Fisher v. Pension Benefit Guaranty Corp.

• Decision Date: 20 April 2021
• Docket Number: No. 20-7063,20-7063
• Citation: 994 F.3d 664
• Parties: Joseph V. FISHER, Appellant v. PENSION BENEFIT GUARANTY CORPORATION, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

994 F.3d 664

Joseph V. FISHER, Appellant

v.PENSION BENEFIT GUARANTY CORPORATION, Appellee

No. 20-7063

United States Court of Appeals, District of Columbia Circuit.

Argued February 5, 2021

Decided April 20, 2021

Alison S. Gaffney argued the cause for appellant. With her on the briefs were David S. Preminger, George M. Chuzi, and Lynn Lincoln Sarko.

Kenneth J. Cooper, Assistant General Counsel, Pension Benefit Guaranty Corporation, argued the cause for appellee. With him on the brief was Mark R. Snyder, Attorney.

Before: Rogers and Katsas, Circuit Judges, and Sentelle, Senior Circuit Judge.

Rogers, Circuit Judge:

This case concerns the Pension Benefit Guaranty Corporation's ("PBGC") 2016 denial of appellant's request for lumpsum payment of his pension benefits. After the district court vacated PBGC's 2011 denial of the same request, PBGC's 2016 remand decision featured a new rationale for denial based on 29 C.F.R. § 4044.4(b). Because PBGC's 2016 decision was a new agency action, the court reviews PBGC's rationale and now concludes that appellant's challenges to this rationale lack merit. Accordingly, we affirm the district court's grant of summary judgment to PBGC.

I.

A.

Among the "principal purposes" of the Employee Retirement Income Security Act of 1974 ("ERISA"), 88 Stat. 829, 29 U.S.C. § 1001 et seq ., "was to ensure that employees and their beneficiaries would not be deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans." PBGC v. R.A. Gray & Co. , 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984) (citing Nachman Corp. v. PBGC , 446 U.S. 359, 361–62, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980) ). "Toward this end, Title IV of ERISA, 29 U.S.C. § 1301 et seq ., created a plan termination insurance program, administered by the Pension Benefit Guaranty Corporation (PBGC), a wholly owned Government corporation within the Department of Labor, § 1302." Id . This plan guarantees a class of "nonforfeitable benefits," 29 U.S.C. § 1322(a), "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).

"If an employer wishes to terminate a plan whose assets are insufficient to pay all benefits, the employer must demonstrate that it is in financial ‘distress.’ " PBGC v. LTV Corp. , 496 U.S. 633, 639, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) ; see 29 U.S.C. § 1341(c). To terminate under a "distress termination," the employer must provide a "60-day advance notice of intent to terminate" ("NOIT") to all affected parties, including plan participants and PBGC. 29 U.S.C. § 1341(c)(1)(A). If PBGC determines that the plan lacks sufficient assets to satisfy its pension obligations, "PBGC becomes trustee of the plan, taking over the plan's assets and liabilities." LTV Corp. , 496 U.S. at 637, 110 S.Ct. 2668 ; see 29 U.S.C. § 1342(c). "As trustee, the PBGC administers the plan—i.e., determines who is entitled to benefits, see 29 U.S.C. § 1342(d), and acts as a fiduciary with respect to the plan, see id. §§ 1342(d)(3), 1002(21)." Davis , 734 F.3d at 1165.

ERISA requires plan administrators to allocate the plan's assets among participants pursuant to six categories, which establish a descending order of priority.

See 29 U.S.C. § 1344 ; Lewis v. PBGC , 912 F.3d 605, 607 (D.C. Cir. 2018). As relevant, administrators of plans entering distress termination must pay "benefits attributable to employer contributions ... only in the form of an annuity," 29 U.S.C. § 1341(c)(3)(D)(ii)(II), during the period "commencing on the date on which the plan administrator provides a notice of distress termination" to PBGC and ending on the date on which PBGC issues a notice determining the plan's eligibility for distress termination, id . § 1341(c)(3)(D)(i)(I). PBGC's regulation implementing 29 U.S.C. § 1344 further prohibits a "distribution, transfer, or allocation of assets to a participant" that contravenes the six-category priority scheme and is "made in anticipation of plan termination." 29 C.F.R. § 4044.4(b). To determine whether a distribution has been made "in anticipation of plan termination," the regulation states that PBGC "will consider all of the facts and circumstances including — (1) Any change in funding or operation procedures; (2) Past practice with regard to employee requests for forms of distributions; (3) Whether the distribution is consistent with plan provisions; and (4) Whether an annuity contract that provides for a cutback based on [specified] guarantee limits ... could have been purchased from an insurance company." Id .

B.

Appellant is a former executive of The Penn Traffic Company ("Penn Traffic") who earned a pension under The Penn Traffic Company Cash Balance Pension Plan ("the Plan"), which is subject to ERISA. In May 2003, Penn Traffic filed for bankruptcy. A few months later, in August 2003, appellant resigned and filed an application for retirement benefits pursuant to the Plan, electing to receive his benefits in the form of a single lumpsum payment. In September 2003, Penn Traffic's Board of Directors voted to terminate the Plan. In October 2003, the Plan's Administrative Committee informed appellant that, given the Plan's impeding termination, his request for lumpsum payment had been denied. PBGC received the Plan's formal NOIT in November 2003 and became the Plan's trustee in February 2005.

In December 2009, PBGC sent appellant a benefit determination letter, explaining its calculation of a monthly annuity benefit. The next month, appellant appealed PBGC's determination that his benefit was payable as a monthly annuity rather than a lumpsum. In September 2011, the PBGC Appeals Board denied appellant's appeal, primarily relying on Policy 5.4-9, Section D.1 of PBGC's Operating Policy Manual.

Appellant filed an action in federal district court challenging the 2011 decision. See 29 U.S.C. § 1303(f)(1). The district court held that the 2011 decision failed to adequately justify its denial of appellant's request for lumpsum payment. See Fisher v. PBGC , 151 F. Supp. 3d 159, 161 (D.D.C. 2016). It reasoned that the PBGC Appeals Board failed to consider whether the application of Policy 5.4-9 to appellant's request was consistent with the text of ERISA, and "wholly ignore[d]" whether and how 29 C.F.R. § 4044.4 might apply to appellant's request. Id . at 166–67. The district court therefore vacated the 2011 decision and remanded to PBGC for further proceedings. Id . at 168.

In July 2016, the PBGC Appeals Board again denied appellant's lumpsum request. This time its reasoning focused on 29 C.F.R. § 4044.4 rather than Policy 5.4-9. Specifically, it concluded that § 4044.4(b), which prohibits certain lumpsum distributions "in anticipation of plan termination," was "a valid exercise of PBGC's rulemaking authority" and applied to appellant's lumpsum request. PBGC Appeals Board, Remand 2016-0147, Joseph V. Fisher, Case No. 200185, at 3–4 (July 22, 2016) (hereinafter, 2016 Remand Decision). Although stating that "PBGC Policy 5.4-9 further supports the denial of [appellant's] lump-sum payment request," it did not follow the district court's remand instructions to explain how the application of Policy 5.4-9 to appellant's request was consistent with ERISA. Id . at 30.

In April 2019, appellant amended his complaint to seek judicial review of the 2016 Remand Decision. Concluding that the 2016 decision properly relied on 29 C.F.R. § 4044.4(b) to deny appellant's lumpsum request, the district court granted summary judgment to PBGC. See Fisher v. PBGC , 468 F. Supp. 3d 7, 28 (D.D.C. 2020). Appellant appeals, and our review is de novo . Allied Pilots Ass'n v. PBGC , 334 F.3d 93, 97 (D.C. Cir. 2003).

II.

As a threshold matter, appellant maintains that the court must disregard the 2016 Remand Decision's reasoning based on 29 C.F.R. § 4044.4(b). In his view, the district court erred in remanding to PBGC in the first instance, and even if remand was appropriate, the PBGC Appeals Board's 2016 decision was not a new agency action and therefore its reliance on § 4044.4(b), which the Appeals Board's 2011 decision did not mention, constitutes an impermissible post hoc rationalization. Neither contention has merit.

Ordinarily, "if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course ... is to remand to the agency for additional investigation or explanation." Fla. Power & Light Co. v. Lorion , 470 U.S. 729, 744, 105 S.Ct. 1598, 84 L.Ed.2d 643 (1985) ; see also LTV Corp. , 496 U.S. at 654, 110 S.Ct. 2668 ; SEC v. Chenery Corp. , 318 U.S. 80, 94–95, 63 S.Ct. 454, 87 L.Ed. 626 (1943). In rare circumstances, when "a remand would be futile on certain matters as only one disposition is possible as a matter of law," courts "retain and decide the issue." George Hyman Const. Co. v. Brooks , 963 F.2d 1532, 1539 (D.C. Cir. 1992). Here, the district court concluded that PBGC's application of Policy 5.4-9 to appellant's lumpsum request was "in at least some tension with" ERISA's text, while acknowledging that PBGC's interpretation of ERISA "may even be right." Fisher , 151 F. Supp. 3d at 167. Concluding that the PBGC Appeals Board's 2011 decision did not adequately explain how its application of Policy 5.4-9 was consistent with ERISA, the district court followed the "proper course" by remanding to PBGC. Fla. Power & Light Co. , 470 U.S. at 744, 105 S.Ct. 1598.

"[A] court may remand for the agency to do one of two things." Dep't of Homeland Sec. v. Regents of the Univ. of California , ––– U.S. ––––, 140 S. Ct. 1891, 1907, 207 L.Ed.2d 353 (2020). If the agency chooses to offer "a fuller explanation of the agency's reasoning at the time of the agency action ," it may not provide new reasons for that action. Id. at 1907–08 (quoting LTV Corp. , 496 U.S. at 654, 110 S.Ct. 2668 ). Alternatively, if the agency chooses...