Bd. of Trs. of the Bakery Drivers Local 550 & Indus. Pension Fund v. Pension Benefit Guar. Corp.
| Docket Number | 23-CV-1595 (JMA) (JMW) |
| Decision Date | 26 October 2023 |
| Parties | BOARD OF TRUSTEES OF THE BAKERY DRIVERS LOCAL 550 AND INDUSTRY PENSION FUND, Plaintiff, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Before the Court are competing motions for summary judgment by Plaintiff Board of Trustees of the Bakery Drivers Local 550 and Industry Pension Fund (the “Fund”) and Defendant Pension Benefit Guaranty Corporation (“PBGC”). The Fund moves for summary judgment and seeks a determination that PBGC's denial of its application for government-backed financial assistance was erroneous as a matter of law and seeks vacatur of that denial. PBGC cross-moves for summary judgment and asks the Court to affirm its decision to deny the Fund's financial assistance application. For the below reasons, PBGC's motion is GRANTED and the Fund's motion is DENIED.
In 1974, in response to concerns over the growth in size and the unregulated state of the employee benefit plan sector Congress passed the Employee Retirement Income Security Act of 1974 (“ERISA”), Pub. L. No. 93-406, 88 Stat. 829, 829 (). One of ERISA's “principal purposes” was to ensure that employees and their beneficiaries would not be deprived of anticipated retirement benefits.” Fisher v. Pension Benefit Guar. Corp., 468 F.Supp.3d 7, 14-16 (D.D.C. 2020), aff'd, 994 F.3d 664 (D.C. Cir. 2021) (internal quotations and citations omitted).
To accomplish this purpose, Title IV of ERISA created a plan termination insurance program, administered by the PBGC. Id.; see also 29 U.S.C. § 1301 et seq. That program protects plan participants “by guaranteeing a class of ‘nonforfeitable benefits,' [and by] reimbursing eligible participants or beneficiaries when a guaranteed plan terminates without sufficient funds.” Davis v. PBGC, 734 F.3d 1161, 1164 (D.C. Cir. 2013) (quoting 29 U.S.C. § 1322(a)). ERISA authorizes the PBGC to promulgate rules and regulations “as may be necessary to carry out the purposes of [Title IV of ERISA].” 29 U.S.C. § 1302(b)(3).
As relevant here, in the midst of the COVID-19 pandemic, Congress passed the American Rescue Plan Act of 2021 (“ARP”), which amended Title IV of ERISA to create a new “special financial assistance” (“SFA”) program, administered by PBGC, to give eligible multiemployer plans money projected to be sufficient to pay all benefits due through 2051. See 29 U.S.C. § 1432(a)(1). The Special Financial Assistance (“SFA”) program, like all provisions of Title IV, is administered by PBGC. Unlike PBGC's regular multiemployer insurance program, which is funded by insurance premiums, the SFA program is funded from general taxpayer monies. See 29 U.S.C. § 1305. Under the SFA program, PBGC “shall provide special financial assistance to an eligible multiemployer plan” that satisfies one of the four criteria found in Section 1432(b)(1):
See 29 U.S.C. § 1432(b)(1).
The parties do not dispute the central facts of this case. PBGC is the federal agency responsible for administering and enforcing Title IV of ERISA. (Defendant's Rule 56.1 Statement of Material Facts (“Def. 56.1”), ECF No. 27-2, ¶ 1.) The Fund is a multiemployer defined benefit pension plan that was established in 1955 under an Agreement and Declaration of Trust pursuant to collective bargaining agreements between the Bakery Drivers Union, Local #550 (the “Union”), and large bakeries in the Northeast who are members of the New York City Bakery Employers Labor Council and other employers who agree to participate individually or as groups. (See Plaintiff's Rule 56.1 Statement of Material Facts (“Pl. 56.1”), ECF No. 26-2, ¶¶ 1-2, 7.) The Fund has approximately 1,122 members, and its plan sponsor is the Board of Trustees of the Bakery Drivers Local 550 and Industry Pension Fund (the “Trustees”). (Id. ¶¶ 3, 6.)
In 2011, approximately 93% of the Fund's active covered employees were employed by Bimbo Bakeries USA, Inc. (“BBU”) and Hostess Brands, Inc. (“Hostess”), with Hostess employing 63% of the active participants. (Id. ¶ 8.) Hostess ceased making contributions to the Fund in 2011, did not pay any of its withdrawal liability, and subsequently filed for bankruptcy in 2012. (Id. ¶¶ 9-10.) In mid-2016, in order to extend the life of the Fund, the Trustees and PBGC created a multiemployer fund - the Teamsters Bakery Drivers and Industry Pension Fund (the “Teamsters Fund”) - which was managed by the Trustees. (Id. ¶¶ 11-13.) In November 2016, the Fund's two largest active employers - BBU and a trucking company named Grocery Haulers, Inc. (“GHI”) - withdrew from the Fund and triggered a mass withdrawal. (Id. ¶ 14.) BBU and GHI made withdrawal liability payments to the Fund of $5.49 million and $1.55 million, respectively, during the plan year that ended October 31, 2017. (Id. ¶ 15.) On November 15, 2016, as part of its withdrawal, BBU paid $19 million into the Teamsters Fund to cover the first five years of expected benefit payments. (Id. ¶ 16.) PBGC approved the transfer of certain liabilities from the Fund to the Teamsters Fund on or about December 1, 2016. (Id. ¶ 17.) The Trustees amended the Fund's Rules and Regulations consistent with the liabilities transfer effective December 6, 2016. (Id. ¶ 18.) On December 17, 2016, the 550 Fund transferred to the Teamsters Fund liabilities for: (1) all benefits associated with current/active employees of BBU, GHI, the Bakery Drivers Local 550 and Industry Health Benefit Fund, and the Union to the Teamsters Fund; and (2) Fund participants with one-half or more of their total service with one of the four employers or their predecessors. (Id. ¶ 19.) The liabilities for the 550 Fund remained with the Fund. The Fund officially terminated by mass withdrawal on December 17, 2016, and notified PBGC of the mass withdrawal on or about January 13, 2017. (Id. ¶¶ 20-21.)[1]
On or about August 25, 2022, and approved by the Trustees effective September 1, 2022, BBU and the Union agreed to amend the Collective Bargaining Agreement (the “CBA”) under which its Fund-participating employees operated (the “Amendment”). (Id. ¶¶ 22, 24.) The Amendment required all covered workers to commence participation in the Fund and required BBU to resume making benefit contributions to the Fund on behalf of each of its covered employees. (Id. ¶¶ 23, 25.)
On September 6, 2022, the Fund filed a certification of its “critical and declining” zone status[2] with the Internal Revenue Service pursuant to section 432 of the Internal Revenue Code, which provides additional funding rules for underfunded multiemployer plans. (Id. ¶ 29.) In response to projections from the Fund's October 31, 2020 valuation that it is only 10.4% funded, PBGC staff purportedly contacted the Fund's Administrator on or about February 15, 2023, to discuss the process for securing traditional financial assistance under section 4261 of ERISA, 29 U.S.C. § 1431.3 (Id. ¶¶ 30-31.)
The Fund filed its SFA application on or about September 27, 2022 (the “SFA Application”). (Def. 56.1 ¶ 2; Pl. 56.1 ¶ 34.) The Fund's SFA Application requested $132,250,472.00 in assistance. It appears that purpose of the Fund's attempted restoration in September 2022 was to allow it to apply for SFA assistance.[3]
In conjunction with the SFA Application, the Trustees submitted numerous documents, including “actuarial valuation reports, zone certifications, plan documents, actuarial and financial calculations[.]” (Pl. 56.1 ¶¶ 35-36.) In its SFA Application, the Fund stated in its application that it “terminated by mass withdrawal 12/17/2016” and that it “was restored 9/1/2022.” (Def. 56.1 ¶ 9.) The SFA Application also included a included a certification by the Fund's actuary stating that the Fund was, as of September 1, 2022, “in critical and declining status” and that, on that date, the Fund “became subject to [Internal Revenue Code] Section 432[4] as a result of a bargaining unit joining the Plan[,]” and was thus eligible for SFA under 29 U.S.C. § 1432(b)(1)(A). (Id. ¶¶ 6, 8.)
On or about January 20, 2023, PBGC denied the Fund's SFA Application, based on its contention that “ERISA contains no provision allowing a multiemployer plan that terminated by mass withdrawal under [Section 1341a] to be restored.” (Pl. 56.1 ¶ 38; Def. 56.1 ¶ 11.)
The Fund commenced this action on March 1, 2023, seeking “a preliminary injunction or stay of PBGC's denial of its application and PBGC's policy determination that once-terminated funds are automatically ineligible for SFA,” and an order setting aside PBGC's denial of its SFA Application and remanding the application to PBGC for additional review. (See ECF No. 1, ¶¶ 7, 81, 87.) In lieu of the Fund formally moving for a preliminary injunction, the...
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