNew Century SchoolbookTimes Roman P['C&P"m^36Gff%==\o3=33ffffffffff33oooQzKfzztzp=o=o\%ffQi\=bp:6m:p\ifQUGpbbbX=o=o=3============i:fffffQ\\\\K:K:K:K:p\\\\ppppbfi\\b\zifffQQQQi\\\\bbbbbbppK:K:K:K:fmz:z:z:z:z:pppp\\QQQtUtUtUtUzGzGzGppppppbpXpXpXiz:pQtUzGbbi\pNo3o\6QNNfff=7f=f=%GGf//\\pp%G=ooee3o<P#BQck QuoteSingle spaced indented quote v C   (  Cd  ( ( ( 2.2oHlOpin InitInitial Opinion codes pЊ #  ( (    П I. A. 1. a.(1)(a) i) a) I A 1 a (1)(a) i) a)5 EllipsisParagraph Ellipsis <;X` hp x (#%'0*,.8135@8:gwZZskkkkB{sssZZcJRRRkkkl_dRZ>\J\B\JlZoN21mRgR\lNaJlRsRSRYZB\BhVrNlRwgsg_BZ11RVVg_]Zk___________________BBBBBBBZZZZZZZZZZZZZZZZZZZZ111111111111RRRRRRRVVVVVVVVVVVVggggggggggggggggggggl\l2lhs2hR2RKcD7Z: >D"m^*,:SS}z22K[*2**SSSSSSSSSS**[[[Collluldu}=Sudzudul_dzljj\2[2[KSSCVK2Q\/,Y/\KVSCE:\QuQQH2[2[2*222222222222V/lSlSlSlSlSwlClKlKlKlK=/=/=/=/z\uKuKuKuKz\z\z\z\jQlSuVuKuKjQuKdVlSlSlSlClClClCuVlKlKlKlKuQuQuQuQuQuQ}\}\=/=/=/=/SuYd/d/d/d/d/z\z\z\z\uKuK}lClClC_E_E_E_Ed:d:d:z\z\z\z\z\z\ujQ\H\H\HuVd/z\lC_Ed:jQjQuVuKz\N[*[K,C@@SSS2-}}S2ooS}2::S''KK\\:2[[RRk*[11RRRkskk[ZZ<[){kJ%>gwZZskkkkB{sssZZcJRRRkkkl_dRZ>\J\B\JlZoN21mRgR\lNaJlRsRSRYZB\BhVrNlRwgsg_BZ11RVVg_]Zk___________________BBBBBBBZZZZZZZZZZZZZZZZZZZZ111111111111RRRRRRRVVVVVVVVVVVVggggggggggggggggggggl\l2lhs2hR&1)o=3no P['C&P&2[G' ԦGG P['C^P3DS?s\  PCP4DS?#皝4  p(AC&5u![2*d[ P['CP6u![2*4[e xzCX)o=34Roe xzC&XфtzeoKp[pPp[o`=gn|g|n|SR}{nnnRRnnnnnnnRRRRRRRRRRRRSS"X^?S}}SSS}?S?F}}}}}}}}}}SS}a}SFS}S}ooS}FSF}oaS}}}oc7cS?SS*SSSSSSSSSSF}}}}}oooooaFaFaFaF}}}}}}}}}}}}}oooooooo}}}}}}aFaFaFaF}FFFFF}}oooaaaaSSS}oooFoaS}}}NX?}S}}}}}}KS}K}KF}}}SS}}S}KF*RRdE|>gn|g|n|SR{nnnRRnnnnnnnRRRRRRRRRRRRSS2 WcKcNcJRsU"m^*2gwZZskkkkB{sssZZcJRRRkkkl_dRZ>\J\B\JlZoN21mRgR\lNaJlRsRSRYZB\BhVrNlRwgsg_BZ11RVVg_]Zk___________________BBBBBBBZZZZZZZZZZZZZZZZZZZZ111111111111RRRRRRRVVVVVVVVVVVVggggggggggggggggggggl\l2lhs2hR"m^3=Iff%==\o3=3offffffffff33oooQzKpzzz~~z=o=o\%ifQpQ=bp=:f=p\ifQQAp_\\U=o=o=3============f=iiiiiQQQQQK=K=K=K=p\\\\pppp~\ip\\~\\ziiiiQQQQpQQQQbbbbbbppK=K=K=K=pfz=z=z=z=z=pppp\\QQQzQzQzQzQ~A~A~Apppppp~\zUzUzUpz=pQzQ~A~\~\p\pNo3w\=QNNfffMDf=f=3GG\==\\pp%G=ooee3o<>RRR1,zzR1llRz199R&&IIZZ91YYQQi)Y00QQQiqiiYXX;Y(yiH$<euXXqiiii@yqqqXXaHQQQiiij]bQXE>1"m^36Gff%==\o3=33ffffffffff33oooQzKfzztzp=o=o\%jjjrjbrzHYYY66^E@@@@(JEEE66;,1N11@@@A9<16%7,7(7,A6C/A1>1P7A/:,A1E12156(7(>4E/A1H>E>9(6144>986@9999999999999999999(((((((666666666666666666661111111444444444444>>>>>>>>>>>>>>>>>>>>A7AA>E>166 P['CPd*w=5R0wX pTC&NN2m cb^ f4 cij"m^!+==\Z%%7C%==========CCC1QOOOVOIV\-=VIhZVIVOEIZOlMMC%C%C7==1?7%;C#!A#bC7?=13+C;V;;5%C%C%%%n%%%%%%%%%%?#O=O=O=O=O=nXO1O7O7O7O7-#-#-#-#ZCV7V7V7V7ZCZCZCZCM;O=V?V7V7M;V7I?O=O=O=O1O1O1O1V?O7O7O7O7V;V;V;V;V;V;\C\C-#-#-#-#=VAI#I#I#I#I#ZCZCZCZCV7V7n\O1O1O1E3E3E3E3I+I+I+ZCZCZCZCZCZClVM;C5C5C5V?I#ZCO1E3I+M;M;V?V7ZCNCC7!1//===%!\\=%QQ=\%++=n77nCCn+n%CC< ment Plan v. Penn Mutual Life Ins. Co., 698 F. 2d 320, 324!327 (1983), and seek guidance from this Court's decisions construing the insurance policy exemption ordered in the Securities Act of 1933. See 48 Stat. 75, 15 U.S.C.  ! 77c(a)(8) (excluding from the reach of the Securities Act [a]ny insurance or endowment policy or annuity contract or optional annuity contract).  J&  In SEC v. Variable Annuity Life Ins. Co. of America, 359 U.S. 65 (1959), we observed that ...the concept of `insurance' entails some investment risktaking on the part of the company, and involves a guarantee that at least some fraction of the benefits will be payable in  J^ fixed amounts. Id., at 71. A variable annuity, we6 "  Ԍheld, is not an insurance policy within the meaning of the statutory exemption because the contract's entire  J investment risk remains with the policyholder inasmuch as benefit payments vary with the success of the  J` Ԛ[insurer's] investment policy, id., at 69, and may be greater or less, depending on the wisdom of [that]  J policy. Id., at 70.&  J  Thereafter, in SEC v. United Benefit Life Ins. Co., 387 U.S. 202 (1967), we held that an annuity contract could be considered a nonexempt investment contract during the contract's accumulation phase, and an exempt insurance contract once contractually guaranteed fixed pay J outs began.  FTN   XFrXFr ff Under the contract there at issue, the  J policyholder paid fixed monthly premiums which the issuer placed in a fund"called the Flexible Fund"invested by the issuer primarily in common stocks. At contract maturity the policyholder could either withdraw the cash value of his proportionate share of the fund (which the issuer guaranteed would not fall below a specified value), or convert to a fixedbenefit annuity, with payment amounts determined by the cash value of the policy. During the accumulation phase, the fund from which the policyholder would ultimately receive benefits fluctuated in value according  J@ to the insurer's investment results; because the  insurer promises to serve as an investment agency and allow the policyholder to share in its investment experience,  J id., at 208, this phase of the contract was serving pri J marily an investment, rather than an insurance, func Jx tion. Ibid.  The same approach"division of the contract into its component parts and examination of risk allocation in each component"appears wellsuited to the matter at hand because ERISA instructs that the  ! 1101(b)(2)(B)  J exemption applies only to the extent that a policy or  J contract provides for benefits the amount of which is  J` guaranteed. Analyzing GAC 50 this way, we find that` "   the contract fits the statutory exclusion only in part.  This much is not in dispute. During the contract's active, accumulation phase, any benefits payable by Hancock for which entries actually have been made in the Liabilities of the Fund fit squarely within the guaranteed category. Furthermore, if the active phase of the contract were to end, all benefits thereafter payable under the contract would be guaranteed in amount. To this extent also, GAC 50 provides for benefits the amount of which is guaranteed.  We turn, then, to the nub of the controversy, Hancock's responsibility for administration of the free funds during GAC 50's active phase. Between 1977 and 1982, we note first, GAC 50 furnished retirement bene J fits expressly called nonguaranteed; those benefits, it is undisputed, entailed no amount... guaranteed by  J the insurer. 29 U.S.C.  ! 1101(b)(2)(B); see supra, at 4!5. To that extent, GAC 50 does not fall within the statutory exemption. But the nonguaranteed benefit option is not the only misfit.  GAC 50, in key respects, is similar to the Flexible  J Fund contract examined in United Benefit. In that case, as in this one, the contract's aggregate value depended upon the insurer's success as an investment manager. Under both contracts, until the occurrence of a triggering event"contract maturity in the Flexible Fund case, Harris' exercise of its conversion option in the case of GAC 50"the investment risk is borne primarily by the contractholder. Confronting a contract bearing similar features, the Seventh Circuit stated: BQ xC   , , (  The pension trustees did not buy an insurance contract with a fixed payout; they turned over the assets of the pension plan to [the insurer] to manage with full investment discretion, subject only to a modest income guaranty. If the pension plan had hired an investment advisor and given him the authority to buy and sell securities at his discretion "   for the plan's account, the advisor would be a fiduciary within the meaning of [ERISA], and that is essentially what the trustees did during the accu J mulation phase of th[is] contract .... Peoria  J` Union, 698 F. 2d, at 327.BQ `d   J  ( , , In the Second Circuit's words,  [t]o the extent that [Hancock] engages in the discretionary management of assets attributable to that phase of the contract which provides no guarantee of benefit payments or fixed rates of return, it seems to us that [Hancock] should be subject to fiduciary responsibility. 970 F. 2d, at 1144.  Hancock urges that to the full extent of the free funds"and hence, to the full extent of the contract"GAC 50 provides for benefits the amount of which is guaranteed, inasmuch as Harris Trust... has the right ...to use any `free funds' to purchase future guaranteed benefits under the contract, in addition to benefits previously guaranteed. Brief for Petitioner 26;  J see also Mack Boring & Parts v. Meeker Sharkey  Jl ԚMoffitt, Actuarial Consultants of New Jersey, 930 F. 2d 267, 273 (CA3 1991) (statute's use of phrase provides for does not require that the benefits contracted for be delivered immediately; it is enough that the contract provides for guaranteed benefits at some finite point in the future).  Logically pursued, Hancock's reading of the statute would exempt from ERISA's fiduciary regime any contract, in its entirety, so long as the funds held thereunder could be used at some point in the future to pur J chase some amount of guaranteed benefits. JJ uBD ԍ FTN  &  XFrXFr ddf < This argument resembles one rejected in SEC v. United Benefit  uB Life Ins. Co., 387 U.S. 202 (1967). In United Benefit, the policyholder was protected somewhat against fluctuations in the value of the contract fund through a promise that the cash value of the contract would not fall below the aggregate amount of premiums  uB deposited with the insurer. Id., at 205, 208, n. 10. We held that "## although this guarantee of cash value based on net premiums reduces substantially the investment risk of the contract holder, the assumption of an investment risk cannot by itself create an insurance provision under the federal definition. The basic difference between a contract which to some degree is insured and a contract  uB# of insurance must be recognized. Id., at 211 (citation omitted). But Con "  Ԯgress did not say a contract is exempt if it provides for guaranteed benefits; it said a contract is exempt  J only to the extent it so provides. Using these words of limitation, Congress apparently recognized that contracts  J` may provide to some extent for something other than guaranteed benefits, and expressly declared the exemption unavailable to that extent.  Tellingly with respect to GAC 50, the Pension Administration Fund is guaranteed only against a decline  J below its January 1, 1968 level. See supra, at 3. Harris thus bears a substantial portion of the risk as to fluctuations in the free funds, and there is not even the modest income guaranty the Seventh Circuit found  J insufficient in Peoria Union. 698 F. 2d, at 327. Furthermore, Hancock has the authority to set the price at which free funds are convertible into guaranteed bene J fits. See supra, at 4, n. 3. In combination, these features provide no genuine guarantee of the amount of benefits that Plan participants will receive in the future.  It is true but irrelevant, Hancock pleads, that GAC 50 provides no guaranteed return to the Plan, for ERISA uniformly uses the word benefits to refer exclusively to payments to plan participants or beneficiaries, not pay Jh ments to plans. Brief for Petitioner 25; see also Mack  J@ Boring, 930 F. 2d, at 273 ( benefits refers only to payments to participants or beneficiaries; payments to plan sponsors can be variable without defeating guaranteed  J benefit exclusion); Goldberg & Altman 482. This confinement of the word benefits, however, perfectly fits the tight compass of the exclusion. A contract compox "  Ԯnent that provides for something other than guaranteed  J payments to plan participants or beneficiaries"e.g., a guaranteed return to the plan"does not, without more,  J provide for guaranteed benefits and thus does not fall within the statutory exclusion. Moreover, the guaranteed benefit policy exclusion requires a guarantee of the  J amount of benefits to be provided; with no guaranteed investment return to the Plan, and no guarantee regarding conversion price, plan participants are undeniably at risk inasmuch as the future amount of benefits"payments to participants and beneficiaries"attributable JH to the free funds can fall to zero. But see post, at J 8, n. 4 (contending that the plan's guarantee renders  J immaterial the absence of a guarantee by the insurer). A contract of that order does not meet the statutory prescription.  In sum, we hold that to determine whether a contract qualifies as a guaranteed benefit policy, each component of the contract bears examination. A component fits within the guaranteed benefit policy exclusion only if it allocates investment risk to the insurer. Such an allocation is present when the insurer provides a genuine guarantee of an aggregate amount of benefits payable to retirement plan participants and their beneficiaries. As to a contract's free funds"funds in excess of those that have been converted into guaranteed benefits"these indicators are key: the insurer's guarantee of a reasonable rate of return on those funds and the provision of a mechanism to convert the funds into guaranteed benefits at rates set by the contract. While another contract, with a different mix of features, might satisfy these requirements, GAC 50 does not. Indeed, Hancock provided no real guarantee that benefits in any amount would be payable from the free funds. We therefore conclude, as did the Second Circuit, that the free funds are plan assets, and that Hancock's actions in regard to their management and disposition must be` "   judged against ERISA's fiduciary standards.  9H1 d dy,III؃  J  2  One other contention pressed by Hancock and amici deserves consideration. Hancock, supported by the United States, asserts that the Department of Labor has adhered consistently to the view that ERISA's fiduciary obligations do not apply in relation to assets held by an insurer in its general account under contracts like GAC  JV 50.%V uB ԍ FTN  &  XFrXFr ddf < The Department of Labor shares enforcement responsibility for ERISA with the Department of the Treasury. See 29 U.S.C.  y ! 1204(a). Hancock urges us to follow this view based on  u  `the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.'    J Brief for Petitioner 39, quoting Skidmore v. Swift & Co.,  Jf 323 U.S. 134, 140 (1944); see also Chevron U.S. A.  J> Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843!844 (1984).  Hancock and the United States place primary reliance on an early interpretive bulletin in which the Department of Labor stated:BQ C   , , (  If an insurance company issues a contract or policy of insurance to a plan and places the consideration for such contract or policy in its general asset account, the assets in such account shall not be considered to be plan assets. Therefore, a subsequent transaction involving the general asset account between a party in interest and the insurance company will not, solely because the plan has been issued such a contract or policy of insurance, be a prohibited transaction. Interpretive Bulletin 75!2,Q"   40 Fed. Reg. 31598 (1975), 29 CFR  ! 2509.75!2(b) (1992).BQ d   ( , , If this passage squarely addressed the question we confront, namely, whether ERISA's fiduciary standards apply to assets held under participating annuity contracts like GAC 50, we would indeed have a clear statement of the Department's view on the matter at issue. But, as the second sentence of the quoted passage shows, the question addressed in Interpretive Bulletin 75!2 was whether a party in interest has engaged in a prohibited transaction [under 29 U.S.C.  f! 1106] with  J an employee benefit plan. 2509.75!2.%  uB ԍ FTN  &  XFrXFr ddf < The subsection title for the interpretation, published in the Code of Federal Regulations, is Interpretive bulletin relating to prohibited transactions.  The Department did not mention, let alone elaborate on, any grounding for Interpretive Bulletin 75!2 in   ! 1101's guaranteed benefit policy exemption, nor did the Bulletin speak of the application of its pronouncement, if any, to ERISA's fiduciary duty prescriptions.  The Department asserts the absence of any textual  J basis for the view, adopted by the Second Circuit, that certain assets [can be considered] plan assets for general fiduciary duty purposes but not for prohibited transaction purposes, 970 F. 2d, at 1145, and, accordingly, no reason to suppose that Interpretive Bulletin 75!2's statement regarding plan assets would not apply in both  J contexts. See Brief for United States as Amicus Curiae  J| 26!27. Nothing in Interpretive Bulletin 75!2 or 29 CFR   ! 2509.75!2 (1992), however, sets forth that position, or otherwise alerts the reader that more than the prohibited transaction exemption was then subject to the  J ԚDepartment's scrutiny.P% uBi ԍ FTN  &  XFrXFr ddf < It is noteworthy that the Secretary of Labor has express authority to grant exemptions from the rules regarding prohibited transactions, but not from 1104's fiduciary duty provisions. See 29"## U.S.C. 1108. P Had the Department intendedG"   Interpretive Bulletin 75!2 to apply to the guaranteed benefit policy exclusion, it would have had to explain  J how an unqualified exclusion for an insurer's general asset account can be reconciled with Congress' choice of a more limited ( to the extent that) formulation. Its silence in that regard is an additional indication that the 1975 pronouncement did not originally have the  J scope the Department now attributes to it.  G uB ԍ FTN  &  XFrXFr ddf < After a lengthy rulemaking proceeding, the Department did promulgate, in 1986, a comprehensive interpretation of what ERISA means by plan assets. See 51 Fed. Reg. 41278 (1986), 29 CFR  y ! 2510.3!101 (1992). Again, however, the Department did not mention the guaranteed benefit policy exemption contained in  y ! 1101(b) or refer to the status of assets in that setting. See 29 CFR   ! 2510.3!101 (1992). The Department, without comment, note[d] that the portion of Interpretive Bulletin 75!2 dealing with contracts or policies of insurance is not affected by the regulation being issued here. 51 Fed. Reg. 41278 (1986). But Interpretive Bulletin 75!2, as we just observed, did not home in on whether, or to what extent, particular insurance contracts fit within the guaranteed benefit policy exemption. Thus the 1986 publication is no more enlightening than the interpretation published in 1975.   We note, too, that the United States was unable to comply with the Second Circuit's request for its assistance in this very case; the Department of Labor in JH formed the Court of Appeals, after requesting and receiving a substantial extension of time, that the need to fully consider all of the implications of the issues within the Department precludes our providing the Court with a brief within a foreseeable time frame. 970 F. 2d, at 1140!1141. We recognize the difficulties the Department faced, given the complexity of ERISA and the constant evolution of insurance contract practices as reflected in this case. Our point is simply that as of 1992, the Department apparently had no firm position it was prepared to communicate.I "  Ԍ We need not grapple here with the difficult question of the deference due an agency view first precisely stated  J in a brief supporting a petitioner. Cf. Estate of Cowart  J v. Nicklos Drilling Co., 505 U.S. ___, ___, (1992) (slip op., at 6!7) ( If the Director asked us to defer to his  J8 new statutory interpretation, this case might present a difficult question regarding whether and under what circumstances deference is due to an interpretation formulated during litigation.) (emphasis in original). It suffices to recall, once again, Congress' words of limitation. The legislature provided an exemption to the extent that a contract provides for guaranteed benefits. By reading the words to the extent to mean nothing more than if, the Department has exceeded the scope  J of available ambiguity. See Public Employees Retire J ment System of Ohio v. Betts, 492 U.S. 158, 171 (1989) ( no deference is due to agency interpretations at odds with the plain language of the statute itself ! ). We therefore cannot accept current pleas for the deference  J described in Skidmore or Chevron.  The Department of Labor recognizes that ranking free funds as plan assets would secure added legal protections against losses by pension plans, because ERISA imposes restrictions not currently provided by contract  J@ and insurance law. Brief for United States as Amicus  J Curiae 25!26. But the Department warns thatBQ C   , , (  the disruptions and costs [of holding insurance companies to be fiduciaries under participating group annuity contracts] would be significant, both in terms of the administrative changes the compa J nies would be forced to undertake (e.g ! ., segregation of planrelated assets into segmented or separate accounts, and reallocation of operating costs to other policyholders) and in terms of the considerable exposure to the ensuing litigation that would be brought by pension plans and others alleging fidu"  Ԯ J ciary breaches. Id., at 25.BQ d   ( , , These are substantial concerns, but we cannot give them dispositive weight. The insurers' views have been pre J sented to CongressJ uBT ԍ FTN  &  XFrXFr ddf < See App. to Brief for Petitioner 19!64 (listing the hundreds of individuals and organizations, including insurance industry representatives, testifying before Congress during deliberations on ERISA). Insurance industry representatives have constantly sought amendment of ERISA to exempt all general account assets. See Brief for  uB Certain United States Senators as Amici Curiae 13!14. and that body can adjust the stat J ute. See Burnet v. Coronado Oil & Gas Co., 285 U.S.  J 393, 406 (1932) (Brandeis, J., dissenting); Di Santo v.  Jt Pennsylvania, 273 U.S. 34, 42 (1927) (Brandeis, J., dissenting). Furthermore, the Department of Labor can provide administrative relief to facilitate insurers' compliance with the law, thereby reducing the disruptions it forecasts. ** * * *,  For the reasons stated, the judgment of the Court of Appeals for the Second Circuit is  J4 ;zAffirmed.ĐD,