,v~ 

PBGC

Protecting America'• Penaiona 

Pension Benefit Guaranty Corporation 

I ZOO K Street, N.W., Washington, D.C. Z0005-40Z6 

December 31, 2013 

Re: Appeal 2013c=]; 

PBGC Case Number: L______j 

Plan Name: Munksjo Paper Inc. Retirement Plan (the "Munksjo Plan" 

or the "Plan") 

Dear Messrs. L________________~ 

This Appeals Board decision responds to the appeal you filed on behalf of 

your client Munksjo Paper Inc. ("Munksjo") regarding PBGC's January 17, 2013 

determination. PBGC's determination letter stated that Munksjo has incurred 

liability in the amount of $3,616,679 under section 4062(e) of the Employee 

Retirement Income Security Act of 1974 ("ERISA") with respect to the Munksjo 

Plan. 1 For the reasons we explain below, the Board found that your appeal did not 

provide a sufficient basis for changing PBGC's determination; we must, therefore, 

deny your appeal. 

Introduction 

Section 4062(e) provides financial protection for pension plans, their 

participants, and PBGC. The section 4062(e) liability arises when two conditions 

are met: (1) "an employer ceases operations at a facility in any location;" and 

(2) "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 

ERISA § 4062(e) ("section 4062(e)") is codified at 29 United States Code ("U.S.C.") 

§ 1362(e). In this decision, we will cite to ERISA and omit parallel citations to its 

codification in the U.S.C. 
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maintained by him are separated from employment." 2 These are strict criteria. 

Individual factors such as the financial condition of the sponsor or the plan's 

funding level are not relevant in determining liability. PBGC may, however, take 

such factors into account in its enforcement decisions. The Appeals Board reviews 

only determinations of liability under section 4062(e). 

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

liability by placing the amount owed in escrow with PBGC. 3 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." 5 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 period, the escrow will be refunded to the employer, without interest, or 

the bond is cancelled? 

PBGC's Determination 

PBGC's January 17, 2013 determination notified Munksjo that it had incurred 

liability under section 4062(e) in the amount of $3,616,679 because it met the 

statutory criteria for the following reasons: 

• 	

• 	

2 	

3 	

4 	

5 	

6 

7 	

Munksjo ceased manufacturing operations at the Fitchburg, 

Massachusetts, facility on June 27, 2009; and 

As a result of the cessation of manufacturing operations at the 

Fitchburg facility, 76.99 percent of the total number of Munksjo's 

employees who were participants in the Munksjo Plan were separated 

from employment. 

PBGC's determination further states that Munksjo may satisfy its liability 

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

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

which section 4062(e) liability is incurred. See 29 Code of Federal Regulations 

("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. 

ERISA§ 4063(b). 

ERISA § 4063( c). 

ERISA§ 4063(c)(3). 

Id. 

ERISA§ 4063(c)(2). 
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PBGC, or, alternatively, by posting a bond for up to 150 percent of the section 

4062(e) liability. PBGC also informed Munksjo that, in appropriate cases, PBGC has 

the authority to consider alternative arrangements for satisfying the section 

4062(e) liability. 

Finally, PBGC's January 17, 2013 determination notified Munksjo that the 

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

Subpart D: Administrative Appeals. As Munksjo filed a timely appeal, PBGC has 

taken no further action with respect to Munksjo's liability under section 4062(e) 

while this appeal has been pending. 

Your Appeal 

On September 6, 2013, you filed a 70-page appeal brief ("Appeal Brief" or 

"Appeal") that requests that the Appeals Board: (1) reverse PBGC's January 17, 

2013 determination and issue a final agency determination that Munksjo has no 

liability under section 4062(e); (2) refer this matter to PBGC's Director, with a 

recommendation that the Director exercise his discretion to decide not to enforce 

section 4062(e) liability against Munksjo; or (3) remand the matter to the PBGC 

department that issued the initial determination, with instructions to "recalculate 

the liability amount in accordance with applicable law." Appeal at 2. 

Your September 6, 2013 Appeal Brief includes three general topics, under 

which you raise several more specific issues. We list below the three general topics 

in your appeal. 

1. 	

2. 	

3. 	

Did Munksjo cease operations at a facility within the meaning of 

section 4062(e)? (Appeal at 34-50) 

Should PBGC seek to enforce section 4062(e) liability in this case 

without a final regulation in force? (Appeal at 50-56) 

Is the liability formula In PBGC's regulation, in general or as applied 

to Munksjo, contrary to law? (Appeal at 56-68) 

The Appeal also asserts that: (a) PBGC should not enforce the section 

4062( e) liability without evidence of a substantial threat to participants or to PBGC, 

(b) PBGC did not comply with its own regulations in determining the amount of the 

liability, and (c) there are calculation errors that should be corrected. 

After you received documents pursuant to Freedom of Information Act 

("FOIA") requests, you filed supplements to your appeal on November 5, 2013, and 

December 17, 2013. The first supplement to the Appeal concerns the following: 

(a) the legal standard for judicial review, (b) a request for an in camera review of 

documents withheld from the response to a FOIA request, and (c) records reflecting 

communications to the Appeals Board. The second supplement to the Appeal 

discusses additional funding contributions made to the Plan in excess of the 

minimum contributions required for the 2013 plan year. 
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Background 

1. Corporate and pension plan history. 

Munksjo AB was a manufacturer and retailer of specialty paper and pulp 

products based in Stockholm, Sweden, at the time when the events leading to the 

issuance of PBGC's determination letter occurred. 8 Munksjo AB did business in the 

United States specialty paper market through Munksjo, its United States subsidiary. 

According to your Appeal Brief, from 1996 to 2008, Munksjo was engaged in the 

business of manufacturing and selling specialty decor paper products from its 

facility in Fitchburg, Massachusetts. Munksjo AB employed approximately 3,000 

employees throughout its facilities in Europe and North America. 

Hourly and salaried employees at the Fitchburg location earned benefits 

under the Munksjo Plan, a qualified single-employer defined-benefit plan sponsored 

by Munksj6. According to your Appeal Brief, the Plan was largely a product of 

collective bargaining between Munksjo and its employees' union, Teamsters Local 

No. 170. In 2007, Munksjo froze benefit accruals under the Plan and instituted a 

401(k) plan for its Fitchburg employees. 

2. 	 The cessation of manufacturing operations at Munksjo's Fitchburg 

facility. 

In 2008, Munksjo experienced both a decline in demand for its products and 

an increase in production costs due to rising oil prices. In March of that year, 

Munksjo AB and Munksjo developed a plan to cut costs and improve Munksjo's 

operations. Munksjo continued, however, to experience losses in 2008. Ultimately, 

Munksjo AB decided on October 29, 2008, that Munksjo would cease all decor paper 

manufacturing operations at the Fitchburg facility. 

On April 21, 2009, Munksjo notified its employees that manufacturing 

operations at the Fitchburg facility would terminate. Subsequently, on June 27, 

2009, Munksjo ceased manufacturing operations and terminated its manufacturing 

employees. Munksjo did not resume manufacturing operations after that date; 

however, its European parent company, Munksjo AB, resumed those operations at 

its ongoing European plants. 

On May 27, 2013, Munksjo AB and Ahlstrom Corporation's Label and Processing 

Business merged to form a new corporation named Munksjo Oyj. We note that "AB" 

is an abbreviation of "aktiebolag," which is the Swedish term for a corporation. "Oyj" 

is an abbreviation of "julkinen osakeyhtio," which is the Finnish term for a publicly 

traded corporation. 

8 
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3. 	 Relevant statutory orovisions. 

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 

substantial 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 4063. 

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 substantial 

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. "

9 

While (as discussed below) the requirements in ERISA section 4063 are important 

with respect to your appeal, ERISA sections 4064 and 4065 do not appear to impact 

upon the issues you have raised. 10 

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 

g 	 Under section 4001(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 the 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. 

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. 

10 
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facility (as defined in section 4062(e)) is "analogous/ but not "equivalent/ to a 

withdrawal from a multiple employer plan. 11 

Under section 4063, if a section 4062(e) event occurs: 

• 	

• 	

The employer must 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; 12 and 

Any amount collected by PBGC shall be held in escrow. 13 In the 

alternative, the employer may be required to furnish a bond to PBGC 

in an amount not exceeding 150 percent of the liability . 

14 

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, PBGC "may also 

determine such liability on any other equitable basis prescribed by the [PBGC] in 

regulations." 

c. 	 The duration and end of section 4062(e) liability. 

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 terminates under [ERISA] 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. 

11 	 71 Fed. Reg. 34,819, 34,821 (June 16, 2006). 

12 	 ERISA § 4063(a). 

13 !d. 

14 	 ERISA§ 4063(c). 
- 7 ­

d. Alternative arrangements for satisfying section 4062(e) liability. 

ERISA section 4067 authorizes PBGC 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, PBGC 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, 

PBGC and employers often agree on "alternative arrangements" for section 4062(e) 

liability under which additional funding contributions are made to pension plans. 

4. Regulations and Enforcement Program. 

Section 4062( e) was included in the original 1974 version of ERISA. In 

2006, PBGC exercised its authority under section 4063 and promulgated a final 

liability calculation rule for section 4062( e). From 2006 to 2010, PBGC negotiated 

settlements in 37 enforcement actions under section 4062(e) for more than $600 

million. 

In 2010, PBGC decided to "clarify the meaning of statutory terms used to 

describe when an event covered by section 4062(e) occurs" through a proposed 

section 4062(e) regulation. 75 Fed. Reg. 48283, 48284 (Aug. 10, 2010). The 

proposed regulation sought to clarify PBGC's interpretation of several terms in the 

statute. For example, it explained PBGC's position that a section 4062(e) cessation 

of operations occurs when an employer ceases a single operation - an 

"organizationally, operationally, or functionally distinct unit of an employer." 75 

Fed. Reg. 48285. The proposed regulation also indicated that "section 4062(e) may 

apply to an employer's cessation of an operation at one facility even if the employer 

continues or resumes the operation at another facility." !d. The 2010 proposed 

regulation has not become a final regulation. 

On November 2, 2012, PBGC established a "4062(e) Enforcement Pilot 

Program." Under this program, PBGC focuses its 4062(e) enforcement efforts on 

plan sponsors who present the greatest risk of plan termination. 

Discussion 

1. Did Munksjo cease operations at a facility within the meaning of 

section 4062(e)? (Appeal at 34-50) 

Liability under ERISA section 4062(e) is incurred when: (1) an employer 

ceases operations at a facility in any location," and (2) "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." (Emphasis added.) 
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a. 	 Section 4062(e) does not require that "all operations" cease at a facility in 

order for a section 4062(e) event to occur. 

In your appeal, you state the following reasons why Munksj6 should not be 

held liable under section 4062(e): 

• 	 You assert that Munksj6 did not cease operations under section 

4062( e) because it terminated only its "paper production" activities at 

the Fitchburg facility, which was just one part of the "operations" 

conducted there. Appeal at 34-38. 

• 	 You assert that the transfer of the paper manufacturing operations 

from the Fitchburg facility to affiliated facilities in Europe did not result 

in a cessation of the paper manufacturing operations at the Fitchburg 

facility. Appeal at 38-39. 

• 	 You assert that although Munksj6 ceased paper manufacturing 

operations at the Fitchburg facility on June 27, 2009, Munksj6 

continued other operations (namely, sales and support operations) at 

the Fitchburg facility. Appeal at 40. 

• 	 You assert that PBGC's determination that a section 4062(e) event 

occurred despite the fact that sales and support operations continued 

at the Fitchburg location is "inconsistent with the plain meaning" of 

section 4062(e) and its legislative history. Appeal 40-48. 

Several of your arguments relate to the plain language of section 4062( e). 

You claim that the statute's plain meaning conflicts with PBGC's interpretation of 

section 4062(e) and its application to Munksjo's cessation of manufacturing 

operations at the Fitchburg facility. The Appeals Board, however, disagrees with 

your reading of the "plain meaning" of section 4062( e). We find nothing in the 

language of section 4062(e) to support your claim that an employer must cease all 

significant operations at a facility for 4062(e) liability to arise. Indeed, if Congress 

had intended the cessation of "all" operations at a facility to be required for 4062(e) 

liability to arise, it could have easily so specified. 

As a general rule, statutory language, unless otherwise defined, is to be 

given its ordinary, common meaning. See, e.g., Summit Valley Indus., Inc. v. Loc. 

112, United Bhd. Of Carpenters & Joiners of Am., 456 U.S. 717, 722 (1982); see 

also Roberts v. Sea-Land Services, Inc., 132 S. Ct. 1350, 1358 (2012) (stating "in 

construing ... any statute, we first look to its language, giving the words used 

their ordinary meaning."). In the case of section 4062(e), the term "operations" is 

not defined. In common usage, the term can apply to both a plural and singular set 

of activities. 

Although you claim that the legislative history does not support PBGC's 

interpretation of the term "operations" in section 4062(e), you cite no portion of the 
- 9 ­

legislative history and the Appeals Board found nothing in the legislative history 

that indicates the term "operations" was intended to mean "all operations." 

In finding that a section 4062(e) event occurred when the manufacturing 

operations at the facility in Fitchburg ceased, PBGC concluded that manufacturing 

operations are "operations" under the common, ordinary meaning of the term. 

Thus, section 4062(e) applies to the Munksjo Plan due to (1) the cessation of those 

operations at the facility in Fitchburg; and (2) the accompanying 76.99% decrease 

in the number of active employees who were participants in the Munksjo Plan. The 

fact that sales and support operations at the Fitchburg facility continued after the 

cessation of the manufacturing operations has no bearing on the application of 

section 4062(e) to the Munksjo Plan. The Appeals Board finds PBGC's application of 

section 4062( e) to the cessation of manufacturing operations at the Fitchburg 

facility is firmly based on a straightforward reading of the language of section 

4062(e). 

PBGC's interpretation of "operations" is also consistent with the federal rules 

of statutory construction set forth in the Dictionary Act. Specifically, 1 U.S.C. § 1 

provides as follows: 

In determining the meaning of any Act of Congress, unless the context 

indicates otherwise ... words importing the singular include and apply 

to several persons, parties or things; words importing the plural 

include the singular. (Underlining added for emphasis.) 

As this provision indicates, singular and plural terms in a statute can be understood 

to include their counterparts when permitted by the statute's context and purpose. 

See, e.g., A.F. Stoddard & Co., Ltd. v. Dawn, 564 F.2d 556 (D.C. Cir. 1977) 

(holding that a patent statute allowing joint inventors to correct and resubmit 

patent applications containing harmless errors also applies to single inventors 

pursuant to 1 U.S.C. § 1). 

In previous instances, courts have found that federal agencies may freely 

substitute singular for plural terms in a statute. For example, in Soto-Hernandez v. 

Holder, 729 F.3d 1 (1st Cir. 2013), the First Circuit considered whether it was 

appropriate for the Department of Homeland Security ("DHS") to seek removal of 

an illegal alien for unlawful "trafficking in firearms." Although the alien in that case 

had been convicted of unlawfully selling a sfngle firearm, the court held that under 

the Dictionary Act, the statutory term "firearms" could apply to the singular term 

"firearm." Id. at 5. The court found nothing in the removal statute that would 

suggest that Congress specifically required only a plural construction, and 

therefore, DHS's interpretation of the statutory term "firearms" was permissible. 

!d. 

Similar to the statute in question in Soto-Hernandez, the Appeals Board 

found nothing in the context or purpose of section 4062(e) that would preclude 

application of the Dictionary Act's general rule of construction and PBGC's use of 

the term "operation" for the plural "operations." Moreover, we believe that PBGC's 
- 10 ­

interpretation of the term "operations" to include a single operation furthers the 

evident Congressional goals in enacting this provision. 

It is clear that Congress included section 4062(e) in ERISA to provide PBGC 

with security when an employer experiences an event that makes plan termination 

more likely. An interpretation of the term "operations" to mean "all operations" 

would allow employers to cease all meaningful operations at a facility but avoid 

liability by retaining one or two employees in ancillary operations such as security 

or maintenance. Such an interpretation of the statute would frustrate Congress's 

intent of protecting PBGC from assuming large, unfunded liabilities of plan sponsors 

after plan terminations. 

Moreover, because liability arises under section 4062( e) only if the employer 

both ceases operations at a facility and terminates more than 20 percent of the 

plan's participants, the statute naturally distinguishes those events that Congress 

deemed to constitute a risk to a plan from those that do not. It appears irrelevant 

to the Appeals Board whether there is a cessation of "all" operations or a cessation 

of a single "operation" because, in either event, a substantial number of the 

participants have been terminated and a substantial risk to the plan exists. If an 

employer ceases an operation but retains more than 80% of its employees who are 

participants in the plan, section 4062(e) does not apply. Thus, the statute naturally 

limits PBGC's enforcement authority to only those circumstances in which a true 

potential threat is presented to the plan. 

For the above reasons, the Appeals Board found that a section 4062(e) event 

occurred in 2009 despite the continuation of non-manufacturing operations at the 

Fitchburg facility. 

b. Relocations of operations fall within the scope of section 4062(e). 

In your appeal, you claim that the "transfer" or "relocation" of the paper 

manufacturing operations from the Fitchburg facility to other facilities in European 

locations run by Munksjo's European affiliate, did not result in a cessation of the 

paper manufacturing operations at the Fitchburg facility. Appeal at 38-39. You rely 

in your appeal on an early PBGC Opinion Letter- 77-134- for the proposition that 

relocations of operations do not fall within the purview of section 4062(e). 

We note that the terms of section 4062(e) do not provide any exceptions for 

cessations of operations that result from a transfer or relocation of operations. 

Under the plain statutory language, section 4062(e) applies whenever an employer 

"ceases operations at a facility in any location" and as a result, more than 20 

percent of the participants in a plan sponsored by the employer are separated from 

service. (Emphasis added.) 

We note also that section 4062( e) does not distinguish between a temporary 

cessation, a permanent cessation, or a relocation of operations. There is no 

exception for plan sponsors who cease operations at a facility but later resume 

them elsewhere. Thus, under the plain terms of section 4062(e), liability may arise 
15 

- 11 ­

when an employer temporarily ceases operations and transfers those operations 

from one facility to another and more than 20 percent of the plan's participants are 

separated from service. 

Furthermore, the Appeals Board found that your reliance on Opinion Letter 

77-134 is misplaced. Opinion Letter 77-134 addressed whether a particular plan 

sponsor's relocation of a particular plant within a metropolitan area, and the 

resulting reduction of 20 percent of employees covered by a plan, would constitute 

a section 4062(e) cessation of operations. The Letter concluded that under the 

facts presented in that case, there was "neither a termination of the Plan under 

Title IV of the Act nor do the provisions of Sec. 4062(e) of the Act apply." 

The facts surrounding the cessation of Munksjo's paper manufacturing 

operations at the Fitchburg facility are materially different from the facts considered 

in Opinion Letter 77-134. In Opinion Letter 77-134, the operations in question 

were relocated in the same geographical location. Munksjo did not transfer 

manufacturing operations to any other facility in the geographical area of Fitchburg, 

Massachusetts. The fact that Munksjo AB, Munksjo's European parent company, 

resumed some of the manufacturing operations in Europe is irrelevant in 

determining whether Munksjo ceased its paper manufacturing operations in 

Fitchburg. 15 

For the reasons explained above, the Appeals Board has concluded that the 

advice offered in Opinion Letter 77-134 is not applicable to Munksjo's cessation of 

its paper manufacturing operations at the Fitchburg facility. 

c. Conclusion. 

For the reasons we cited above, the Appeals Board has concluded that 

PBGC's application of section 4062( e) to Munksjo's cessation of paper 

manufacturing operations at its Fitchburg facility was in accordance with a 

straightforward interpretation of the language of section 4062(e), and thus the 

determination was consistent with the plain meaning of the statute. The Appeals 

Board found no reason to change PBGC's determination that Munksjo is liable under 

ERISA section 4062( e). 

We note that PBGC is not precluded from changing the conclusion reached in Opinion 

Letter 77-134 through adjudication or otherwise. It is a well-established principle of 

administrative law that an agency is permitted to change its position if it supplies a 

"reasoned basis" for the change. See Motor Vehicle Mfrs. Ass'n v. State Farm Mut. 

Auto Ins. Co., 463 U.S. 29, 43 (1983). As the Supreme Court has stated, 

"regulatory agencies do not establish rules of conduct to last forever ... and ... 

must be given ample latitude to adapt their rules and policies to the demands of 

changing circumstances." !d. (internal citations omitted). And "an agency is free to 

alter its past rulings and practices even in an adjudicatory setting" if it "provides a 

reasoned explanation for. any failure to adhere to its own precedents." See also 

Hatch v. FERC, 654 F.2d 825, 834 (D.C. Cir. 1981). As discussed, in this case it is 

not necessary for the Appeals Board to consider whether the conclusion in Opinion 

Letter 77-134 should continue to apply. 
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2. 	 Should PBGC seek to enforce section 4062(e) liability in this case 

without a final regulation in force? {Appeal at 50-56) 

In your appeal, you claim that Munksjd did not have fair notice of PBGC's 

interpretation of section 4062(e) at the time the section 4062(e) event occurred. 

PBGC has been actively enforcing section 4062(e) liability since its liability 

calculation rule became final in 2006. The Appeals Board has no reason to believe, 

and your Appeal Brief provided no argument to suggest, that PBGC treated Munksjd 

differently from other employers who incurred section 4062{e) liability. As we 

found above, PBGC's determination of Munksjd's section 4062( e) liability was the 

result of a straightforward application of the terms of section 4062(e). Thus, the 

Appeals Board has found that the language of section 4062{e) itself provided 

sufficient notice to Munksjd of its potential liability under section 4062{ e). 

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

to Munksjo, contrary to law? {Appeal at 56-68) 

Your appeal contains several arguments based on issues relating to the 

validity and reasonableness of PBGC's section 4062(e) regulation and PBGC's use of 

estimation procedures to determine Munksjo's section 4062( e) liability in 

accordance with the liability formula in PBGC's 2006 regulation. You also 

questioned the validity and reasonableness of the liability formula as it applies to 

Munksjd, based on a letter you submitted with the Appeal from Munksjo's actuary, 

which cited calculation errors with respect to specific participants. 

In your appeal, you recognized that the same issues regarding the validity 

and reasonableness of PBGC's regulation were raised by the appellant and 

answered by the Appeals Board in the Bendix16 decision. 

We address your arguments concerning the liability calculation below. 

a. 	 It is appropriate and necessary for PBGC to use its estimation procedures 

based on non-seriatim data (gross participant data) in calculating the section 

4062(e) liability to avoid undue delay. 

As the Appeals Board said in Bendix, PBGC's regulation was promulgated by 

notice-and-comment rulemaking. Through this process, PBGC invited interested 

parties to submit comments concerning its proposed rule. 17 PBGC further 

16 	 http://www. pbgc.gov/Documents/apbletter/Decision--Bendix-Commercial- 2011-08­

08.pdf. 

17 	 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 

http: I/www. pbgc.gov/Documents/section4062_ERISA. pdf. 
- 13 ­

considered the comments it received before it issued its final regulation. 18 In the 

Bendix decision, the Appeals Board concluded that it lacks the authority to review 

the validity or the reasonableness of a regulation issued through notice-andcomment rulemaking. The Appeals Board finds no reason to deviate from that 

conclusion in this Appeal. 

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 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 Munksj6. 

As the Appeals Board explained in Bendix, section 4062(e) is inherently 

different than PBGC's claims for employer liability under section 4062(b) of ERISA, 

which are calculated according to the procedures outlined in PBGC's Actuarial 

Technical Manual (the "Manual"). Unlike section 4062(b), nothing in ERISA or 

PBGC's regulations require PBGC to use the Manual's procedures or perform 

participant-by-participant calculations in determining liability under section 

4062(e). Bendix at 20. The decision explained as follows: 

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

the following significant ways: (1) section 4062(e) requires a liable 

employer [to] 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 that 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 cancelled; and (3) even if the plan terminates within the fiveyear 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 owed to PBGC, and the 

plan's trustee as of the termination date. 

Id. at 21. 

These obvious differences negate the need for PBGC to perform a precise 

analysis of a plan's underfunding when calculating liability under section 4062( e). 

As the Appeals Board explained in Bendix, PBGC "must be able to determine section 

4062(e) liability without undue delay." Id. Since the valuation procedures set forth 

in the Manual can often take several years to complete, it is not practicable for 

PBGC to perform such valuations when assessing section 4062(e) liability. 

Furthermore, in the event the plan terminates within the five years that the section 

4062(e) liability is held in escrow, any amounts in excess of that needed to fully 

satisfy the plan's benefit obligations will be returned to the plan sponsor. For these 

18 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. 
- 14 ­

reasons, PBGC need not determine section 4062(e) liability under the precise 

methods set forth in the Manual. 

b. 	 It is not appropriate to offset PBGC's section 4062(e) liability amount by the 

amount of a potential future claim under section 4062(e) that may never 

exist. 

Your Appeal states that PBGC's Valuation and Allocation of Recoveries Policy 

(the "Valuation Policy") in section 8.2-1 of the PBGC Operating Policy assigns 

different values for the separate claims PBGC asserts against a plan sponsor after 

plan termination. Upon the termination of a plan, PBGC asserts claims for both a 

plan's Unfunded Benefit Liabilities and Due and Unpaid Employer Contributions 

("DUEC"). DUEC claims are for unpaid, mandatory employer plan contributions 

under section 4062(c). The method by which PBGC values these claims affects 

PBGC's allocation of a plan's assets under ERISA section 4044 and PBGC recoveries 

under section 4022( c). Your Appeal claims that the section 4062( e) liability should 

be offset by a claim under 4062(c). 

While the Valuation Policy provides that PBGC should consider its section 

4062(c) claims "plan assets," the policy does not require PBGC to offset an 

employer's section 4062(e) liability by this amount. It is illogical to reduce 

Munksjo's 4062(e) liability, which it incurred on June 27, 2009, the date on which 

operations ceased at the Fitchburg facility, by a contingent claim that may never 

occur. Moreover, if the Plan were to terminate within the five-year period in which 

the section 4062(e) liability funds were held in escrow, those amounts would be 

used to offset the PBGC's 4062(c) claims. As in Bendix, the Appeals Board rejects 

your claim that 4062(e) liability should be reduced by a plan's 4062(c) claim. 

c. 	 To adjust PBGC's section 4062(e) liability amount using data for individual 

participants would require PBGC to perform its own seriatim valuation and 

would result in undue delay. 

Your Appeal Brief asserts that even if it is appropriate for PBGC to use its 

estimation procedures based on non-seriatim data, PBGC should nonetheless 

change its section 4062(e) liability calculation to make corrections based on 

calculations for certain individual participants. 

The Appeals Board found that PBGC properly based its calculation of 

Munksjo's section 4062( e) liability on the Plan's last actuarial valuation report that 

was issued before the section 4062(e) event occurred. As the Appeals Board 

explained above and in Bendix, PBGC has determined that it must calculate the 

section 4062(e) liability based on non-seriatim data so as to minimize the time it 

takes to calculate the section 4062(e) liability amount. 

In order to evaluate your actuary's suggested corrections based on 

calculations for individual participants and actual individual payments to 

participants, PBGC would need to abandon its calculation rules and instead perform 

individual calculations for every participant in the Plan. Thus, the Appeals Board 
- 15 ­

has concluded that applying your suggested adjustments to Munksjo's section 

4062(e) liability would be inappropriate. The Appeals Board has, therefore, found 

no reason to adjust Munksjo's section 4062(e) liability based on your actuary's 

suggested changes. 

d. 	 Conclusion. 

Based on our discussion above, the Appeals Board found that PBGC's 

regulation is, in general, and as applied to Munksjo, not contrary to law. 

4. 	 Liability vs. Enforcement. 

Your Appeal raised concerns regarding PBGC's decision to enforce the section 

4062(e) liability against Munksjo. As discussed above, the liability arises when two 

strict conditions are satisfied. Although PBGC has discretion regarding whether to 

enforce the liability, the Appeals Board reviews only the liability determination. 

a. 	 Whether the Appeals Board should refer this case to PBGC's Director, with a 

recommendation that the Director exercise his discretion to decide not to 

enforce section 4062(e) liability against Munksjo. 

While the Appeals Board does have authority to refer matters to PBGC's 

Director, the Appeals Board has decided that it would not be appropriate to do so in 

this case. We note that the Appeals Board rarely refers appeal matters to PBGC's 

Director, and we found nothing exceptional about the facts in this case that warrant 

granting your request. 

b. 	 Whether PBGC should cease enforcement activities because the five-year 

security period is nearing its end. 

You argue in the Appeal that PBGC should exercise its discretion not to 

enforce section 4062(e) liability in this case because the five-year security period 

under that section is nearing its end. Whether PBGC enforces section 4062( e) 

liability is beyond the scope of PBGC's determination and is beyond the authority of 

PBGC's Appeals Board. 

While the Appeals Board cannot determine whether PBGC will enforce liability 

in this case, the Appeals Board believes that it would be reasonable for PBGC to 

enforce section 4062(e) liability regardless of the amount of time that has elapsed 

since the section 4062( e) event occurred. If PBGC discontinued enforcement in 

such circumstances, employers would be encouraged to pursue delays in the final 

determination of 4062(e) liability by (1) artificially prolonging negotiations 

regarding its liability; and (2) submitting lengthy and repetitive requests to PBGC 

for information under the Freedom of Information Act ("FOIA"). 
- 16 ­

c. 	 Whether the Appeals Board should reverse PBGC's determination of liability 

because there is no risk to the Plan's participants in this case. 

You have claimed in your Appeal and your second supplement to the Appeal 

that PBGC should not enforce Munksjb's section 4062(e) liability because there is 

no risk to the Munksjb Plan's participants due to (1) the healthy financial state of 

Munksjb; and (2) Munksjb's recent contribution to the Plan. 

Please note that whether a plan's participants are placed at risk as a result of 

a section 4062(e) event is not a criterion for determining: (1) whether a section 

4062(e) event occurred; or (2) the amount of the liability incurred by an employer 

as the result of the section 4062(e) liability. The Appeals Board does not make 

section 4062(e) enforcement decisions, and has no authority to reverse PBGC's 

decision to enforce Munksjb's section 4062( e) liability based on an assessment of 

the risk to the Plan at the time of the section 4062(e) event or later. We have, 

therefore, concluded that whether there is a risk to the Plan's participants as a 

result of the section 4062( e) event in this case is beyond the scope of the Board's 

review. If you believe that PBGC should not enforce the section 4062( e) liability 

because of the healthy state of Munksjb or its recent contributions to the Plan, you 

may wish to discuss these matters with PBGC's Corporate Finance and 

Restructuring Department. 

5. 	 Other Concerns Raised in the Appeal. 

a. 	 Documents withheld under the Freedom of Information Act. 

In your appeal, you mention that PBGC's Disclosure Division withheld 

documents responsive to your multiple FOIA requests based on various exemptions 

under FOIA. You asked that the Appeals Board review the documents that were 

withheld and release to Munksjb any documents that the Appeals Board thinks 

should have been released. 

Please note that the Disclosure Division's FOIA responses are not subject to 

review by the Appeals Board. The Appeals Board has no authority to change the 

Disclosure Division's decision as to what documents it releases as part of the FOIA 

process. As you noted in your appeal, FOIA responses are appealable to the 

PBGC's Office of the General Counsel. And PBGC's records show that Munksjb has 

filed an appeal with the Office of the General Counsel regarding the Disclosure 

Division's responses to Munksjb's FOIA requests. 

The Appeals Board denies your request that we perform an "in camera" 

review of the documents that were not disclosed. Likewise, the Board denies your 

request for copies of any records reflecting communications to the Appeals Board 

from persons who performed work on or had input on the initial liability 

determination. The Board relied on the documents in the administrative record and 

your appeal in making its decision; the Board did not review the documents 

withheld by PBGC. 
- 17 ­

b. The standard for judicial review. 

In the first supplement to the Appeal you discuss the level of deference, if any, 

to be given PBGC's interpretation of section 4062(e). The issue of deference may 

arise if an action is filed for judicial review of the Appeals Board's decision. It is not 

relevant for purposes of this proceeding, and the Board will not address the issue 

here. 

Decision 

The Appeals Board has reviewed your appeal of PBGC's determination that 

Munksjo incurred liability, in the amount of $3,616,679, under ERISA section 

4062( e). For the reasons explained in this decision, the Appeals Board found that 

your appeal does not provide a sufficient basis for changing PBGC's determination, 

and we must, therefore, deny your appeal. This decision is PBGC's final agency 

action with respect to Munksjo's section 4062(e) liability. Accordingly, Munksjo has 

exhausted its administrative remedies. If it wishes, Munksjo may seek review of 

this decision in federal court. 

Sincerely, 

Michel Louis 

Appeals Board Member