Pension Benefi t Guaranty Corporatio n 

Protecting America's Pensions Street , Washington , D.C . 20005-402 6 

Marc h 201 9 

 Attorney 

Address 

Address 

Address 

R e : Appea l Appellant Name; PBG C Cas e No . xxxxxx, Company Define d 

Benefi t Pensio n Pla n (th e "Plan" ) 

Dea r Attorney: 

Thi s is th e decisio n i n th e appea l tha t yo u file d o n behal f o f the Appellant regardin g PBGC' s 

Decembe r benefi t determination . The Appellant ha s aske d th e Appeal s Boar d t o increas e 

t h e amoun t o f its lifetim e annuit y payment s fro m $5,357.3 3 pe r mont h t o $7,296.6 7 pe r month . 

T h e appea l is supporte d b y the Appellant's unswor n declaration , you r lega l analysis an d th e 

calculation s o f a credentiale d actuary , the Actuary. 

T h e Pla n administrato r pai d the Appellant a n annuit y a t th e rat e o f $5,357.3 3 pe r mont h fro m 

200 9 unti l PBG C becam e statutor y truste e o f th e terminate d Pla n o n Date. I n a numbe r o f pre -

a n d post-determinatio n meeting s an d communication s wit h the Appellant an d the Appellant's 

professiona l team , PBG C considered , bu t rejected , the Appellant's request fo r a greate r amount . 

PBGC' s Decembe r 29 , 201 7 determinatio n di d no t mak e an y change s t o the Appellant's lifetim e 

 payment s o f $5,357.3 3 pe r month , whic h is th e benefi t the Appellant currentl y receives. 

T h e appeal , however , maintain s tha t PBG C shoul d increas e th e monthl y benefi t amoun t tha t 

the Appellant ha s bee n receivin g sinc e 2009 . Th e centra l issu e tha t the Appellant ha s raise d is 

whethe r th e term s o f th e Pla n an d applicabl e la w suppor t PBGC' s an d th e Plan' s decisio n t o offse t 

t h e benefi t accruals tha t the Appellant earne d from 200 3 t o 200 7 b y o f in-servic e 

pensio n distribution s tha t the Appellant receive d durin g thos e years. 

Base d o n ou r ow n independen t an d detaile d revie w o f th e documente d recor d an d applicabl e 

law , th e Appeal s Boar d ha s foun d tha t PBG C an d th e Pla n administrato r reasonabl y construe d an d 

applie d th e term s o f th e Pla n an d applicabl e law , an d w e hav e foun d n o erro r i n PBGC' s 

determinatio n t o continu e t o pa y the Appellant a lifetim e annuit y o f $5,357.3 3 pe r month . 

Therefore , as explaine d i n mor e detai l below , w e hav e denie d th e appeal . 

Pag e 1 o f 18 
Factua l Background1 

T h e Pla n Sponsor : 

The Appellant founde d th e Pla n sponsor , Company A Durin g th e relevan t time , the 

Appellant wa s th e owne r o f A, an d h e als o owne d o f a relate d compan y name d Company B 

 Fo r th e sak e o f brevit y an d convenience , w e refe r t o A an d B as th e "Employer. " 

T h e Employe r operate d a Business. I n i t entere d int o a contrac t wit h a Customer t o 

operat e a Project. Th e Employer' s mai n sourc e o f revenu e cam e fro m th e payment s tha t th e 

Customer mad e unde r th e contract . I n Jun e 2007 , the Appellant sol d th e Employer' s nam e an d 

assets, includin g th e contract , t o New Owner. Th e Customer di d no t rene w th e contrac t whe n i t 

expire d o n Jun e 30 , 2012 . Shortl y thereafter, th e Employe r cease d operations, an d i t wa s 

dissolve d i n Jun e 2013 . 

T h e Plan : 

T h e Pla n wa s effectiv e a s o f Januar y 1 , Pursuan t t o Articl e I , Sectio n J o f th e Plan , 

"[a ] Participant's Norma l Retiremen t Benefi t shal l b e equa l t o 4 % o f his o r he r Averag e 

Compensatio n multiplie d b y th e Participant's Year s o f Participatio n no t t o excee d 2 5 Year s o f 

Participation." 5 I n othe r words , participants coul d ear n a pensio n o f 50 % o f thei r averag e 

compensatio n afte r 12 % years, an d o f thei r averag e compensatio n afte r 2 5 years. 

 Ou r discussio n belo w summarize s onl y th e mos t relevan t informatio n from th e appea l correspondence , th e 

Determination , an d certai n othe r documents , copie s o f whic h ar e provide d i n th e Appendix . Ou r citation s t o th e 

Appendi x begi n wit h th e lette r "A " an d ar e followe d b y th e pag e o f th e Appendi x o n whic h th e documen t ma y b e 

found . Fo r example , a detaile d timelin e o f relevan t events ca n b e foun d i n th e Appendi x o n page s t o A-003 . 

A cop y o f th e Decembe r 29 , 201 7 Determinatio n ca n b e foun d i n th e Appendi x o n page s A-00 5 an d A-006 . 

 A cop y o f th e Certificat e o f Limite d Partnershi p fo r A tha t wa s signe d b y the Appellant an d file d wit h th e State's 

Secretar y o f Stat e o n Octobe r 30 , 199 1 ca n b e foun d i n th e Appendi x o n pag e A-007 . Th e Pla n document , effectiv e 

Januar y 1 , als o signe d b y the Appellant confirm s tha t A wa s th e "Employer. " See Appendi x o n page s A-00 8 

t o

 Upo n formatio n i n the Appellant wa s its owner . Th e sam e wa s tru e i n 200 7 accordin g t o th e 200 7 

Employe e Censu s For m whic h Appellant signed . See Appendi x o n page s 1 7 an d 18 . I n Sectio n 3.3 o f 

t h e Asse t Purchas e Agreemen t date d effectiv e a s o f Jun e 22 , 2007 , regardin g th e sal e o f substantiall y al l o f th e assets 

use d i n th e business o f A an d a New Owner, the Appellant represente d tha t the Appellant owne d al l o f th e stoc k 

i n B. Se e Appendi x o n page s 1 9 t o Yo u hav e provide d the Appellant's unswor n statemen t tha t the 

Appellant wa s "a t least a 73 % owne r o f A from th e en d o f 198 8 unti l prio r t o the Appellant's retiremen t i n 2007. " 

Ownershi p o f o f A is no t inconsisten t wit h the Appellant's unswor n statemen t tha t the Appellant owne d "a t 

least " it . 

 A complet e cop y o f th e Pla n documen t ca n b e foun d i n Appendi x o n page s A-00 8 t o

 See Appendi x o n pag e

Pag e 2 o f 18 
Norma l Retiremen t Dat e is define d as th e participant's birthday , ye t participants coul d 

continu e t o ear n benefi t accruals (u p t o th e 2 5 years o f participatio n maximum ) b y workin g afte r 

t h e Norma l Retiremen t Date. 6 Retiree s coul d elec t t o receiv e thei r retiremen t benefi t as a singl e 

lum p sum , lif e annuity , an d 50 % survivo r annuity , o r installments. 7 Th e Pla n specifie d th e 

assumption s t o b e use d i n determinin g actuaria l equivalenc e o f th e availabl e form s o f benefit. 8 

Whil e th e Plan , o n its face , permitte d in-servic e distribution s t o participants wh o continue d t o 

wor k "a t o r afte r Norma l Retiremen t Age," 9 th e Pla n include d a provisio n whereb y

benefits wil l b e suspende d fo r eac h calenda r mont h durin g whic h th e Employe e complete s a t least 

4 0 hours o f Servic e wit h th e Employe r . . . Du e t o th e suspensio n o f benefits provision , al l 

participants wh o complete d 4 0 o r mor e Hour s o f Servic e i n a calenda r mont h wer e prohibite d fro m 

takin g advantag e o f th e Plan' s in-servic e distributio n option . 

 See Articl e I , Sectio n H o f th e Plan , tha t ca n b e foun d i n th e Appendi x o n pag e Articl e I , Sectio n H als o 

provide s as follow s (emphasi s added) : 

A Participan t wh o continue s i n th e emplo y o f th e Employe r afte r h e o r sh e attain s Norma l 

Retiremen t Ag e o r reache s his o r he r Norma l Retiremen t Dat e shal l remai n a Participan t whil e s o 

employed , an d shal l b e entitle d t o al l Pla n benefits t o th e exten t h e o r sh e woul d b e entitle d theret o 

i f h e o r sh e ha d no t ye t attaine d Norma l Retiremen t includin g a n y bene f i t accruals fo r servic e 

performe d afte r Norma l Retiremen t Ag e o r du e t o increase s i n Compensation . 

Thi s apparentl y wa s suc h a n importan t poin t tha t th e sam e rul e is repeate d i n Articl e II , Sectio n o f th e Pla n 

(regardin g th e definitio n o f "Accrue d Benefit") , see Appendi x o n pag e an d i n Articl e V , Sectio n B (regardin g 

Deferre d Retirement) , see Appendi x o n pag e A-057 . 

 Articl e I , Sectio n KK , see Appendi x o n pag e A-026 . 

 Articl e I , Sectio n U , see Appendi x o n pag e A-022 . 

 Articl e I , Sectio n F F note s tha t "in-servic e distribution s a t o r afte r Norma l Retiremen t Ag e shal l b e allowed. " See 

Appendi x o n pag e A-025 . 

 Articl e V , Sectio n B.3 , Appendi x a t pag e A-057 , provide s i n relevan t par t as follows : 

3 . Suspensio n an d Resumptio n o f Benefits . Retiremen t benefits wil l b e suspende d fo r eac h 

calenda r mont h durin g whic h th e Employe e complete s a t least 4 0 Hour s o f Servic e wit h th e 

Employe r ("Sectio n 203(a)(3)(B ) Service") . Consequently , th e amoun t o f benefits whic h ar e pai d 

late r tha n th e Participant' s Norma l Retiremen t Dat e wil l b e compute d as i f th e Employe e ha d bee n 

receivin g benefits sinc e Norma l Retiremen t Age . 

I f benefi t payment s hav e bee n suspended , payment s shal l resum e n o late r tha n th e first da y o f th e 

thir d calenda r mont h afte r th e calenda r mont h i n whic h th e Employe e cease s t o b e employe d i n 

Sectio n 203(a)(3)(B ) Service . 

Pag e 3 o f 18 
Minimu m Require d Distributions : 

T h e minimu m require d distributio n provision s unde r Sectio n 401(a)(9 ) o f th e Interna l 

Revenu e Cod e (th e "Code" ) requir e a n individua l ownin g 5 % o r mor e o f th e business sponsorin g 

a qualifie d retiremen t pla n t o begi n receivin g suc h distribution s b y Apri l 1 o f th e yea r afte r th e 

calenda r yea r i n whic h it attain s ag e 70% , regardless o f whethe r it is retired . I n othe r words , a 5 % 

owne r wh o ha s attaine d ag e 70 % befor e it retire s is require d t o tak e this typ e o f in-servic e 

distributio n fro m a qualifie d retiremen t plan . 

I n contrast , consisten t wit h th e minimu m require d distributio n provisio n unde r Cod e Sectio n 

 th e Pla n provide s th e followin g rul e fo r

T h e required beginning date fo r minimu m require d distribution s for a non-5%-

 is th e Apri l 1 o f th e calenda r yea r followin g th e calenda r yea r i n whic h suc h 

Participan t attain s ag e 70 % o r th e calenda r yea r i n whic h suc h Participan t retires. 

(Emphasi s added.) 

I n othe r words , a non-5%-owne r is no t require d t o begi n receivin g minimu m require d 

distribution s unti l it retires, eve n i f it ha s attaine d ag e 70% . T o mak e this poin t eve n clearer, th e 

Pla n containe d th e followin g languag e i n Articl e I , Sectio n NN : 

Option s Tha t Eliminat e th e Righ t t o Receiv e Post 70 % Distributions . 

T h e preretiremen t ag e 70%-distributio n optio n is onl y eliminate d wit h respec t t o 

non-5%-Owner s wh o attai n ag e 70 % i n o r afte r a calenda r yea r tha t begin s afte r th e 

late r o f Decembe r o r th e adoptio n dat e o f a n amendmen t doin g so . 

Althoug h drafte d as a provisio n applicabl e t o participants wh o ar e non-5%-owners , th e effec t 

o f th e provision , quote d above , is tha t only 5 % owner s coul d tak e advantag e o f th e Plan' s

 I , Sectio n NN , Appendi x a t pag e A-027 , provide s i n relevan t par t as follow s (wit h emphasis added) : 

N N . Righ t t o Defe r Receip t o f Benefit s Afte r Norma l Retiremen t Ag e an d Ag e

1 . .. . 

2 . T h e require d beginnin g dat e fo r minimu m require d distribution s fo r a is 

t h e Apri l 1 o f th e calenda r yea r followin g th e calenda r yea r i n whic h suc h Participan t 

attain s a g e o r th e calenda r yea r i n whic h suc h Participan t

Option s Tha t Eliminat e th e Righ t t o Receiv e Post 70 % Distributions . 

T h e preretiremen t ag e optio n is onl y eliminate d wit h respec t t o

w h o attai n ag e 70 % i n o r afte r a calenda r yea r tha t begin s afte r th e late r o f Decembe r 31 , o r 

t h e adoptio n dat e o f a n amendmen t doin g so . 

Pag e 4 o f 18 
servic e distributio n optio n upo n attainin g thei r require d minimu m distributio n date . The 

Appellant availe d th e opportunit y t o tak e in-servic e distribution s fro m 200 3 throug h 2007 , 

a n d the Appellant claim s tha t it wa s entitle d t o receiv e thos e in-servic e distribution s withou t an y 

offse t t o the Appellant's benefi t accruals durin g thos e years. 

Pla n Administrator' s Discretionar y Authority : 

T h e Pla n administrato r ha d discretionar y authorit y t o interpre t th e Pla n an d decid e issue s o f 

Pla n administration , includin g whethe r t o offse t yearl y benefi t accruals t o reflec t in-servic e 

distributions. 1 2 The Appellant, wh o signe d th e Plan' s For m 550 0 Annua l Return/Repor t as th e 

Pla n administrato r o n Septembe r 27 , woul d hav e participate d i n an y decision-makin g 

abou t th e Plan' s rule s fo r in-servic e distribution s an d thei r effec t o n benefi t accruals. Th e Pla n 

record s tha t wer e turne d ove r t o PBG C d o no t contai n definitiv e documentatio n regardin g ho w th e 

Pla n administrato r (the Appellant) o r its delegate d representativ e decide d th e questio n presente d 

i n this appeal . Similarly , the Appellant ha s no t provide d an y suc h informatio n t o PBG C t o suppor t 

t h e arguments mad e i n th e appeal . 

The Pension : 

The Appellant wa s bor n o n Januar y xx, The Appellant bega n t o participat e i n th e Pla n 

as o f Januar y 1 , its effectiv e date , an d it earne d mor e tha n hal f o f its pensio n afte r attainin g 

a g e 70 % i n O n Novembe r 3 , 2003 , th e Pla n administrato r bega n t o pa y the Appellant in -

service , minimu m require d distribution s unde r Sectio n 401(a)(9 ) o f th e Cod e The 

Appellant's benefi t electio n form , whic h it signe d an d date d Decembe r 2002 , electe d th e 

straight-lif e monthl y annuit y o f Tabl e 1 belo w show s th e amount s o f th e MRD s tha t 

the Appellant received : 

 Articl e XIII. B o f th e Pla n provide s th e relevan t language , whic h is discusse d late r i n this decision , an d ca n b e foun d 

i n th e Appendi x o n pag e a t

 Copie s o f th e Plan' s 200 6 an d 200 7 For m 550 0 Annua l Return/Report , whic h wer e signe d b y the Appellant, ca n b e 

foun d i n Appendi x o n page s t o Late r years' Form s 550 0 wer e signe d b y a New Owner. 

 Accordin g t o th e handwritte n calculatio n o f the Appellant's pension , Appendi x a t pag e A-004 , the Appellant's 

accrue d benefi t o n Decembe r 200 2 - day s befor e the 70 t h birthda y - wa s $2,672.0 0 pe r month . 

 Fo r reason s unknow n t o th e Board , i t appears tha t th e Pla n administrato r conclude d tha t the Appellant's require d 

beginnin g dat e fo r MRD s wa s th e yea r i n whic h the Appellant turne d ag e 70% , rathe r than , pursuan t t o Cod e Sectio n 

401(a)(9) , "Apri l 1 o f th e calenda r yea r followin g th e calenda r yea r i n whic h suc h participan t [the Appellant] attain s 

7 0 % . . . ." A s note d o n th e followin g page , th e Boar d ha s respected , bu t expresse s n o opinio n about , th e Pla n 

administrator' s conclusion . 

 See the Appellant's Benefi t Paymen t For m tha t ca n b e foun d i n th e Appendi x o n page s t o

Pag e 5 o f 18 
Tab e 1: In-Service Distributions Made by the Plan to the Appellant 

Yea r Monthl y Paymen t Amoun t H o w Pai d 

200 3 / 3>i on e paymen t o n

200 4 $1,256.9 2 i n on e paymen t o n 09/07/200 4 

200 5 $1,485.9 2 i n on e paymen t o n 01/20/200 5 

200 6 $4,405.2 5 $52,863.9 6 i n on e paymen t o n

200 7 $5,316.7 5 $63,801.3 6 i n on e paymen t o n 01/13/200 7 

Total: $161,177.79 

T h e Plan' s Cas h Disbursemen t Journal , whic h wa s maintaine d b y th e Pla n administrator , 

recorde d al l disbursements o f Pla n assets, includin g th e distribution s mad e t o the Appellant. Th e 

Journa l show s tha t th e Pla n mad e distribution s t o the fro m 200 3 throug h 2007 , generall y 

i n yearly , lump-su m payments . Th e followin g description s wer e use d fo r th e distribution s t o the 

Appellant: "Minimu m Distribution, " "Minimu m Dist, " "Re q Mi n Dist, " "MRD, " "Minimu m 

Require d Dist., " "Require d Distribution, " o r "Mi n Distrib. " 

T h e Appeal s Boar d ha s no t scrutinize d th e in-servic e distribution s tha t wer e pai d t o the 

Appellant, as the y wer e mad e b y th e Pla n administrato r befor e PBG C becam e statutor y trustee . 

Instead , lik e PBGC , w e hav e respecte d th e Pla n administrator' s conclusio n tha t th e Pla n wa s 

require d t o mak e in-servic e distribution s t o the Appellant i n th e amount s liste d abov e t o compl y 

wit h Sectio n 401(a)(9 ) o f th e Code . W e als o hav e take n notic e tha t th e amoun t o f eac h year's 

distributio n wa s greate r tha n th e amoun t o f th e previou s year's distribution . Thi s is wha t on e 

woul d expec t t o se e fo r a participan t wh o wa s continuin g t o wor k fo r th e Employer , earnin g 

compensatio n an d benefi t accruals. 

The Appellant sol d th e business i n Jun e 200 7 an d retire d as o f Decembe r 2007 , on e wee k 

befor e its 75 t h birthday . Th e Pla n administrato r adjuste d the Appellant's paymen t amount s as 

reflecte d i n Tabl e 2 below : 

Table 2 : Post-Retirement Distributions Made by the Plan to the Appellant 

Yea r Monthl y Paymen t 

Amoun t 

H o w Pai d 

200 8 $4,775.2 5 $57,303.7 2 i n on e paymen t o n 02/27/200 8 

200 9 $5,357.3 3 $64,288.0 0 i n tw o payments : $20,000.0 0 o n 

03/07/200 9 an d $44,288.0 0 o n 09/02/200 9 

201 0 $5,357.3 3 $64,288.0 0 o n 10/04/201 0 

201 1 $5,357.3 3 $64,288.0 0 i n tw o payments : $20,000.0 0 o n 

 an d $44,288.0 0 o n

201 2 $5,357.3 3 $64,288.0 0 o n 04/14/2012 1 7 

 Th e Plan' s Cas h Disbursemen t Journa l suggests tha t th e Pla n administrato r als o mad e a "Januar y '1 2 Distribution " 

o f $5,360.0 0 t o the Appellant o n Januar y 16 , 2012 . 

Pag e 6 o f 18 
201 3 $5,357.3 3 Payment s eac h mont h o f $5,357.3 3 

201 4 $5,357.3 3 Januar y - Marc h payment s o f $5,357.3 3 

I n 2008 , th e Pla n administrato r decrease d th e amoun t o f distribution s t o the Appellant t o th e 

monthl y rat e o f I n 2009 , however , th e Pla n administrato r increase d th e amoun t o f 

yearl y retiremen t distribution s t o the Appellant an d fixe d th e amoun t a t th e rat e o f $5,357.3 3 pe r 

month . I n 2013 , th e Pla n administrato r change d the Appellant's paymen t frequenc y so tha t it 

receive d monthl y payment s o f $5,357.33 , rathe r tha n annua l payments , an d i t als o change d th e 

characterizatio n o f th e distribution s fro m "Required, " o r "Minimum " distribution s t o merel y 

"Distribution. " 

The Appellant's an d 201 3 benefi t statements - th e onl y one s i n PBGC' s fo r the 

Appellant - stat e tha t "[y]ou r monthl y retiremen t benefi t commencin g a t you r retiremen t dat e 

payabl e fo r you r lifetime " is Th e benefi t statements reporte d the Appellant's 

retiremen t dat e as Decembe r 2007 . 

T h e Plan' s Actuaria l Fundin g Report s Confir m th e Valu e o f the Appellant's Retiremen t Benefit : 

I n accordanc e wit h Sectio n 41 2 o f th e Code , th e Plan' s annua l fundin g requirements wer e se t 

fort h i n its actuaria l valuatio n report . T o d o this, th e Plan' s actuar y calculate d th e tota l amoun t o f 

retiremen t benefits tha t ha d bee n promise d unde r th e Plan . Th e Plan' s actuaria l valuatio n 

repor t show s tha t the Appellant's retiremen t benefi t wa s pe r mont h fo r its Th e 

actuaria l presen t valu e o f the Appellant 's retiremen t benefi t wa s $505,019.00 , whic h wa s mor e 

tha n on e thir d o f th e $1,350,339.0 0 tota l presen t valu e o f al l retiremen t benefits tha t ha d bee n 

promise d unde r th e Plan . Accordin g t o Schedul e S B o f th e Plan' s For m 5500 , th e Plan' s 

fundin g targe t include d $538,014.0 0 i n liabilitie s owe d t o tw o retiree s The Appellant wa s on e 

o f th e tw o retirees. 

 A s discusse d above , the Appellant continue d t o b e th e Pla n administrato r unti l Septembe r 27 , 2008 . Thus , the 

Appellant woul d hav e bee n involve d i n th e Plan' s decisio n t o pa y its retiremen t benefi t a t th e rat e o f $4,775.2 5 pe r 

mont h fo r 2008 . Th e doe s no t contai n an y informatio n t o suppor t th e Plan' s decisio n t o d o so , an d th e Appeal s 

Boar d is unawar e o f an y reaso n wh y th e monthl y amoun t o f the Appellant's retiremen t benefi t payment s i n 200 8 

shoul d hav e bee n less tha n th e amoun t o f the Appellant's minimu m require d distribution s i n 2007 . Thi s unexplaine d 

circumstance , however , tend s t o contradic t you r argumen t tha t th e correc t amoun t o f the Appellant's monthl y 

retiremen t benefi t is $7,296.67 . 

 See Appendi x o n page s an d Ther e is n o explanatio n i n th e regardin g wh y the Appellant's actua l 

payment s wer e greate r b y 2 cents pe r month . 

 A cop y o f th e Plan' s Actuaria l Valuatio n Repor t ca n b e foun d i n th e Appendi x o n page s t o

 A cop y o f th e Plan' s For m 550 0 an d Schedul e S B ca n b e foun d i n th e Appendi x o n page s t o

T h e Schedul e S B wa s signe d b y the Actuary. 

Pag e 7 o f 18 
T h e Plan' s Underfunde d Terminatio n an d PBGC' s Appointmen t as Statutor y Trustee : 

Accordin g t o PBGC' s Actuaria l Cas e Memorandum , as o f Jun e 30 , 2012 , th e Pla n wa s less 

tha n 50 % funded , wit h tota l benefi t liabilitie s o f $1,872,509.0 0 an d estimate d assets o f 

$889,778.0 0 Accordingly , th e Pla n wa s terminate d as o f Jun e 30 , 201 2 wit h unfunde d benefi t 

liabilitie s o f PBG C becam e statutor y truste e o f th e Pla n o n Marc h 10 , 2014 , an d i t 

wil l pa y al l o f th e Plan' s unfunde d guarantee d

PBG C is th e Unite d State s governmen t agenc y tha t provide s pensio n insuranc e i n accordanc e 

wit h th e Employe e Retiremen t Incom e Securit y Ac t o f 1974 , as amende d ("ERISA") . Whe n a 

pla n sponso r become s unabl e t o suppor t its tax-qualified , define d benefi t pensio n plan , PBG C 

become s th e statutor y truste e o f th e plan . PBG C pay s pensio n benefits accordin g t o th e term s o f 

t h e plan , th e provision s o f ERISA , th e Code , an d PBGC' s regulation s an d policies. 

Whe n PBG C become s truste e o f a terminate d plan , PBG C collects participan t dat a an d pla n 

documents fro m th e forme r pla n administrator . PBG C the n audits tha t information . PBG C relie s 

o n th e informatio n i t receive s fro m a forme r pla n administrato r unless PBGC' s audi t o f tha t 

informatio n show s tha t i t is wrong , o r a participant , beneficiar y o r alternat e paye e supplie s PBG C 

wit h documents showin g tha t th e informatio n is wrong . 

T h e Appeal s Boar d wa s establishe d pursuan t t o 2 9 Cod e o f Federa l Regulation s ("CFR" ) 

 4003.5 § 1 t o 4003.61 . Th e Boar d review s challenge s t o PBG C benefi t determinations. Th e 

Boar d conducts its ow n revie w o f th e challenge s an d th e specifi c reason s wh y PBG C is claime d 

t o hav e mad e a n erroneou s determination . Issuanc e o f a n Appeal s Boar d decisio n is th e fina l ste p 

i n PBGC' s administrativ e revie w process. 

Pre-Determinatio n Communication 

B y lette r date d Apri l 28 , 2014 , PBG C notifie d the Appellant tha t PBG C ha d take n 

responsibilit y fo r the Appellant's pension. 2 3 I n fact , PBG C continue d t o pa y the Appellant th e 

sam e monthl y amoun t ($5,357.33 ) tha t th e Pla n administrato r ha d bee n payin g the Appellant. 

PBGC' s lette r t o the Appellant date d Ma y 2 , 201 4 provide d additiona l details regardin g the 

Appellant's monthl y payments. 2 4 

 The Appellant signe d th e Trusteeshi p Agreement , a cop y o f whic h ca n b e foun d i n th e Appendi x o n page s

t o

 See PBG C lette r o f Apri l 28 , Appendi x o n page s an d PBG C file s sho w tha t the Appellant 

alread y kne w tha t PBG C ha d take n responsibilit y fo r its benefi t payments , a s the Appellant ha d signe d th e Trusteeshi p 

Agreemen t o n Marc h See Appendi x o n page s t o

 See PBG C lette r o f Ma y 2 , tha t ca n b e foun d i n th e Appendi x o n page s an d

Pag e 8 o f 18 
O n Ma y the Appellant provide d PBG C wit h informatio n regardin g its pension , 

includin g th e Pla n for m tha t waive d th e 50 % spousa l survivo r annuity . The Appellant's Spouse, 

w h o ha d bee n marrie d t o the Appellant sinc e Month xx, is show n a s havin g signe d th e for m 

befor e a notar y publi c o n Ma y 15 , 2014 . The Appellant als o provide d PBG C wit h a cop y o f th e 

for m tha t the Appellant ha d signed , purportedl y o n Decembe r 15 , 2002 , electin g th e lifetim e 

monthl y annuit y o f

O n Ma y 3 , 2017 , the Appellant signe d a Powe r o f Attorne y tha t authorize d yo u t o 

communicat e wit h PBGC . Shortl y thereafter, yo u contacte d PBG C o n behal f o f the Appellant 

a n d claime d tha t th e amoun t o f the Appellant's retiremen t benefi t is erroneous. A t you r request , 

PBG C me t wit h yo u an d th e othe r member s o f the Appellant's professiona l team . Accordin g t o 

you r appea l lette r date d Marc h the Appellant's tea m communicate d a numbe r o f time s 

wit h PBGC , includin g a conferenc e cal l o n Jun e 29 , 2017 . Yo u provide d PBG C wit h mor e 

informatio n o n Jul y 25 , 2017 , includin g th e calculatio n o f the Appellant's pensio n fro m . . . the 

PBGC' s Benefit Determinatio n 

O n Decembe r 29 , PBG C issue d th e benefi t determinatio n t o the Appellant (th e 

"Determination") . Accordin g t o th e Determination , the Appellant is entitle d t o monthl y annuit y 

payment s o f $5,357.3 3 fo r the Appellant's lifetim e only , unchange d fro m wha t th e Pla n 

administrato r ha d bee n payin g the Appellant sinc e 2009. 2 7 

Post-Determination Communication 

 See Ma y facsimil e o f the Appellant's Electio n o f For m o f Benefi t Payment , tha t ca n b e foun d i n th e 

Appendi x o n page s t o Accordin g t o th e handwritte n calculatio n b y the Actuary, the benefi t 

amoun t as o f Decembe r wa s $2,672.0 0 pe r month . See Appendi x a t pag e A-004 . W e ar e skeptica l tha t th e 

benefi t amoun t o f - th e amoun t state d i n the Appellant's Electio n o f For m o f Benefi t know n 

o n Decembe r 2002 , whic h is th e dat e the Appellant place d nex t t o its signatur e o n suc h Form . 

 See Appendi x a t pag e A-004 . 

 Th e relevan t tex t o f th e Determination , Appendi x o n page s A-00 5 an d A-006 , is as follows : 

Y o u ar e receivin g estimate d pensio n benefits from th e PBG C unde r th e pensio n pla n name d above . 

T h e monthl y benefi t yo u currentl y receive , detaile d i n th e tabl e below , is th e sam e amoun t yo u hav e 

receive d from th e prio r pla n administrator . W e hav e finishe d ou r revie w o f th e pla n an d you r 

benefit , an d w e hav e determine d tha t yo u ar e receivin g th e correc t amount . 

Payment Frequency Amount 

Monthl y $5,357.3 3 

You r benefi t is pai d i n th e for m o f a Straigh t Lif e Annuity . A Straigh t Lif e Annuit y provide s yo u 

wit h a monthl y benefi t fo r th e rest o f you r lif e bu t doe s no t provid e survivo r benefits. 

Pag e 9 o f 18 
A t the Appellant's request , PBG C sen t yo u a cop y o f th e Determinatio n o n Januar y 8,

Y o u an d th e othe r member s o f the professiona l tea m sen t PBG C correspondenc e an d 

m e t wit h PBG C representative s t o explai n you r positio n tha t PBG C owe d the Appellant mor e tha n 

t h e benefi t amoun t h e ha d accepte d fro m th e Pla n administrator . PBG C di d no t chang e th e 

Determination ; rather, b y lette r date d PBGC' s Offic e o f Benefit s Administratio n 

("OBA" ) provide d th e writte n explanatio n o f its reason s fo r no t changin g th e amoun t o f the 

Appellant's monthl y annuity . Th e Febmar y 8, 201 8 lette r summarize d PBGC' s positio n as 

follows : 

Becaus e yo u ar e unabl e t o provid e mor e detaile d informatio n o n th e Plan' s 

calculatio n o f the benefit , w e d o no t hav e anythin g tha t woul d indicat e 

a n erro r wa s mad e b y th e Plan , an d thu s ca n onl y conclud e tha t th e amoun t i n pa y 

statu s is reasonable. 2 8 

PBGC' s Febmar y 8, 201 8 correspondenc e containe d analysis o f Sectio n 401(a)(9 ) o f th e 

Code , bu t yo u hav e objecte d t o som e o f tha t analysis as bein g off-point . I n decidin g the 

Appellant's appeal , w e hav e not applie d o r relie d i n an y manne r o n PBGC' s Cod e Sectio n 

 analysis t o whic h yo u hav e objected . 

Your 

Y o u timel y file d you r appea l o n behal f o f the Appellant o n Marc h 15 , You r 

correspondenc e provide d th e followin g succinc t summar y o f you r position : 

O u r position , briefly , is tha t the Appellant's benefi t shoul d b e a Norma l Retiremen t 

Benefi t as o f th e dat e o f its retiremen t fro m th e sponso r rathe r tha n a Require d 

Minimu m Distributio n tha t the Appellant bega n t o receiv e prio r t o its

Y o u hav e claime d tha t the Appellant's Norma l Retiremen t Benefi t ("NRB" ) is a straight-lif e 

annuit y i n th e amoun t o f $7,296.6 7 pe r month , bu t PBG C ha s improperl y reduce d i t t o $5,357.3 3 

p e r mont h b y subtractin g th e valu e o f MRD s tha t the Appellant receive d whil e the Appellant wa s 

 I n th e alternative , yo u hav e argue d tha t i f suc h a reductio n is warranted , th e amoun t 

 A cop y o f PBGC' s Februar y 8 , 201 8 explanatio n lette r an d enclosur e ca n b e foun d i n th e Appendi x o n page s A -

1 9 6 t o A-206 . 

 Yo u requeste d a n extensio n o f tim e o n Januar y 30 , 2018 , an d th e Appeal s Boar d grante d i t o n Februar y 1 , 2018 . 

 See Appendi x o n page s A-20 7 t o

 You r Marc h 15 , 201 8 appea l letter , Appendi x o n page s A-20 7 t o A-214 , state s as follows : 

Basis fo r Appea l 

Pag e 10 o f 18 
shoul d b e pe r mont h becaus e th e tota l amoun t o f in-servic e distribution s tha t the 

Appellant receive d is equivalen t (usin g th e Plan' s definitio n o f actuaria l equivalence ) t o a n annuit y 

o f pe r month . Finally , yo u conten d tha t the Appellant is entitle d t o a lump-su m 

paymen t fo r underpayment s owe d t o the Appellant retroactiv e t o its dat e o f retirement . 

The Appeals Board's Apri l 16 , 201 8 Request Letter 

W e wrot e t o yo u o n Apri l an d aske d fo r clarificatio n o n fiv e question s tha t wer e 

raise d b y th e appeal. 3 2 Yo u provide d the Appellant's respons e o n Ma y 24 , W e hav e 

carefull y considere d you r response s i n analyzin g th e issues, as provide d i n th e Discussio n below . 

Discussion 

The Appellant ha s claime d tha t PBG C erroneousl y reduce d th e amoun t o f th e retiremen t 

benefi t tha t the Appellant earne d whil e the Appellant wa s workin g fo r th e Employer . A s w e 

discuss below , w e hav e rejecte d the Appellant's claim s becaus e the y ar e inconsisten t wit h th e facts 

a n d applicabl e law. 3 4 

I . PBG C Di d Not , I n Fact , Reduc e th e Amoun t o f the Retiremen t Benefit . 

PBG C explaine d i n its Febmar y 8, lette r tha t i t di d no t chang e th e amoun t o f the 

 monthl y annuit y payments . Instead , PBG C foun d tha t the Appellant ha d no t provide d 

evidenc e o f an y errors i n th e Pla n administrator' s calculatio n o f the Appellant's $5,357.3 3 pe r 

mont h retiremen t benefit . Th e fro m th e Determinatio n quote d belo w (wit h emphasis 

added ) make s this abundantl y clear: 

Y o u ar e receivin g estimate d pensio n benefits fro m th e PBG C unde r th e pensio n 

pla n name d above . T h e monthl y benefi t yo u currentl y receive , detaile d i n th e tabl e 

belo w is th e sam e amoun t yo u hav e receive d fro m th e prio r pla n 

administrator . W e hav e finishe d ou r revie w o f th e pla n an d you r benefit , an d w e 

hav e determine d tha t yo u ar e receivin g th e correc t amount . 

1 . Ther e is n o lega l o r othe r authorit y fo r offsettin g benefits tha t the Appellant receive d prio r t o the 

Appellant's Norma l Retiremen t Date . 

 A cop y o f ou r Apri l 16 , 201 8 request lette r ca n b e foun d i n th e Appendi x o n pag e an d

 A cop y o f you r Ma y 24 , respons e lette r an d enclosur e ca n b e foun d i n th e Appendi x o n page s t o A -

222 . 

 Fo r th e sak e o f clarity , w e not e tha t ou r decisio n t o uphol d PBGC' s determinatio n applie s equall y t o the Appellant's 

clai m tha t the appellant is entitle d t o payment s o f $7,296.6 7 pe r mont h an d t o th e alternativ e clai m tha t the appellant 

is entitle d t o pe r month , thoug h w e hav e furthe r note d tha t yo u di d no t suppor t th e alternativ e clai m wit h 

a n y calculations. 

Pag e 11 o f 18 
T h e appea l doe s no t disput e th e fac t tha t PBG C ha s continue d t o pa y the Appellant th e sam e 

amoun t tha t the Appellant ha d bee n receivin g fro m Pla n administrato r sinc e 2009 , afte r the 

Appellant's retirement . I n addition , the Appellant ha s no t provide d an y recor d o f eve r havin g 

bee n pai d mor e tha n th e $5,357.3 3 pe r mont h retiremen t benefi t tha t PBG C ha s bee n payin g the 

Appellant. Therefore , w e hav e foun d tha t PBG C di d no t reduc e o r offse t the Appellant's 

retiremen t benefit . 

I I . Applicabl e La w Permitte d th e Pla n t o Offse t the Appellant's Benefi t Accrual s b y Th e Valu e 

o f In-Service , Minimu m Require d Distribution s Tha t Wer e Pai d t o the Appellant. 

T h e appea l lette r relie s o n Cod e Sectio n 4 1 l(b)(l)(H)(i) , an d i t claim s as follows : 

[T]h e relevan t applicabl e la w is Cod e Sectio n Section s an d 

 requir e tha t a n actuaria l adjustmen t b e mad e whe n a participan t work s 

past Norma l Retiremen t Ag e . . . Significantly , a n offse t o f prio r 

distribution s is permitted , bu t no t mandated , unde r Cod e Sectio n 

W e hav e agree d wit h yo u tha t Cod e Sectio n provide s applicabl e relevan t law . However , 

you r argumen t t o invalidat e th e offse t fo r th e MRD s tha t the Appellant receive d doe s no t overcom e 

t h e compellin g opposit e conclusio n tha t w e hav e reache d fro m applyin g othe r languag e i n Cod e 

Sectio n an d relate d IR S guidance . Specifically , Sectio n 4 1 l(b)(l)(H)(iii)(I ) o f th e 

Cod e provide s as follows : 

(iii ) Adjustments under plan for delayed retirement taken into account 

I n th e cas e o f an y employe e who , as o f th e en d o f an y pla n yea r unde r a define d 

benefi t plan , ha s attaine d norma l retiremen t ag e unde r suc h pla n — 

( I ) i f distributio n o f benefits unde r suc h pla n wit h respec t t o suc h 

employe e ha s commence d as o f th e en d o f suc h pla n year , the n an y 

requiremen t o f this subparagrap h fo r continue d accrua l o f benefits 

unde r suc h pla n wit h respec t t o suc h employe e durin g suc h pla n yea r 

shal l b e treate d as satisfie d t o th e exten t o f th e actuaria l equivalen t 

o f in-servic e distributio n o f benefits. . . . 

T h e precedin g provision s o f this claus e shal l appl y i n accordanc e wit h regulation s 

o f th e Secretary . Suc h regulation s ma y provid e fo r th e applicatio n o f th e precedin g 

provision s o f this clause , i n th e cas e o f an y suc h employee , wit h respec t t o an y 

perio d o f tim e withi n a pla n year. 3 6 

See you r Appea l Letter , Appendi x a t pag e (emphasis i n original) . 

See 2 6 U.S.C . 4 1 l(b)(l)(H)(iii)(l) . 

Pag e 12 o f 18 
Applyin g jus t th e languag e abov e t o th e facts o f this matter , a compellin g argumen t 

c a n b e mad e tha t "an y requiremen t o f this subparagrap h [Sectio n fo r continue d 

accrua l o f benefits unde r suc h pla n [th e Plan ] wit h respec t t o suc h employe e [the Appellant] durin g 

suc h pla n yea r [2003 , 2004 , 2005 , 2006 , an d 2007 ] shal l b e treate d as satisfie d t o th e exten t o f th e 

actuaria l equivalen t o f in-servic e distributio n o f benefits [MRD s pai d t o the Appellant]." Viewe d 

i n this light , you r argumen t seem s t o b e directe d mor e against applicatio n o f languag e i n th e Code , 

whic h is somethin g th e Boar d canno t change , tha n i t is t o PBGC' s decisio n no t t o overtur n th e 

Plan' s applicatio n o f th e offset , whic h is somethin g th e Boar d woul d no t d o withou t sufficien t 

cause . 

T h e Propose d Treasur y Regulation s unde r Cod e Sectio n 4 1 l(b)(l)(H)(iii ) illustrat e ho w plan s 

m a y appl y th e statutor y rul e quote d abov e t o offse t post-retiremen t benefi t accruals b y th e actuaria l 

equivalen t o f pre-retiremen t distributions: 3 7 

Assum e B receive s 2 4 monthl y benefi t payment s prio r t o B' s retiremen t at ag e 67 . 

T h e tota l monthl y benefi t payment s o f $14,40 0 ($60 0 x 2 4 payments ) hav e a n 

actuaria l valu e a t ag e 6 7 o f $15,83 9 (reflectin g interest an d mortality ) whic h woul d 

produc e a monthl y benefi t paymen t o f $15 6 commencin g a t ag e 67 . Th e benefi t 

accrua l fo r th e tw o years o f credite d servic e B complete d afte r attainin g norma l 

retiremen t ag e is $4 0 pe r mont h ($2 0 x 2 years) . Becaus e th e actuaria l valu e 

(determine d as a monthl y benefi t o f $156 ) o f th e benefi t payment s mad e durin g th e 

t w o years o f credite d servic e afte r B' s norma l retiremen t ag e exceed s th e benefi t 

accrua l fo r th e tw o years o f credite d servic e afte r B' s norma l retiremen t ag e ($2 0 x 

2 years = $40) , th e pla n is no t require d t o accru e benefits o n behal f o f B fo r th e 

secon d yea r o f credite d servic e B complete d afte r attainin g norma l retiremen t ag e 

a n d th e pla n is no t require d t o increas e B' s monthl y benefi t paymen t o f $600 . 

T h e tests tha t PBG C performe d o f the Appellant's benefi t amount , $5,357.3 3 pe r month , als o 

tracke d th e abov e illustratio n fro m th e Propose d Treasur y Regulations : 

PBG C teste d th e reasonableness o f th e amoun t o f th e benefi t in-pay , $5,357.33 . 

. . . W e use d the compensatio n an d years o f participatio n t o calculat e 

t h e accrue d monthl y benefi t includin g additiona l accruals an d subtracte d th e 

actuaria l equivalen t o f th e actua l distribution s mad e o n an d afte r Novembe r

unti l Decembe r 31 , 2007. 3 8 

 See Prop . Treas . Reg . (b)-2(b)(4)(iv) , Exampl e 3 . W e hav e als o reviewe d A . Bhaga t an d A . Trichilo , 

Employe e Plan s CP E Topic s fo r 2002 , Chapte r Define d Benefi t Accrual s (rev . Apri l 2002) , a cop y o f whic h ca n 

b e foun d i n th e Appendi x o n page s A-22 3 t o "Finally , whe n determinin g additiona l accruals fo r a participan t 

beyon d norma l retiremen t age , th e pla n ca n als o tak e int o accoun t th e actuaria l equivalen t o f distribution s alread y 

made , whe n a n employe e attaine d norma l retiremen t age . (See Cod e Sectio n Thos e 

distribution s ca n b e use d t o offse t an y additiona l benefits accrue d b y th e participant , afte r norma l retiremen t age. " 

 See PBGC' s Februar y 8, explanatio n lette r an d enclosure , tha t ca n b e foun d i n th e Appendi x o n pag e

t o A-206 . 

Pag e 13 o f 18 
Y o u hav e attempte d t o suppor t you r argumen t against th e offse t b y claimin g tha t Articl e V , 

Paragrap h B o f th e Pla n compel s the desire d result. 3 9 Yo u hav e claime d tha t "Articl e 

V , Paragrap h B o f th e Pla n require s tha t th e actuaria l valu e o f a Participant's accrue d benefi t tak e 

int o accoun t the Appellant's additiona l years o f servic e an d increase s i n W e 

hav e rejecte d this argumen t fo r tw o reasons. First , th e languag e i n Articl e V , Paragrap h B o f th e 

Pla n neithe r require s no r preclude s th e offset . Second , as w e discusse d above , PBGC' s actuarie s 

teste d th e reasonableness o f th e amoun t tha t the Appellant ha s bee n receivin g an d conclude d tha t 

t h e Pla n administrato r likel y di d tak e int o accoun t the additiona l years o f servic e an d 

increase s i n compensation. 4 1 W e therefor e tha t Articl e V , Paragrap h B o f th e Pla n di d no t 

curtai l th e Plan' s authorit y unde r Cod e Sectio n 4 1 l(b)(l)(H)(iii)(I ) Prop . Reg .

2(b)(4 ) t o offse t the Appellant's benefi t accruals fro m 200 3 t o 200 7 b y th e actuaria l equivalen t o f 

MRD s tha t ha d bee n pai d t o the Appellant durin g tha t time . 

III . T h e Pla n Administrator' s Decisio n t o Offse t the Appellant's Benefi t Accrual s b y the 

Appellant's MRD s Wa s Mad e i n Accordanc e wit h Pla n Provision s an d Complie d wit h 

Nondiscriminatio n Rules . 

W e hav e foun d tha t th e Pla n administrator' s decisio n t o appl y th e offse t fo r prio r distribution s 

w a s base d o n a reasonabl e interpretatio n o f th e Plan , whic h w e hav e furthe r discusse d below . Th e 

Pla n Administrato r wa s authorize d unde r Sectio n XIII. B o f th e Plan , quote d below , wit h emphasis 

added , t o constru e an d appl y th e rule s o f th e Pla n an d t o comput e retiremen t benefits: 

T h e Committee , as agen t fo r th e administrato r an d t o th e administrator's 

approval , shal l mak e suc h rules, regulations, interpretation s an d computation s an d 

shal l tak e suc h othe r actio n t o administe r th e Pla n as th e Committe e ma y dee m 

appropriat e i n its sol e discretion . . . . T h e Committe e shal l resolv e b y majorit y 

vot e al l question s involvin g th e interpretation , applicatio n an d administratio n o f th e 

Plan . Th e Committee' s resolutio n o f suc h question s shal l b e fina l an d bindin g 

 Th e relevan t languag e i n Articl e Paragrap h B o f th e Plan , tha t ca n b e foun d i n th e Appendi x o n pag e A-057 , is 

as follows : 

B . Deferre d Retirement . Th e Accrue d Benefi t o f a Participan t wh o retire s afte r his o r he r Norma l 

Retiremen t Dat e shal l b e determine d as o f th e dat e th e Participan t actuall y retire s a s follows : 

Servic e an d Compensatio n Credits. I n n o even t wil l th e Accrue d Benefi t o f a Participan t wh o 

retire s afte r his o r he r Norma l Retiremen t Dat e b e less tha n th e benefi t calculate d unde r Articl e I 

recognizin g th e Participant' s additiona l Year s o f Servic e an d increase s i n Compensatio n afte r th e 

Participant's Norma l Retiremen t Date . 

 See you r Appea l Letter , tha t ca n b e foun d i n th e Appendi x o n page s A-20 7 t o

 See PBGC' s Februar y 8 , 201 8 explanatio n lette r an d enclosure , tha t ca n b e foun d i n th e Appendi x o n pag e

t o A-206 . 

Pag e 14 o f 18 
upo n th e Participants, thei r Beneficiaries, an d th e successors, assigns, heirs an d 

persona l representative s o f an y o f them . 

I n computin g an d distributin g Pla n benefits, Sectio n XV.D(l ) o f th e Pla n implemente d th e 

specia l nondiscriminatio n rule s i n Treasur y Regulation s Sectio n Thes e rule s 

restric t benefi t distribution s tha t ar e mad e t o th e pla n sponsor's 2 5 highest pai d Th e 

restriction s i n th e specia l nondiscriminatio n rul e applie d t o the Appellant because : (1 ) th e Pla n wa s 

n o t funde d fo r o f curren t an d (2 ) the Appellant wa s th e highest-pai d 

 Consequently , whe n the Appellant retired , Sectio n XV.D(l ) o f th e Pla n require d 

t h e Pla n administrato r t o comput e th e su m o f al l o f benefits tha t ha d bee n pai d t o the Appellant 

(th e MRDs ) an d al l o f th e remainin g retiremen t benefi t tha t the Appellant wa s owed , an d i t ha d t o 

 Th e relevan t provision s from Sectio n an d XV.D(l) , tha t ca n b e foun d i n th e Appendi x o n page s A- l 1 0 t o A -

 ar e provide d below : 

A . Limitation s fo r Highl y Compensate d Participants. Th e provision s o f this Articl e X V shal l appl y 

onl y t o Participants whos e Norma l Retiremen t Benefi t exceed s $1,50 0 annuall y an d who , a t th e 

Effectiv e Dat e o f this Plan , wer e amon g th e 2 5 highest pai d Employee s o f th e Employer . Thi s 

Articl e X V shal l appl y t o suc h Participants notwithstandin g an y contrar y provisio n i n this Plan . 

T h e provision s o f this Articl e X V appl y t o forme r o r retire d Participants as wel l as activel y 

employe d Participants. 

D . Limitation s fo r Pla n Year s Afte r Decembe r 1993 . Fo r Pla n Year s beginnin g afte r 

Decembe r o r suc h earlie r dat e i f electe d b y th e Employer , th e benefi t o f an y Highl y 

Compensate d Employe e o r forme r Highl y Compensate d Employe e shal l b e limite d t o a benefi t tha t 

is non-discriminator y unde r Sectio n 401(a)(4 ) o f th e Code . 

1 . Restricte d Benefits . Th e annua l payment s t o Highl y Compensate d Employee s an d 

forme r Highl y Compensate d Employees , wh o ar e amon g on e (1 ) o f th e 2 5 highest pai d 

non-exclude d Employee s o r forme r Employee s durin g th e Pla n Yea r o r an y prio r Pla n 

Year , ar e restricte d t o a n amoun t equa l t o th e paymen t tha t woul d b e mad e o n behal f o f th e 

Employe e unde r a singl e lif e annuit y tha t is th e Actuaria l Equivalen t o f th e su m o f th e 

Employee' s accrue d benefi t an d th e Employee' s othe r benefi t unde r th e Plan . F o r 

purpose s o f thi s paragraph , benefi t include s loan s i n excess o f th e amoun t se t fort h i n 

Sectio n 72(p)(2)(A ) o f th e Code , a l l payment s fro m th e Pla n t o a Highl y Compensate d 

Employe e durin g his o r he r lifetim e an d an y deat h benefits no t provide d fo r b y insuranc e 

o n suc h Highl y Compensate d Employee' s life . (Emphasi s added.) 

 See 2 6 CF R Rev . 92-76 ; C.B . 7 6 (Jul y

 Accordin g t o Rev . Rul . 92-76 , 1992- 2 C.B . 7 6 (Jul y th e specia l nondiscriminatio n rule s ma y b e relaxe d i f 

"th e valu e o f pla n assets equals o r exceed s percen t o f th e valu e o f curren t liabilities. " However , accordin g t o th e 

200 7 For m 550 0 Schedul e B , Appendi x a t page s an d 55 , th e Pla n wa s onl y abou t 83 % funded , wit h curren t 

liabilit y o f $1,139,837.0 0 an d assets o f $941,835.00 , an d its curren t liabilit y percentag e fo r 200 6 wa s liste d as 94% . 

 Th e 200 7 Employe e Census, Appendi x a t page s reports tha t the earne d Accordin g 

t o PBG C records, th e nex t highes t pai d employe e earne d $109,250.00 . 

Pag e 15 o f 18 
test tha t su m fo r complianc e wit h th e specia l nondiscriminatio n rul e i n Treasur y Regulation s 

Sectio n

T h e recor d show s tha t th e Pla n administrato r di d so i n a manne r th e Boar d woul d cal l th e 

reasonabl e wa y b y calculatin g the Appellant's remainin g retiremen t benefi t afte r offsettin g th e 

MRD s against th e benefi t accruals tha t the Appellant earne d durin g years i n whic h MRD s wer e 

pai d t o the Appellant}1 I n particular , an d consisten t wit h Section s an d XV.D(l ) o f th e 

Plan , th e Pla n administrato r mad e th e followin g fou r significan t change s t o th e payment s mad e t o 

the Appellant afte r the Appellant ha d retired : 

( 1 ) I t increase d th e amoun t o f th e payment s fro m th e final MR D rat e o f pe r 

mont h t o $5,357.3 3 pe r month ; 

( 2 ) Startin g i n 2009 , i t fixed th e revise d amount , $5,357.3 3 pe r month , as the 

benefi t paymen t amount ; 

( 3 ) I t bega n t o pa y the Appellant [a ] $5,357.3 3 benefi t o n a monthl y basis i n 2013 ; an d 

( 4 ) I t stoppe d describin g th e monthl y payment s a s MRD s and , instead , referre d t o the m 

merel y as "distributions. " (See descriptio n immediatel y followin g Tabl e 2 o n pag e 7 o f 

this decision. ) 

Thes e action s wer e consisten t wit h ho w th e Pla n wa s operate d an d funded . A s show n i n th e 

 Actuaria l Valuatio n Repor t an d For m 5500 , Schedul e SB , th e certifie d actuaria l calculatio n 

o f the Appellant's retiremen t benefi t wa s $5,357.3 3 pe r mont h a s a straight-lif e annuity . The 

Appellant's Pla n participan t statements als o showe d the Appellant's retiremen t benefi t t o b e 

 pe r mont h (i.e. , th e amoun t afte r th e offset) . Takin g thes e action s als o enable d th e Pla n 

administrato r t o avoi d havin g t o ad d bac k an y non-offse t MRD s fo r purpose s o f th e specia l 

nondiscriminatio n testin g unde r Treasur y Regulation s Sectio n Th e resultin g 

decisio n wa s t o pa y th e offse t benefi t i n th e for m o f a straigh t lif e annuit y o f $5,357.3 3 - a resul t 

tha t wa s perfectl y consisten t wit h th e Plan , applicabl e la w an d IR S guidance . 

T h e analysis describe d i n PBGC' s Februar y 8, lette r furthe r supports th e findin g tha t th e 

Pla n administrato r ha d compute d the Appellant's retiremen t benefi t o f $5,357.3 3 pe r month . 

PBGC' s actuarie s teste d th e reasonableness o f th e calculatio n b y makin g its ow n calculation s o f 

 Th e distributio n restrictio n i n Pla n Sectio n XV.D(l ) wa s base d o n the Appellant's "straigh t lif e annuit y tha t is th e 

actuaria l equivalen t o f th e accrue d benefi t an d othe r benefits t o whic h [the Appellant was ] entitle d unde r th e plan. " 

Thi s mean s tha t al l amount s tha t wer e pai d o r payabl e b y th e Pla n t o the Appellant, includin g th e MRDs , woul d hav e 

bee n includabl e i n th e calculatio n o f the Appellant's restricte d benefi t amoun t fo r purpose s o f Sectio n XV.D(l ) o f th e 

Pla n an d Treasur y Regulation s Sectio n

 W e cal l this th e reasonabl e wa y becaus e i t follow s th e analysis o f th e Interna l Revenu e Servic e i n Privat e Lette r 

Rulin g ("PLR" ) 951402 8 (Januar y 13 , 1995) . See Appendi x o n page s A-25 2 t o A-262 . 

Pag e 16 o f 18 
the Appellant's retiremen t benefit . PBG C actuarie s gav e the Appellant credi t fo r th e additiona l 

Year s o f Servic e an d increase s i n Compensatio n afte r the Norma l Retiremen t Dat e an d 

subtracte d th e valu e o f th e in-servic e distributions. PBG C foun d tha t the Appellant's benefi t 

amoun t o f $5,357.3 3 wa s reasonabl e as i t wa s withi n 5 % o r $5.0 0 o f th e retiremen t benefi t tha t 

PBG C actuarie s ha d calculated. 4 8 

I n you r respons e t o ou r Apri l letter, yo u acknowledge d tha t the Appellant woul d no t 

b e entitle d t o a n unreduce d benefi t accrua l unde r Sectio n 4 1 l(b)(l)(H)(i ) o f th e Cod e i f suc h a 

benefi t accrua l woul d caus e th e Pla n t o discriminat e i n favo r o f highl y compensate d employee s 

withi n th e meanin g o f Cod e Sectio n 401(a)(4). 4 9 Th e recor d strongl y suggests tha t wa s th e case . 

I n addition , w e not e tha t you r argumen t against th e offse t is entirel y lackin g evidentiar y support . 

I f th e MRD s wer e a separate , non-offse t benefi t a s yo u hav e claimed , the n ther e woul d hav e ha d 

t o hav e bee n a contemporaneou s nondiscriminatio n test performe d a t the retiremen t t o 

properl y advis e the Appellant o f its distributio n rights i n accordanc e wit h th e nondiscriminatio n 

rales. Accordin g t o th e IR S guidanc e discusse d above , th e tota l benefi t teste d woul d hav e bee n 

base d o n th e annuit y valu e o f th e o f th e MRDs , plu s th e non-offse t benefi t o f $7,296.6 7 pe r mont h 

tha t the Appellant ha s claimed . N o othe r participan t benefi t unde r th e Pla n is anywher e nea r as 

larg e as the benefit . Ther e ar e n o nondiscriminatio n tests i n th e record , an d yo u hav e 

n o t provide d an y informatio n abou t the m despit e th e request tha t w e mad e i n ou r lette r date d 

Apri l

I n addition , becaus e th e Pla n offere d lump-su m distributions , the Appellant's distributio n 

electio n materials woul d hav e neede d t o sho w the Appellant ho w muc h o f an y possibl e lum p su m 

woul d hav e bee n a restricte d benefi t unde r Treasur y Regulation s Sectio n

However , th e distributio n electio n for m tha t the Appellant provide d t o PBG C show s onl y th e 

straight-lif e annuit y benefi t o f $5,357.33 . Th e sectio n abou t th e singl e su m an d combinatio n 

benefi t is blank . 

Give n th e clea r languag e i n th e Plan , whic h authorize s th e Pla n administrato r t o mak e suc h 

interpretation s an d computation s as i t deem s appropriate , th e Appeal s Boar d foun d tha t PBG C an d 

t h e Pla n administrato r reasonabl y construe d an d applie d th e term s o f th e Pla n an d applicabl e la w 

t o offse t the Appellant's benefi t accruals fro m 200 3 t o 200 7 b y th e valu e o f th e MRD s tha t the 

Appellant ha d received. 5 0 Th e Boar d als o foun d tha t ther e is n o erro r i n PBGC' s determinatio n 

PBGC' s Februar y 8, 201 8 explanatio n lette r provide d i n relevan t par t a s follow s (see Appendi x o n pag e

PBG C teste d th e reasonableness o f th e amoun t o f th e benefi t in-pay , $5,357.33 , comparin g i t wit h 

t h e estimate d accrue d benefi t a s o f th e dat e the Appellant terminate d employment , Decembe r

2007 , usin g th e Pla n provision s i n th e documen t an d th e regulator y guidanc e above . . .. 

. . . Th e resultin g calculate d benefi t as o f Decembe r 31 , 2007 , wa s withi n $5.00/5 % toleranc e 

describe d abov e and , thus, PBG C accepte d th e benefi t i n pa y as reasonable . 

See Appendi x o n pag e

See e.g. Block v. Pitney Bowes Inc. 95 2 F.2 d 1450 , 145 4 (D.C . Ci r 1992 ) ("Th e essentia l inquir y here , i n short , is 

Pag e 17 o f 18 
t o continu e t o pa y the retiremen t benefi t as a straight-lif e annuit y i n th e amoun t o f 

$5,357.3 3 pe r month . Thi s is th e sam e monthl y amoun t th e Pla n administrato r ha d recorde d as 

the Appellant's benefi t an d ha d pai d the Appellant sinc e 2009 . 

Decisio n 

T h e Appeal s Boar d ha s applie d th e term s o f th e Pla n an d applicabl e provision s o f la w t o th e 

facts as foun d i n th e documente d record . Fo r th e reason s discusse d above , w e hav e foun d n o basis 

f o r changin g PBGC' s Decembe r 29 , determination ; thus, w e hav e denie d th e appeal . Thi s 

is th e agency's fina l decisio n o n this matter , an d the Appellant may , i f the Appellant wishes , see k 

revie w o f this decisio n i n a n appropriat e Unite d State s Distric t Court . 

I f the ha s an y question s abou t the Appellant's benefit , the Appellant ma y cal l 

PBGC' s Custome r Contac t Cente r a t 1-800-400-724 2 an d as k t o spea k wit h th e authorize d 

representativ e fo r th e Pla n (Cas e No . 223408) . 

Sincerely , 

Joh n R . Palig a 

Member , Appeals Boar d 

Enclosure : Appendi x wit h 26 2 page s 

c c : The 

wha t th e distric t cour t understoo d i t t o be : Di d th e Committe e reasonabl y constru e an d appl y th e [] Pla n i n [th e 

participant's] case?"). See also Firestone Tire & Rubber Co. v. 48 9 U.S . 101 , (1989) . 

Pag e 18 o f 18