|RAYMOND B. YATES, M.D., P.C. PROFIT SHARINGPLAN V. HENDON (02-458) 541 U.S. 1 (2004)
287 F.3d 521, reversed and remanded.
[ Ginsburg ]
[ Scalia ]
[ Thomas ]
RAYMOND B. YATES, M.D., P.C. PROFIT
PLAN, and RAYMOND B. YATES, trustee,
v. WILLIAM T. HENDON,
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
[March 2, 2004]
Justice Ginsburg delivered the opinion of the Court.
This case presents a question on which federal courts have divided: Does the working owner of a business (here, the sole shareholder and president of a professional corporation) qualify as a participant in a pension plan covered by the Employee Retirement Income Security Act of 1974 (ERISA or Act), 88 Stat. 832, as amended, 29 U.S.C. § 1001 et seq. The answer, we hold, is yes: If the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants. Such a working owner, in common with other employees, qualifies for the protections ERISA affords plan participants and is governed by the rights and remedies ERISA specifies. In so ruling, we reject the position, taken by the lower courts in this case, that a business owner may rank only as an employer and not also as an employee for purposes of ERISA-sheltered plan participation.
Enacted to protect
interests of participants in employee benefit plans and their
beneficiaries, 29 U.S.C. §
1001(b), ERISA comprises four titles. Title I, 29 U.S.C. §
1001 et seq., requires administrators of all
covered pension plans to file periodic reports with the
Secretary of Labor, mandates minimum participation, vesting and
funding schedules, establishes standards of fiduciary conduct
for plan administrators, and provides for civil and criminal
enforcement of the Act. Nachman Corp. v.
Pension Benefit Guaranty Corporation, 446 U.S. 359, 361,
n. 1 (1980). Title II, codified in various parts of Title
26 of the United States Code, amended various [Internal
Revenue Code] provisions
pertaining to qualification of
pension plans for special tax treatment, in order, among other
things, to conform to the standards set forth in Title I.
446 U.S., at 361, n. 1. Title III, 29 U.S.C. §
1201 et seq., contains provisions designed to
coordinate enforcement efforts of different federal
departments, and provides for further study of [benefit
plans]. 446 U.S., at 361, n. 1. Title IV, 29 U.S.C. §
1301 et seq., created the Pension Benefit
Guaranty Corporation (PBGC) and a termination insurance program
to protect employees against the loss of
nonforfeitable benefits upon termination of pension
plans that lack sufficient funds to pay such benefits in
446 U.S., at 361, n. 1. See also Mead Corp. v. Tilley, 490 U.S. 714, 717 (1989); Brief for United States as Amicus Curiae 2.
This case concerns the definition and coverage provisions of Title I, though those provisions, indicating who may participate in an ERISA-sheltered plan, inform each of ERISAs four titles. Title I defines the term employee benefit plan to encompass an employee welfare benefit plan or an employee pension benefit plan or a plan which is both . 29 U.S.C. § 1002(3). The same omnibus section defines participant as any employee or former employee of an employer, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer , or whose beneficiaries may be eligible to receive any such benefit. §1002(7). Employee, under Title Is definition section, means any individual employed by an employer, §1002(6), and employer includes any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan, §1002(5).
Dr. Raymond B. Yates was the sole shareholder and president of Raymond B. Yates, M.D., P.C., a professional corporation. 287 F.3d 521, 524 (CA6 2002); App. to Pet. for Cert. 10a. The corporation maintained the Raymond B. Yates, M.D., P.C. Profit Sharing Plan (Profit Sharing Plan or Plan), for which Yates was the administrator and trustee. Ibid. From the Profit Sharing Plans inception, at least one person other than Yates or his wife was a participant. Ibid.; App. 269a. The Profit Sharing Plan qualified for favorable tax treatment under §401 of the Internal Revenue Code (IRC). 287 F.3d, at 524; App. 71a73a. As required by both the IRC, 26 U.S.C. § 401(a)(13), and Title I of ERISA, 29 U.S.C. § 1056(d), the Plan contained an anti-alienation provision. That provision, entitled Spendthrift Clause, stated in relevant part: Except for loans to Participants as [expressly provided for in the Plan], no benefit or interest available hereunder will be subject to assignment or alienation, either voluntarily or involuntarily. App. 252a.
In December 1989, Yates borrowed $20,000 at 11 percent interest from the Raymond B. Yates, M.D., P.C. Money Purchase Pension Plan (Money Purchase Pension Plan), which later merged into the Profit Sharing Plan. Id., at 268a269a. The terms of the loan agreement required Yates to make monthly payments of $433.85 over the five-year period of the loan. Id., at 269a. Yates failed to make any monthly payment. 287 F.3d, at 524. In June 1992, coinciding with the Money Purchase Pension Plan-Profit Sharing Plan merger, Yates renewed the loan for five years. App. 269a. Again, he made no monthly payments. In fact, Yates repaid nothing until November 1996. 287 F.3d, at 524. That month, he used the proceeds from the sale of his house to make two payments totaling $50,467.46, which paid off in full the principal and interest due on the loan. Ibid. Yates maintained that, after the repayment, his interest in the Profit Sharing Plan amounted to about $87,000. App. to Pet. for Cert. 39a.
Three weeks after Yates repaid the loan to the Profit Sharing Plan, on December 2, 1996, Yatess creditors filed an involuntary petition against him under Chapter 7 of the Bankruptcy Code. Id., at 12a; accord, App. 300a. In August 1998, respondent William T. Hendon, the Bankruptcy Trustee, filed a complaint, pursuant to 11 U.S.C. § 547(b) and 550, against petitioners Profit Sharing Plan and Yates, in his capacity as the Plans trustee. App. 1a3a. Hendon asked the Bankruptcy Court to avoi[d] the preferential transfer by [Yates] to [the Profit Sharing Plan] in the amount of $50,467.46 and [to] orde[r] [the Plan and Yates, as trustee] to pay over to the [bankruptcy] trustee the sum of $50,467.46, plus legal interest . . . , together with costs . . . . Id., at 3a. On cross-motions for summary judgment, the Bankruptcy Court ruled for Trustee Hendon. App. to Pet. for Cert. 36a50a.
The Bankruptcy Court first determined that the loan repayment qualified as a preferential transfer under 11 U.S.C. § 547(b).1 App. to Pet. for Cert. 41a42a. That finding was not challenged on appeal. The Bankruptcy Court then held that the Profit Sharing Plan and Yates, as trustee, could not rely on the Plans anti-alienation provision to prevent Hendon from recovering the loan repayment. As a self-employed owner of the professional corporation that sponsor[ed] the pension plan, the Bankruptcy Court stated, Yates could not participate as an employee under ERISA and . . . [therefore could not] use its provisions to enforce the restriction on the transfer of his beneficial interest in the Defendant Plan. Id., at 43a44a. In so ruling, the Bankruptcy Court relied on Circuit precedent, including SEC v. Johnston, 143 F.3d 260 (CA6 1998), and Fugarino v. Hartford Life and Accident Ins. Co., 969 F.2d 178 (CA6 1992).
The District Court affirmed the Bankruptcy Courts judgment. App. to Pet. for Cert. 9a35a. Acknowledging that other Courts of Appeals had reached a different conclusion, id., at 19a, the District Court observed that it was bound by Sixth Circuit precedent. According to the controlling Sixth Circuit decisions, neither a sole proprietor, Fugarino, 969 F.2d, at 186, nor a sole owner of a corporation, Agrawal v. Paul Revere Life Ins. Co., 205 F.3d 297, 302 (2000), qualifies as a participant in an ERISA-sheltered employee benefit plan. App. to Pet. for Cert. 20a21a. Applying Circuit precedent, the District Court concluded:
The fact Dr. Yates was not qualified to participate in an ERISA protected plan means none of the money he contributed to the Plan as an employee was ever part of an ERISA plan. The $50,467.46 he returned to the Plan was not protected by ERISA, because none of the money he had in the Plan was protected by ERISA. Id., at 20a.
The Sixth Circuit affirmed the
District Courts judgment. 287 F.3d 521. The Court of
Appeals adhered to its published caselaw [holding] that
a sole proprietor or sole shareholder of a business must
be considered an employer and not an employee
purposes of ERISA.
We granted certiorari, 539 U.S. (2003), in view of the division of opinion among the Circuits on the question whether a working owner may qualify as a participant in an employee benefit plan covered by ERISA. Compare Agrawal, 205 F.3d, at 302 (sole shareholder is not a participant in an ERISA-qualified plan); Fugarino, 969 F.2d, at 186 (sole proprietor is not a participant); Kwatcher v. Massachusetts Serv. Employees Pension Fund, 879 F.2d 957, 963 (CA1 1989) (sole shareholder is not a participant); Giardono v. Jones, 867 F.2d 409, 411412 (CA7 1989) (sole proprietor is not a participant); Peckham v. Board of Trustees of Intl Brotherhood of Painters and Allied Trades Union, 653 F.2d 424, 427428 (CA10 1981) (sole proprietor is not a participant), with Vega v. National Life Ins. Servs., Inc., 188 F.3d 287, 294 (CA5 1999) (co-owner is a participant); In re Baker, 114 F.3d 636, 639 (CA7 1997) (majority shareholder is a participant); Madonia v. Blue Cross & Blue Shield of Virginia, 11 F.3d 444, 450 (CA4 1993) (sole shareholder is a participant).2
ERISAs definitions of employee, and, in turn, participant, are uninformative. See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992) (ERISAs nominal definition of employee as any individual employed by an employer, is completely circular and explains nothing. (citation omitted)). We therefore look to other provisions of the Act for instruction. See ibid. ERISAs text contains multiple indications that Congress intended working owners to qualify as plan participants. Because these indications combine to provide specific guidance, ibid., there is no cause in this case to resort to common law.3
Congress enacted ERISA against a backdrop of IRC provisions that permitted corporate shareholders, partners, and sole proprietors to participate in tax-qualified pension plans. Brief for United States as Amicus Curiae 1920. Working shareholders have been eligible to participate in such plans since 1942. See Revenue Act of 1942, ch. 619, §165(a)(4), 56 Stat. 862 (a pension plan shall be tax-exempt if, inter alia, the contributions or benefits provided under the plan do not discriminate in favor of employees who are officers, shareholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees). Two decades later, still prior to ERISAs adoption, Congress permitted partners and sole proprietors to establish tax-favored pension plans, commonly known as H. R. 10 or Keogh plans. Self-Employed Individuals Tax Retirement Act of 1962, 76 Stat. 809; Brief for United States as Amicus Curiae 19. Thus, by 1962, working owners of all kinds could contribute to tax-qualified retirement plans.
ERISAs enactment in 1974 did not change that situation.4 Rather, Congress objective was to harmonize ERISA with longstanding tax provisions. Title I of ERISA and related IRC provisions expressly contemplate the participation of working owners in covered benefit plans. Id., at 1416. Most notably, several Title I provisions partially exempt certain plans in which working owners likely participate from otherwise mandatory ERISA provisions. Exemptions of this order would be unnecessary if working owners could not qualify as participants in ERISA-protected plans in the first place.
To illustrate, Title I frees the following plans from the Acts fiduciary responsibility requirements:
(1) a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees; or
(2) any agreement described in section 736 of [the IRC], which provides payments to a retired partner or deceased partner or a deceased partners successor in interest. 29 U.S.C. § 1101(a).
The IRC defines the term highly compensated employee to include any employee who was a 5-percent owner at any time during the year or the preceding year. 26 U.S.C. § 414(q)(1)(A). A 5-percent owner, the IRC further specifies, is any person who owns more than 5 percent of the outstanding stock of the corporation or stock possessing more than 5 percent of the total combined voting power of all stock of the corporation if the employer is a corporation, or any person who owns more than 5 percent of the capital or profits interest in the employer if the employer is not a corporation. §416(i)(1)(B)(i). Under these definitions, some working owners would fit the description highly compensated employees. Similarly, agreements that make payments to retired partners, or to deceased partners successors in interest, surely involve plans in which working partners participate.
Title I also contains more limited
exemptions from ERISAs fiduciary responsibility
requirements. These exemptions, too, cover plans that
ordinarily include working owners as participants. To
illustrate, assets of an employee benefit plan typically must
be held in trust. See 29 U.S.C. §
1103(a). That requirement, however, does
not apply, inter alia, to a plan some or all of the participants of which are employees described in section 401(c)(1) of [the IRC]. 29 U.S.C. § 1103(b)(3)(A). IRC §401(c)(1)(A) defines an employee to include a self-employed individual; and IRC §§401(c)(1)(B) and (2)(A)(i), in turn, define a self-employed individual to cover an individual with earned income from a trade or business in which personal services of the taxpayer are a material income-producing factor. This definition no doubt encompasses working sole proprietors and partners. 26 U.S.C. § 1402(a) and (c).
Title I also contains exemptions from ERISAs prohibited transaction provisions. Like the fiduciary responsibility exemptions, these exemptions indicate that working owners may participate in ERISA-qualified plans. For example, although Title I generally bars transactions between a plan and a party in interest, 29 U.S.C. § 1106 the Act permits, among other exceptions, loans to plan participants if certain conditions are satisfied, §1108(b)(1). One condition is that loans must not be made available to highly compensated employees in an amount greater than the amount made available to other employees. §1108(b)(1)(B). As just observed, see supra, at 910, some working owners, including shareholder-employees, qualify as highly compensated employees. Title I goes on to exclude owner-employees, as defined in the IRC, from the participant loan exemption. §1108(d)(1). Under the IRCs definition, owner-employees include partners who ow[n] more than 10 percent of either the capital interest or the profits interest in [a] partnership and sole proprietors, but not shareholder-employees. 26 U.S.C. § 401(c)(3). In sum, Title Is provisions involving loans to plan participants, by explicit inclusion or exclusion, assume that working ownersshareholder-employees, partners, and sole proprietorsmay participate in ERISA-qualified benefit plans.
Provisions of Title IV of ERISA are corroborative. Brief for United States as Amicus Curiae 17, and n. 8. Title IV does not apply to plans established and maintained exclusively for substantial owners, 29 U.S.C. § 1321(b)(9) (emphasis added), a category that includes sole proprietors and shareholders and partners with a ten percent or greater ownership interest, §1322(b)(5)(A). But Title IV does cover plans in which substantial owners participate along with other employees. See §1322(b)(5)(B). In addition, Title IV does not cover plans established by professional service employers with 25 or fewer active participants. §1321(b)(13). Yatess medical practice was set up as a professional service employer. See §1321(c)(2)(A) (a professional service employer is any proprietorship, partnership, corporation owned or controlled by professional individuals the principal business of which is the performance of professional services). But significantly larger plansplans covering more than 25 employeesestablished by a professional service employer would presumably qualify for protection.
Particularly instructive, Title IV and the IRC, as amended by Title II, clarify a key point missed by several lower courts: Under ERISA, a working owner may have dual status, i.e., he can be an employee entitled to participate in a plan and, at the same time, the employer (or owner or member of the employer) who established the plan. Both Title IV and the IRC describe the employer of a sole proprietor or partner. See 29 U.S.C. § 1301(b)(1) (An individual who owns the entire interest in an unincorporated trade or business is treated as his own employer, and a partnership is treated as the employer of each partner who is an employee within the meaning of section 401(c)(1) of [the IRC].); 26 U.S.C. § 401(c)(4) (An individual who owns the entire interest in an unincorporated trade or business shall be treated as his own employer. A partnership shall be treated as the employer of each partner who is an employee within the meaning of [§401(c)(1)].). These descriptions expressly anticipate that a working owner can wear two hats, as an employer and employee. Cf. Clackamas Gastroenterology Assoc., P. C. v. Wells, 538 U.S. 440, (2003) (slip op., at 23) (Ginsburg, J., dissenting) (Clackamas readily acknowledges that the physician-shareholders are employees for ERISA purposes.).
In sum, because the statutes text is adequately informative, we need not look outside ERISA itself to conclude with security that Congress intended working owners to qualify as plan participants.5
Congress aim is advanced by our reading of the text. The working employers opportunity personally to participate and gain ERISA coverage serves as an incentive to the creation of plans that will benefit employer and nonowner employees alike. See Brief for United States as Amicus Curiae 2122. Treating working owners as participants not only furthers ERISAs purpose to promote and facilitate employee benefit plans. Recognizing the working owner as an ERISA-sheltered plan participant also avoids the anomaly that the same plan will be controlled by discrete regimes: federal-law governance for the nonowner employees; state-law governance for the working owner. See, e.g., Agrawal, 205 F.3d, at 302 (because sole shareholder does not rank as a plan participant under ERISA, his state-law claims against insurer are not preempted). ERISAs goal, this Court has emphasized, is uniform national treatment of pension benefits. Patterson v. Shumate, 504 U.S. 753, 765 (1992). Excepting working owners from the federal Acts coverage would generate administrative difficulties and is hardly consistent with a national uniformity goal. Cf. Madonia, 11 F.3d, at 450 (Disallowing shareholders from being plan participants would result in disparate treatment of corporate employees claims, thereby frustrating the statutory purpose of ensuring similar treatment for all claims relating to employee benefit plans.).
We note finally that a 1999 Department of Labor advisory opinion accords with our comprehension of Title Is definition and coverage provisions. Pension and Welfare Benefits Admin., U.S. Dept. of Labor, Advisory Opinion 9904A, 26 BNA Pension and Benefits Rptr. 559 (hereinafter Advisory Opinion 9904A). Confirming that working owners may qualify as participants in ERISA-protected plans, the Departments opinion concludes:
In our view, the statutory provisions of ERISA, taken as a whole, reveal a clear Congressional design to include working owners within the definition of participant for purposes of Title I of ERISA. Congress could not have intended that a pension plan operated so as to satisfy the complex tax qualification rules applicable to benefits provided to owner-employees under the provisions of Title II of ERISA, and with respect to which an employer faithfully makes the premium payments required to protect the benefits payable under the plan to such individuals under Title IV of ERISA, would somehow transgress against the limitations of the definitions contained in Title I of ERISA. Such a result would cause an intolerable conflict between the separate titles of ERISA, leading to the sort of absurd results that the Supreme Court warned against in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992). Id., at 560561 (footnote omitted).
This agency view on the qualification of a self-employed individual for plan participation reflects a body of experience and informed judgment to which courts and litigants may properly resort for guidance. Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).
The Sixth Circuits leading decision in pointits 1992 determination in Fugarinorelied, in large part, on an incorrect reading of a Department of Labor regulation, 29 CFR § 2510.33. The Fugarino court read the Departments regulation to rule out classification of a working owner as an employee of the business he owns. Entitled Employee benefit plan, the regulation complements §3(3) of ERISA, 29 U.S.C. § 1002(3), which defines employee benefit plan, see supra, at 2; the regulation provides, in relevant part:
(b) Plans without employees. For purposes of title I of the Act and this chapter, the term employee benefit plan shall not include any plan, fund or program, other than an apprenticeship or other training program, under which no employees are participants covered under the plan, as defined in paragraph (d) of this section. For example, a so-called Keogh or H. R. 10 plan under which only partners or only a sole proprietor are participants covered under the plan will not be covered under title I. However, a Keogh plan under which one or more common law employees, in addition to the self-employed individuals, are participants covered under the plan, will be covered under title I.
(c) Employees. For purposes of this section:
(1) An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse, and
(2) A partner in a partnership and his or her spouse shall not be deemed to be employees with respect to the partnership. 29 CFR § 2510.33 (2003) (emphasis added and deleted).
In common with other Courts of Appeals
that have held working owners do not qualify as participants in
ERISA-governed employee benefit plans, the Sixth Circuit
apparently understood the regulation to provide a generally
applicable definition of the term employee,
controlling for all Title I purposes. Fugarino, 969
F.2d, at 185186 (As a result of [the] regulatio[n],
a plan whose sole beneficiaries are the companys owners
cannot qualify as a plan under ERISA. Further, an employer
cannot ordinarily be an employee or participant under
ERISA. (citation omitted)). See also Kwatcher,
879 F.2d, at 961 (By its terms, the regulation
unambiguously debars a sole share-
holder from employee status, notwithstanding that
he may work for the corporation he owns, shoulder to shoulder with eligible (non-owner) employees.); Giardono, 867 F.2d, at 412 ([This] regulatio[n] exclude[s] from
the definition of an employee any individual who wholly owns a trade or business, whether incorporated or
Almost eight years after its decision in Fugarino, in Agrawal, the Sixth Circuit implied that it may have misread the regulation: Th[e] limiting definition of employee [in §2510.33(c)] addresses the threshold issue of whether an ERISA plan exists. It is not consistent with the purpose of ERISA to apply this limiting definition of employee to the statutory definitions of participant and beneficiary. 205 F.3d, at 303. The Circuit, however, did not overrule its earlier interpretation. See 287 F.3d, at 525 (case below) ([T]he three judge panel before which this appeal is currently pending has no authority to overrule Fugarino.); Agrawal, 205 F.3d, at 302 (the decision in the present case is preordained by the Fugarino holding).
The Department of Labors 1999 advisory opinion, see supra, at 1314, interprets the Employee benefit plan regulation as follows:
In its regulation at 29 C. F. R. 2510.33, the Department clarified that the term employee benefit plan as defined in section 3(3) of Title I does not include a plan the only participants of which are [a]n individual and his or her spouse with respect to a trade of business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse or [a] partner in a partnership and his or her spouse. The regulation further specifies, however, that a plan that covers as participants one or more common law employees, in addition to the self-employed individuals will be included in the definition of employee benefit plan under section 3(3). The conclusion of this opinion, that such self-employed individuals are themselves participants in the covered plan, is fully consistent with that regulation. Advisory Opinion 9904A, at 561, n. 7 (emphasis added).
This agency view, overlooked by the Sixth Circuit, see Brief for United States as Amicus Curiae 26, merits the Judiciarys respectful consideration. Cf. Clackamas Gastroenterology Assoc., P. C., 538 U.S., at (slip op., at 9) (EEOC guidelines under the Americans with Disabilities Act of 1990 are persuasive).
The Departments regulation
itself reveals the definitional prescriptions limited
scope. The prescription describes employees only
[f]or purposes of this section, see supra,
at 15 (emphasis deleted), i.e., the section defining
employee benefit plans. Accordingly, the
regulation addresses only what plans qualify as employee
benefit plans under Title I of ERISA. Plans that cover
only sole owners or partners and their spouses, the regulation
instructs, fall outside Title Is domain.6 Plans covering working owners
and their nonowner employees, on the other hand, fall
entirely within ERISAs compass.7 See Vega, 188 F.3d, at
interpret the regulatio[n] to define
employee only for purposes of determining the existence of an
ERISA plan.); Madonia, 11 F.3d, at
450 ([T]he regulation does not govern the issue of whether someone is a participant in an ERISA plan, once the existence of that plan has been established. This makes perfect sense: once a plan has been established,
it would be anomalous to have those persons bene-
fitting from it governed by two disparate sets of legal obligations.).
Also in common with other Courts of
Appeals that have denied participant status to working owners,
the Sixth Circuits leading decision mistakenly relied, in
addition, on ERISAs anti-inurement provision,
29 U.S.C. §
1103(c)(1), which prohibits plan assets from inuring to the
benefit of employers. See Fugarino, 969 F.2d, at 186
(A fundamental requirement of ERISA is that the
assets of a plan shall never inure to the benefit of any
Correctly read, however, the anti-inurement provision does not preclude Title I coverage of working owners as plan participants. It states that, with enumerated exceptions, the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan. 29 U.S.C. § 1103(c)(1). The provision demands only that plan assets be held for supplying benefits to plan participants. Like the Department of Labor regulation, see supra, at 1415, the anti-inurement provision does not address the discrete question whether working owners, along with nonowner employees, may be participants in ERISA-sheltered plans. As the Fifth Circuit observed in Vega:
Th[e] [anti-inurement] provision refers to the congressional determination that funds contributed by the employer (and, obviously, by the [nonowner] employees ) must never revert to the employer; it does not relate to plan benefits being paid with funds or assets of the plan to cover a legitimate pension or health benefit claim by an employee who happens to be a stockholder or even the sole shareholder of a corporation. 188 F.3d, at 293, n. 5.
ERISAs anti-inurement provision is based on the analogous exclusive benefit provision in the IRC, 26 U.S.C. § 401(a)(2), which has never been understood to bar tax-qualified plan participation by working owners. See H. R. Conf. Rep. No. 931280, pp. 302303 (1974); Brief for United States as Amicus Curiae 29. The purpose of the anti-inurement provision, in common with ERISAs other fiduciary responsibility provisions, is to apply the law of trusts to discourage abuses such as self-dealing, imprudent investment, and misappropriation of plan assets, by employers and others. See, e.g., Prudential Ins. Co. of Am. v. Doe, 76 F.3d 206, 209 (CA8 1996). Those concerns are not implicated by paying benefits to working owners who participate on an equal basis with nonowner employees in ERISA-protected plans.
In sum, the anti-inurement provision, like the Department of Labor regulation, establishes no categorical barrier to working owner participation in ERISA plans. Whether Yates himself, in his handling of loan repayments, see supra, at 4, engaged in conduct inconsistent with the anti-inurement provision is an issue not yet reached by the courts below, one on which we express no opinion.
For the reasons stated, the judgment of the Court of Appeals for the Sixth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion, including consideration of questions earlier raised but not resolved. Specifically, given the undisputed facts concerning Yatess handling of the loan, i.e., his failure to honor the periodic repayment requirements: (1) Did the November 1996 close-to-bankruptcy repayments, despite the prior defaults, become a portion of [Yatess] interest in a qualified retirement plan excluded from his bankruptcy estate, App. to Pet. for Cert. 40a; and (2) if so, were the repayments beyond the reach of [the Bankruptcy] [T]rustees power to avoid and recover preferential transfers, id., at 47a?
It is so ordered.
1. Subsection 547(b) provides: Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property (1) to or for the benefit of a creditor; (2) for or on account of an antecedent debt owed by the debtor before such transfer was made; (3) made while the debtor was insolvent; (4) made (A) on or within 90 days before the date of the filing of the petition; or (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and (5) that enables such creditor to receive more than such creditor would receive if (A) the case were a case under chapter 7 of this title; (B) the transfer had not been made; and (C) such creditor received payment of such debt to the extent provided by the provisions of this title. This provision permits the bankruptcy trustee to avoid certain transfers of property that would have been part of the [bankruptcy] estate had it not been transferred before the commencement of bankruptcy proceedings. Begier v. IRS, 496 U.S. 53, 58 (1990).
2. The Courts of Appeals are also divided on whether working owners may qualify as beneficiaries of ERISA-sheltered employee benefit plans. Compare 287 F.3d 521, 525 (CA6 2002) (case below) (sole shareholder is not a beneficiary of an ERISA-qualified plan); Agrawal, 205 F.3d, at 302 (sole shareholder is not a beneficiary), with Gilbert v. Alta Health & Life Ins. Co., 276 F.3d 1292, 1302 (CA11 2001) (sole shareholder is a beneficiary); Wolk v. UNUM Life Ins. of Am., 186 F.3d 352, 356 (CA3 1999) (partner is a beneficiary); Prudential Ins. Co. of Am. v. Doe, 76 F.3d 206, 208 (CA8 1996) (controlling shareholder is a beneficiary); Robinson v. Linomaz, 58 F.3d 365, 370 (CA8 1995) (co-owners are beneficiaries); Peterson v. American Life & Health Ins. Co., 48 F.3d 404, 409 (CA9 1995) (partner is a beneficiary). The United States, as amicus curiae, urges that treating working owners as beneficiaries of an ERISA-qualified plan is not an acceptable solution. Brief for United States as Amicus Curiae 9 (The beneficiary approach has no logical stopping point, because it would allow a plan to cover anyone it chooses, including independent contractors excluded by [Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992)] and fails to resolve participation questions for pension plans which, unlike welfare plans, tie coverage directly to service as an employee.); id., at 2425. This issue is not presented here, and we do not resolve it.
3. Cf. Nationwide Mut. Ins. Co. v.
U.S. 318 (1992), and Clackamas Gastroenterology Assoc.,
P. C. v. Wells, 538 U.S.
(2003) (finding textual clues absent, Court looked to common law for guidance).
4. A particular employee benefit plan may be covered by one title of ERISA, but not by another. See Brief for United States as Amicus Curiae 18, n. 9.
5. We do not suggest that each provision described supra, at 912, in isolation, would compel the Courts reading. But cf. post, at 12 (Thomas, J., concurring in judgment). In combination, however, the provisions supply specific guidance adequate to obviate any need to expound on common law. See Darden, 503 U.S., at 323.
6. Courts agree that if a benefit plan covers only working owners, it is not covered by Title I. See, e.g., Slamen v. Paul Revere Life Ins. Co., 166 F.3d 1102, 1105 (CA11 1999) (sole shareholder is not a participant where disability plan covered only him); In re Watson, 161 F.3d 593, 597 (CA9 1998) (sole shareholder is not a participant where retirement plan covered only him); SEC v. Johnston, 143 F.3d 260, 262263 (CA6 1998) (owner is not a participant where pension plan covered only owner and perhaps his wife); Schwartz v. Gordon, 761 F.2d 864, 867 (CA2 1985) (self-employed individual is not a participant where he is the only contributor to a Keogh plan). Such a plan, however, could qualify for favorable tax treatment. See Brief for United States as Amicus Curiae 18, n. 9.
7. Section 2510.33s preamble supports this interpretation. The preamble states, in relevant part: According to the comments [concerning proposed §2510.33], a definition of employee excluding self-employed individuals might raise problems under section 404(a)(1) with respect to disbursements to self-employed individuals from Keogh or H. R. 10 plans covering both self-employed individuals and common law employees. Therefore, the definition of employee formerly appearing in proposed §2510.36 has been inserted into §2510.33 and restricted in scope to that section. 40 Fed. Reg. 34528 (1975) (emphasis added).