The opinion of the court was delivered by: GASCH
This case presents the question of whether payments in excess of statutorily guaranteed benefits made by the Pension Benefit Guaranty Corporation (bPBGC) to participants in terminated employee pension plans constitute overpayments that can be recouped by the PBGC. The payments here in question were made in the interim between the termination of the inadequately funded pension plan for employees of the bankrupt Alan Wood Steel Company of Conshohocken, Pennsylvania, and the time when payments were reduced to statutorily guaranteed amounts. The Court denied the plaintiff's motion for preliminary injunction, and the case is now before the Court on the parties' cross-motions for summary judgment.
On June 10, 1977, the Alan Wood Steel Company filed a Chapter XI bankruptcy petition in the Eastern District of Pennsylvania. Alan Wood had maintained a pension plan pursuant to a pension agreement between it and the United Steel Workers of America, AFL-CIO (USWA). All steelmaking operations at Alan Wood ceased and all Alan Wood employees were laid off by November 1, 1977. At that time, employees who were eligible for pension benefits under the plan were receiving pension benefits at levels specified in the plan.
Alan Wood filed a Notice of Intent to Terminate with the PBGC on May 26, 1978, proposing June 5, 1978 as the date of termination. In a letter from PBGC to the Alan Wood Pension Advisory Committee, dated June 22, 1978, PBGC indicated that the proposed date would not necessarily be the date of the plan's termination and that the Advisory Committee could continue making payments to participants and beneficiaries who had been receiving pension benefits when the Notice of Termination was filed and could commence payments to those who subsequently became eligible for benefits for reasons other than the plan's termination. The PBGC's letter went on to state:
In the course of the statutory termination procedure it may become necessary to adjust or recapture a portion of the amounts paid to participants or their beneficiaries if such amounts are in excess of benefits guaranteed under [ERISA]. Therefore, we recommend that you advise all participants receiving benefits that their benefits may be subject to adjustment or recapture if plan assets . . . are insufficient to satisfy guaranteed benefits.
In July 1978, PBGC wrote to the advisory committee recommending discontinuance of monthly Social Security supplemental benefit payments
because such payments would not be guaranteed under ERISA. Pursuant to this request, payment of the Social Security supplements was discontinued effective August 1, 1978.
By agreement effective January 5, 1979, PBGC and Alan Wood established November 1, 1977, as the date of plan termination. By that agreement, PBGC also became trustee of the plan. Following this agreement, the participants' benefits continued to be paid at the same levels as those immediately prior to January 5, 1979. On February 27, 1979, PBGC hired Milliman & Robertson, Inc., an actuarial consulting firm, to calculate guaranteed benefits for plan participants. The plan provides for a complicated benefit structure, making calculations difficult.
By letter dated July 19, 1979, PBGC informed participants that it had become trustee of the plan and that the plan termination date was November 1, 1977. The letter stated that no additional benefits would accrue after the termination date, that the guaranteed provisions of ERISA became effective on that date, and that PBGC could pay only those benefits guaranteed by ERISA.
On November 6, 1979, PBGC informed participants who had been receiving benefits in excess of guaranteed amounts that payments would be cut back to guaranteed levels. PBGC also informed participants that they would have to repay amounts received in excess of guaranteed amounts during the period since the date of plan termination. The letter further stated that repayment could be in a lump sum or by pro rata reduction of future payments. Payments at guaranteed levels began in January 1980. On or about November 16, 1982, PBGC notified each participant who had received the November 1979 letter that only excess payments received after June 5, 1978, would be recouped. Recoupment from participants who did not make lump sum repayments began with the February 1, 1983, benefit checks. As of September 13, 1983, PBGC was recouping benefit overpayments by a reduction in benefit payments to 635 Alan Wood participants.
The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., is designed to protect participants in employee benefit plans. See 29 U.S.C. § 1001. Title IV of ERISA insures employees against a complete loss of pension benefits in the event their employee pension plans terminate. 29 U.S.C. § 1301 et seq. Section 1301
creates the PBGC to administer this insurance program.
If a pension plan terminates without sufficient assets to pay all vested benefits, the PBGC pays the benefits within certain limits. Section 1322(b) imposes limits on the amounts guaranteed to participants in inadequately funded terminated plans. Section 1361 provides that the PBGC cannot pay benefits above and beyond the ...