"v~ PBGe P" ... etingAmeric.'.Penaions 

I ERISA § 4062(e) (which we will refer to as "section 4062(e)") is p~blished at 29 United States Code ("U.S.C.") 

§ 1362(e). In this decision, we will cite only to ERlSA, without the parallel citations to the U.S.C. 

Pension Benefit Guaranty Corporation 

1200 K Street, N.W., Washington, D.C. 20005-4026 

August 8,2011

Re: Appeal 2010-D I I Plan Name: Bendix Commercial 

Vehicle Systems LLC Pension Plan for Hourly Employees ("Bendix Plan" or 

"Plan") 

DearMr.[~: 

The Appeals Board has reviewed your appeal, on behalf of your client Bendix 

Commercial Vehicle Systems LLC ("Bendix"), of JPBGC's January 29, 2010' initial 

detennination. PBGC's initial determination stated that Bendix has incurred liability in the 

amount of $16,947,933.00 under section 4062(e/ of the Employee Retirement Income Security 

Act ("ERISA") with respect to the Bendix Plan. 'For the reasons explained in this decision, we 

made the following three rulings that are favorable to your dient: 

• As you advocated in your appeal, we decided that January 1, 2008 is the correct date for 

valuing Bendix's liability under section 4062( e), rather than the December 31, 2007 date 

that PBGC used; 

• We granted your request to have Bendix's liability calculated using the information in the 

Bendix Plan's January I, 2008 actuarial valuation report ("2008 A VR") and using the 

Bendix Plan's 2008 Form 5500 Schedule SB filing with the IRS ("2008 Schedule SBIf); 

and 

• Using the January 1, 2008 valuation date, the 2008 A YR, and the 2008 Schedule SB, we 

recalculated Bendix's liability under section 4062(e) as $16,637,695.00, which is a 

reduction of $310,238.00 from the amount PBGC had determined. 

In aU other respects, your appeal is denied for the reasons explained in this decision. This 

decision is PBGC's final Agency action with respect to your appeal of PBGGs January 29, 20 I 0 

determination. 
Introduction 

Section 4062( e) provides financial protection to pension plans, their participants, and 

PBGC. The section 4062(e) liability rules are triggered when "an employer ceases operations at 

a facility in any location and, as a result of cessation of operations, more than 20 percent of the 

total number of his employees who are participants under a plan established and maintained by 

him are separated from employment. ,,2 

ERISA section 4063 provides that an employer may satisfy section 4062( e) liability by 

placing the amount owed in escrow with PBGC. Alternatively, PBGC may require a bond for 

up to 150 percent of the section 4062( e) liability. 4 If the pension plan remains underfunded and 

terminates within five years of the section 4062(e) event, the escrowed amount is forfeited, or 

PBGC will "realize on the bond."s The proceeds held in escrow (or covered under the bond) 

then become assets of the terminated pension plan.6 If the plan does not terminate within the 

five-year-~eriod, the escrow will be refunded to the employer, without interest, or the bond is 

cancelled. 

On December 31, 2007, Bendix ceased operations at its Frankfort, Kentucky 

manufacturing facility (the "Frankfort facility"). The Frankfort facility's closure meets the 

criteria of a section 4062( e) event in that more than 20% of the employees who were participants 

under the Bendix Plan were separated from employment with Bendix. Bendix is the Plan's 

contributing sponsor. 8 PBGC applied the formula in PBGC's section 4062( e) regulation9 and 

calculated Bendix's section 4062(e) liability as $16,947,933.00. 

The issues raised in your 35-page appeal brief have not previously been addressed by the 

Board. We have carefully reviewed the issues you have raised, and we provide a detailed 

explanation of our rulings in this decision. 

2 PBGC uses the term "section 4062(e) event" when it refers to the conditions under which section 4062(e) liability 

is incurred. See 29 C.F.R. § 4062.8(b) (example of "section 4062(e) event"). In this decision, we similarly use the 

term "section 4062(e) event" to refer to the conditions under which section 4062(e) liability is incurred. 

3 ERISA § 4063(b). 

4 ERISA § 4063( c). 

5 ERISA § 4063(c)(3). 

6 ld. 

7 ERISA § 4063( c )(2). 

8 The term "contributing sponsor" is defined in ERISA § 4001(a)(13). 

9 29 C.F.R. § 4062.8. 

2 
PBGC's Detcrminati(J11 

PBGC's January 29, 2010 determination notified Bendix that the company had incurred 

liability under section 4062(e) in the amount of$16,947,933.00 for the following reasons: 

• In the company's ERISA section 4043 filing, Bendix had notified PBGC that more than 

20 percent of the number of active participants in the Bendix Plan had been separated 

from employment. PBGC confirmed that the participant reduction was the result of the 

closure of the Frankfort facility and that 100 Fen::ent of the active participants in the 

Bendix Plan were separated from employment; I 

• The "cessation of operations" with respect to the Frankfort facility occurred on December 

31,2007; 

• As of the December 31, 2007 cessation-of-operations date, the Bendix Plan's "unfunded 

benefit liabilities" ("UBLs") - which is an actuarial measure, defined in ERISA, of a 

pension plan's underfunding 11_ were $16,947,933.00; and 

• Based on the Bendix Plan's UBLs on December 31, 2007 and the 100% cessation of 

operations with respect to the Bendix Plan's active participants, Bendix is liable to PBGC 

for $16,947,933.00 pursuant to ERISA sections 4062(e) and 4063 and PBGC's regulation 

at 29 C.F.R. § 4062.8. 

PBGC's January 29, 2010 determination further states that Bendix must satisfy its 

liability under ERISA sections 4062(e) and 4063 by placing that amount in escrow with PBGC, 

or, alternatively, by posting a bond for up to 150 percent of the 4062(e) liability. PBGC also 

informed Bendix that, in appropriate cases, PBGC has the authority to consider alternative 

arrangements for satisfying the 4062(e) liability. 

Finally, PBOCts January 29, 2010 determination notified Bendix that: (I) the 

determination is subject to appeal under PBGC Regulations at 29 C.F.R. § 4003, Subpart D: 

Administrative Appeals; and (2) in the absence of a timely appeal, PBGC's determination will 

become final upon the expiration of the 45-day appeal period. Since Bendix filed a timely 

appeal, PBGC has taken no further action with respect to Bendix's liability under section 4062(e) 

while this appeal has been pending. 

10 PBGC's determination states that "the Cessation of Operations meets the criteria under section 4062(e) of 

ERlSA, 29 U.S.C. § 1 362(e), and accordingly, the provisions of sections 4063, 4064, and 4065 of ERlSA apply and 

subject Bendix to liability." 

II As PBGC's determination indicates: (I) the term lIunfunded benefit liabilities" is defined in ERISA section 

4001(a)(18); and (2) UBLs also are addressed in ERlSA section 4062(b), which imposes liability upon a pension 

plan sponsor and members of its controlled group in the event that ~.n underfunded single-employer pension plan 

tenninates. 

3 
Your Appeal 

On June 30, 2010, you filed a 35-page appeal brief ("Appeal Brief' or "AB") that 

requests the Appeals Board to either: (1) reverse PBGC's January 10, 2010 determination and 

issue a final order that Bendix has no liability under section 4062(e); or (2) remand the matter to 

the PBGC department that issued the initial. detennination, with instructions to issue a revised 

detennination that "complies with ... applicable statutory and regulatory requirements." AB at 

1. 

Your June 30, 2010 appeal lists three general topics, under which you raise several morespecific issues. Also, after you received several documents pursuant to Freedom of Infonnation 

Act ("FOIA") requests, you filed a supplement to your appeal on March 4, 2011. The 

supplement elaborates on some of the issues raised in your June 30,2010 appeal. 

We list below the three general topics in your appeal. Additionally, under the third 

general topic we list five more-specific issues that you have raised. 

A: Was the Bendix Plan "established and maintaine(.(" by Bendix within the meaning of 

section 4062(e)? (AB at 11-18) 

B: Is the liability formula in PBGC's regulation, in gem?ral or as applied to Bendix, contrary 

to law? (AB at 18-27) 

C: Did PBGC err in calculating the amount of Bendix'J section 4062(e) liability? (AB at 27-

34) 

Issue #1: Did PBGC use the correct valuation date in calculating Bendix's section 

4062(e) liability? (AB at 27-28) 

Issue #2: Should PBGC be required to use the PBGC Actuarial Technical Manual 

procedures that apply to calculating UBLs for tenninated pension plans? 

(AB at 28-29) 

Issue #3: Should PBGC have used the Bendix Plan's January 1, 2008 Actuarial 

Valuation Report and its 2008 Fonn 5500 Schedule SB in calculating the 

Bendix Plan's UBLs? (AB at 29-30) 

Issue #4: Are PBGC's 4062(e) liability calculatiens flawed because PBGC used a "rol1-

forward" methodology for some purposes but actual data for other purposes? 

(AB at 30-31) 

Issue #5: Should PBGC, in calculating Bendix's section 4062(e) liability, have 

deducted the value of the contingent claim under ERISA section 4062(<:) for 

the shortfall amortization "charge" and "installments"? (AB at 31-34) 

4 
Background 

1. Corporate and pension plan history. 

Bendix develops and supplies safety technologies, air brake charging, and control 

systems and components under the Bendix brand name for medium and heavy duty trucks, 

tractors, trailers, buses, and other commercial vehicles throughout North America. In 1993, 

AlliedSignal Inc. ("AlliedSignal") and the Knorr Brake Truck Systems Company ("Knorr") 

formed a joint venture through their subsidiaries called tr.e AlliedSignal Truck Brake Systems 

Company (the "JV"). AlliedSignal owned a 65%1 ownership stake in the N, which it received in 

exchange for certain business assets. Knorr owned the remaining 35% of the JV, which it 

received in exchange for $124,000,000 in cash. Later, following certain corporate transactions, 

the JV changed its name to "Bendix Commercial Vehicle Systems LCC." 12 

On or near November I, 1993, the JV established the Bendix Plan. 13 The Bendix Plan 

covers collectively-bargained participants (and their beneficiaries) who had worked at Bendix's 

Frankfort, Kentucky plant. Between the end of 1998 and 2007, the Frankfort facility was the 

only Bendix facility that employed active Bendix Plan partIcipants. The Bendix Plan also covers 

retirees who earlier had worked at facilities in Salisbury, North Carolina; Charlotte, North 

Carolina; Elyria, Ohio; Oklahoma City, Oklahoma; Reno, Nevada; and Huntington, Indiana. 

2. The cessation o(operations at Bendix's Franklort facility. 

Bendix ceased operations at the Frankfort facility on December 31, 2007, when it 

terminated the employment of fifty-nine collectively-bargamed employees, all of whom had been 

active participants in the Bendix Plan. 14 As of January 1, 2008, four active Bendix Plan 

participants remained to assist Bendix with final shutdown tasks; these participants were 

terminated from employment on January 31, 2008. 

Bendix's Frankfort facility had produced air compressors and air disc brakes for 

commercial vehicles. The company attributed its decision to close the facility to its need to 

reduce costs and to its business strategy of aligning facto:ries and product lines. Following the 

Frankfort facility closure: (1) Bendix shifted production of its air compressors from Frankfort to 

12 In 1999, following AlliedSignal's merger with Honeywell International, the IV was renamed the Honeywell 

Commercial Vehicle Systems, The association with Honeywell was short-lived, however, because on March 28, 

2002, it was announced that Honeywell had divested its interest in the lV to KnOIT. From that point forward, the JV 

was known as "Bendix Commercial Vehicle Systems LCC." 

13 See Preamble to the Bendix Commercial Vehicle Systems LLC Pension Plan for Hourly Employees Amended 

and Restated as of January I, 1997 ("1997 Bendix Plan Restatement"), which states that the Bendix Plan was 

established effective November 1, 1993. We provide a copy of the Jreamble as Enclosure 1. In 1993, when the 

Bendix Plan was established, it was known as the "AlIiedSignal Truck Brake Systems Company Pension Plan for 

Hourly Employees." 

14 On January 30, 2008, Bendix filed a Post-Event Notice of Rerortable Event (PBGC Fonn 10) with PBGC 

regarding the cessation of operations at the Frankfort location on December 31,2007. This notice infonned PBGC 

that the number of active participants in the Bendix Plan decreased from 63 to 4. 

5 
an existing Bendix facility in Acuna, Mexico that also manufactures other components used 

within a vehicle's air charging system; and (2) Bendix's air disc brake production was transferred 

to a new dedicated foundation brake manufacturing facility for Bendix Spicer Foundation Brake 

LLC (a wheel-end joint venture between Bendix and Dana Corporation) located in Bowling 

Green, Kentucky. 

3. Relevant statutory provisions. 

a. The statutory language in section 4062(e) 

Section 4062(e), which applies to single-employer plans covered by Title IV of ERISA, 

states; 

(e) Treatment of substantial cessation of operations.-If an employer ceases 

operations at a facility in any location and, as a result of such cessation of operations, 

more than 20 percent of the total number of his employees who are participants under a 

plan established and maintained by him are separated from employment, the employer 

shall be treated with respect to that plan as if he were a mbstantial employer under a plan 

under which more than one employer makes contributions and the provisions of sections 

[4063,4064, and 4065 of ERISA] shall apply. 

b. Additional requirements in ERISA section 4.063 

Section 4062(e) provides that, if an event triggering liability occurs, the employer "shall 

be treated with respect to that plan as if he were a substanti al employer under a plan under which 

more than one employer makes contributions and the provisions of sections [4063, 4064, and 

4065 of ERISA] shall apply.'r1S While (as discussed belo'.\!) the requirements in ERISA section 

4063 are important with respect to your appeal, ERISA sections 4064 and 4065 do not appear to 

. h . h· d Impact upon t e Issues you ave ralse . 16 

15 Under section 400 I (a)(2) of ERISA, "substantial employer," for any plan year of a single-employer plan, means 

one or more persons·-

(A) who are contributing sponsors of the plan in such plan year, 

(B) who, at any time during such plan year, are members of tr,e same 

controlled group, and 

(C) whose required contributions to the plan for each plan year 

constituting one of--

(i) the two immediately preceding plan years, or 

(ii) the first two of the three immediately preceding plan years, 

total an amount greater than or equal to 10 percent of all contributions 

required to be paid to or under the plan for such plan year. 

16 ERISA section 4064 applies to the termination of a single-employer pension plan that has, or had, two or more 

sponsors that are not members of the same controlled group. ERISA section 4065 requires PBGC-covered, single· 

employer plans to file annual reports with PBGC. 

6 
ERISA section 4063 applies to single-employer plans that have two or more contributing 

sponsors, at least two of whom are not under common control (i.e., multiple employer plans). 

Liability under section 4063 is triggered when a "substantial employer" withdraws from a 

multiple employer plan. As PBGC stated in its preamble to its section 4062(e) regulation, the 

cessation of operations at a facility (as defined in secti.;)n 4062(e») is "analogous," but not 

"equivalent," to a withdrawal from a multiple employer plan. 17 

Section 4063 contains the following provisions thac apply to a section 4062(e) event (as 

well as to a withdrawal from a multiple employer plan); 

• The employer is required to notify PBGC of the event within 60 days. PBGC shall, as 

soon as 'practicable" thereafter, determine the amount of the liability and notify liable 

persons; I and 

• Any amount collected by PBGC shall be held in escrow.

19 In the alternative, the 

employer may be required to furnish a bond to PBGC in an amount not exceeding 150 

percent of the liability?O 

ERISA section 4063(b) further provides that, "[i]n addition to and in lieu of" the manner 

of computing the liability prescribed in that provision, PBCiC "may also determine such liability 

on any other equitable basis prescribed by the [PBGCl in regulations." 

c. The duration and end of section 4062( e) liab~lity 

ERISA section 4063(c)(2) provides that, if the plan does not terminate within five years, 

"the liability is abated and any payment held in escrow shall be refunded without interest (or the 

bond cancelled) in accordance with bylaws or rules prescribed by the corporation." 

ERISA section 4063(c)(3) provides that the following shall occur in the event of pension 

plan termination within the five-year-period: 

If the plan tenninates under [ERlSA] section 4041 (c) or 4042 within the 5-year period 

... , [PBGC] shall-

(A) demand payment or realize on the bond and hold such amount in escrow for the 

benefit of the plan; 

(B) treat any escrowed payments under this section as if they were plan assets and apply 

them in a manner consistent with this subtitle; and 

(C) refund any amount to the contributing sponsor which is not required to meet any 

obligation of[PBGC] with respect to the plan. 

17 71 Fed. Reg. 34,819,34,821 (June 16,2006). 

18 ERISA § 4063(a). 

19 Jd 

20 ERISA § 4063(c). 

7 
d. Alternative arrangements for _sati$fying secti9n 4062(e) liability 

ERISA section 4067 authorizes PBGe to make "alternative arrangements" with any 

contributing sponsors or members of their controlled group for satisfaction of section 4062(e) 

liability. As authorized by this provision, PBGe has taken a flexible enforcement approach as to 

how a plan sponsor satisfies its section 4062(e) liability, evaluating each case based on its facts 

and circumstances. For example, PBGe and employers often agree on "alternative 

arrangements" for section 4062(e) liability under which additional funding contributions are 

made to pension plans. 

4. Uncontested matters and matters in dispute. 

With regard to section 4062(e) liability, your appeal does not dispute that: (I) the closure 

of the Frankfort facility, which occurred on December 31, 2007, is an event that met the criteria 

in section 4062(e); (2) Bendix was the employer of the Frankfort facility's employees; (3) the 

Frankfort employees are Bendix Plan participants; and (4) at the time of the closure and 

afterwards, Bendix maintained the Bendix Plan. You also do not dispute PBGe's finding that 63 

employees were separated from employment as a result of the December 31, 2007 cessation of 

operations, and that the 63 employees comprised all of the active participants in the Bendix Plan 

just prior to the cessation-of-operations date. 

You claim, however, that Bendix is not the employer who "established" the Bendix Plan, 

and, therefore, it did not incur liability under section 4062(e). You further challenge the validity 

and reasonableness of PBGe's section 4062(e) regulation. Finally, you dispute PBGe's 

calculation of the amount of Bendix's section 4062(2) :.iability. We address each of these 

contentions in the sections that follow. 

Discussion 

The "Discussion" section of this decision contains three parts. In Part I, we respond to 

the issues raised in your appeal. [n Part II, we present the Appeals Board's revised detennination 

of the amount of Bendix's section 4062(e) liability. In Part III, we respond to certain other 

requests made in your appeal. 

I. OUR RESPONSE TO ISSUES RAISED IN THE AI'PEAL 

A. Was the Bendix Plan "established and maintained" by Bendix within the 

meaning of ERISA section 4062(e)? 

Liability under ERISA section 4062(e) is incurred "[i]f an employer ceases operations at 

a facility in any location, and as a result of such cessation of operations, more than 20 percent of 

the total number of his employees who are participants under a plan established and maintained 

by him are separated trom employment" (emphasis added). 

You assert that Bendix is not liable under section 4062(e) because it was not the 

employer who "established" the Bendix Plan. AB at 11. In making this argument, you do not 

dispute that the Bendix Plan carne into existence when it was adopted by the "newly-formed" JV 

8 
in 1993. AB at 12. You also do not dispute that the JV subsequently became Bendix. Rather, 

your contention is: (1) the Bendix Plan is the "succes::;or" to a prior plan that had been 

established by a different employer (Allied Corporation); and (2) under the "successor plan" 

definition in ERISA section 4021 (a), Allied Corporation (rather than Bendix) should be treated 

as the employer who established the Bendix Plan. AB at 12 -13. . 

For the reasons discussed below, we have denied your appeal on the "established and 

maintained" issue. We decided that, even if the Bendix Plan is the successor to an Allied 

Corporation pension plan, this does not mean that the two pension plans - which were 

established by two separate companies - should be treated as a single legal entity. Accordingly, 

we decided that Bendix is the employer who both had "established" and "maintained" the Bendix 

Plan, notwithstanding that Allied Corporation had established what may be a predecessor plan. 

Factual background. Before we respond further to your claims regarding this issue, we first 

provide additional factual information concerning the relationship between the Bendix Plan and 

the prior plan established by Allied Corporation. 

As previously stated, a joint venture named the "AlIiedSignal Truck Brake Systems 

Company" ("the JV") established the Bendix Plan on or near November I) 1993.21 The JV later 

became Bendix. The preamble to the 1997 Bendix Plan Restatement clearly states that Bendix 

established the Plan: 

Bendix Commercial Vehicle Systems LLC (£lkla AlliedSignal Truck 

Brake Systems Company) (the "Company") estabiished the Allied Signal Truck 

Brake Systems Company Pension Plan for Hourly Employees (the "Plan"), 

effective as of November 1, 1993. Effective January 10, 2002, the Company 

changed its name to Bendix Commercial Vehicle Systems LLC. The Plan is 

hereby amended and restated in its entirety, effective January 1, 1997, and the 

name of the Plan is changed to Bendix Commercial Vehicle Systems LLC 

Pension Plan for Hourly Employees, effective January 10, 2002. (Emphasis 

added). 

As you indicate in your appeal, AlliedSignal and Knorr formed the ]V in 1993 through a 

Contribution Agreement, Joint Venture Agreement, and related agreements (collectively, the 

"Joint Venture Agreements,,).22 The Contribution Agreement provided: (1) former AlliedSignal 

employees who became the IV's employees will continue to receive the same level of benefits as 

was provided under the AlliedSignal Inc. Pension Plan for Hourly Employees (the "AS Plan" or 

21 The actual date of establishment is somewhat unclear. Section 13.6(A)(l) of the Contribution Agreement 

executed by AlliedSignal and Knorr, through their respective subsidiaries, states that the IV "shall have established 

effective as of the Closing Date a tax-qualified defined benefit pemion plan or plans which shall discharge the 

pension obligations of the partnership .... " Section 5 of the Contribu1 ion Agreement defines the "Closing Date" as 

"[t]he date on which the Closing actually occurs[,]" which was "the end of business on October 16, 1993, unless 

otherwise agreed to by the parties." As discussed above, however, tht: preamble to the 1997 Bendix Plan document 

states that Bendix established the Bendix Plan on November I, 1993. 

22 You provided a copy of the Contribution Agreement as Exhibit 4A to your appeal and a copy of the Partnership 

Agreement as Exhibit 48. 

9 
"Prior Plan"), and (2) the benefits under the new lV Plan will be "substantially equivalent to the 

Benefit Plans in effect as of the Closing Date[.]"23 

1be AS Plan previously had been established by the Allied Corporation. AlliedSignal 

became the sponsor and administrator of the AS Plan in 1987, after the Allied Corporation 

merged with the Signal Companies. 

As of the Bendix Plan's effective date, certain eligible employees and former employees 

who were participants in the AS Plan became participants in the Bendix Plan, including the 

collectively-bargained employees who worked at the Frankfort facility. Also, the Contribution 

Agreement provided for the transfer of AS Plan assets to the Bendix Plan to fund the benefit 

liabilities for the transferred participants.24 

Your appeal. You assert that, under the "plain statutory language" of section 4062(e), an 

employer "who maintains, but did not establish" the plan that experienced the cessation of 

operations cannot be liable under that provision. You accordingly contend that, if Bendix is not 

the employer who "established" the Bendix Plan, then Bendix cannot be held liable under section 

4062( e) with respect to the Bendix Plan. AB at I I. 

Your appeal asserts that, although the Bendix Plan was adopted in 1993 by the "newlyformed" JV, for Title IV purposes it should be "deemed to have been established ... when the 

relevant predecessor plan was established." AB at 12. In making this claim, you refer to the 

language in ERISA section 4021 (a) that a succeSSor plan is "considered to be a continuation of a 

predecessor plan" for purposes of Title IV of ERISA. AB at 12. You assert that this language 

means, for purposes of section 4062(e), that the determination of "when and by whom" a 

successor plan was "established" must be based "on when and by whom the predecessor plan 

was established." AB at 12. 

You further claim that the relevant predecessor plan for purposes of this appeal is the AS 

Plan. AB at 12. You assert that the Bendix Plan is a "successor plan" to the AS Plan within the 

meaning of ERISA section 4021(a) because it "covers a group of employees which includes 

substantially the same employees and provides substantia.lly the same benefits as a previously 

established plan, the AlliedSignal Plan." AB at 12. Based on this alleged successor plan 

relationship, you contend that Allied Corporation, who established the AS Plan, should be treated 

as the employer who established the Bendix Plan, rather than Bendix. 

23 See Contribution Agreement §§ 13.3, 13.6(A), which provide that the transfer of pension plan assets and 

liabilities would be accomplished in accordance with Internal Revenue Code sections 414(1) and 401(a)(12). In 

addition, the Contribution Agreement required the N to "grant. .. under any successor employee benefit plans, to all 

Employees all service with AlliedSignal credited to them and to be credited to them in respect of the Benefit Plans, 

including, without limitation, all such service credited to them for purposes of eligibility, vesting and benefit accrual 

under ... the Allied-Signal Inc. Pension Plan for Hourly Employees .... " Contribution Agreement § 13.3. 

24 See Contribution Agreement § l3.6(A) (providing for transfer of plan assets and liabilities as of the Contribution 

Agreement's closing date). 

10 
Finally, your appeal recognizes that, in the context of Title IV coverage determinations 

under ERISA sections 4021 (b )(2) and 4021 (b )(9), up BGC has declined to interpret the 

conjunction of the terms 'established and maintained' strictly."25 You contend that PBGC 

should not depart from the strict statutory language in interpreting the meaning of "established 

and maintained" in the context of section 4062(e) liability,26 You assert that departure from the 

statutory language with respect to section 4062(e) is improper because "it would not resolve a 

statutory ambiguity but instead would conflict with plain statutory language that clearly serves 

one of Title IV's purposes.,027 

Consequently, under your view that the same employer must have both established and 

maintained the pension plan, you argue that "the liability provisions of section 4062(e) do not 

apply (and thus cannot be applied) to Bendix." AB at 12-13. 

Our response. This appeal does not invol ve a dispute of the relevant facts concerning how the 

Bendix Plan was established or maintained. It is undisputed that the Bendix Plan did not exist 

before 1993, which is also the year when the JV (which later became Bendix) was created. 

Additionally, as discussed above, the Bendix Plan's own formal document states that the IV 

"established the [Plan], effecti ve as of November 1, 1993." There is also no dispute that Bendix 

has maintained the Bendix Plan since 1993. Finally, while your appeal presents information 

indicating that the Bendix Plan was a "successor" (within the meaning of ERISA section 

4021 (a» to the prior AS Plan,2s there is no evidence that the Bendix Plan and the prior AS Plan 

ever were a single legal entity. Rather, the Bendix Plan and the AS Plan are two separate 

pension plans sponsored by two different companies. 

Your argument rests on two premises, both of which must be satisfied if Bendix is to 

avoid section 4062( e) liability. The first premise is that section 4062( e) applies only to a pension 

plan that is both established and maintained by the same employer. The second premise is that 

the successor plan language in ERISA section 4021(a) requires a finding that Bendix did not 

establish the Bendix Plan. For the reasons discussed below, we concluded that, even if we 

accept your first premise (which we do not), your second premise is incorrect and does not 

25 AB at 13. Your appeal refers to PBGC Opinion Letters 75-44 and 90-6 as examples of how PBGC has 

interpreted "established and maintained" in the context of Title lV's coverage requirements. 

26 You refer to two court cases - Rose v. Long Island R.R. Pension Plan. 825 F.2d 9lO (2d Cif. 1987) and 

Hightower v. Texas Hospital Assn., 65 F.3d 443 (5th Cir. 1995) that address "established and maintained" in the 

context of the coverage exemption under ERISA Title IV for governmental plans. You contend that, while the 

court in Rose agreed with PBGC's position concerning the meaning of "established and maintained," the court in 

Hightower "took a more straightforward approach: it simply followed the plain statutory language." AB at 15. You 

contend that Hightower supports your position that PBGC should not depart from the statute's plain language in 

interpreting section 4062(e). AB at 17. 

21 AB at 16. You refer to ERISA's purpose "to encourage the conLnuation and maintenance of voluntary private 

pension plans for the benefit of their participants," which is one of the three Title IV purposes stated in ERISA 

section 4002(a)(1). AB at 17. 

2& Because we are rejecting your position as to how the "established and maintained" language in section 4062(e) 

should be interpreted with respect to a successor plan, we need not (and do not) reach the question of whether the 

Bendix Plan, in fact, is a successor to the AS Plan based on the definition in ERISA section 4021 (a). 

11 
provide Bendix with a basis for relief. Accordingly, we decided that Bendix had both 

established and maintained the Bendix Plan notwithstanding the successor plan definition in 

ERISA section 4021 (a). 

A linchpin of your "established and maintained" argument is that section 4021 (a) requires 

PBGC to deem the employer who established a predecessor plan as the employer who 

established its successor, even if the employer who actua/ly established the successor plan is a 

different entity. Thus, under your view, section 4062(e) liability would not exist in the situation 

where the employer who established the predecessor plan is different from the employer who 

maintained the successor plan at the time of the section 4062( e) event. 

We disagree with this position. Although a successor plan is to be treated as a 

continuation of its predecessor for purposes of Title IV of ERISA, this does not mean that a 

predecessor plan and its successor are to be treated as a single, combined plan. Furthermore, 

because a successor plan and its predecessor are separate legal entities, the "continuation" 

language in ERISA section 402l(a) does not preclude a finding that the two plans were 

"established" by different employers. That, in fact, is what happened here: Allied Corporation 

established what may be a predecessor plan (the AS Plan), and Bendix established the Bendix 

Plan in 1993, as stated in the preamble to the 1997 Bendix Plan Restatement. 

As you state in your appeal, ERISA section 4021 (a) defines a successor plan, for 

purposes of TitIe IV of ERISA, through the following language: 

For purposes of this title, a successor plan is considered to be a continuation of a 

predecessor plan. For this purpose, unless otherwi~;e specifically indicated in this 

title, a successor plan is a plan which covers a group of employees which includes 

substantially the same employees as a previously established plan, and provides 

substantially the same benefits as that plan provided?9 

This successor plan definition, however, does not address the meaning of "established and 

maintained." Additionally, there is nothing in ERISA's terms, or in its legislative history, that 

would indicate that "established and maintained" was intended to have a different meaning for a 

successor plan than in the situation where there is no successor plan relationship. 

Furthermore, PBGC historically has applied the successor plan definition only to plan 

coverage determinations under ERISA section 4021 (a) and to PBGC's insurance limits under 

ERISA section 4022(b).3o As is explained below, the areas where PBGC has applied the 

successor plan definition are not analogous to section 4062( e) liability. 

29 ERISA § 4021 (a) (emphasis added). In the above-quoted language, the phrase "[f]or purposes of this title" 

means for purposes of ERISA Title IV. 

30 We observe that the Title IV provisions for single-employer p'~nsion plans contain only two references to 

"successor plan." The first, in ERISA section 402 I (a), is located in the Title IV section (section 4021) that pertains 

to "coverage." The second, in ERISA section 4022(b)(2), applies tD the "phase-in" limit to PBGC's guarantee. 

Although Title IV contains detailed liability provisions for single·employer plans (ERISA sections 4061 through 

4071), there is no reference in those provisions to "successor plan." 

12 
It IS PBGC's experience that the successor plan definition has the following three 

impacts: 

• a successor plan may meet the requirements for coverage under ERISA Title IV based 

on the status of the predecessor plan;31 

• for purposes of the "phase-in" limit to PBGC's guarantee, the time a successor plan has 

been in effect includes the time a predecessor plan rad been in effect;32 and 

• in applying the "maximum guaranteed benefit" ("MGB") limit in ERISA section 

4022(b)(3) to a successor plan, PBGC takes into account the total benefits a participant 

has earned under the predecessor plan and under the successor plan. 

Significantly, however, in none of these three instances does the "continuation" language 

mean that the two plans are to be treated as, or deemed to be, a single plan. We observe in this 

regard that: 

• Although the plan coverage status of the predecessor plan may be relevant with respect to 

the coverage status of its successor, the two plans nevertheless remain separate entities; 

• For "phase-in," the "continuation" language simply operates as a time-counting 

mechanism for purposes of guaranteed benefit reductions in recently-established pension 

plans. Ordinarily, because of the "phase-in" limit, PBGC carmot fully guarantee benefits 

under a pension plan if the plan was in existence for less than five full years before it 

terminated. But for a successor plan, the combined time period that a predecessor plan 

and a successor plan were in existence is taken in':o account in computing any phase-in 

reduction; and 

• For the MGB, PBGC has concluded that the monthlY cap ERISA places upon the benefits 

PBGC guarantees with respect to a participant is to be applied to the total benefits the 

participant receives from the predecessor plan and the successor plan. Despite this 

consideration of both plans' benefits for purposes of computing the MGB, the benefits 

under the successor plan and its predecessor are not merged. Thus, when PBGC allocates 

plan assets to benefit liabilities pursuant to ERISA section 4044, the successor plan is a 

separate entity from its predecessor. 33 

1I ERISA section 4021 (a) states that Title IV applies (except as provided under section 4021 (b» to "any plan 

(including a successor plan)" which (among other things) has: (I) in practice met the tax-qualification requirements 

for pension plans under the Internal Revenue Code for the preceding 5 plan years; or (2) has been determined by the 

Treasury Secretary to meet the requirements for tax qualification. Thus, one of the intended purposes of the 

successor plan definition is to allow a successor plan to "piggy-back" upon the tax-qualified status of a predecessor 

plan. 

32 The phase-in limit applies to: (I) pension plans that were in effect f)f less than five years before plan termination; 

and (2) benefit increases under plan amendments that were in effect for less than five years before plan termination. 

ERISA § 4022(b){l), (7). With respect to these requirements, ERISA § 4022(b)(2) states: "For purposes of this 

subsection, the time a successor plan (within the meaning of section 4021(a» has been in effect includes the time a 

previously established plan (within the meaning of section 402 1 (a» was in effect." See also ERISA § 4022(b)(S) (a 

30-year phase-in requirement applies to a "majority owner"). 

33 When a predecessor plan terminates, section 4044 of ERISA r'~quires that the predecessor plan's assets be 

allocated to the benefit liabilities of the predecessor plan (without ret:~rence to the successor plan). Furthermore, if 

13 
Additionally, in a 1986 Opinion Letter, PBGC rejected the position that a successor plan 

and its predecessor should be treated as a single pension plan for all Title N purposes. The 

opinion letter concerned a premium refund request by an employer who paid premiums for both 

a predecessor and successor plan during the year in which the tennination process overlapped 

with the employer's establishment of the successor plan. The employer based its refund request 

on the belief that the new plan was a "successor plan" to t:Je old plan, as that term is defined in 

section 4021(a) of ERISA. As a result, the employer claimed that the new plan should be 

considered a "continuation" of the old plan for purposes of precluding a duplication of premium 

payments. PBGC rejected this argument, stating: 

It is clear that both the Old Plan and the New Plan _ .. two separate plans -- were in 

existence during the 1985 plan year for the purpose of accrual of premium 

payments. This is so even assuming, as you assert, that the New Plan is a 

"successor plan" to the Old Plan and therefore, ... "is considered to be a 

continuation of' the Old Plan for purposes of Title IV. The mere fact that one 

plan is considered to be a "continuation" of another in no way negates the separate 

nature of the two plans or changes their respective periods of existence .... The 

two plans clearly coexisted for a period of time, and must pay premiums 

accordingly. 

PBGC Op. Letter 86-14 (Jun. 26, 1986).34 

Moreover, there are no requirements in ERlSA Title IV that relate to how a singleemployer pension plan is "established" or "maintained." Instead, ERISA requirements relating to 

the establishment and maintenance of pension plans are ~et forth in Title I. See, for example, 

ERISA section 402(a) (titled "Establishment of Plan") and ERISA section 403 (titled 

"Establishment of Trust,,).35 As you acknowledge in your appeal, there is no successor plan 

provision in Title I that is analogous to the Title IV successor plan provision. AB at 14-15 

(footnote 9). Thus, we concluded that the "continuation" language as to how a successor plan is 

to he "considered" for purposes of Title IV is unrelated to the identification of the employer who 

"established" the plan. 

In summary, for all of the above reasons, we conclude that Bendix "established and 

maintained" the Bendix Plan. This conclusion is consistent with the Joint Venture Agreements 

and the Bendix Plan's own formal document, which state!; that the Bendix Plan was established 

in 1993 by Bendix. That the Bendix Plan may be considered a successor plan under section 

the successor plan later terminates, PBGC would not do a new 4044 allocation based on the combined assets and 

benefit liabilities of the two plans. This is true even though a succ:essor plan is treated as a "continuation of a 

predecessor plan" for purposes of Title IV. 

34 Language consistent with Opinion Letter 86-14 later was included in PBGC's "Premium Rates" regulation. That 

regulation defines the term "new plan" as follows: "New Plan mean~. a plan that did not exist before the premium 

payment year and includes a plan resulting from a consolidation or spinoff. A plan that meets this definition is 

considered to be a new plan even if the plan constitutes a successorJlan within the meaning of section 4021 (a) of 

ERlSA." 29 C.F.R. § 4006.2. 

J5 In particular, ERlSA § 402(a)(I) states: "Every employee bent:fit plan shall be established and maintained 

pursuant to a written instrument. Such instrument shall provide for one or more named fiduciaries who jointly or 

severally shall have authority to control and manage the operation and administration of the plan." 

14 
4021(a)--and thus a "continuation" of a predecessor plan for purposes of Title IV-does not 

change this conclusion. Given our conclusion, we need not address the hypothetical question of 

whether Bendix could be liable under section 4062(e) if :.t had only "maintained" the Bendix 

Plan. We note, however, that PBGC has declined to interpret the conjunction of the tenns 

"established and maintained" strictly under sections 4021(b)(2) and 4021(b)(9) of ERISA, and 

we see no reason why PBGC should depart from such an interpretation under section 4062(e) of 

ERlSA.36 

B. Is the liability formula in PBGC's regulation, in general or as applied to 

Bendix, contrary to law? 

Your appeal contains several assertions that relate to the validity and reasonableness of 

PBGGs section 4062(e) regulation. As discussed below, the Appeals Board has concluded it 

lacks the authority to grant Bendix relief with respect to the:;e assertions. 

Background concerning PBGC's section 4062(e) regulation. As stated above under 

"Background," ERISA section 4063(b) authorizes PBGC to issue a regulation that prescribes 

how ERISA section 4062(e) liability is detennined. 37 Pursuant to that authority, PBGC issued a 

regulation in 2006 that establishes the formula for computing section 4062(e) liability.38 

PBGGs regulation establishes a section 4062(e) liability formula that PBGC considers to 

be "a simple, practicable, and equitable method for detennining the liability for a section 4062(e) 

event." 39 Specifically, the rule established by PBGC regulation is that the section 4062(e) 

liability equals the liability under ERISA section 4062(b)40 multiplied by a fraction36 PBGe Opinion Letters 75-44 and 90-6. See also 75 Fed. Reg. 48,283, 48,284 (August 10,2010) (discussion of 

"established and maintained" issue in preamble to PBGC's proposed section 4062(e) regulation). 

37 Section 4063(b) provides: "In addition to and in lieu of' the maIUleT of computing the liability prescribed in that 

provision, PBGe "may also determine such liability on any other equitable basis prescribed by the [PBGC] in 

regulations. " 

38 This PBGe regulation, codified at 29 C.F.R. § 4062.8, is published at 71 Fed. Reg. 34,819 (June 16,2006). 

Although PBGe has proposed a regulation that would provide a.dditional guidance on the applicability and 

enforcement of section 4062(e) liability, PBGe has not issued a final regulation as of the date of this decision. 

PBGC's proposed regulation is published at 75 Fed. Reg. 48,283 (August ]0,2010). 

39 71 Fed. Reg. 34,819, 34,820 (June 16,2006). 

40 ER1SA § 4062(a) provides that a contributing sponsor of a pensior: plan or a member of a contributing sponsor's 

control group may be liable to PBGe in any case in which a single· employer plan is terminated under a distress 

termination under ERJSA § 4041( c) or a termination by PBGe under ERlSA § 4042. Among other things, ERJSA 

§ 4062(b) provides: 

(b) Liability to corporation 

(l) Amount of liability 

(A) In general 

15 
(1) the numerator of which is the number of the employer's employees who are 

participants under the plan and are separated from empbyment as a result of the cessation 

of operations; and 

(2) the denominator of which is the total number of the employer's current employees, 

as determined immediately before the cessation of operations, who are participants under 

theplan.41 

PBGe's regulation further provides that "[t]he liability under section 4062(b) is 

detenruned as if the plan had been terminated by the PBGe immediately after the cessation of 

operations."42 The preamble to PBGe's regulation explains that a change in the applicable date 

was needed because "the date of the withdrawal" (as specified in section 4063(b)) does not 

"literally apply" in the case of a section 4062(e) event.43 

Your appeal. You assert that PBGe's section 4062(e) f4:lgulation impermissibly deviates from 

the "core principle" of section 4063.44 In particular, you state that PBGe's formula: (1) expands 

the employer's liability beyond its "fair share," as measun:d by the funding support the employer 

wilI provide to the plan (AB at 19); (2) does not correlate to the financial impact that the section 

4062(e) event has on the plan (AB at 20); (3) does not relate to the "magnitude of increased risk" 

resulting from the triggering event (AB at 21); and (4) "st;t,cks the deck to maximize liability" by 

... the liability to the [pBGC] of a person described in subsection (a) shall be the total amount of the 

unfunded benefit liabilities (as of the termination date) to all participants and beneficiaries under the 

plan, together with interest (at a reasonable rate) calculated from the termination date in accordance 

with regulations prescribed by the [pBGC]. 

ERISA § 4001(a)(18) states: 

"amount of unfunded benefit liabilities" means, as of any dale, the excess (if any) of-

(A) the value of the benefit liabilities under the plall (determined as of such date on the basis of 

assumptions prescribed by [PBGe] for purposes of [ERISA] section 4044), over 

(B) the current value (as of such date) of the assets of the plan. 

41 29 CFR § 4062.8(a)(1)-(2). 

42 /d~ 

43 71 Fed. Reg. at 34,820. 

44 AB at 18-25. In making this argument, you refer to the section 4062(e) requirement that the employer's liability 

be determined by treating that employer "as ifhe were a substantial employer under a plan under which more than 

one employer makes contributions" and that the provisions of section 4063 "shall apply." AB at 18. You further 

note that section 4063(b), in turn, requires a withdrawing employer in a multiple employer plan to pay a specified 

portion of the liability under section 4062 for the entire plan as if the plan had been terminated by PBGe on the date 

of the withdrawal. AB at 18. Finally, yOll acknowledge that, through ERISA section 4063(b), "Congress explicitly 

empowered PBGC to determine the amount of liability 'on any othe!r equitable basis prescribed by the [pBGC] in 

regulations ... .' ERISA section 4063(b)." AB at 19. 

16 
focusing only on the number of employees on the eve of the shutdown and only on the number of 

employees who are plan participants (AB at 18-25). 

You also argue that, based on the terms of ERISA section 4063(b), PBGC has a legal 

obligation to ensure that the formula in its section 4062(e) regulation determines liability on an 

"equitable basis." AB at 25-26. You claim that PBOC did not meet this obligation because 

PBGC's rule "makes no attempt to measure the amount of section 4062(e) liability on a basis that 

captures the employer's fair share [of pension plan underfunding]." AB at 26. 

You further contend that it would be inequilable, based on Bendix's particular 

circumstances, to impose liability on it for 100 percent of the Bendix Plan's UBLs. AB at 26. In 

your view, imposing this amount of liability is inequitable because the shutdown of Bendix's 

facility "accounted for less than 5 percent of the Company's revenues and less than 1 percent of 

the [controlled] group's global revenues and the resulting separation from employment of less 

than 3 percent of the Company's employees and less than 112 of 1 percent of the controlled 

group's total employees." AB at 26. You accordingly comend that PBGC's regulation as applied 

to Bendix "is arbitrary, capricious, an abuse of discretion, and contrary to law." AB at 26. 

Our response. PBGC determined Bendix's section 4062(e) liability amount by applying the 

formula in its section 4062(e) regulation. In the argument:; summarized immediately above, you 

do not claim that PBGC failed to follow its own regulation. Rather, your contention is that 

PBGC's regulation concerning section 4062(e) liability is invalid or unreasonable. 

PBGC's regulation was issued after notice-and··comment rulemaking. Thus, before 

issuing the re.f,ulation, PBGC invited interested parties to submit comments concerning its 

proposed rule. 5 PBGC further considered the comment;; it received before it issued its final 

regulation.46 The Appeals Board has concluded that it lacks the authority to review the validity 

or the reasonableness ofa regulation issued through notice-·and-comment rulemaking. 

Furthermore, in its section 4062(e) regulation, PBGC established a rule of general 

applicability. By the regulation's terms, the liability formula is to be applied whenever a section 

4062(e) event occurs, regardless of the facts of a given case. Furthermore, there is nothing to 

indicate that PBGC intended for the Appeals Board to review in an appeal the validity or 

reasonableness of the regulation as it is applied to a particular employer. The Appeals Board 

accordingly concluded that it lacks the authority to determine whether or not PBGC's regulation 

is invalid as applied to Bendix. 

C. Did PBGC err in calculating the Bendix Plan's Unfunded Benefit Liabilities 

("UBLs")? 

PBGC detennined that Bendix incurred liability under section 4062(e) in the amount of 

$16,947,933.00. Your appeal raises five specific issues that relate to the amount of Bendix's 

section 4062(e) liability. For the reasons explained below, we granted your appeal on two of 

45 See Liability Pursuant to Section 4062(e) of ERISA, 70 Fed. Reg. 9258 (proposed February 25, 2005). The 

comments PBGC received are available on its website at www.pbgc.govlDocuments/section4062_ERlSA_pdf. 

~6 In the preamble to its final section 4062(e) regulation, PBGC discussed in detail the comments it received. 71 

Fed. Reg. at 34,820 - 821. 

17 
these issues, dellied it with respect to two others, and concbded that a fifth issue was resolved by 

the Board's recalculation of Bendix's section 4062(e) liability. Before we discuss your individual 

issues, however, we provide additional background. 

Additional Background concerning PBGC's section 40(;2(e) determination. A January 28, 

2010 PBGC document, titled "Section 4062(e) Detennination Memorandum" ("Determination 

Memorandum" or "Det. Memo"), provides an explanation of PBGC's detennination of Bendix's 

section 4062(e) liability amount. The Determination Memorandum (Enclosure 2), which was 

prepared by PBGC's Department of Insurance Supervision and Compliance ("DISC"), was 

provided to you on April 28, 2010. 

As is stated in the Determination Memorandum, DISC actuaries calculated the Bendix 

Plan's UBLs, based on a valuation date of December 31,2007, as $16,947,933.00. Del. Memo at 

1. 

PBGC then determined the fraction by which the UBLs should be multiplied. According 

to the information provided by Bendix, fifty-nine particip.mts were separated from employment 

on December 31, 2007, and four additional participants were separated from employment on 

January 31, 2008. Det. Memo at All of the separations were the result of the cessation of 

operations. Det. Memo at 2. Accordingly, PBGC concluded that the numerator of the fraction 

should be sixty-three. Det. Memo at 4. Further, since these sixty-three employees were all of 

the active participants in the Bendix Plan just prior to th,~ cessation-of-operations date, PBGC 

determined that the denominator is also sixty-three. DeL Memo at 5. 

Since the numerator and denominator were identical, PBGC detennined that the VBL 

amount ($16,947,933.00) should be multiplied by one, resulting in a 4062(e) liability amount of 

$16,947,933.00. 

Issue #1: Did PBGC use the correct valuation date in calculating Bendix's section 4062(e) 

liability? 

Your anneal. You point out that PBGe's initial determina.tion used a liability estimate based on 

a valuation date of December 31, 2007. AB at 27. You contend this is an incorrect date for 

determining Bendix's liability because PBGC's section 4062(e) regulation states: "PBGC will 

determine the amount of liability under section 4063(b) of ERISA to be the amount described in 

section 4062 of ERlSA for the entire plan, as if the plan had been terminated by the PBGC 

immediately after the date of the cessation of operations . ... ,,47 

Thus, you argue that the correct date for determining any section 4062(e) liability 

incurred by Bendix is January 1, 2008 which is the date "immediately after" the December 31, 

2007 cessation-of-operations date for the Frankfort faci!ity. AB at 27. Consequently, you 

contend that PBGC must recalculate the value of the Bendix Plan's benefit liabilities under 

section 4001(a)(18)(A) using a January 1,2008 valuation date.48 

47 AB at 27 (citing 29 CFR § 4062.8(a)). 

48 AB at 28. You state that "using the correct tennination date, which in this case requires shifting from a 2007 date 

to a 2008 date, means that the key actuarial assumptions must be changed to comply with PBGC regulatory 

18 
Our response. We agree with you that: (1) the cessation ~)f operations for purposes of section 

4062( e) liability occurred on December 31, 2007; (2) PBGC's regulation requires that section 

4062( e) liability be calculated as if the Bendix Plan had temlinated on the day after the cessationof-operations date, which is January 1,2008; and (3) PBGC erred by calculating Bendix's section 

4062( e) Iiabi lity based on a December 31, 2007 valuation date. PBGC's use of the December 31, 

2007 date appears to have been a mistake, rather than one involving a legal interpretation. 

The Appeals Board has recalculated Bendix's section4062(e) liability based on a January 

1,2008 valuation date. This change in the valuation date has resulted in a slight reduction to the 

amount of Bendix's section 4062(e) liability. 

Issue #2: Should PBGC be required to calculate Bendix's section 4062(e) liability using the 

PBGC Actuarial Technical Manual procedures that apply to terminated pension 

plans? 

Your appeal. You claim that PBGC did not use the correct methodology to calculate Bendix's 

section 4062(e) liability. AB at 28-29. Noting that PBGC's section 4062(e) regulation 

references the liability described under ERISA section 4062 for a plan's UBLs as of its 

termination date, you contend that PBGC must use the same methodology and apply the same 

procedures in computing section 4062(e) liability that PBGC uses and applies in computing 

UBLs for terminated plans.49 

You argue that the appropriate methodology, whi::h PBGC consistently has used with 

respect to terminated plans, is the one prescribed in PBGC's Actuarial Technical Manual 

("Actuarial Manual"). AB at 28. You assert that, under the procedures in the Actuarial Manual, 

PBGC: (1) determines the plan's UBLs by using the plan's participant census data to perform 

participant-by-participant calculations;5o and (2) uses estimates only in limited circumstances and 

only as permitted under specific instructions. 

requirements for determining the value of benefit liabilities since those assumptions are dependent upon the 

applicable plan tennination date." AB at 28 (citing 29 CFR § 4044, subpt. B (Valuation of Benefits and Assets». 

29 CFR § 4044 prescribes the methodology for valuing benefit liabilities, including the assumptions that must be 

used with respect to interest, mortality, and expected retirement age. 

49 You refer to the following language in PBGC's section 4062(e) regulation: "PBGC will detennine the amount of 

liability under section 4063(b) of ERISA to be the amount described iT' section 4062 of ERISA for the entire plan, as 

if the plan had been terminated by the PBGC immediately after the dale of the cessation of operations, multiplied by 

a fraction .... " 29 CFR § 4062.8(a). 

50 AB at 29. You cite Section II of the Actuarial Manual, titled "Participant & Plan Data," which states: "Whenever 

possible, all valuations should be made using audited participant and plan data. Deviations from this rule should be 

documented in the Actuarial Case Report. No questions with respect to participant data should pass unresolved 

from ASD to PSD. If a given data item cannot be determined, even by writing to participants, then such must be 

stated in writing, preferably in the audit." 

19 
You claim that the actuarial calculations PBGe made to detennine Bendix's section 

4062(e) liability did not comply with the Actuarial Manual because they are based on 

estimates. 51 You state; 

It appears from the documentation supplied by the [PBGC] Disclosure Officer that 

PBGe simply used the computer model that g'~nerates claims estimates for 

bankruptcy purposes. When filing those claims, PBGC discloses that they are 

estimates, not final determinations of the amount of the claims. While using 

estimates is acceptable in a bankruptcy context for purposes of filing initial claims, 

it is not acceptable here. 

AB at 28. 52 

Our response. Neither ERISA nor PBGe's regulations prescribe a particular procedure for 

computing seCtion 4062(e) liability.53 There further is nothing in either ERISA or PBGe's 

regulation that indicates that PBGC must use the plan's participant census data to perform 

participant-by-participant calculations for purposes of calculating section 4062( e) liability. 

Accordingly, we reject your position that PBGe is required to use any particular data source, 

procedure or methodology. 

PBGe's Actuarial Manual sets out in detail PBGe's procedures for calculating benefit 

liabilities for tenninated pension plans for purposes of (among other things) ERlSA section 

4062(b) liability. 54 PBGe has not developed written actuarial procedures, however, that 

51 AB at 29. You assert that PBGC "knew, or should have known, t.1at the necessary participant census data was 

readily available from the Company, but PBGC never requested that data." Id 

52 You note that "perhaps PBGC could have promulgated a rule tha'; permitted the agency to use estimated UBL 

numbers for its section 4062(e) cases, but PBGC failed to do so." You assert that, in the absence of such a rule, 

PBGC must determine UBLs for purposes of section 4062(e) liability "in the same manner as [UBLs] would be 

determined for any terminated plan-I.e., in accordance with the methodology prescribed in PBGC's Actuarial 

Technical Manual .... " AB at 29. You state that "the Company will gladly supply upon request" the relevant 

participant-by-participant census data with respect to the Bendix Plan. ld 

S3 Section 4062(e) requires that an employer who incurs section 4062(e) liability "shall be treated with respect to 

[the] plan as if he were a substantial employer" as provided under ERISA section 4063. ERlSA section 4063(b) 

provides that "[t]he amount of liability shall be computed on the basis of an amount determined by [PBGC] to be the 

amount described in section 4062 for the entire plan, as ifthe plan had been terminated by [PBGC] on the date of the 

withdrawal .... " Aside from changing the "date of withdrawal" to the date "immediately after the date of the 

cessation of operations," PBGC's regulation at 29 C.F.R. § 4062.8 did not change the UBLs component of the 

section 4062(e) liability formula. These, and other, ERISA provisiom. and PBGC regulations do not elaborate upon 

how PBGC's calculations shall be made. 

S4 PBGC's determination of a pension plan's benefit liabilities as of it~ termination date serves several purposes. As 

you indicate in your appeal, the liability calculation is used to establish the amount the employer owes to PBGC 

under ERISA section 4062(b). See 29 C.F.R. § 4062.3 (pBGC regulation concerning amount and payment of 

ERISA § 4062(b) liability) and § 4068 (regulation concerning PBGe's lien for employer liability). Furthermore, 

PBGC needs to determine accurately the benefit liabilities in a terminated plan because those amounts often impact 

upon the benefits PBGC is authorized pay to pension plan participants See ERISA § 4044 (allocation of plan assets 

to benefit liabilities in a terminated plan) and ERISA § 4022(c) (allocation of PBGC's claim recoveries to certain 

benefits). Finally, PBGe's calculations of benefit liabilities are used il1 preparing PBGC's financial statements. 

20 
specifically apply to section 4062{ e). Because there are obvious differences between the two 

situations, we disagree with your position that PBGC must use the same procedures and 

methodology for calculating UBLs for section 4062(e) liability purposes as it uses for valuing 

UBLs in terminated plans. 

Section 4062(e) liability differs from ERISA section 4062{b) liability in the following 

significant ways: (1) section 4062{e) requires a liable employer provide "security" to PBGC for a 

limited time period (five years), while ERISA section 4062{b) liability can be viewed as the 

employer's "final bill" to PBGC for the plan's underfunding; (2) in contrast to the finality of a 

section 4062{b) assessment, the employer is released from section 4062{e) liability if the plan 

does not terminate within five years, with the escrowed funds returned to the employer or the 

bond canceled; and (3) even if the plan tenninates within the five-year-period, the escrowed fund 

or bond amount will become a plan asset as of the plan'S termination date, and PBGC then will 

do a final accounting under ERISA of what the employer owes to PBGC and to the plan's trustee 

as of the termination date. 

Although PBGC has concluded that the use of {!stimates is inappropriate in the final 

valuation of benefit liabilities in a terminated plan (except in limited circumstances), we see no 

reason why PBac cannot use estimates in determining section 4062{e) liability. Unlike section 

4062{b) liability, the amounts paid by the employer for section 4062{e) liability are refunded or 

may (in effect) be corrected at a later date, i.e., at the expiration of the five-year-period or upon a 

final accounting at plan termination. Accordingly, the need for precision is not as great for 

calculating section 4062{ e) liability as it is for calculating section 4062{b) liability. 

PBGC also must be able to determine section 4062{e) liability without undue delay. 1bis 

is necessary because of the limited duration of the liability and the provision's obvious intent that 

PBGC obtain financial security with respect to the affected pension plan. If PBGC were required 

to use participant census data and participant-by-participant benefit calculations before assessing 

section 4062{e) liability, PBGC's ability to obtain financial security could be frustrated because 

of the length of time needed to obtain the necessary data 2nd to make the necessary calculations. 

In any event, what you seek is more than what ERISA requires, since ERISA section 4063{a) 

directs only that PBGC, after receiving notice, "shall, as soon as practicable thereafter, detennine 

whether there is liability ... and notifY the liable persons of such liability." 

Finally, an employer may make its own calculations of section 4062(e) liability.55 If, as 

here, PBGC issues an initial determination to an employer that provides for Appeals Board 

review, on appeal the Board will review any calculations the employer timely submits. In this 

case, however, Bendix has not provided the Appeals Bo,ard with its own liability calculations, 

even though the Appeals Board provided you with a lengthy time period to supplement your 

appeal. 

Accordingly, we reject your claim that PBGC did not correctly determine Bendix's 

section 4062{e) liability amount because PBGC did not perform participant-by-participant 

j5 Such calculations, however, would need to be based on the actuarial assumptions for calculating benefit 

liabilities for terminating plans that are specified in PBGCs regulations at 29 C.F.R. § 4044. 

21 
calculations in accordance with PBGC's Actuarial Manual's procedures for terminated pension 

plans. 

Issue #3: Should PBGC have used the January 1, 20m' Actuarial Valuation Report and the 

2008 Schedule SB in calculating the Bendix Plan's UBIs? 

Your appeal. You assert that, even assuming that PBGC properly may use a liability estimate to 

support a determination of section 4062(e) liability, its UI3L estimate must be revised because 

PBGC used "outdated actuarial information." AB at 29-30. You note that the UBL estimate in 

PBGC's January 29, 2010 determination is based on the Bendix Plan's January 1,2007 Actuarial 

Valuation Report ("A VR") and the 2007 Schedule SB. AB at 30. Both of those documents 

provide data as of January 1, 2007. You contend that PBGC should have used the January 1, 

2008 A VR and the 2008 Schedule SB, both of which reported numbers as of January 1, 2008. 

AB at 30. 

You state that both the 2008 A VR and the 2008 Schedule SB were completed long before 

PBGC's January 29,2010 determination was issued. AB at 30. You contend that, ifPBGC had 

used these more-recent reports, it would have computed Bendix's section 4062(e) liability more 

accurately. 56 

Our response. We have granted your request to have Bendix's liability calculated using the 

2008 AVR and the 2008 Schedule SB. We concluded that use of those documents is appropriate 

because they report the Bendix Plan's pension obligations as of January 1, 2008, which is the 

relevant date for determining Bendix's section 4062(e) liability. We further found that, under the 

particular circumstances of this case, the use of the more-recent documents would not cause 

undue delay. 57 

As discussed later in this decision, the Appeals Board, with the assistance of enrolled 

actuaries, has recalculated Bendix's section 4062( e) liabili'~y using the January 1, 2008 valuation 

date, the 2008 A VR, and the 2008 Schedule SB. Our recalculated amount is $310,238.00 less 

than the amount PBGC had determined. 

56 In your view, PBGC's use of the outdated actuarial information caused "a number of errors resulting from the 

improper "roll-forward" methodology." In your discussion of Issue #4, you elaborate further as to why PBGC's 

"roll-forward" methodology" in valuing the Bendix Plan's benefit liabilities led to what you consider to be "flawed 

results. " 

57 The 2008 AVR is dated August 2009. The 2008 Schedule SB was signed by the Bendix Plan's actuary on 

October 12, 2009. Thus, these documents were not completed until 19 months and until 21 months, respectively, 

after the cessation of operations at the Frankfort facility occurred. Allhough PBGC did not issue its section 4062( e) 

determination to Bendix until a later date (January 29, 2010), in c.:L5es involving other employers it may be in 

PBGC's interest to issue its determination of section 4062(e) liability soon after the triggering event and/or to have 

an expedited process for reaching a final decision on appeal. Thus, our grant of your request to use the 2008 A VR 

and the 2008 SB does not establish a precedent to be applied in other cases. 

22 
Issue #4: Are PBGC's 4062(e) lidbility calculations flawed because PBGC used a "rol/-

forward" methodology for some purposes but actual data for other purposes? 

Your appeal. In your initial appeal and in your appeal supplement, you contend that PBGC's 

failure to use the 2008 A VR and 2008 Schedule SB led 1:0 a "flawed" calculation of Bendix's 

section 4062(e) liability. AB at 29-31; AB Supplement ("AB Supp.") at 4-5. Specifically, you 

state that: (I) for purposes of determining the Bendix Plan's benefit liabilities, PBGe used data 

as of January 1, 2007, to which it made "unspecified adjustments and assumptions to rollforward the data" to December 31, 2007; but (2) for purposes of determining the Bendix Plan's 

assets, PBGe used data as of December 31,2007. AB at 30. You assert that this "disconnect" in 

the data PBGe used for valuing the plan's assets and liabilities is likely to have produced 

"inaccuracies" in the calculation of the Bendix Plan's UBLs as of January 1,2008.58 

Our response. We concluded that your claims with respect to Issue #4 are resolved by our 

recalculation of Bendix's liability using the January 1, 2008 valuation date, the 2008 AVR, and 

the 2008 Schedule SB. See our response to Issue #3. No roll-forward adjustments and 

assumptions were made in our recalculation. 

We note that, in other cases involving section 4062(e) liability, PBGC may not have 

actuarial data that reflects a pension plan's liabilities as of the applicable date, Le., the day after 

the cessation-of-operations date. In such cases, PBGC may need to adjust available actuarial 

data in calculating the plan's UBis for purposes of section 4062(e) liability. Because it is not 

necessary to our decision, we do not address the data sources, actuarial assumptions and 

methodology PBGC should use in such cases. 

Issue #5: Should PBGC, in calculating Bendix's section. 4062(e) liability, have deducted the 

value of the contingent claim under ERlS4 section 4062(c) for the shortfall 

amortization "charge" and "installments"? 

Your appeal. You state that, under PBGC's section 4062(e) regulation, the starting point for 

determining 4062(e) liability is the amount of a plan's UBis, determined as if the plan 

terminated immediately after the cessation-of-operations date. AB at 27. You assert that (I) the 

plan's UBis "equals the value of the plan's benefit liabilities minus the fair market value of plan 

assets ... as of the termination date;" and (2) "the value of plan assets includes the value, ... as 

of the assumed termination date, of any plan receivables." AB at 32. 

You contend that PBGC's $16,947,933.00 section 4062(e) liability determination for 

Bendix "inappropriately disregards the value of a key receivable-the claim that the successor 

trustee of the Plan would have, on behalf of the Plan, under ERISA Section 4062(c)." AB at 32. 

You note that ERISA section 4062(c) provides the "Section 4042 Trustee" with a claim upon 

plan termination for the sum of the "shortfall amortization charge" for the current plan year (i.e., 

the plan year containing the plan's termination date) and the "shortfall amortization installments" 

58 AB at 29-31; AB Supp. at 4-5. Referring to certain data in the 2008 A VR., such as the benefit payments the 

Bendix Plan made in 2007 and terminations of employment that occurred in 2007, you further claim that PBGe's 

"roll-forward" methodology is likely to have resulted in an inflated alL.ount with respect to Bendix's section 4062(e) 

liability. 

23 
for all future plan years. AB at 32. Referring to the 20,)8 A VR's computation of the Bendix 

Plan's shortfall amortization installment amount, you c:alculate the Section 4042 Trustee's 

4062(c) claim to be $15,717,450, based on a January 1,2008 valuation date. AB at 32. 

You contend that "PBGC has suggested no basis, and the Company believes that none 

exists," for failing to include the Section 4042 Trustee's $15,717,450.00 section 4062(b) claim as 

a Bendix Plan asset. AS at 32. Accordingly, in your view, the value of the Bendix Plan's assets 

as of January 1,2008, must be increased by $15,717,450.00, with a corresponding decrease in 

the amount of the Bendix Plan's UBLs as of that date. AB at 32. 

You further refer to a PBGC policy that explains how PBGC finalizes its claims for 

UBLs and for "Due and Unpaid Contributions" ("DUEC") in the situation where PBGC ends up 

with a combined recovery for its various claims upon plan termination. You state that this policy 

"explain[s] the methodology PBGC uses to determine how much of a combined recovery is 

allocable to its DUEC recovery and thus serves to reduce the amount of its UBL claim." AB at 

33. You assert that PBGC should apply a methodology similar to the policy's, which prevents 

"double-counting" by PSGe. AS at 33. AdditionaHy, you observe that, U[a]lthough the section 

4062(c) claim may have little value in a bankruptcy, it clearly has significant value in this case, 

where the Plan sponsor remains ongoing and is a part of a robust controlled group." AB at 33. 

Accordingly, you contend that PBGC erred in determimng Bendix's section 4062(e) liability 

because it did not include a deduction for the Section 4042 Trustee's section 4062(c) claim. AB 

at 33-34. 

Our response. In the plan termination context, PBGe applies a valuation rule that takes into 

account that PBGC may recover (often simultaneously) on its employer liability claim under 

section 4062(b) and on its claim (as trustee) under section 4062(c).59 This PBGC rule adjusts 

recovery values to reflect that the recovery on the section 4062(c) claim - which is valued as a 

plan asset - has the effect of reducing the amount of PBGC's section 4062(b) claim for UBLs. 

Your appeal proposes to apply a similar rule to section 4062(e) liability - even though, during 

the relevant section 4062(e) time period, only one recovery could occur with respect to the 

Bendix Plan. As is further explained below, we reject your position on this issue. 60 

As you state in your appeal, section 4062(e) liability is based on the plan's UBLs and is 

determined as if the plan terminated immediately after the cessation-of-operations date. The 

ERISA section 4062(c) claim, which you propose to offset, is payable to the "Section 4042 

trustee" (who ordinarily is PBGC) and arises upon the plan's actual termination. The section 

4062(c) liability is incurred by the plan's contributing sponsor and members of its controlled 

group and is for the sum of: (I) the "shortfall amortization charge" for the current plan year (Le., 

59 See PBGC Operating Policy Manual Chapter 8.2-1 (5th Ed. 07/3112008), titled "Valuation and Allocation of 

Recoveries," which is Exhibit 9 to your appeal. 

60 We do not address in this decision whether the Section 4042 trus'~ee's claim under ERlSA § 4062(c) equals the 

$15,717,450.00 amount that you state in your appeal. Because we decided that there should be no deduction in the 

section 4062(e) liability calculation for the trustee's claim under section 4062(c) (which would arise upon plan 

termination), it is unnecessary to detennine the amount of the trustee's potential section 4062(c) claim. 

24 
the plan year containing the plan's termination date); and (2) the "shortfall amortization 

installments" for succeeding plan years.

61 

Significantly, PBGC's claim under section 4062(e) - which arose on the date of the 

section 4062(e) event - is the only Title IV employer liability claim that Bendix could incur 

unless (and until) the Bendix Plan tenninates. 62 Bendix's potential future liability under section 

4062(c), by contrast, is only a contingent claim. The section 4062(c) claim is contingent because 

the Bendix Plan has not terminated, a Section 4042 Trustee has not been appointed, and no 

recovery is possible under section 4062(c) unless and until the Bend.ix Plan terminates. 

Accordingly, you are asking that Bendix's liability amount under section 4062(e), which was 

triggered immediately on the December 31, 2007 cessation-of-operations date, be reduced by a 

section 4062(c) claim amount that may only possibly be payable as ofa later date. 

Moreover, if the pension plan terminates within the five-year-period covered by section 

4062(e), the section 4062(e) liability effectively ends. This is because, upon plan termination, 

the section 4062(e) amounts paid into escrow or covered under a bond are to be treated as plan 

assets.63 Consequently, the forfeiture of section 4062(e~ funds has the immediate impact of 

increasing the plan's assets and reducing its UBLs. This '~eduction in UBLs is favorable to the 

employer because it reduces its liability under ERISA section 4062(b) to PBGC. The practical 

result of these employer liability provisions is that, at plan tennination, a final accounting is 

made and PBGC will not collect more than what is needed to fully satisfy the plan's benefit 

obligations as of the plan termination date.64 Accordingly, we see no reason why section 4062(e) 

liability should be reduced based on a section 4062(c) claim that could only arise on the Bendix 

Plan's tennination date. 

II. APPEALS BOARD'S CALCULATION OF BENDIX'S SECTON 4062(e) LIABILITY 

In an effort to expedite the processing of your appe:ll, the Appeals Board has recalculated 

Bendix's section 4062(e) liability amount. Specifically, with the assistance of enrolled actuaries, 

we calculated the 4062(e) liability amount based on: (1) a valuation date ofJanuary 1,2008; and 

(2) the Bendix Plart's January 1, 2008 actuarial valuation report and the 2008 Form 5500 

Schedule B. We also obtained a second calculation that shows the 4062(e) liability as of a 

61 It also captures other amounts tied to funding waivers, which are not applicable here. 

62 Although Subtitle D of ERISA Title IV contains several employer liability provisions, only two of the provisions 

provide for liability before plan termination - section 4062(e) and section 4063 (withdrawal of a substantial 

employer from a multiple employer plan). Since the Bendix Plan is not a multiple employer plan, the only pretermination employer liability with respect to that plan is under ERISA section 4062(e). Our reference to employer 

liability does not encompass PBGGs claims for premiums under ERISA § 4007 or its penalty assessment authority 

under ERISA § 4071, which are immaterial to our analysis of this issue. 

63 ERISA § 4063(c)(3)(B). 

64 Although we would not expect it to occur, it is theoretically possible that, after the section 4062(e) amount 

becomes a plan asset ofa terminated plan, the plan will be fully funded and the employer will not otherwise owe any 

additional amounts to PBGC or to the plan. In that situation, PBe C would refund any surplus amounts to the 

employer with respect to the section 4062(e) liability it had incurred, a; is provided in ERISA section 4063(b)(3)(C). 

25 
valuation date of January 1, 2008, but without using the information in the 2008 valuation and 

2008 Schedule B. Thus, this second calculation uses the same information that DISC used in its 

4062( e) calculation, but reflects a valuation date that is onc day later. The calculations show: 

• if a January 1, 2008 valuation date is used and the liability is determined using the 2007 

AVR and the 2007 Schedule SB, the Bendix Plan's UBLs are $16,904,622.00 (which is a 

decrease of $43,311 from the amount DISC calculated); and 

• if a January I, 2008 valuation date is used and the liability is determined using the 2008 

AVR and the 2008 Schedule SB, the Bendix Plan's UBLs are $16,637,695.00 (which is a 

decrease of$310,238.00 from the amount DISC calculated). 

The table below summarizes the calculations for the Bendix Plan's UBLs: 

26 

(1 ) (2) (3) 

Calculations Appeals Board's Appeals Board's 

completed by DISC calculations calculations 

Actuarial Valuation Report (AVR) Date 01/01/2007 01/01/2007 0110112008 

Part I _. Actuarial Assumptions 

Valuation Date 31-Dec-07 01-Jan-08 01-Jan-08 

PBGC Interest Factors 

First 20 

Years 5.37% 5.42% 5.42% 

Thereafter 5.04% 4.49% 4.49% 

Part II •• Underfunding Details (in dollars) 

Assets $21,622.103 $21,622,103 $21,643,430 

As of date for assets 12/31/2007 12/31/2007 12/3112007 

Source 2007 Sch H 2007 Sch H 1/1/2008 AVR 

Estimated Unfunded Benefit Liability -

UBL 

Retired $24,263,677 $24,191,354 $25,668,368 

Terminated Vested $3,819,160 $3,823,943 $11,322,643 

Active $9,962,058 $9,984,750 $770,427 

Expenses $526.678 

Total $38,570,036 $38,526,725 $38,281,125 

UBl $16,947,933 $16,904,622 $16,637,695 

Change from Column (1) ($43,311 ) ($310,238) 

Part III - Number of Participants at Plan Valuation Date 

Total 1,109 1,109 1,061 
The Appeals Board also obtained two additional worksheets that each use a January 1, 

2008 valuation date. These additional worksheets show the Bendix Plan's UBLs under the 

assumption that the Bendix Plan did not provide for supplemental benefits. The amounts without 

supplemental benefits are: (1) $16,373,298.00, if the 2007 AVR and the 2007 Schedule SB are 

used; and (2) $16,442,923.00, if the 2008 A VR and the 2.008 Schedule SB are used. Since the 

Bendix Plan provides for supplemental benefits, we did not use the calculations without 

supplements in determining Bendix's section 4062(e) liability amount. 65 

We are providing you with copies of the following documents that relate to the 

calculations: 

• a "Summary ofUBL Results" (Enclosure 3); 

• Worksheets showing UBLs calculations based on a January 1, 2008 valuation date and 

information in the 2007 A VR and the 2007 Schedule SB. Enclosure 4 shows the UBLs 

calculations with supplements, and Enclosure 5 shows the calculations without 

supplements; and 

• Worksheets showing UBLs calculations based on a January 1, 2008 valuation date and 

information in the 2008 A VR and the 2008 Schedule SB. Enclosure 6 shows the UBLs 

calculations with supplements, and Enclosure 7 shows the calculations without 

supplements. 

As is stated in the "Discussion of Results" in Enclosure 3, the liabilities shown in Column 

(3) in the above table are based on the following assumpti'Jns that are favorable to Bendix: 

• The 2008 A VR does not specifically state the eligibility provisions for the special early 

retirement benefit (unreduced benefit and supplement payable to age 65), but in all three 

calculations we assume a participant must be age 60 with 10 years of service (the same as 

for early retirement); 

• Page 5 of the attachment to the 2008 Schedule SB states that "the special early retirement 

benefit has been excluded from the valuation." During 2007, 6 employees retired from 

active service but it is unclear whether they retired as a result of the shutdown. If they 

did retire due to the shutdown, it is unclear whether the actuary included their special 

early retirement benefits in the valuation liabilities. If the benefits were not included, the 

liabilities would increase. 

65 On page 5 of your Appeal Supplement, you refer to a PBGC "discussion notes" document that PBGCs 

Disclosure Officer provided to you on March I, 2011. The docwnent you refer to indicates that DISC had 

calculated UBLs both with and without supplemental benefits. You requested an explanation of a "comment" that 

appears on the docwnent. 

As discussed above, we decided that Bendix's section 4062(e) liability includes supplemental benefits. We also' 

have recalculated Bendix's liability. For these reasons, we concluded it is unnecessary to provide you with an 

explanation of a "comment" that refers to a calculation of supplemental benefits by DISC's actuaries. Please note 

that we are providing, as exhibits to this appeal, worksheets that show our calculations both with and without 

supplemental benefits. 

27 
• As of 11112007, there were } 5 active participants who were age 60 with 10 years of 

service. The participant reconciliation shows 6 active participants retired during 2007. 

As of 111/2008, there are 3 active participants who are age 60 with 10 years of service. 

Therefore, we conclude that there are at least 6 active participants (15 minus 6 minus 3) 

(and probably more since some of the participants age 55-59 shown in the 1/112007 

valuation likely turned 60 by 12/31/2007) who are included as terminated vested 

participants but may actually be entitled to special early retirement benefits as of 

111/2008. If they are entitled, the liability would be higher. 

The Appeals Board, based on the above-discussed calculations, found that the Bendix 

Plan's UBLs, as of January I, 2008, and using assumptions that are favorable to Bendix, are 

$16,637,695.00. 

The Board further found no reason to change PBCC's determination that the fraction by 

which the VBLs amount should be multiplied is one. As previously stated, the fraction of one 

reflects that: (1) 63 participants were separated from employment as a result of the cessation of 

operations at the Frankfort facility, and (2) those 63 employees were all of the active participants 

in the Bendix Plan just prior to the cessation-of-operations date. 66 Accordingly, the Appeals 

Board determined that Bendix's sections 4062(e) liability amount is $16,637,695.00. 

III. OUR RESPONSE TO ADDITIONAL REQUESTS IN YOUR APPEAL 

In your appeal, you made several requests that primarily are procedural. Your requests 

and our responses are as follows: 

• You ask the Appeals Board to remand this case to the department that issued the 

initial determination with specific instructions to recalculate the amount of liability in 

accordance with applicable law, with that department to issue a revised initial 

determination to Bendix in accordance with 29 CFR part 4003 that Bendix would 

have the right to appeal. AB at 34. 

Our Re§J!.Q1l§!l: For the reasons discussed abov(:, the Appeals Board determined that 

Bendix is liable to PBGe under section 4062(e). To expedite the processing of your appeal, the 

Appeals Board further has recalculated, with the assistance of enrolled actuaries, the section 

4062( e) amount. Having decided all of the issues that were raised in your appeal and the amount 

of liability, the Appeals Board concluded that there is no need to remand this matter to the 

department that issued the initial determination. 

• You request the Appeals Board to notify Bendix if the Appeals Board shares this 

appeal with any other PBGC department, including the department that issued the 

initial determination. You state that this request is "in the interest of ensuring a fair 

and independent review of this matter.1! AB at 34. 

66 PBGC's regulation provides that the denominator for the liability calculation is the "total number of the 

employer's current employees, as determined immediately before the cessation of operations, who are participants 

under the plan." 29 C.F.R. § 4062.8(a)(2). In this decision, "active participant" refers to an individual who is (as of 

a particular date) both a current employee of the employer and a parti<:ipanr under the Bendix Plan. 

28 
• You also request that, if there are any communications or submissions to the Appeals 

Board from any other PBGC department relating to this appeal, Bendix be provided 

with all such communications and submissions and be afforded an opportunity to 

respond. AB at 34. 

Our Res12onse: The Appeals Board declines tt:ese requests. The rules governing 

administrative review of agency decisions are found in part 4003 of PBGC's regulations. The 

regulations provide, among other things, that the Chairperson of the Appeals Board "shall 

designate the three officials who will constitute the Appeals Board with respect to a case, 

provided that a person may not serve on the Appeals Board with respect to a case in which he or 

she made a decision regarding the merits of the determination being appealed." 29 CFR 

§ 4003 .2 (emphasis added). Such was the case here. Your appeal was decided by the 

undersigned and two other Appeals Board members, none of whom were involved in issuing the 

initial section 4062(e) determination. 

PBGC regulations also provide that, in reaching its decision, "the Appeals Board shall 

consider those portions of the file relating to the initial determination, all material submitted by 

the appellant and any third parties in connection with the appeal, and any additional information 

submitted by PBGC staff." 29 C.F.R. § 4003.59(a). The regulations further state that the 

Board's decision "shall be in writing, specifY the relief granted, if any, state the bases for the 

decision, including a brief statement of the facts or legal conclusions supporting the decision, and 

state that the appellant has exhausted his or her administrative remedies." 29 C.F.R. 

§ 4003.S9(c). The regulations accordingly delineate the information the Board may consider and 

the requirements for an Appeals Board decision. The Appeals Board has followed PBGC's 

regulations in deciding your appeal. 

The regulations, however, do not require the Appeals Board to provide an appellant with 

an "opportunity to respond" to any information or submissions that the Appeals Board obtains 

before the Board renders its decision. Nor do the regulations require the Appeals Board to notify 

an appellant if the Board provides a copy of an administrative appeal to PBGC staff. 

Finally, the Appeals Board notes that, subject to certain limitations contained in FOIA 

and the Privacy Act, your administrative appeal became subject to disclosure both inside and 

outside of the agency after you filed it with the Appeals Board. 

• You request the Appeals Board: (I) determine whether PBGC has any other 

documents relevant to the section 4062( e) hability determination; and (2) either 

provide Bendix with copies of those documents or with confirmation that none exist. 

You state that you received a "discussion notes" document only three days before you 

filed your March 4,2011 supplemental appeal, and that document "leads to a logical 

inference that other documents may exist." AB Supp. At 5-6. 

Our Res12onse: PBGC's Disclosure Officer is r,~sponsible for processing all of your 

requests for information on behalf of Bendix. Appeals Board personnel, as well as other PBGC 

employees, work with the Disclosure Officer to ensure that you are provided with the 

information you are entitled to receive under applicable law. We note that, in reviewing your 

29 
appeal, the Appeals Board has examined a number of PJ3GC documents, and, when they are 

relevant to the issues you have raised, has discussed them in this decision. To the extent you are 

suggesting that the Appeals Board has an additional obli!;i;ation to search for documents and to 

provide them to you, we disagree with your view and, accordingly, deny your request. 

Decision 

The Appeals Board has reviewed your appeal of PBGC's detennination that Bendix had 

incurred liability, in the amount of $16,947,933.00, under ERISA section 4062(e). For the 

reasons explained in this decision, the Board decided: (1) January I, 2008 is the correct date for 

valuing Bendix's liability under section 4062(e), rather than the December 31, 2007 date that 

PBGC used; and (2) the information in the Bendix Plan's January 1, 2008 actuarial valuation 

report ("AVRil) and in the Bendix Plan's 2008 Form 5500 Schedule SB filing with the IRS 

should be used in computing Bendix's liability. 

The Appeals Board further decided that, based on the January I, 2008 valuation date, the 

2008 AVR, and the 2008 Schedule SB, Bendix's liability under section 4062(e) is 

$16,637,695.00, which is $310,238.00 less than the amoun': PBGC initially determined. 

In all other respects, your appeal is denied for the reasons explained in this decision. This 

decision is PBGC's final Agency action with respect to Bendix's section 4062( e) liability. 

Bendix, accordingly, has exhausted its administrative remedies. Bendix, if it wishes, may seek 

review of this decision in federal court. 

Sincerely, 

~V~

Charles W. Vemon 

Appeals Board Chair 

30