United States District Court, D. Columbia.
JOSEPH V. FISHER, Plaintiff: David S. Preminger, LEAD
ATTORNEY, PRO HAC VICE, KELLER ROHRBACK L.L.P., New York, NY;
George Michael Chuzi, KALIJARVI, CHUZI & NEWMAN & FITCH,
P.C., Washington, DC.
PENSION BENEFIT GUARANTY CORPORATION, Defendant: Mark R.
Snyder, PENSION BENEFIT GUARANTY CORORATION, LEAD ATTORNEY,
Office of the Chief Counsel, Washington, DC.
D. MOSS, United States District Judge.
an action brought under the Administrative Procedure Act, 5
U.S.C. § 701 et seq., to recover unpaid
retirement benefits regulated by the Employee Retirement
Income Security Act of 1974 (" ERISA" ). ERISA
establishes certain limitations on the payment of retirement
benefits by failing plans. An administrator of such a
plan--known as a " distressed" plan--is barred from
making payments other than in the order established by the
statute, and from making lump-sum payments of any kind. 29
U.S.C. § § 1341(c)(3)(D), 1344. But the text of
ERISA states that such limitations apply only once the
administrator provides notice that the plan will be
terminated. Id. § 1341(c)(3)(D)(i)(I). This
case is about the administrator's obligations in the
period before it provides notice of termination.
Joseph Fisher is a former executive of a corporation that
sponsored a retirement plan governed by ERISA. He requested a
lump-sum benefits payment several months before the plan
administrator submitted formal notice of its intent to
terminate the plan. The administrator denied Fisher's
request on the ground that " applicable law prohibits
the payment of lump sum distributions in anticipation of the
termination of the Plan." The plan was terminated, and
the Pension Benefit Guaranty Corporation (" PBGC" )
took over as trustee. Fisher submitted another request for a
lump-sum benefits payment, which the PBGC again denied,
citing a PBGC policy. Fisher now brings this action, arguing
that the PBGC should have honored his request for a lump-sum
payment of his retirement benefits.
matter is before the Court on the parties' cross-motions
for summary judgment. Because the Court concludes that the
PBGC Appeals Board failed to justify its decision not to
honor Fisher's request for a lump-sum payment, it will
REMAND the matter to the agency for further
Statutory and Regulatory Background
1974, animated by concerns over the growth in size and the
unregulated state of the employee benefit plan sector,
Congress passed the Employee Retirement Income Security Act
(" ERISA" ), Pub. L. No. 93-406, 88 Stat. 829
(codified at 29 U.S.C. § 1001 et seq. ). "
Among the principal purposes of this 'comprehensive and
reticulated statute' was to ensure that employees and
their beneficiaries would not be deprived of anticipated
retirement benefits . . . ." PBGC v. R. A. Gray &
Co., 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601
(1984) (quoting Nachman Corp. v. PBGC, 446 U.S. 359,
361-62, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980)). In order to
accomplish this purpose, Title IV of ERISA created a plan
termination insurance program, administered by the PBGC.
Id. ; see 29 U.S.C. § 1301 et
seq. That program protects plan participants " by
guaranteeing a class of 'nonforfeitable benefits,'
reimbursing eligible participants or beneficiaries when a
guaranteed plan terminates without sufficient funds."
Davis v. PBGC, 734 F.3d 1161, 1164, 407 U.S.App.D.C.
119 (D.C. Cir. 2013) (quoting 29 U.S.C. § 1322(a)). The
basic premise of this program is that " if a worker has
been promised a defined pension benefit upon retirement[,] .
. . he actually will receive it." Nachman
Corp., 446 U.S. at 375.
central function of Title IV is to facilitate the orderly
wind-down of retirement plans that cannot meet their payment
obligations. Such a retirement plan can enter into what is
known as a " distress termination" if the PBGC
finds that it has " insufficient assets to satisfy its
pension obligations." Davis, 734 F.3d at 1164;
29 U.S.C. § 1341(c). A plan in distress must provide
sixty days' notice to all affected parties, including
participants and the PBGC--an event known as a " notice
of distress termination." Id. §
1341(a)(2), (c)(3)(D)(i)(I). Once the plan has provided such
notice, the PBGC determines whether the plan has sufficient
assets to pay all, some, or none of its liabilities.
Id. § 1341(c)(3)(A)-(C). If the PBGC determines
that the plan lacks the assets to pay all liabilities that
are guaranteed by Title IV, " the PBGC becomes trustee
of the plan, taking over the plan's assets and
liabilities." PBGC v. LTV Corp., 496 U.S. 633,
637, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990); 29 U.S.C. §
1341(c)(3)(B)(iii). In order to pay those benefits guaranteed
by ERISA, the PBGC " uses the plan's assets to cover
what it can," but " then must add its own funds to
ensure payment of most of the remaining . . . benefits."
LTV Corp., 496 U.S. at 637.
such plans do not have the resources to meet their
obligations, ERISA imposes certain limitations on what a plan
administrator (and the PBGC) may pay the participants of a
distressed plan. Most basically, ERISA "
guarantees" only a portion of the benefits to which
participants would have been entitled to under a
plan. See 29 U.S.C. § 1322.
ERISA also establishes a priority order under which a plan
administrator (or the PBGC) shall pay participants if the
plan has sufficient assets to pay guaranteed
benefits, but not enough to pay all benefits.
Id. § 1344(a). ERISA imposes several other
restrictions on the benefits payable by an administrator of a
plan entering into a distress termination (or by the PBGC).
For instance, the statute states that any benefits that
result from an amendment to a plan that was executed within
five years of the date on which the plan terminated shall be
" phased in" over the course of five years, not
honored as provided in the plan document. Id. §
1322(b)(1), (7). The purpose is to protect the PBGC--and the
plan's beneficiaries as a whole--from amendments that
increase the benefits made payable to some (but not all)
beneficiaries in the period of time immediately preceding a
issue in this case are the statutory provisions that govern
the payment of benefits by a plan entering into a distress
termination. ERISA imposes certain payment restrictions that
take effect " on the date on which the plan
administrator provides a notice of distress termination to
the" PBGC. See id. § 1341(c)(3)(D)(i)(I).
The administrator of such a plan is prohibited from paying
benefits except those " guaranteed by the [PBGC]"
under 29 U.S.C. § 1322 and those " to which assets
are required to be allocated" under 29 U.S.C. §
1344. Id. § 1341(c)(3)(D)(ii)(IV). Most
significantly, for present purposes, the administrator of a
plan entering into a distress termination is also required to
" pay benefits attributable to employer contributions,
other than death benefits, only in the form of an
annuity." Id. § 1341(c)(3)(D)(ii)(II)
(emphasis added). These provisions, which were enacted in
1986 as part of a revision to ERISA, were meant " to
increase the likelihood that participants and beneficiaries .
. . will receive their full benefits" by ensuring that
the limited resources of a distressed plan were allocated for
the benefit of all participants. H.R. Rep. No. 99-241, pt. 2,
at 27 (1985), as reprinted in 1986 U.S.C.C.A.N. 685,
685. The provision limiting the lump-sum distribution of plan
assets, in particular, was enacted in response to
congressional concern that such distributions " would
dilute plan assets and may adversely affect participants'
benefits under Title IV and the PBGC's recovery."
Id. at 50.
PBGC has promulgated regulations and policies to implement
Title IV. It has promulgated regulations that mirror §
1341's prohibition on paying lump-sum benefits.
See 29 C.F.R. § 4041.42(b)(2) (prohibiting plan
administrators from " [p]aying benefits attributable to
employer contributions, other than death benefits, in any
form other than as an annuity," as of " the first
day [the administrator] issues a notice of intent to
terminate" ). It has also promulgated regulations that
prohibit administrators from allocating plan assets "
upon plan termination in a manner other than that prescribed
in" 29 U.S.C. § 1344, and that provide that "
a distribution . . . of assets . . . made in anticipation of
plan termination is considered to be an allocation of plan
assets upon termination." Id. § 4044.4(a),
(b). It has even promulgated regulations that bar the PBGC
itself from paying benefits as a lump sum, at least in most
circumstances. Id. § 4022.7(a). Finally, the
PBGC has adopted an internal policy under which it will not
pay out a request for a lump-sum payment made to a plan in
distress " even if [the request] was received
before the date of the Notice of Intent to
Terminate." Dkt. 24-1 at 125 (Administrative Record
(" A.R." ) 53 at 3) (" Policy 5.4-9" )
Facts and Proceedings
is a former executive of the Penn Traffic Company, a
corporation that operated a chain of supermarkets throughout
the Mid-Atlantic and New England. See Compl. ¶
7. Until it declared bankruptcy in 2003, Penn Traffic
operated a retirement plan known as the Penn Traffic Plan.
See Dkt. 24-1 at 3 (A.R. 2 at 2) (" Appeals
Board Decision" ); id. at 47 (A.R. 3, Ex. 9, at
1). In 2002, Penn Traffic adopted an amendment to the plan in
order to increase the benefits owed to Fisher under the plan.
Id. at 9 (Appeals Board Decision, Encl., at 1). The
amendment, known as the Second Amendment, provided Fisher
with an immediate credit to his retirement account " in
the amount of $318,449," as well as subsequent annual
credits of over $100,000. Id. at 10 (Appeals Board