DEPPENBROOK et al v. PENSION BENEFIT GUARANTY CORPORATION
MEMORANDUM OPINION. Signed by Judge Reggie B. Walton on 6/17/2013. (lcrbw2)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
PAUL DEPPENBROOK, et al.,
Civil Action No. 11-600 (RBW)
PENSION BENEFIT GUARANTY CORP., )
The pro se plaintiffs, a group of former employees of a now defunct steel product
producer, Republic Technologies International, LLC (“Republic”), seek review under the
Administrative Procedure Act (“APA”), 5 U.S.C. § 706 (2012), of agency determinations made
by the defendant, the Pension Benefit Guaranty Corporation (“PBGC”), pursuant to the
Employment Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. §§
1002-1461 (2012). See generally Second Amended Complaint (“Compl.”). Currently before the
Court are the parties’ cross-motions for summary judgment. Upon careful consideration of the
parties’ submissions, 1 the Court concludes for the following reasons that the PBGC’s motion
must be granted, and the plaintiffs’ motion must be denied.
In deciding the motions, the Court considered the following filings made by the parties in addition to those already
identified: (1) the defendant’s Motion for Summary Judgment (“Def.’s Mot.”); (2) the Pension Benefit Guaranty
Corporation’s Memorandum in Support of Summary Judgment (“Def.’s Mem.”); (3) the Plaintiffs’ Counter Motion
for Summary Judgment (“Pls.’ Mot.”); (4) the Plaintiffs’ Reply in Opposition to Defendant PBGC’s Motion for
Summary Judgment and Brief in Support of Plaintiffs’ Counter Motion for Summary Judgment (“Pls.’ Mem.”); (5)
the Defendant’s Opposition to the Plaintiff’s Motion and Reply (“Def.’s Reply”); and (6) the plaintiffs’ Reply to
Defendant’s Opposition to Plaintiffs’ Counter Motion for Summary Judgment and Brief in Support of Said Motion
A. The Employment Income Security Act of 1974
The ERISA was enacted in 1974 to, among other things, “ensure that employees and their
beneficiaries would not be deprived of anticipated retirement benefits by termination of pension
plans before sufficient funds [had] been accumulated in the plans.” Pension Benefit Guar. Corp.
v. R.A. Gray & Co., 467 U.S. 717, 720 (1984). Congress’s goal in enacting the ERISA was “to
guarantee that ‘if a worker has been promised a defined pension benefit upon retirement—and if
he has fulfilled whatever conditions are required to obtain a vested benefit—he actually will
receive it.” Id. (quoting Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S 359, 375
(1980)). The ERISA is divided into three major parts. The first details reporting and disclosure
requirements, participation and vesting, funding of pension plans, fiduciary responsibilities, and
administration and enforcement. 29 U.S.C. §§ 1002-1191c. The second identifies the agencies
charged with administering the ERISA, as well as the outlines procedures for doing so, and also
establishes a task force. Id. §§ 1120-1242. The third part, which is most pertinent to this case
and thus discussed in further detail below, addresses insurance for certain types of pension plans
through the PBGC. Id. §§ 1301-1461.
B. The Pension Benefit Guaranty Corporation
“There is established within the Department of Labor a body corporate . . . known as the
Pension Benefit Guaranty Corporation.” Id. § 1302(a). The PBGC’s board of directors is
comprised of the Secretaries of the United States Departments of Treasury, Labor, and
Commerce, with the Secretary of Labor serving as the chair of the board. Id. § 1302(d). The
PBGC is charged with carrying out the following duties:
(1) to encourage the continuation and maintenance of voluntary private pension
plans for the benefit of their participants,
(2) to provide for the timely and uninterrupted payment of pension benefits to
participants and beneficiaries under plans to which this title applies, and
(3) to maintain premiums established by the corporation under [29 U.S.C. § 1306]
at the lowest level consistent with carrying out its obligations under this
29 U.S.C. § 1302(a)(1)-(3).
C. Factual and Procedural Background
The following facts are undisputed. 2
1. The Republic Technologies Shutdown and the Plan Termination Date
The plaintiffs are all former employees of Republic’s now defunct Beaver Falls,
Pennsylvania, facility. Compl. ¶ 23. Republic was the product of “a pair of mergers in 1998 and
1999.” 3 Def.’s Mem. at 3. A combination of market conditions, high debt obligations, and
deteriorating liquidity at Republic led the company to “ha[ve] difficulty meeting its financial
obligations.” Id. Thus, the “PBGC attempted to secure better funding for the [company’s]
[p]ension [p]lans by entering into agreements with [Republic] that would increase the level of
funding.” Id. at 3-4. As part of those efforts, “[Republic] contributed a total of $64.5 million to
its [p]ension [p]lans in addition to its legally required funding contributions.” Id. at 4.
Neither the plaintiffs nor the PBGC filed separate statements of undisputed fact. Rather, as required by Local Civil
Rule 7(h)(2), the PBGC incorporated its statement of facts into its initial memorandum, and included citations to the
administrative record. Def.’s Mem. at 3 n.7. The plaintiffs did not include a statement of facts, but rather
incorporated into their initial memorandum a section entitled “Factual Background Corrections.” Pls.’ Mem. at 1-2.
Although the plaintiffs’ “Factual Background Corrections” dispute the PBGC’s characterization of certain facts, the
plaintiffs fail entirely to cite to what in the administrative record supports their corrections. Accordingly, the Court
treats the PBGC’s statement of facts as the only statement of facts not in dispute. Cf. Fed. R. Civ. P. 56(e) (“If a
party fails to properly support an assertion of fact or fails to properly address another party’s assertion of fact as
required by Rule 56(c), the court may . . . consider the fact undisputed for purposes of the motion.”).
The details of the merger can be found in Pension Benefit Guaranty Corp. v. Republic Technologies, International,
LLC, 287 F. Supp. 2d 815 (N.D. Ohio 2003).
Republic was ultimately “[u]nable to meet is financial obligations,” and filed for
bankruptcy in 2001. 4 Id. at 4. After determining that the company “could not reorganize as a
standalone entity and would instead have to sell its assets[,] . . . ce[ase] . . . [its] operations[,] and
. . . resum[e] . . . operations [under] a new owner after the assets were sold, [Republic] issued”
notices to its employees pursuant to the Worker Adjustment Retraining and Notification Act
(“WARN Act”), 29 U.S.C. §§ 2101-09 (2012). Id. at 4. The notices stated:
As you know, the Company filed a petition with the Bankruptcy Court last year
seeking to reorganize the business. Last week, we signed a letter of intent to sell
substantially all the assets of Republic to a new company, RTI Acquisition
Company. We have filed a motion with the Bankruptcy Court to approve this
transaction, subject to higher and better offers. Some of Republic’s assets are not
included in the proposed transaction, including the Beaver Falls Cold Finished
facility. Accordingly, subject to the approval of the Bankruptcy Court, the
Company plans to permanently and entire [sic] close its plant located at 220
Seventh Avenue, Beaver Falls, PA 15010. The expected date of first separation
will be between July 17, 2002 and August 1, 2002. A list of the job titles of
positions to be affected by the plant closure and the names of workers currently
holding the affected jobs is also attached hereto. This is a formal notice pursuant
to the Worker Adjustment and Retraining Notification (“WARN”) Act. The
Company expressly reserves its right to invoke any exception available to it under
the WARN Act should circumstances change.
Administrative Record (“AR”) at 28. “Around the same time, [Republic] negotiated an
agreement with [the United Steelworkers of America Union (“United Steelworkers”)] under
which (i) July 9, 2002, was specified as the ‘shutdown’ date of [Republic] for purposes of the
shutdown benefits . . . under [its] [p]ension [p]lans and (ii) [Republic] employees who otherwise
met the age and service requirements would be deemed eligible for shutdown benefits.” Def.’s
Mem. at 4-5. As explained by the Sixth Circuit,
[s]hutdown benefits are enhanced early retirement benefits for certain workers
who are affected by a facility shutdown or business cessation. They permit
participants who meet certain age and service requirements to begin receiving a
Although the PBGC lists “April 2002” as the date when Republic filed for bankruptcy, the actual filing date was
April 2, 2001. Pension Benefit Guar. Corp. v. Republic Techs., Int’l, LLC, 386 F.3d 659, 663 (6th Cir. 2004).
retirement benefit after a plant shutdown, rather than having to wait while out of
work to reach a specific retirement age. Unlike other early and normal retirement
benefits, shutdown benefits usually are not advance-funded. Because this
enhanced benefit may be paid for many years before a recipient is eligible for
normal retirement benefits, the cost of shutdown benefits can be very high.
Pension Benefit Guar. Corp. v. Republic Techs., Int’l, LLC, 386 F.3d 659, 662-63 (6th Cir.
2004) (footnotes omitted).
Republic filed for bankruptcy and was eventually “liquidated in . . . 2004.” Def.’s Mem.
at 3. “During that bankruptcy, [the] PBGC terminated [Republic’s] four defined benefit pension
plans.” Def.’s Mem. at 3. The PBGC “had to decide whether to involuntarily terminate the
[p]ension [p]lans prior to the accrual of shutdown benefits, which would add an additional $96
million to [the] PBGC’s liability,” which was already “then estimated at more than $300
million.” Id. at 5-6. The “PBGC determined to terminate the plans and, on or about June 14,
2002, notified [the plans’] participants, through [United Steelworkers] and by newspaper
publication, of its intent to terminate the [p]ension [p]lans and establish June 14, 2002, as the
[p]ension [p]lans’ termination date.” Id. at 6. Because disagreements arose as to “the
appropriate termination date for [Republic’s] pension plans,” the PBGC filed suit in the United
States District Court for the Northern District of Ohio, which set the plans’ termination date as
August 17, 2002. Pension Benefit Guar. Corp. v. Republic Techs. Int’l, LLC, 287 F. Supp. 2d
815 (N.D. Ohio 2003). The case was appealed to the Sixth Circuit Court of Appeals, which
ultimately set the plan termination date back to June 14, 2002, as requested by the PBGC.
Republic Techs., Int’l, 386 F.3d at 668. Among the affected Republic pension plans was “the
pension plan for hourly workers in which [the] [p]laintiffs are participants” (Republic’s “Hourly
Pension Plan”). Def.’s Mem. at 5.
2. The PBGC’s Determination of the Plaintiffs’ Benefits
Under the original August 17, 2002 plan termination date, many of the Republic pension
plans’ “participants became eligible to take early retirement under the shutdown benefit
provisions . . . and did in fact retire.” Def.’s Mem. at 7. As a result, when the Sixth Circuit set
the date two months earlier, to June 14, 2002, “many participants suddenly became ineligible for
certain benefits that they had in fact received during the prior two years under the district court’s
chosen termination date.” Id. The “PBGC gave [affected] participants the option of continuing
to receive pension benefits . . . , or rescinding their retirement and deferring their pensions until
they reached their normal retirement age. [The] [p]laintiffs chose the latter option.” Id. at 7-8
3. The Plaintiffs’ Administrative Appeals and the Current Lawsuit
Upon receiving the PBGC’s benefit determinations, each plaintiff filed a timely appeal
alleging, among other things, that the PBGC should treat the May 1, 2002 WARN Act notice as
the date of constructive shutdown, and that it had “mishandled” the plaintiffs’ defined
contribution plan accounts which the plaintiffs had carried over from pre-merger pension plans.
Id. at 8-10; AR at 642, 741, 854, 953. The PBGC Appeals Board rejected each of the appeals.
AR at 3, 91, 177, 262. Following that denial, the plaintiffs initiated this lawsuit, requesting
administrative review of the alleged “delays, wrongful reductions, and improper pension
calculations by the [d]efendant who fraudulently altered and changed the pension agreement.”
Compl., Prayer For Relief. The parties have now filed cross motions for summary judgment.
II. STANDARD OF REVIEW
Summary judgment will be granted “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). “Summary judgment is the proper mechanism for deciding, as a matter of law, whether an
agency action is supported by the administrative record and consistent with the APA standard of
review.” Loma Linda Univ. Med. Ctr. v. Sebelius, 684 F. Supp. 2d 42, 52 (D.D.C. 2010) (citing
Stuttering Found. of Am. v. Springer, 498 F. Supp. 2d 203, 207 (D.D.C. 2007)); see also
Richards v. INS, 554 F.2d 1173, 1177, 1177 n. 28 (D.C. Cir. 1977). But due to the limited role a
court plays in reviewing the administrative record, the typical summary judgment standards set
forth in Rule 56(c) are not applicable. Stuttering, 498 F. Supp. 2d at 207. Rather, “[u]nder the
APA, it is the role of the agency to resolve factual issues to arrive at a decision that is supported
by the administrative record, whereas ‘the function of the district court is to determine whether
or not as a matter of law the evidence in the administrative record permitted the agency to make
the decision it did.’” Id. (quoting Occidental Eng’g Co. v. INS, 753 F.2d 766, 769 (9th Cir.
1985)). In other words, “when a party seeks review of agency action under the APA, the district
judge sits as an appellate tribunal,” and “[t]he ‘entire case’ on review is a question of law.” Am.
Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (footnote and citations
The APA provides a “default standard” of judicial review of agency actions when a
statute does not otherwise provide one: “A court must set aside agency action it finds to be
‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Tourus
Records, Inc. v. DEA, 259 F.3d 731, 736, 736 n. 10 (D.C. Cir. 2001) (quoting 5 U.S.C. §
706(2)(A)). “The ‘arbitrary and capricious’ standard of review as set forth in the APA is highly
deferential,” and the Court must therefore “presume the validity of agency action.” Am. Horse
Prot. Ass’n v. Yeutter, 917 F.2d 594, 596 (D.C. Cir. 1990). Although the “court is not to
substitute its judgment for that of the agency[,] . . . the agency must examine the relevant data
and articulate a satisfactory explanation for its action[,] including a rational connection between
the facts found and the choice made.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 43 (1983) (citations and quotation marks omitted).
Where a plaintiff is proceeding pro se, “the Court must take particular care to construe
the plaintiff’s filings liberally, for such complaints are held ‘to less stringent standards than
formal pleadings drafted by lawyers.’” Cheeks v. Fort Myers Constr. Co., 722 F. Supp. 2d 93,
107 (D.D.C. 2010) (quoting Haines v. Kerner, 404 U.S. 519, 520-21 (1972))
III. LEGAL ANALYSIS
A. The PBGC’s Calculations of the Plaintiffs’ Shutdown Benefits
The PBGC contends that it correctly calculated the plaintiffs’ benefits because “[t]he
record clearly shows that [the p]laintiffs were simply not entitled to a shutdown benefit.” Def.’s
Mem. at 15. Under the PBGC’s regulations,
the PBGC will guarantee the amount, as of the termination date [of a pension
plan], of a benefit provided under a plan to the extent that the benefit does not
exceed the limitations in ERISA and in subpart B if -(1) The benefit is, on the termination date, a nonforfeitable benefit;
(2) The benefit qualifies as a pension benefit as defined in § 4022.2; and
(3) The participant is entitled to the benefit under § 4022.4.
29 C.F.R. § 4022.3. In other words, the PBGC will guarantee a plan benefit if (1) the
plan participant has satisfied the plan’s requirements for receiving benefits on the date
that the plan is terminated, 29 U.S.C. § 1301(a)(8); 29 C.F.R. § 4001.2; (2) the benefit is
“payable as an annuity . . . which . . . provide[s] a substantially level income to the
recipient,” 29 C.F.R. § 4022.2; and, as relevant here, (3) “under the provisions of [the]
plan . . . [and] before the termination date . . . [,] the participant had satisfied the
conditions of the plan necessary to establish the right to receive the benefit prior to such
date,” 29 C.F.R. § 4022.4(a)(3). The regulations plainly mandate that the PBGC must
guarantee only those benefits the plaintiffs were entitled to receive under the plan’s
requirements for the receipt of that particular benefit, and only if those requirements were
satisfied before the plan was terminated.
Here, Article 4 of Republic’s Hourly Pension Plan, titled “Eligibility for
Benefits,” AR at 383-88, outlines the requirements that must be satisfied to be eligible for
benefits. The plaintiffs do not dispute, Pls.’ Mem. at 14, that under Article 4, the two
applicable sections are § 4.06, concerning “70/80 Retirement,” AR at 385-86, and § 4.07,
concerning “Rule-of-65 Retirement,” AR at 386-87. Section 4.06 provides that “[a]ny
Participant who has not attained the age of 62 years and who shall have had at least 15
years of Continuous Service” is eligible for a pension upon retirement if that Participant
also “incurs a Break in Continuous Service by reason of a permanent shutdown of a plant,
department or subdivision thereof” if (a) the Participant is over “the age of 55 years and
[his or her] combined age and years of Continuous Service . . . equal 70 or more,” or (b)
the Participant is under the age of 55 and his or her “combined age and years of
Continuous Service . . . equal 80 or more.” AR at 385-86. And § 4.07 provides that
“[a]ny Participant who has not attained the age of 55 years and who shall have had at
least 20 years of Continuous Service as of his last day worked” is eligible for a pension
upon retirement if (a) the Participant’s “combined age and years of Continuous Service . .
. equal 65 or more, but less than 80,” and (b) the Participant “is absent from work by
reason of a layoff resulting from . . . a permanent shutdown.” AR at 386-87.
The PBGC contends that
[t]he Administrative Record clearly shows that . . . [a]lthough each [p]laintiff
appears to have satisfied the age and service requirements, none of them
underwent the requisite break in continuous service prior to the [Hourly] Pension
Plan’s termination date of June 14, 2002. Their employment at the Beaver Falls
facility continued through the middle of August 2002.
Def.’s Mem. at 16. The Court finds that the Administrative Record supports the PBGC’s
As to plaintiff Paul Deppenbrook, the PBGC conceded that he “met the age and service
requirements for a Rule-of-65 benefit before the [Hourly Pension] Plan terminated.” AR at 3.
However, in order to have been eligible for a benefit guaranteed by the PBGC, the benefit must
have been nonforfeitable. 29 U.S.C. § 1301(a)(8); 29 C.F.R. § 4001.2; id. § 4022.3. Stated
differently, the requirements for a PBGC guaranteed benefit must have been met prior to the date
on which the pension plan terminated. By definition, shutdown benefits would not have become
nonforfeitable until the date of the plant shutdown. Republic Techs., Int’l, 386 F.3d at 664. In
Mr. Deppenbrook’s case, the Sixth Circuit determined the plan termination date to be June 14,
2002, id., whereas the PBGC had evidence from “data . . . obtained from [Republic,]” as well as
from “a telephone interview with the former Plant Manager[,] that the Beaver Falls facility was
not shutdown until mid-August of 2002.” AR at 4. Indeed, employment records provided by
Republic to the PBGC show that Mr. Deppenbrook’s last day of work was August 16, 2002. AR
As to plaintiff Arthur Evans, Jr., the PBGC conceded that he “met the age and service
requirements for a Rule-of-65 benefit before the [Hourly Pension] Plan terminated.” AR at 3.
However, as with Mr. Deppenbrook, the PBGC had evidence from Republic records and from a
phone interview that the Beaver Falls facility where Mr. Evans worked remained open past the
Hourly Pension Plan’s termination date. AR at 95-96. And although employment records for
Mr. Evans are not contained in the Administrative Record, there is a handwritten notation on his
appeal of the initial PBGC determination indicating that his last day of work was on or around
August 16, 2002. AR at 751.
The PBGC found that plaintiff Ronald Gossard also “met the age and service
requirements for a Rule-of-65 benefit before the [Hourly Pension] Plan terminated.” AR at 180.
Again, however, there was evidence that the Beaver Falls facility remained open and Mr.
Gossard continued to work until mid-August 2002, which was well past the June 14, 2002
termination date of the Hourly Pension Plan. AR at 181-82. Further, the Administrative Record
contains employment records indicating that Mr. Gossard applied on September 10, 2002, for
retirement as of August 16, 2002. AR at 880.
Finally, as to plaintiff William Venezie, the PBGC found that he “met the age and service
requirements for a 70/80 benefit before the [Hourly Pension] Plan terminated.” AR at 265. But
as with the other plaintiffs, the PBGC had evidence that Mr. Venezie’s final day of employment
was August 16, 2002. AR 266-67. And the Administrative Record contains evidence that he
applied on September 9, 2002, for retirement as of August 16, 2002. AR at 1009.
As discussed above, the Administrative Record supports the PBGC’s determination that
none of the plaintiffs experienced a break in continuous service until after the Hourly Pension
Plan was terminated, and that they thus did not meet the requirements for shutdown benefits.
Because the evidence in the record provided a reasonable basis for the PBGC to deny shutdown
benefits to the plaintiffs, the Court finds that the PBGC’s determination was not arbitrary or
The plaintiffs argue for many reasons that May 1, 2002, the date of the WARN Act
notice, should be considered the shutdown date with respect to the Beaver Falls facility. Pls.’
Mem. at 3-8. However, the plain language of the WARN Act notice makes clear that, as of May
1, 2002, the shutdown was not yet a certainty:
[Republic] plans to permanently and entire[ly] close its [Beaver Falls facility] . . .
The expected date of first separation will be between July 17, 2002 and August 1,
2002. . . . [Republic] expressly reserves its right to invoke any exception available
to it under the WARN Act should circumstances change.
AR at 28 (emphasis added). And even if the notice set a date certain for the shutdown, the
earliest such date was July 17, 2002—more than one month after the plan termination date
designated by the Sixth Circuit.
Regardless, and as discussed above, there is ample evidence in the Administrative Record
that the Beaver Falls facility did not actually close until after the Hourly Pension Plan was
terminated. Republic’s Hourly Pension Plan provides for shutdown benefits when there has been
a break in continuous service, and enumerates various circumstances that would constitute such a
break. AR at 375-77. Notably absent from this list of circumstances constituting a break in
continuous service is an expected shutdown. Given the uncertainty at the time the anticipated
shutdown notice was issued regarding the date when Republic would actually close the facility,
as well as the affirmative evidence in the Administrative Record that the facility did not close
until August 16, 2002, the Court finds that the PBGC’s determination to not use May 1, 2002, as
the eligibility date for shutdown benefits for employees of the Beaver Falls facility was not
arbitrary, capricious, or an abuse of discretion.
The plaintiffs contend in the alternative that the waiting period outlined in the WARN
Act should be read together with the ERISA waiting period discussed in the definition of
“nonforfeitable benefits,” such that the plant shutdown condition should be deemed the
beginning of the WARN Act waiting period. Pls.’ Mem. at 5-7. The PBGC disagrees, arguing
that “the 60-day notice under the WARN Act is not a ‘waiting period’ for purposes of guaranteed
benefits under [the] ERISA.” Def.’s Reply at 4-5.
As noted earlier, the “PBGC’s interpretation of [the] ERISA is entitled to great
deference.” Belland v. Pension Benefit Guar. Corp., 726 F.2d 839, 843 (D.C. Cir. 1984). But
“[i]f the statutory language ‘is plain and admits of no more than one meaning, the duty of
interpretation does not arise, and the rules which are to aid doubtful meanings need no
discussion.’” Id. (citation omitted). Here, while the plaintiffs are correct that the WARN Act
requires employers to notify their employees 60 days prior to closing a plant, 29 U.S.C. §
2102(a), the plain language of the ERISA makes clear that the WARN Act waiting period is
distinct from the waiting period contained in the ERISA’s definition of nonforfeitable benefits.
As discussed above, the ERISA defines a nonforfeitable benefit as one “for which a participant
has satisfied the conditions for entitlement under the plan or the requirements of this chapter
(other than . . . completion of a required waiting period . . .) . . . .” 29 U.S.C. § 1301(a)(8). The
plain language of the statute refers to requirements under a pension plan or under “requirements
of this chapter,” that is, Chapter 18 of Title 29. Chapter 18, in turn, encompasses the ERISA.
The parenthetical following the phrase “under the plan or the requirements of this chapter”
modifies the phrase to exclude certain plan and ERISA requirements, such as plan waiting
periods and Chapter 18 (i.e., the ERISA) waiting periods. Id. The WARN Act is not part of the
Republic Hourly Pension Plan. And the WARN Act itself, and any waiting periods referenced
therein, are part of Chapter 23 of the Title 29, and not part of Chapter 18. 29 U.S.C. §§ 21012209.
The PBGC’s interpretation of a “nonforfeitable benefit” as contemplating only waiting
periods under the ERISA or under the pension plan at issue is consistent with the purposes of the
PBGC. These purposes include, among others, “provid[ing] for the timely and uninterrupted
payment of pension benefits to participants and beneficiaries under plans to which this
subchapter applies.” 29 U.S.C. § 1302(a)(2). Because the PBGC’s interpretation of
“nonforfeitable benefits” here is consistent with paying “pension benefits . . . under plans to
which this subchapter applies,” id. (emphasis added), as opposed to under other statutes or
documents, and because the interpretation comports with the statute’s plain language, the Court
finds that the PBGC’s interpretation is not arbitrary, capricious, or an abuse of discretion. 5 See
Belland, 726 F.2d at 843-44 (holding that the PBGC’s interpretation of the ERISA was
permissible where the interpretation “adhered to an express statutory purpose and complied with
the statute’s plain language”).
B. The PBGC’s Decision to Insure only Defined Benefit Plans
The plaintiffs also accuse the PBGC of allowing the Hourly Pension Plan to become
underfunded, of wrongly “refus[ing] to insure the individual accounts” that comprise certain
portions of the Plan, and of failing to adhere to the terms of the plaintiffs’ union’s collective
bargaining agreement. Pls.’ Mem. at 10-12. The plaintiffs further argue that the PBGC
improperly ignored a particular adjustment contained in § 5.03(a) of the Hourly Pension Plan.
Id. at 15-18.
The plaintiffs advance other arguments concerning the WARN Act. First, they argue that the Hourly Pension Plan
was “amended retroactively on the basis of the WARN Act legislation,” and that the PBGC failed to notify the
Plan’s participants of the amendment, in violation of the terms of the Plan. Pls.’ Mem. at 8-9. As the PBGC
correctly notes, Def.’s Reply at 5, this argument is not helpful to the plaintiffs because they fail to address how such
an amendment would affect the shutdown date. Further, the WARN Act, by its very terms, does not purport to alter
the plaintiffs’ rights under the ERISA or under the Hourly Pension Plan. 29 U.S.C. § 2105 (stating that the WARN
Act’s “rights and remedies . . . are in addition to, and not in lieu of, any other contractual or statutory rights . . . and
are not intended to alter or affect such rights and remedies”). Second, the plaintiffs argue that the PBGC should
have used May 1, 2002, as the shutdown date because Republic “could have ignored the [l]aw and closed the Beaver
Falls facility instantly.” Pls.’ Mem. at 7. This argument must be rejected. The plaintiffs’ suggestion assumes that a
company is free to ignore the law, and that other entities can and should rely on that assumption, neither of which is
the case. In any event, none of the plaintiffs’ WARN Act arguments affect the Court’s conclusion that the PBGC’s
determination with respect to the plaintiffs’ shutdown benefits was not arbitrary, capricious, or an abuse of
The PBGC argues that its calculation of the plaintiffs’ benefits is correct because the
PBGC properly administered only the portion of the Hourly Pension Plan that it is legally
permitted to insure—namely, the portion comprising the plaintiffs’ defined benefit plan and not
their individual defined contribution plans that had been carried over from the merger that
created Republic. Def.’s Mem. at 15, 17-18.
“In enacting [the] ERISA, Congress distinguished between two types of employee benefit
plans: ‘defined benefit plan[s]’ and ‘defined contribution plan[s],’ also known as ‘individual
account plan[s].’” Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 229 (1986) (quoting
29 U.S.C. §§ 1002(34), (35)). And under the statute, the PBGC’s “coverage . . . continues to
turn on whether [a plan] is a defined benefit plan” because the “ERISA . . . exempt[s] . . . defined
contribution plans, narrowly defined, from PBGC coverage.” Id. at 231. Further, the PBGC is
limited to assuming the role of trustee with respect to underfunded defined benefit plans that
have been terminated. 29 U.S.C. §§ 1322, 1342(c).
There is no dispute that certain portions of the plaintiffs’ benefits arise out of one of
Republic’s four defined benefit plans, and that others arise out of the plaintiffs’ individual
defined contribution plans. Rather, the plaintiffs assert that the “PBGC has refused to insure the
individual accounts as required by [the] ERISA.” Pls.’ Mem. at 10. This position is devoid of
statutory support. As the Supreme Court made clear, the PBGC cannot provide coverage for
defined contribution plans. Connolly, 475 U.S. at 230-31. Accordingly, the Court finds that the
PBGC’s decision to administer and insure only the plaintiffs’ defined benefit plan was not
arbitrary, capricious, or an abuse of discretion.
While the plaintiffs are correct that the Republic merger and the subsequent amendments
to the Hourly Pension Plan combined defined contribution plans with defined benefit plans, Pls.’
Mem. at 10-11; Def.’s Mem. at 17, it is not the case that the mere combination of the plans
created an obligation that the PBGC insure the entirety of the combined plan. The plaintiffs and
the PBGC agree that the combined plan, the Hourly Pension Plan, comprised a “floor offset”
plan under 26 U.S.C. § 414(k), a fact supported by the Administrative Record. AR at 567-73.
Section 414(k) states only that the portion of the Hourly Pension Plan derived from an
employee’s individual account will, for ERISA purposes, continue to be treated as a defined
contribution plan. 26 U.S.C. § 414(k); Berger v. Nazametz, 157 F. Supp. 2d 998, 1010 (S.D. Ill.
2001) (observing that § 414(k) requires that defined contribution funds be “maintained in a
separate account and not be considered for purposes of compliance with the defined benefit
rules”). As discussed above, the PBGC is prohibited from administering or insuring defined
The plaintiffs concede that the “PBGC is correct that the benefit is to be offset” by the
amount distributed from an individual employee’s individual account, Pls.’ Mem. at 15-16, but
make much of the fact that certain defined contribution plans were transferred to one of
Republic’s defined benefit plans as a result of the merger, id. at 18. They argue that the “PBGC
has forced the plan participants to take a distribution[, despite the fact that the] [p]laintiffs were
to have a choice to these elections of distribution and this has decreased their ‘Protected Benefit’
under the terms of the plan.” Id. (footnote omitted). The PBGC counters that “each [p]laintiff
received a lump-sum distribution of the amount in his individual account, which represented the
‘accrued benefit’ of the [defined contribution plan] account.” Def.’s Reply at 12 (citing Tres.
Reg. § 1.411(a)-(7)(a)(2)). The Hourly Pension Plan, in turn, directs that the amount that a plan
participant receives under the defined benefit plan must be offset by the amount of the lump sum.
AR at 456-57. Accordingly, the PBGC did not arbitrarily or capriciously decrease the plaintiffs’
benefits under the Hourly Pension Plan. 6
The plaintiffs argue also that the PBGC’s treatment of the defined contribution plans
constituted an unlawful amendment to the Hourly Pension Plan, in violation of 26 U.S.C. §
411(d)(6) and 29 U.S.C. § 1054(g). Pls.’ Mem. at 25. These provisions of the Internal Revenue
Code and the ERISA, commonly called the “Anti-Cutback Rule,” “bar ERISA-covered benefit
plans from enacting most amendments that would decrease participants’ accrued benefits.”
Virtue v. Int’l Bhd. of Teamsters Ret. & Family Prot. Plan, __ F. Supp. 2d __, __, 2013 WL
1769804, at *3 (D.D.C. 2013). Here, however, the PBGC did not amend the Hourly Pension
Plan by requiring that the plaintiffs receive a distribution of the amounts in their defined
contribution plans upon the termination of the Hourly Pension Plan, or by requiring that the
plaintiffs’ defined benefit plan amount be offset by the amount of the distribution received under
their individual defined contribution plans. Rather, the distributions and subsequent offsets were
already required by the terms of the Hourly Pension Plan. See AR at 392, 456-57.
The plaintiffs argue that 29 U.S.C. § 1321, which they contend “clearly describes plans
covered by the PBGC pension insurance program, as well as those plans that are excluded from
coverage,” requires the PBGC to provide coverage of their defined contribution plans. Pls.’
Mem. at 22-25. However, § 1321(b) explicitly excludes from PBGC coverage “individual
Nor did the PBGC force the plaintiffs to receive their defined contribution plan distributions as a lump sum.
Rather, a letter was sent to each plaintiff explaining that he had a choice to receive the distribution from his defined
contribution plan as either a lump sum or an annuity. AR at 87-90,173-76, 258-61, 342-45. If the plaintiffs mean to
argue that they should not have been required to receive any distributions at all because the Hourly Pension Plan
constituted a single defined benefit plan, then the plaintiffs misapprehend the nature of the plan as explained in the
Administrative Record, AR at 567-73, as well as the PBGC’s statutory obligation. The Administrative Record
indicates that the Hourly Pension Plan was a § 414(k) floor offset plan, i.e., one comprised of defined contribution
components and defined benefit components. Id. As discussed above, the PBGC is prohibited from administering
or insuring defined contribution plans. Accordingly, the PBGC preserved the plaintiffs’ rights as to their defined
contribution plans by having a third party administer the plans. Id. The PBGC cannot be at fault for the manner in
which the defined contribution plans were administered, as it did not, in fact, administer them.
account plan[s], as defined in paragraph (34) of section 1002.” 29 U.S.C. § 1321; see also
Connolly, 475 U.S. at 230-31.
Finally, the plaintiffs argue that the PBGC ignored a particular adjustment contained in §
5.03(a) of the Hourly Pension Plan. Pls.’ Mem. at 15-16. In particular, the plaintiffs believe that
they are entitled under that provision to an increase in their monthly benefit payments. Id. (citing
§§ 5.03(a), 5.04(c), 5.05(g) of the Hourly Pension Plan). The Hourly Pension Plan states that
certain increases are available to plan participants only if they are not “eligible for an unreduced .
. . [b]enefit.” AR at 394-99 (emphasis added). “The monthly amount of any Regular Pension
shall be equal to a monthly benefit of $35.00 . . . multiplied by” the number of years of service.
Id. at 392. And Appendix A to the Hourly Pension Plan explicitly states that a plan participant’s
benefits are equal to the “Individual Account Benefit . . . and . . . a defined benefit pension
determined in accordance with Article 5 of the [Hourly Pension] Plan.” Id. at 451. As explained
by the PBGC Appeals Board, the plaintiffs ultimately each received full benefits by virtue of
“the combination of the [individual account] benefit, the [Republic] defined benefit,” and
additional benefits such that each plaintiff ultimately received the equivalent of “$35 multiplied
by [his] years of Continuous Service.” Id. at 11, 100, 186, 271. Further, the PBGC Appeals
Board stated that it “examined the files of numerous participants who retired before [the] PBGC
became trustee [and that i]n every file [it] . . . reviewed, the Prior Plan Administrator” had
administered retiree benefits in the same manner. Id. at 11, 100, 187, 271. Because the plaintiffs
were ultimately receiving full, unreduced benefits, the Court finds that the PBGC’s decision not
to increase the plaintiffs’ benefits in accordance with § 5.04(a) of the Hourly Pension Plan was
not arbitrary or capricious.
For the foregoing reasons, the Court grants the PBGC’s motion for summary judgment
and denies the plaintiffs’ cross motion for summary judgment. 7
SO ORDERED this 17th day of June, 2013.
REGGIE B. WALTON
United States District Judge
The Court will contemporaneously issue an Order consistent with the Memorandum Opinion.
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