Opinion by Judge PREGERSON; Dissent by Judge NORRIS.
PREGERSON, Circuit Judge:
Plaintiffs appeal the district court’s dismissal of their action brought under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et. seq. Plaintiffs are retired Hughes Aircraft Company employees who are participants in the Hughes Non-Bargaining Retirement Plan (the “Contributory Plan”). Plaintiffs allege in their complaint that the employer, defendant Hughes Aircraft Company (“Hughes”), breached its statutory and fiduciary duties under ERISA when it used the Contributory Plan’s surplus assets-attributable in part to employee eontributions-to fund an early retirement program for existing employees and a new non-contributory pension plan for [1291]*1291some employees that were not participants of the Contributory Plan. Plaintiffs seek a variety of remedies, including a distribution of “all or a portion of the excess Plan assets” in the form of increased benefits. The district court dismissed plaintiffs’ complaint under Fed.R.Civ.P. 12(b)(6), without leave to amend. The simple question before us is whether plaintiffs have alleged sufficient facts in their complaint to state any claim for relief under ERISA. Assuming plaintiffs can prove what they have plead in their complaint, we conclude their claims are cognizable. We, therefore, reverse.
FACTS
According to the complaint,1 defendant Hughes is an aerospace and electronics manufacturing company. Since 1951, Hughes has provided a retirement pension plan for its employees. At issue in this litigation is the use by Hughes of surplus assets from the Contributory Plan.
The terms of the Contributory Plan provide, in relevant part, that both Hughes and its employees must contribute to the Plan. The employees’ contributions are automatically deducted from their pay. By 1986; as a result of both employer and employee contributions and as a result of investment growth, the Contributory Plan’s assets exceeded the actuarial or present value of accrued benefits by almost one billion dollars.
Apparently, because of this surplus, and after being acquired by the General Motors Corporation, Hughes, in 1987, ceased making contributions to the Contributory Plan.2 The employees, in contrast, despite the overfund-ing, were required to continue making contributions to the Contributory Plan. As of January 1, 1992, approximately half the surplus in the Contributory Plan was attributable to employee contributions and the other half to employer contributions.
In 1989, Hughes amended the Plan and used part of the asset surplus to provide an early retirement program for existing employees. According to plaintiffs, by offering this program, Hughes was able to reduce its workforce and save payroll costs.
Plaintiffs also allege in their complaint that Hughes terminated the Contributory Plan on January 1,1991, when Hughes created a new defined benefit plan (the “Non-Contributory Plan”) and froze new enrollment in the Contributory Plan. The new Non-Contributory Plan covers all new employees as well as those old employees who chose not to remain in the Contributory Plan.
Although created through an “amendment” to the Contributory Plan, the Non-Contributory Plan shares virtually no characteristics with the older plan, other than administration by the same trustees. The Contributory Plan is elective and requires monthly contributions by the employees. The Contributory Plan also provides health coverage, a cost of living adjustment, and unreduced early retirement benefits.
In contrast, the Non-Contributory Plan requires no employee contributions, and new employees are enrolled automatically. The new plan does not provide health coverage, cost of living adjustment, or unreduced early retirement benefits. In addition, the new plan pays lower monthly retirement benefits than the Contributory Plan, and the two plans use different formulas to compute benefits.
According to plaintiffs’ complaint, Hughes used and continues to use the asset surplus generated by employee and employer contributions from the Contributory Plan to fund the new Non-Contributory Plan. Plaintiffs further allege that in so doing, Hughes is improperly using plan assets attributable in part to employee contributions for its own benefit.
Plaintiffs filed this class action in the United States District Court for the District of Arizona. The putative class consists of over 10,000 persons who were participants in the [1292]*1292Contributory Plan on December 31, 1991. The court granted Hughes’s motion to transfer venue to the Central District of California. Defendants filed a motion to dismiss under Federal Rules of Civil Procedure 12(b)(6). The district court granted the motion and dismissed plaintiffs’ complaint without leave to amend. No discovery was ever taken in the district court.
ANALYSIS
A. Standard of Review
We review de novo a district court’s dismissal of a complaint for failure to state a claim under Federal Rules of Civil Procedure 12(b)(6). Everest and Jennings v. American Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.1994) (citations omitted). We apply the same standard on appeal as the district court. Id. “It is axiomatic that a complaint should not be dismissed unless ‘it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’ Conley v. Gibson, 355 U.S. 41, 45-46 [78 S.Ct. 99, 102, 2 L.Ed.2d 80] (1957); see 5 C. Wright & A. Miller, Federal Practice & Procedure §§ 1202, 1205-1207, 1215-1224, 1228 (1969).” McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232, 246, 100 S.Ct. 502, 511, 62 L.Ed.2d 441 (1980) (emphasis added).
The Supreme Court has consistently adhered to this standard. Most recently, in Hartford Fire Ins. Co. v. California, 509 U.S. 764, 809-13, 113 S.Ct. 2891, 2916-17, 125 L.Ed.2d 612 (1993), Justice Scalia, who concurred in the Court’s decision, stated that, although he disagreed with Justice Souter’s analysis as to what constitutes a boycott, he agreed that the action should not be dismissed because “other allegations in the complaints describe conduct that may amount to a boycott if the plaintiffs can prove certain additional facts.” Id. (emphasis added). Justice Scalia further noted that allegations in a complaint are to be “Illiberally construed” at the 12(b)(6) stage. Id. at 811, 113 S.Ct. at 2917.
Thus, a court’s role at the 12(b)(6) stage is not to decide winners and losers or evaluate the strength or weakness of claims. See Everest and Jennings, 23 F.3d at 228; Abramson v. Brownstein, 897 F.2d 389, 391 (9th Cir.1990). Nor can a court resolve factual questions at the 12(b)(6) stage. We must accept as true the allegations in the complaint and decide only whether plaintiff has advanced potentially viable claims.
With this standard in mind, we now examine plaintiffs’ claims in this action.
B. Plaintiffs’ ERISA Claims
At the heart of this dispute is whether Hughes is entitled to use and control for its own benefit the Contributory Plan’s one billion dollar surplus, approximately half of which was generated by employee contributions. This is not a case in which the pension plan at issue was funded entirely by employer contributions. Nor is this a case in which the employer used the plan’s asset surplus solely to benefit participants of the plan. Because plaintiffs allege that the employer used the Contributory Plan’s asset surplus attributable in part to employee contributions for its own benefit and for the benefit of employees who were never participants in the Contributory Plan, we conclude that plaintiffs have stated cognizable claims under ERISA.
First Claim
Plaintiffs’ first claim alleges that Hughes violated ERISA § 403(c)(1), 29 U.S.C. § 1103(c)(1), which provides that “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 of the plan.” The term “inure” has been defined as “meaning] broadly to ‘become of advantage to the employer.’ ” Amato v. Western Union Int’l, Inc., 773 F.2d 1402, 1414 (2d Cir.1985)(citing Teamsters Local 639 v. Cassidy Trucking, Inc., 646 F.2d 865, 868 (4th Cir.1981)), cert. dismissed, 474 U.S. 1113, 106 S.Ct. 1167, 89 L.Ed.2d 288 (1986).
The district court rejected plaintiffs’ anti-inurement claim. We agree with the district court that Hughes did not violate § 1103(c)(1) by the mere fact that Hughes ceased its contributions to the Contributory [1293]*1293Plan. The terms of the Contributory Plan require Hughes to contribute to the Plan only when necessary to ensure sufficient funding. ERISA does not require an employer to contribute to an overfunded plan. See Fechter v. HMW Indus., Inc., 879 F.2d 1111, 1113 (3rd Cir.1989).
This, however, does not mean that Hughes can use the Contributory Plan's asset surplus for its own benefit and for the benefit of employees who were never participants in the Contributory Plan. Hughes did not do anything so blatant as to distribute the surplus to itself and to the new employees. Instead, Hughes twice "amended" the Contributory Plan to its own advantage and used the asset surplus attributable in part to plaintiffs' contributions to offer an early retirement program and the Non-Contributory Plan for existing and new employees. By so doing, plaintiffs allege, Hughes reduced its labor costs while effectively increasing new employees' wages. Thus we find that, based "on plaintiffs' allegations, Hughes has taken advantage of the plan's asset surplus for its own benefit.
Hughes, however, contends that its "amendthents" creating two new benefits structures under the Contributory Plan did not violate ERISA's anti-inurement provision, because Hughes was not acting as a fiduciary when it "amended" the plan. To support its contention, Hughes relies on the Supreme Court's recent decision in Lockheed Corp. v. Spink, - U.S. -, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996).
In Lockheed, the Supreme Court held that amending an existing pension plan to use surplus assets to fund an early retirement program for participants of the plan does not violate ERISA, so long as other ERISA provisions are not violated. Id. at -, 116 S.Ct. at 1790 ("While other portions of ERISA govern plan amendments, see, e.g., 29 U.S.C. § 1054(g) (amendment generally may not decrease accrued benefits); § 1085b (if adoption of an amendment results in underfuncling of a defined benefit plan, the sponsor must post security for the amount of the deficiency), the act of amending a pension plan does not trigger ERISA's fiduciary provisions."). As the Supreme Court explained, generally "[pilan sponsors who alter the terms of a plan do not fall into the category of fiduciaries" under ERISA. Id. at -, 116 S.Ct. at 1789.
Lockheed, however, can be distinguished from this case. First, the Supreme Court in Lockheed did not address whether the early retirement program in that case violated ERISA's anti-inurement provision. Here, plaintiffs allege that Hughes improperly benefited from using plan assets. Second, the asset surplus that was used in Lockheed to fund" the early retirement program was attributable only to employer contributions. Here, plaintiffs allege that the asset surplus Hughes used to fund the early retirement program and the new Non-Contributory Plan was attributable to both employer and employee contributions. Third, the early retirement program in Lockheed only benefited employees who were already participants in the existing pension plan. Here, some of the employees benefiting `from the Non-Contributory Plan are new employees who "were never participants in the Contributory Plan. Fourth, plaintiffs in Lockheed did not allege that the employer had terminated the pension plan. Hire, plaintiffs allege that Hughes terminated the Contributory Plan when it froze new enrollment and create"d the Non-Contributory Plan. Lastly, the plaintiffs In Lbckheed did not allege that the amendment resulted in the violation of any other ERISA provisions. Here, plaintiffs allege that by using the asset surplus attributable in part to employee contributions Hughes reduced ~laintiffs' accrued "benefits and violated ERISA's vesting, nonforfeiture, and distribution requirements under 29 U.S.C. §~ 1053(a) and 1344.
Thus, Lockheed is of little help in determining whether Hughes's. use of the Contributory Plan's asset surplus attributable in part to employee contributions violates ERISA. Even if we were to hold that under Lockheed Hughes's "amendments" in this case did not trigger its fiduciary obligations under ERISA, that does not mean that we must also hold that Hughes's conduct did not trigger ERISA's anti-inurement provision.
[1294]*1294We have found no case which holds that the anti-inurement provision is only triggered when an employer is acting as a fiduciary. Nor can we reasonably interpret 29 U.S.C. § 1103(c)(1) as establishing such a requirement. Unlike other provisions under ERISA, see, e.g, 29 U.S.C. § 1104 (specifically addressing fiduciary duties) and 29 U.S.C. § 1106 (specifically referring to a fiduciary), § 1103 makes no reference to fiduciaries or fiduciary obligations. Section 1103 refers only to employers, stating that “assets of a plan shall never inure to the benefit of any employer.” 29 U.S.C. § 1103(c)(1). Thus, we hold that under a plan reading of § 1103, Hughes’s alleged conduct in this case triggers ERISA’s anti-inurement provision, whether or not the alleged conduct implicates ERISA’s fiduciary obligations.
The dissent, however, asserts that the fact that an asset surplus is attributable in part to employee contributions is irrelevant. According to the dissent, an employer has sole discretion as settlor to use an asset surplus attributable in part to employee contributions. We disagree.
Under ERISA, Congress specifically provided protections for assets attributable to employee contributions. Congress enacted 29 U.S.C. § 1053, which establishes minimum vesting and nonforfeiture requirements for accrued benefits derived from employee contributions. In addition, section 4404 requires that, upon a plan’s termination, any residual assets attributable to employee contributions “shall be equitably distributed to the participants who made such contributions,” after all liabilities have been satisfied. 29 U.S.C. § 1344(d)(3)(A).
It is clear from these provisions that Congress intended to distinguish between plan assets attributable solely to employer contributions from plan assets attributable in part to employee contributions. As the Fifth Circuit has explained:
An entirely employer funded defined benefit plan pension trust is therefore more akin to a gratuitous trust so far as concerns surplus assets, as to which ERISA so markedly distinguishes between those attributable to employer contributions (thus suggesting that employer contributions are not a form of recontributed wages for such purposes). Where a gratuitous trust is fully performed without exhausting the trust estate, a resulting trust of the surplus is presumed to arise in favor of the settlor. RESTATEMENT (SECOND) OF TRUST § 430. This principle has been looked to in holding an employer entitled to surplus assets on termination of an employer funded defined benefit pension plan.
Borst v. Chevron Corp., 36 F.3d 1308, 1315 (5th Cir.1994) (emphasis added).
Thus, to ignore the distinction between a plan funded solely by employer contributions and a plan funded by both employer and employee contributions would eviscerate the protections provided to employees under ERISA with respect to their employee contributions. We, therefore, hold that, when both the employer and its employees contribute to a pension plan, the employer does not have sole discretion to use that part of a plan’s asset surplus attributable to employee contributions.
Hughes, alternatively, argues, that even if plaintiffs are entitled to some portion of the asset surplus, the anti-inurement provision has not been triggered in this case because Hughes has not withdrawn or threatened to withdraw plan assets. Hughes relies on a Second Circuit decision, Amato v. Western Union Int’l, Inc., 773 F.2d 1402, in support of its position.
Amato does not help Hughes. Like Lockheed, Amato involves an amendment to a More-contributory pension plan that reduced retirement benefits for a group of participants under an existing plan. As discussed above, this distinction is critical. While an employer may have the discretion to decide how to use an asset surplus attributable solely to employer contributions, so long as other provisions of ERISA are not violated, an employer does not have sole discretion to use a plan’s asset surplus attributable in part to employee contributions to benefit itself and employees that were never participants in the plan. By its plain language, the anti-inurement provision requires that plan assets must “never inure to the benefit of any em[1295]*1295ployer” and must be used “for the exclusive purposes of providing benefits to participants of the plan.” 29 U.S.C. § 1103(c)(1) (emphasis added).
Further, to affirm the district court’s dismissal on the ground that under Amato plan assets were never withdrawn in this case would require us to resolve disputed issues of fact. We would have to conclude that no termination has occurred and that only one plan exists. We, however, cannot resolve factual issues on a motion to dismiss.
In ruling on a 12(b)(6) motion, plaintiffs’ allegations must be taken as true. Here, plaintiffs allege that by “amending” the Contributory Plan to freeze its enrollment and to create a separate Non-Contributory Plan for new employees, Hughes, in effect, terminated the Contributory Plan and “withdrew” the surplus assets for its own use and for the benefit of some employees who were never participants in the Contributory Plan.3 If in fact plaintiffs can prove that two separate plans exist and that Hughes’s amendment terminated the Contributory Plan, Hughes’s withdrawal of assets from the Contributory Plan to create and fund the new Non-Contributory Plan for the benefit of some employees who were never participants in the Contributory Plan violated ERISA’s anti-inurement provision.4
Hughes, however, contends that any benefit it receives from using the surplus assets [1296]*1296of the Contributory Plan is an “incidental side effect,” insufficient as a matter of law to state a claim under the anti-inurement provision. Holliday v. Xerox Corp., 732-F.2d 548, 551 (6th Cir.1984), cert. denied, 469 U.S. 917, 105 S.Ct. 294, 83 L.Ed.2d 229 (1984). We reject this contention.
Whether Hughes gains an “incidental” economic benefit from being able to buy out its older employees through an early retirement program and by being able to offer new employees a pension plan that requires no employee contributions is a question of fact we cannot resolve on a 12(b)(6) motion. To resolve this factual question, we would have to look beyond the allegations in the complaint. This, we cannot do. We reiterate that on a 12(b)(6) motion we must take as true each allegation in plaintiffs’ complaint and draw all reasonable inferences in favor of plaintiffs.
Based on the liberal 12(b)(6) standard, we believe that plaintiffs’ allegations' are sufficient to state a claim under ERISA’s anti-inurement provision. Hughes, in effect, remained competitive in the labor market by using the asset surplus, created in part by employee contributions, to reduce its labor costs and to increase new employees’ wages. Had Hughes not used the Contributory Plan’s surplus, Hughes would have had to use its own revenues or offered fewer benefits to its new employees. We cannot say at the 12(b)(6) stage that Hughes’s alleged benefit is an “incidental side effect” that does not violate ERISA’s anti-inurement provision.
Second Claim
Plaintiffs’ second claim alleges that Hughes breached its fiduciary duties under ERISA § 404, 29 U.S.C. § 1104, by using the Contributory Plan’s surplus assets to fund the Non-Contributory Plan for some employees that never were participants in the Contributory Plan. Section 1104 requires that a fiduciary “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and (A)' for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries.” 29 U.S.C. § 1104(A)(1) (emphasis added). The complaint, by alleging that Hughes'is using funds attributable to their employee contributions to fund a new plan for some employees who were never participants in the Contributory Plan, states a valid claim for relief.
Hughes, however, contends that its conduct did not violate ERISA’s § 1104. Hughes maintains that it was not acting as a fiduciary when it “amended” the Contributory Plan to use the asset surplus. According to Hughes, an employer, as settlor, can change a plan’s structure at any time, for whatever reason, and for anyone’s benefit without implicating its fiduciary duties under ERISA.
The district court agreed. The district court concluded that Hughes’s decision to amend the Contributory Plan to provide for asset surplus reversion to itself was a plan design decision that did not implicate ERISA’s fiduciary obligations, regardless of the fact that the asset surplus was attributable in part to employee contributions and used to benefit some employees who were never participants in the Contributory Plan. The district court was wrong.
As discussed above, based on our reading of the relevant ERISA provisions, we hold that, when an employer is not the sole contributor of a pension plan, the employer does not have sole discretion to use the asset surplus of the plan. If employees contribute to the plan, the employer has a fiduciary duty to the employees when it amends the plan to use an asset surplus. In essence, when a plan is funded by both employer and employee contributions, both the employer and the employees are co-settlors of the plan.
The recent Supreme Court decisions construing ERISA’s fiduciary provisions do not dictate otherwise. See Lockheed Corp. v. Spink, — U.S. -, 116 S.Ct. 1783; Varity Corp. v. Howe, — U.S. -, 116 S.Ct. 1065. It is true that in Lockheed, the Supreme Court held that an amendment to a plan to provide an early retirement program for existing employees did not trigger ERISA’s fiduciary obligations because “[w]hen employers undertake those actions, ... they do not act as fiduciaries, ... but are analogous to the settlors of a trust.” — U.S. at -, 116 S.Ct. at 1789. But as discussed above, [1297]*1297the employer in Lockheed was the sole contributor of the plan and used the plan’s surplus only to benefit the plan’s participants. Here, plaintiffs allege that Hughes used the Contributory Plan’s surplus assets attributable in part to employee contributions for Hughes’s own benefit and for the benefit of some employees who were never participants in the Plan.
Thus, we cannot say that Hughes was simply acting like a settlor of a trust when it “amended” the plan to fund the Non-Contributory Plan for existing and new employees. We hold that, when an employer amends a plan to use for its own benefit an asset surplus attributable in part to employee contributions, the employer is wearing both its “fiduciary” and its “employer” hats. See Varity, — U.S. at -, 116 S.Ct. at 1073 (“reasonable employees, in the circumstances found by the District Court, could have thought that Varity was communicating with them both in its capacity as employer and in its capacity as plan administrator”).
In Varity, the Supreme Court construed 29 U.S.C. § 1002(21)(A), which provides that a person acts as “a fiduciary with respect to a plan to the extent ... he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets ... or he has any discretionary authority or discretionary responsibility in the administration of such plan.” The Supreme Court held that this definition “limit[s] the scope of fiduciary activity to discretionary acts of plan ‘management’ and ‘administration.’ ” — U.S. at -, 116 S.Ct. at 1072-1073.
The Supreme Court also looked to trust law to construe the meaning of “fiduciary” and trust “administration.” As the Supreme Court observed:
The ordinary trust law understanding of fiduciary “administration” of a trust is that to act as an administrator is to perform the duties imposed, or exercise the powers conferred, by the trust documents.... The law of trusts also understands, a trust document to implicitly confer “such powers as are necessary or appropriate for the carrying out of the purposes” of the trust.
Id. at -, 116 S.Ct. at 1073. Further, the Supreme Court stated:
There is more to plan (or trust) administration than simply complying with the specific duties imposed by the plan documents or statutory regime; it also includes the activities that are “ordinary and natural means” of achieving the “objective” of the plan_ Indeed, the primary function of the fiduciary duty is to constrain the exercise of discretionary powers which are controlled by no other specific duty imposed by the trust instrument or the legal regime. If the fiduciary duty applied to nothing more than activities already controlled by other specific legal duties, it would serve no purpose.
Id. at - - -, 116 S.Ct. at 1073-1074.
Under Varity, therefore, the question we must answer is whether Hughes was carrying out discretionary functions relating to plan management and administration when it “amended” the plan to use surplus assets attributable in part to employee contributions.
We answer this question affirmatively, and conclude that, based on the allegations in plaintiffs’ complaint, Hughes was acting as a fiduciary when it “amended” the plan. There is no question that Hughes’s amendment triggered ERISA’s statutory duties with respect to assets attributable to employee contributions. In addition, because Hughes was disposing of the plan’s assets when it amended the plan, Hughes’s amendment necessarily affected the management and administration of the plan. Further, the use of surplus assets from one plan to fund another plan that benefits new employees who were never participants in the first plan may increase the risk of underfunding and non-payment.
Hughes, however, contends that there can be no violation of the exclusive benefit rule under 29 U.S.C. § 1104 because only one plan and one group of employees exist in this case. To adopt Hughes’s contention at the pleading stage, we would have to disregard plaintiffs’ allegations in the complaint that two separate pension plans exist and that the new employees benefiting from the Contribu[1298]*1298tory Plan’s asset surplus never were participants in the Contributory Plan. Because we must take as true all of the allegations plaintiffs make in their complaint, we find that plaintiffs’ allegations are sufficient to overcome a dismissal under 12(b)(6).
A Seventh Circuit ease, Johnson v. Georgian-Pacific Corp., 19 F.3d 1184 (7th Cir.1994), does not persuade us otherwise. In Johnson, the employer, GNN, amended the company pension plan to provide increased benefits to active workers and thereby deter a hostile takeover. After GNN was acquired, the surplus from the pension plan was 'distributed in the form of increased wages to the active employees. The retired workers brought suit, alleging that GNN breached its fiduciary duties under ERISA by not also increasing their benefits. The Seventh Circuit found that the district court properly dismissed the retirees’ claims.
The instant case presents a fundamentally different scenario. Like the employer in Lockheed, the employer in Johnson chose to give an extra benefit to one group of employees within a larger group, all of whom were participants in the same plan. Id. at 1186-1187. There was no allegation in Johnson that the employer transferred assets fi’om one plan to another or that the asset surplus was used to benefit employees who were not participants of the plan. Id. at 1189. The Seventh Circuit found that, even though it favored one group of employees over others, GNN was still exercising its duties in the sole interest of the plan participants. Id. at 1187.
Here, we cannot say that when Hughes “amended” the plan to use the asset surplus it was “managing” or “disposing of’ plan assets for the sole benefit of participants in one plan. Id. at 1189. Plaintiffs allege in their complaint that the Contributory Plan was terminated and that the new Non-Contributory Plan benefited some employees who were never participants in the Contributory Plan. Based on these allegations, we find that when Hughes used the Contributory Plan surplus to create and fund the NonContributory Plan, Hughes was managing and disposing of plan assets within the meaning of ERISA. Assuming that plaintiffs can prove their allegations, we conclude that Hughes’s conduct implicated its fiduciary duties under ERISA. Plaintiffs, therefore, have stated a claim for relief under § 1104 of ERISA.
Third Claim
Plaintiffs’ third claim alleges that Hughes violated ERISA § 203, 29 U.S.C. § 1053(a), by using vested, nonforfeitable benefits to meet Hughes’s obligations to fund the Contributory and Non-Contributory Plans. Plaintiffs allege that, by depleting the surplus to fund the Non-Contributory Plan, Hughes, in effect, forfeited plaintiffs’ accrued benefits derived from employee contributions. Plaintiffs contend that under ERISA employees are entitled to accrued benefits traceable to their own contributions, even if the amount of such benefits exceeds the defined benefits under the plan. We agree that, if employees’ own contributions and the income their contributions generate exceed the defined benefit amount under the plan, ERISA requires that employees be paid the larger amount.
Section 1053 establishes minimum vesting and nonforfeiture requirements for all pension plans, providing, in relevant part:
Each pension plan shall provide that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age and in addition shall satisfy the requirements of paragraphs (1) and (2) of this subsection.
(1) A plan satisfies the requirements of this paragraph if an employee’s rights in his accrued benefit derived from his oim contributions are nonforfeitable.
29 U.S.C. § 1053(a)(1). Paragraph (2) establishes the vesting requirements for an employee’s accrued benefit derived from employer contributions. The vesting requirements for employer contributions are not at issue in this case.
To determine the amount of accrued benefits under paragraph (1), we look to § 1054(c)(2)(B), which defines the “accrued benefit derived from contributions made by an employee” as the employee’s “accumulat[1299]*1299ed contributions expressed as an annual benefit commencing at normal retirement age.” Section 1054(c)(2)(C), in turn, defines “accumulated contributions” to include the employee’s mandatory contributions plus appropriate interest. Further, 29 U.S.C. § 1002(28) provides that “[t]he accrued benefit of an employee shall not be less than the amount determined under section 1054(c)(2)(B) of this title with respect to the employee’s accumulated contribution.” (Emphasis added.)
A plain reading of these ERISA provisions makes clear that plaintiffs are entitled to more than the amount of defined benefits under the plan if that amount is less than the accrued benefits derived from their mandatory employee contributions. In other words, § 1053 establishes a floor with respect to mandatory employee contributions: the amount of accrued benefits cannot fall below the amount of accrued benefits derived from employee contributions. If it does, the employer violates the minimum vesting and forfeiture requirements of 29 U.S.C. § 1053.
As the Supreme Court has stated, “the concepts of vested rights and nonforfeitable rights are critical to the ERISA scheme.” Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 510, 101 S.Ct. 1895, 1899-1900, 68 L.Ed.2d 402 (1981). “One of the primary purposes of the Act is to insure that plan participants do not lose vested benefits because of ‘unduly restrictive’ forfeiture[s].” Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 449 (9th Cir.1980).
Thus, by establishing minimum vesting and pay-out requirements for all pension plans under section 1053, Congress gave employees nonforfeitable rights to their vested benefits. A “nonforfeitable” right is defined under ERISA as “‘a claim obtained by a participant or his beneficiary to that part of an immediate or deferred benefit under a pension plan which arises from the participant’s service, which is unconditional, and which is legally enforceable against the plan.’ ” 29 U.S.C. § 1002(19) (emphasis added). In construing this definition, the Supreme Court has stated that “[i]t is therefore surely consistent with the statutory definition of ‘nonforfeitable’ to view it as describing the quality of the participant’s right to a pension rather than a limit on the amount he may collect.” Alessi, 451 U.S. at 512, 101 S.Ct. at 1900 (quotations and citations omitted) (emphasis added).
Hughes maintains that the forfeiture requirements apply only upon termination, which, according to Hughes, has not occurred here. Hughes, however, cites no cases to support its assertion that the forfeiture requirements are triggered only upon termination. Nor is such an interpretation supported by the language of 29 U.S.C. § 1053. This section does not mention termination, nor does it reference 29 U.S.C. § 1344(d)(2), which requires the equitable distribution of residual plan assets attributable to employee contributions upon the termination of a plan.
Hughes further argues that in a defined benefit plan accrued benefits attributable to employee contributions can be forfeited where a surplus exists. In support of its position, Hughes quotes a passage from Hummell, which states that “nothing in ERISA prohibits ‘a plan’s providing for forfeiture of benefits when the affected benefits are in excess of the minimum vesting requirements of 29 U.S.C. § 1053.’ ” 634 F.2d at 450.
This passage does not help Hughes. In Hummell, the accrued benefits at issue were attributable only to employer contributions. We held that the forfeiture in Hummell did not violate ERISA’s minimum vesting requirements because the accrued benefits all from employer contributions exceeded the minimum vesting requirements under 29 U.S.C. § 1053(a).5 Therefore, Hummell’s holding, which allows an employer to forfeit benefits in excess of the minimum vesting requirements when all the benefits derive from employer contributions, cannot be ex[1300]*1300tended to situations where, as here, a portion of the surplus assets are attributable to employee contributions. By statutory definition, employees are vested in their own contributions and the income generated therefrom.
As discussed above, plaintiffs in this case allege that Hughes is using accrued benefits that are protected by ERISA’s minimum vesting and nonforfeiture requirements. Because such benefits are attributable to employee contributions and thus nonforfeitable under 29 U.S.C. § 1053(a), Hughes’s alleged forfeiture may violate ERISA.6 Even if we were to concede for purposes of argument that section 1053 is triggered only upon termination,7 we must still reverse the district court because the complaint alleges that a termination has occurred. Plaintiffs, therefore, have stated a claim for relief under 29 U.S.C. § 1053.8
Fourth Claim
Plaintiffs’ fourth claim alleges that Hughes violated ERISA § 4404, 29 U.S.C. § 1344, which addresses the allocation of assets when an employer terminates a plan. Section 1344(d)(3)(A) requires that any residual assets attributable to employee contributions that remain after all liabilities have been satisfied “shall be equitably distributed to the participants who made such contributions.” Id. Further, § 4404(d)(1) provides that an employer may cause reversion of excess assets to itself only if “(A) all liabilities of the plan to the participants and their beneficiaries have been satisfied, (B) the distribution does not contravene any provision of law and (C) the plan provides for such a distribution.” Id.
The complaint alleges that Hughes terminated the Contributory Plan when it froze enrollment in the Contributory Plan and created the Non-Contributory Plan for new employees without equitably distributing the surplus attributable to the employee contributions. The complaint further alleges that the Contributory Plan does not contain a provision for reversion of excess assets upon termination. Based on these allegations, we find that plaintiffs stated a claim under § 1344.
In determining whether a plan has been terminated, courts must look to “all the facts and circumstances in a particular case.” 26 C.F.R. § 1.401-6(b)(l). See also Borst, 36 F.3d at 1313 n. 9. Under the applicable regulations, the Department of the Treasury has construed termination to “include[ ] both a partial termination and a complete termination of a plan.” Id. at § 1.401-6(b)(2). Examples of when a termination may occur include: (1) an employer beginning to discharge employees in connection with winding down a business; (2) an employer replacing a plan with a non-comparable plan; (3) an employer amending the plan to exclude a group of employees who were formerly covered by the plan; (4) an employer changing the eligibility and vesting requirements under the plan; or (5) an employer reducing or eliminating its contributions to the plan. Id. at § 1.401-6(b). See also In re Gulf, 764 F.Supp. at 1202 (finding constructive termination by applying wasting trust principles to ERISA context).
Assuming that plaintiffs can prove that Hughes terminated the Contributory Plan, ERISA would require Hughes to equitably [1301]*1301distribute to employees the surplus assets attributable to employee contributions. See, e.g., Bridgestone/Firestone v. Pension Benefit Guaranty Corp., 892 F.2d 105 (D.C.Cir.1989) (holding that employer required to return surplus attributable to employee contributions under § 1344 upon termination of defined benefit plan). Thus, we conclude that plaintiffs have stated a claim under § 1344.
Fifth Claim
Plaintiffs’ fifth claim alleges that the defendants breached their fiduciary duties under 29 U.S.C. § 1106(a)(1)(D), which prohibits the “transfer to, or use by or for the benefit of, a party in interest, of any assets of the plan.” The complaint alleges that the Contributory Plan and the Non-Contributory Plan are two different plans, and that transferring funds from one to the other is prohibited by ERISA.
The district court dismissed the fifth claim by finding that only one plan exists in this case. As discussed above, the district court erred in making this finding because it contradicts plaintiffs’ allegations in the complaint. As we stated above, courts are not supposed to resolve questions of fact on a 12(b)(6) motion. Even assuming that only one plan exists, we still find that plaintiffs’ allegations are sufficient to state a claim under § 1106(a)(1)(D). See Cutaiar v. Marshall, 590 F.2d 523, 529 (3rd Cir.1979) (“[w]hen identical trustees of two employee benefit plans whose participants and beneficiaries are not identical effect a loan between the plans without a[n] ... exemption, a per se violation of ERISA exists”).
As we discussed above,-Hughes was acting as a fiduciary when it “amended” the Contributory Plan to use surplus assets attributable to plaintiffs’ employee contributions. As a fiduciary, Hughes was prohibited under § 1106(a)(1)(D) from using the asset surplus attributable to employee contributions for its own benefit and for the benefit of new employees who were never participants in the plan.
Although the Supreme Court held in Lockheed, that “payment of benefits to plan participants and beneficiaries pursuant to terms of an otherwise lawful plan is wholly outside the scope of’ § 1106(a)(1)(D), the Supreme Court also recognized that “commercial bargains that present special risk of plan underfunding” or that “involve uses of plan assets that are potentially harmful to the plan” are the kind of transactions prohibited under § 1106(a)(1)(D). — U.S. at -,116 S.Ct. at 1790-1791. Indeed, the Supreme Court in Lockheed qualified its holding that requiring employees to release all employment-related claims against the employer in exchange for benefits under an early retirement program did not violate ERISA’s fiduciary obligations by noting that there was no claim in Lockheed that the employer’s “amendments resulted in any violation of the participation, funding or vesting requirements of ERISA.” Id. at-n. 5,116 S.Ct. at 1790 n. 5. Thus, the Supreme Court in Lockheed suggested that, where there is an allegation that payment of benefits is “a sham transaction, meant to disguise an otherwise unlawful transfer of assets to a party in interest, or involved a kickback scheme,” such allegation is sufficient to state a claim under § 1106(a)(1)(D). Id. at - n. 8, 116 S.Ct. at 1792 n. 8.
Reading the complaint as a whole and drawing all reasonable inferences in favor of plaintiffs, we find that plaintiffs’ allegations also support a claim for relief under the “sham transaction” theory recognized in Lockheed. In essence, plaintiffs allege that Hughes’s “amendment” of the Contributory Plan was a sham transaction used to accomplish the unlawful transfer of the Contributory Plan’s asset surplus attributable to employee contributions. The alleged transfer may be unlawful because, under the anti-inurement and nonforfeiture provisions, Hughes was prohibited from using the asset surplus attributable in part to employee contributions for its own benefit and the benefit of new employees who were never participants in the Contributory Plan. Assuming that plaintiffs can prove that Hughes’s “amendment” resulted in an unlawful use of plan assets, we find that Hughes’s alleged conduct constitutes a prohibited transaction under 29 U.S.C. § 1106(a)(1)(D).
[1302]*1302. Sixth Claim
Plaintiffs’ sixth claim alleges that the defendants violated ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D), which provides that the plan fiduciaries must carry out then-duties “in accordance with the documents and instruments governing the plan.” According to plaintiffs, Hughes used Contributory Plan assets to provide eligible employees with an early retirement program. Plaintiffs contend that the early retirement program offered benefits in a discriminatory manner to only a select group of participants in violation of Article V, § 5.2 of the Plan. This section provides that the “Plan shall be administered, interpreted and applied fairly and equitably and in accordance with the specified purpose of the Plan.”
Although the Supreme Court in Lockheed held that using surplus assets attributable solely to employer contributions to fund an early retirement program does not violate ERISA, this holding does not mean that the use of plan assets attributable to employee contributions to fund an early retirement program also does not violate ERISA As discussed above, we do not think that an employer can unilaterally decide to use plan assets attributable to employee contributions without implicating ERISA’s fiduciary obligations. Whether Hughes’s conduct in this case actually violated the provisions of the plan raises questions of fact which we cannot resolve on a 12(b)(6) motion. Thus, we find that plaintiffs have stated a claim under 29 U.S.C. § 1104.
C. Procedural Errors
Plaintiffs additionally argue that the Arizona district court abused its discretion by transferring the action to the Central District of California. We review a district court’s decision to transfer an action pursuant to 28 U.S.C. § 1404(a) for an abuse of discretion. See Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir.1987), cert. denied, 485 U.S. 993, 108 S.Ct. 1302, 99 L.Ed.2d 512 (1988).
Plaintiffs correctly note that a plaintiff’s choice of forum is accorded great deference in ERISA cases. See Dugan v. M & W Dozing & Trucking, Inc., 727 F.Supp. 417, 419 (N.D.Ill.1989). However, this deference is one of several factors a court must consider when ruling on a motion to transfer venue. Under Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir.1986), the district court must consider: (1) the relative convenience of the selected forum and the proposed forum; (2) the possible hardship to the plaintiff if the court grants the motion; (3) the interests of justice; and (4) the deference to be accorded the plaintiffs’ choice of forum. In applying these factors to the instant ease, we cannot say that the Arizona district court abused its discretion in concluding that a transfer of venue was proper.
Finally, plaintiffs argue that after the case was transferred to California, it was wrongly reassigned to Judge Gadbois. The case was initially assigned to Judge Consuelo Marshall, but was transferred to Judge Gadbois because it allegedly presented issues similar to those in another case previously heard by him. Plaintiffs contend that the instant case did not qualify as a “related case” transfer. While it may be that the instant case has little in common with the prior case, we are required to accord broad deference to a court’s interpretation of its local rules. See United States v. Mouzin, 785 F.2d 682, 695 (9th Cir.1986), cert. denied sub nom., Carvajal v. United States, 479 U.S. 985, 107 S.Ct. 574, 93 L.Ed.2d 577 (1986). The district court did not abuse its discretion in transferring this ease from Judge Marshall to Judge Gadbois.
CONCLUSION
The district- court erred in dismissing plaintiffs’ complaint under rule 12(b)(6). Neither the district court nor the dissent applied the 12(b)(6) standard correctly. At the pleading stage before discovery, all allegations must be liberally construed and taken as true, and all inferences must be drawn in favor of the plaintiff. Applying this standard, we conclude that this complaint alleges cognizable causes of action under ERISA We, therefore, reverse and remand this case for further proceedings consistent with this opinion.
REVERSED AND REMANDED.