Deppenbrook ex rel. All Rti Beaver Falls Emps. 9305-04 v. Pension Benefit Guaranty Corp.

• Decision Date: 20 February 2015
• Docket Number: No. 13–5254.,13–5254.
• Citation: 778 F.3d 166
• Parties: Paul DEPPENBROOK, on behalf of all RTI Beaver Falls Employees 9305–04, Appellant v. PENSION BENEFIT GUARANTY CORPORATION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

778 F.3d 166

Paul DEPPENBROOK, on behalf of all RTI Beaver Falls Employees 9305–04, Appellant

v.PENSION BENEFIT GUARANTY CORPORATION, Appellee.

No. 13–5254.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 18, 2014.

Decided Feb. 20, 2015.

Appeal from the United States District Court for the District of Columbia, (No. 1:11–cv–00600).

Paul Deppenbrook, pro se, argued the cause and filed briefs for the appellant.

Nathaniel Rayle, Attorney, Pension Benefit Guaranty Corporation, argued the cause for the appellee. Judith Starr, General Counsel, Israel Goldowitz, Chief Counsel, Karen L. Morris, Deputy Chief Counsel and Kartar Khalsa, Assistant Chief Counsel were with him on brief.

Before: HENDERSON, GRIFFITH and SRINIVASAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LeCRAFT HENDERSON, Circuit Judge:

Paul Deppenbrook worked for Republic Technologies International, LLC (RTI), a steel company that filed for bankruptcy in 2001. Once bankruptcy proceedings began, the Pension Benefit Guaranty Corporation (PBGC) terminated the pension plans administered by RTI. After many rounds of litigation, the PBGC eventually determined the amounts due former RTI employees under the pension plans and disbursed them. Deppenbrook believes the PBGC miscalculated his benefits. His claim, however, was rejected in his administrative appeal. He then sued the PBGC in district court, raising claims under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq., and seeking to correct the PBGC's benefit determinations. The district court granted summary judgment to the PBGC. We affirm.¹

I. BACKGROUND

A. Statutes

The PBGC is a federal corporation charged with “administer[ing] and enforc [ing] the plan termination insurance provisions” of ERISA. PBGC v. Fed. Labor Relations Auth., 967 F.2d 658, 660 n. 1 (D.C.Cir.1992). It is governed by a board of directors composed of the Secretaries of Labor, Commerce and the Treasury. 29 U.S.C. § 1302(d)(1). One of its goals is “to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries under plans” covered by ERISA. Id. § 1302(a)(2). In order to protect the financial viability of its fund, the PBGC is allowed to terminate a pension plan under certain conditions. See id. § 1342(a). As relevant here, the PBGC may terminate a plan when “the possible long-run loss of the [PBGC] with respect to the plan may reasonably be expected to increase unreasonably if the plan is not terminated.” Id. § 1342(a)(4). Once the PBGC terminates a pension plan, it “typically becomes trustee of the plan, takes over the assets and liabilities of the plan, and pays benefits to plan participants.” PBGC v. Republic Tech. Int'l, LLC ( RTI ), 386 F.3d 659, 661 (6th Cir.2004).

In order to appropriately distribute benefits under a plan, the PBGC and the plan administrator ² must agree on the date of plan termination. Determining the date can turn contentious. A plan's termination date “is significant” to plan participants “because it marks the date on which [their] benefits ... cease to accrue.” RTI, 386 F.3d at 662. It is also important to the PBGC because “the date of termination can significantly affect the extent of PBGC's recovery from the employer,” an especially sensitive consideration if “bankrupt corporations with deteriorating financial resources” are involved. Id. If these competing interests prevent agreement on a plan termination date, “the termination date of a single-employer plan is ... the date established by the court.” 29 U.S.C. § 1348(a)(4).

The PBGC cannot administer certain types of pension plans. “In enacting ERISA, Congress distinguished between two types of employee retirement benefit plans: ‘defined benefit plans' and ‘defined contribution plans,’ also known as ‘individual account plans.’ ” Connolly v. PBGC, 475 U.S. 211, 229, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) (O'Connor, J., concurring) (citing 29 U.S.C. §§ 1002(34), (35)) (internal alterations omitted). ERISA's pension insurance program “applies to defined benefit plans but not to defined contribution plans.” Id. at 229–30, 106 S.Ct. 1018 (citing 29 U.S.C. § 1321(b)(1)). The Congress made the distinction because an individual account plan “does not specify benefits to be paid, but instead establishes an individual account for each participant to which employer contributions are made.” Id. at 230, 106 S.Ct. 1018 (citing 29 U.S.C. § 1002(34)); see also Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999) (noting there can never be insufficient funds in individual account plan “since each beneficiary is entitled to whatever assets are dedicated to his individual account”).

Moreover, not every pension benefit included in a defined benefit plan is insured through ERISA.³See PBGC v. LTV Corp., 496 U.S. 633, 637–38, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) (“ERISA ... limits ... benefits PBGC may guarantee upon plan termination, ... even if an employee is entitled to greater benefits under the terms of the plan.”). The PBGC is obligated to insure only “the payment of all nonforfeitable benefits” a plan participant is due.⁴29 U.S.C. § 1322(a). The Congress defines “nonforfeitable” to include “a claim obtained by a participant ... 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.” Id. § 1002(19). The PBGC guarantees only those benefits that are nonforfeitable as of the plan termination date. See LTV Corp., 496 U.S. at 637–38, 110 S.Ct. 2668 (PBGC insures only “those benefits to which participants have earned entitlement under the plan terms as of the date of termination”); see also29 C.F.R. § 4022.3(a)(1) (PBGC guarantees benefit, subject to minimal exceptions, that “is, on the termination date, a nonforfeitable benefit” (emphasis added)); id.§ 4022.4(a)(3) (same).

B. Facts

When Deppenbrook's employer filed for bankruptcy, the PBGC stepped in to terminate the employees' pension plan. RTI, 386 F.3d at 663–64. The PBGC, however, was concerned about the plan termination date. Id. at 664–65. At the heart of the dispute was the availability of “shutdown benefits.” Id. at 662–63. Shutdown benefits are “enhanced early retirement benefits for certain workers who are affected by a facility shutdown or business cessation.” Id. Employees who meet “certain age and service requirements” can begin receiving shutdown benefits “after a plant shutdown, rather than having to wait while out of work to reach a specific retirement age.” Id. at 663. Under the RTI plan, shutdown benefits were triggered by, inter alia, a “break in continuous service,” which the plan defined as “[t]ermination ... due to permanent shutdown of a plant, department or subdivision thereof.” JA 363. RTI had given notice to its employees in May 2002 that it planned to permanently shut down its plant in Beaver Falls, Pennsylvania, sometime in July or August. Thus, if the plant shutdown happened while the RTI plan was still in effect, the terminated employees would satisfy the plan's “break in continuous service” requirement and would be eligible to receive shutdown benefits. But if the pension plan terminated before the plant shutdown, the PBGC would not be obligated to guarantee those benefits.

The PBGC selected June 14, 2002, as the plan termination date in order to avoid paying shutdown benefits to former RTI employees. Id. at 664–65. The PBGC was concerned because “shutdown benefits [would] potentially increase [ ] the amount of unfunded liabilities for the plans by almost $96 million.” Id. at 664. The district court in RTI, however, rejected the PBGC's proposed date, concluding that “the plan participants continued to have strong reliance interests in the receipt of shutdown benefits” even after the PBGC notified the participants of their plan's termination. Id. at 665. The district court ultimately set the plan termination date as August 17, 2002—one day after RTI sold its assets to another firm—obligating the PBGC to pay shutdown benefits. Id.

The Sixth Circuit reversed. It held that “[a]fter the employees received notice that PBGC intended to terminate the pension plans ..., the participants no longer had a justifiable expectation in the accrual of vested pension rights,” including shutdown benefits. Id. at 666–67 (internal quotation marks omitted). Moreover, the employees' reliance interest in shutdown benefits was not as “strong” as the district court had concluded because shutdown benefits were “contingent on bankruptcy court approval, and that approval was not given until ... one month after PBGC issued the notices of termination.” Id. at 667 (emphasis in original). The Sixth Circuit also chastised the district court for not giving “appropriate deference to PBGC's conclusion” and reset the plan termination date as June 14, 2002.⁵Id. at 667–68.

The PBGC and RTI entered into a settlement agreement that outlined how the RTI employees' pension-plan accounts were to be administered. While the PBGC administered the defined benefit portion of the plan, the settlement agreement specified that the parties were to hire a third-party accounts administrator to handle the funds in the individual accounts. The agreement provided that the accounts administrator was to terminate the individual accounts and allow employees to receive the funds using one of the options provided under the pension plan. Employees could not, however, decline the distribution. The PBGC also reduced the monthly benefits payable under the defined benefit portion of the plan for employees based on the amounts distributed from the separate individual accounts.

With the settlement agreement in place, the PBGC calculated the monthly benefits owed to each employee. Deppenbrook believed his benefit calculations were in error and sought...