D.C. Circuit: Pension Benefit Guaranty Corporation Has Discretion to Deny Pre-NOIT Lumpsum Distributions

Fisher v. Pension Benefit Guar. Corp., No. 20-7063, __F.3d__, 2021 WL 1538234 (D.C. Cir. Apr. 20, 2021) (Before Rogers and Katsas, Circuit Judges, and Sentelle, Senior Circuit Judge).

Appellant Joseph Fisher is a former executive of The Penn Traffic Company who had a pension under the company’s cash balance plan. The company filed for bankruptcy in May 2003, and he resigned and filed an application for a lumpsum payment of his retirement benefits in August 2003. The company’s Board of Directors voted to terminate the Plan in September 2003 and in October 2003 the Plan’s Administrative Committee told Appellant that given the Plan’s impending termination that it was denying his lumpsum payment request. Pension Benefit Guaranty Corporation (“PBGC”) received the Plan’s formal notice of intent to terminate (“NOIT”) request in November 2003 and became the Plan’s trustee in February 2005.

In December 2009, PBGC informed Appellant of his monthly annuity benefit and Appellant appealed that determination because he wanted a lumpsum. In September 2011, PBGC Appeals Board denied the appeal relying on Policy 5.4-9, Section D.1 of PBGC’s Operating Policy Manual. Appellant filed suit challenging the decision and the district court vacated the decision and remanded to PBGC to consider whether the application of Policy 5.4-9 to Appellant’s request was consistent with the text of ERISA, including whether and how 29 C.F.R. § 4044.4 might apply to Appellant’s request. In other words, the PBGC Appeals Board should “either rest on its 2011 decision while elaborating on its prior reasoning, or issue a new decision featuring additional reasons absent from its 2011 decision.”

In July 2016, the PBGC Appeals Board denied the lumpsum request and focused its reasoning on 29 C.F.R. § 4044.4. The district court concluded that this decision was a new agency action, properly relied on this regulation, and denied Appellant’s lumpsum request.

In affirming the district court’s decision, the court found that the PBGC Appeals Board’s 2016 decision was a new agency action even if it claimed to modify the 2011 decision by providing a revised and more complete explanation. The substance of the decision, which was styled as a “final agency action,” made it clear that it was a new agency action. Second, PBGC’s reliance on 29 C.F.R. § 4044.4(b) supported the denial of Appellant’s lumpsum request. The court applied Chevron’s two-step framework. First, did Congress directly speak to the precise question at issue? The court found that 29 U.S.C. §§ 1341(c)(3)(D)(i)–(ii) is silent with respect to pre-NOIT lumpsum distributions. Appellant argued § 1341(c)’s prohibition on post-NOIT lumpsum distributions reflects Congress’ unambiguous intent to preclude PBGC from denying pre-NOIT lumpsum distributions. The court explained that silence may signal permission rather than proscription, leaving the question open to agency discretion. Nothing in ERISA indicates Congress intended to limit PBGC’s authority to regulate pre-NOIT lumpsum distributions.

Second, is 29 C.F.R. § 4044.4(b) a “permissible construction” of ERISA? The court found that it is applicable to Appellant’s lumpsum request. PBGC did not act arbitrarily or capriciously in determining that the Plan’s termination was likely at the time of Appellant’s request and Appellant was in a different situation from other plan participants due to the substantial benefit increase he received under a Plan amendment that applied just to him. The court concluded that PBGC reasonably applied § 4044.4(b) and did not address whether Penn Traffic’s handling of his lumpsum request was inconsistent with the Plan’s terms.