And a Happy Halloween from the Eighth Circuit?

So here's a question - you're managing an overfunded defined benefit plan (remember those?) and you want to let your guard down. You want to roll the dice a bit or push the limit of what you can do with ancillary (non-investment) motivations, and you figure you can do so because you're playing with house money. At least, you want to play around just with some of the excess. Or maybe you're just a touch careless, albeit unintentionally so.

What's the big deal? After all, participants and beneficiaries are going to get their money, without government help, unless the whole overfunded thing goes to heck in a handbasket and turns radically south. Yes? No?

You ultimately decide that you might well be on the wrong end of this one, so, as your feet get colder, you poke around a bit. And what do you find? You find that you may indeed have a friend or two in the Eighth Circuit with an ever-so-slightly delayed Halloween present for you. In McCullough v. AEGON USA, No. 08-1952 (8th Cir. Nov. 3, 2009), which follows the earlier decision in Minnesota Mining and Manufacturing, 284 F.3d 901 (8th Cir. 2002), the Eighth Circuit in effect seems to hold that one cannot violate the prudence rules with respect to the investment of excess assets. (Note that the widely discussed 3M case may well be wrong on both of the issues considered there.) Assuming AEGON is not reviewed en banc and reversed on rehearing, its confirmation of the 3M decision seems like a welcome development for those seeking to limit potential liability for investment decisions under a DB plan. On the other hand, it's maybe not so welcome for those trying to hold fiduciaries accountable for imprudent behavior (can you say, "PBGC"?).

You may want to be careful - real careful - before proceeding on the basis of 3M/AEGON, even in the Eighth Circuit. The reasoning is sufficiently suspect that you would draw comfort outside the Eighth Circuit from these cases at your own peril, and, even within the Eighth Circuit, I think you'd have to be at least a little concerned that any given case could be reversed by the nine old and young men and women in the black robes. (Stated another way, in honor of the dissenting judge in both cases, it's not clear we won't be saying, "Bye", to this rationale.) Having said that, the cases are certainly nice precedent if you need to use them defensively, and certainly a pain in the neck for the offense.

So: "Boo!" or "boo" or "boo hoo" - depending on your perspective.