,v~ 

PBGC 

Protecting America's Pensions 

Pension Benefit Guaranty Corporation 

1200 K Street, N.W., Washington, D.C. Z0005-40Z6 

December 13,2013 

Re: Appeal2012--Case #196603, Bethlehem Steel Corporation Pension Plan 

Dear 

The Appeals Board ha.S reviewed your appeal of PBGC's August 24, 201 0 determination of 

your PBGC-payable benefit under the Bethlehem Plan. For the reasons discussed below, we found 

no basis for changing PBGC's determination that the Plan's Surviving Spouse Benefit must be taken 

into account in determining your Maximum Guaranteeable Benefit. We further found no basis for 

changing your PBGC-payable benefit amounts. However, we did change PBGC's methodology for 

computing any amounts payable to your surviving spouse under the Plan's separate Surviving Spouse 

Benefit. 

PBGC's Determinations and Your Appeal 

On August 12,2010, PBGC determined that you are entitled to a PBGC benefit of$1,706.96 

per month, payable as a Straight Life Annuity with a Five-Year Certain feature and a separate 

Surviving Spouse Benefit. PBGC's letter also said that (1) although the amount you are entitled to 

receive is higher than the estimated benefit you had been receiving ($1 ,659.59), you were previously 

overpaid (then equal to $53,094.61 ), and (2) your future monthly payment will be reduced to 

$1,536.26 until you have repaid the overpayment, without interest. PBGC included a benefit 

statement showing the information PBGC used to calculate your benefit. 

On August 24, 201 0, PBGC issued a corrected determination that changed your overpayment 

balance from $53,094.61 to $33,593.07. 

After receiving a number offiling extensions so that you could obtain additional information 

about your PBGC-payable benefit under the Freedom ofinformation Act ("FOIA"), you filed your 

appeal on December 22, 20 11. You specifically disagreed with PBGC's recoupment ofthe pension 

benefits paid to you in the months immediately after PBGC terminated the Bethlehem Steel Plan and 

took over as trustee. You stated that the eight-year delay in determining your final benefit amount 

is unreasonable. 
You also disagreed with PBGC's treatment of the "free surviving spouse benefit" as a joint 

and survivor annuity that results in a reduction to your benefit and to the benefit payable to your wife 

after your death. You further noted that, while it is understandable that PBGC must take surviving 

·spouse benefits into account in determining its potential liability, calculating benefits actually 

payable to participants is a different matter. You said, in particular, that after an eight-year delay, 

PBGC should have used then-current ages for you and your spouse, instead of your ages as ofthe 

Plan's 2002 termination date, to adjust for the surviving spouse benefit. For these reasons, you 

believe both the recoupment and free surviving spouse benefit calculations are contrary to PBGC's 

fiduciary obligations under ERISA and are arbitrary and capricious. You also cited a number of 

Federal court decisions you believe support your appeal. 

Lastly, you discussed a prior Appeals Board decision that provided a participant in the 

Northwestern Steel and Wire Company Plan the opportunity to waive that Plan's Surviving Spouse 

Benefit. Your appeal asked for the same opportunity. 

Background 

The Bethlehem Plan terminated, effective December 18, 2002, without sufficient assets to 

provide all benefits PBGC guarantees under Title IV of ERISA. PBGC became the Plan's trustee 

on April30, 2003. Because oflegallimits under ERISA and PBGC's regulations, the benefits PBGC 

guarantees may be less than the benefits a pension plan would otherwise pay. One of these limits, 

the "Maximum Guaranteeable Benefit" limit, applies to your benefit. 

The records PBGC's auditors obtained from the former Plan administrator show that ( 1) you 

were born (2) your wife was (3) you were hired by Bethlehem 

Steel 1979, and (4) you were actively employed there when the Plan terminated on 

December 18,2002. As ofthat date, you had -.years ofcontinuous service and average monthly 

earnings of $12,417.60. Effective- 2003, you retired under the 70/80 Retirement 

provisions of the 1999 Steel Division component of the Bethlehem Plan (nonrepresented salaried 

employees). You elected, with your wife's consent, to receive your benefit in the Plan's Straight Life 

Annuity form, which includes a Five-Year Certain feature and a separate Surviving Spouse Benefit. 

The records further show that you received a "Sp~nt" of $27,801.72 from the 

Bethlehem Plan i~2003, covering the period from--2003 through- 2003. 

Beginnin~2003, the Plan began paying you a regular Plan benefit of$3,706.69 as a Straight 

Life Annuity with a Five-Year Certain feature and a separate Surviving Spouse Benefit. 

Your Bethlehem Plan Benefit 

Under the 1999 Steel Plan for nonrepresented salaried employees, your benefit is the highest 

ofthe amounts calculated under four different formulas: the Percent Pension formula, the Minimum 

Pension formula, the Total Retirement Benefit ("TRB ")formula and the Lifetime Minimum Pension 

formula. Also, because you elected to receive your Retirement Account Balance in a lump sum, your 

monthly Plan benefit must be reduced by the $126.08 per month annuity value of your Retirement 

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Account Balance (the "RAB offset"). The calculations below show your Plan benefit under each 

formula as a Straight Life Annuity with a Five-Year Certain feature and a separate Surviving Spouse 

Benefit: 

Percent Pension Formula: 

(1.2% ~yrs. x $12,417.60) + (1.5% x.yrs. x $12,417.60) = $3,600.48 

$3,600.48 permo $126.08 [RAB offset} = $3,474.40 per month 

Minimum Pension Formula: 

($26.50 x ..yrs.) + ($28.00 x.yrs.) = $630.74 

$630.74 permo- $126.08 [RAB offset} = $504.66 per month 

TRB before~: 

(1.575% x-yrs. x $12,417.60) = $4,562.82 

$4,562.82 x 0.8400 [early retirement}= $3,832.77 

$3,832.77- $126.08 [RAB offset)= $3,706.69 per inonth 

TRB after age 62: 

$4,562.82 - $126.08 [RAB offset] = $4,436.74 

$4,436.74- $559.19 [Social Security Offset]:::: $3,877.55 per month 

Lifetime Minimum Formula: 

$2,000 - $126.08 [RAB offset] = $I ,873.92 per month 

Your Plan benefit is highest under the TRB Pension Formula both before and after age 62. 

Surviving Spouse Benefit C'SSB") 

Under the provisions of Plan section 4 that apply to nonrepresented salaried employees, an 

eligible surviving spouse is entitled to a separate Surviving Spouse Benefit beginning the first ofthe 

month following the participant's death and continuing for the life of the spouse. If an eligible 

surviving spouse is younger than age 60 at the participant's date of death, the SSB payable until he 

or she reaches age 60 is equal to the greater of 50% ofthe participant's benefit, or $140.00 per month 

(Plan section 4.2). When an eligible spouse is or reaches age 60, Plan section 4.3(d) requires that 

the pre-age 60 monthly SSB amount "be reduced by 50% ofthe amount ofthe widow's or widower's 

benefit ('Widow's Benefit'] to which the surviving spouse is, or upon application would be, entitled 

for such month based on the [Social Security] law in effect at the time the Surviving Spouse Benefit 

first becomes payable ..."but not below $90 per month. PBGC generally refers to the post-age 60 

reduction described above as the "Social Security Offset." 

Please note that the Social Security Widow's Benefit used to determine the post-age-60 offset 

to the Plan's SSB is calculated in accordance with Plan provisions and based on the participant's 

earnings with Bethlehem. 

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Maximum Guaranteeable Benefit (MGB) 

Section 4022(b )(3) ofERISA provides that PBGC's guarantee of a participant's plan benefit 

cannot exceed a specified dollar amount payable in the form of a Straight Life Annuity at age 65. 

For a plan like the Bethlehem Plan with a termination date in 2002, the MGB is $3,579.55 per month 

in the form of a Straight Life Annuity for a participant who is age 65 on the Plan's termination date. 

Please note that PBGC can guarantee no more than a participant's MGB. The value of the MGB 

payable to a particular participant whose benefit form includes a survivor benefit and a Five-Year 

Certain feature is equivalent to the value ofthe MGB payable to that participant if his or her benefit 

form were a Straight Life Annuity with no survivor benefits. 

Because you began receiving your benefit before age 65 and your regular Plan benefit is in 

the form ofa Straight Life Annuity with a Five-Year Certain feature and a separate Surviving Spouse 

Benefit ("SSB"), PBGC must adjust the $3,579.55 amount to take into account your age and your 

benefit form. PBGC's benefits regulation (Benefits Payable in Terminated Single-Employer Plans, 

29 Code ofFederal Regulations§§ 4022.22 and 4022.23) sets forth the rules for adjusting the MGB. 

Age Adjustment Factor 

The MGB for a participant who begins receiving a benefit before age 65 must be reduced to 

reflect the number of whole months between (A) the later of the participant's age at the Plan's 

termination dat~at retirement, and (B) age 65. In your case, the later date in (A) is your· 

retirement date,..-2003. On that date, you were age.ears.onths and.days, with 

.whole months remaining until you reached age 65. Under PBGC's benefits regulation, this 

reduction is equal to 7112 of l% for each of the first 60 months, 4/12 of 1% for each of the next 60 

months, and 2112 of 1% for each ofthe next 120 months. Thus, your age adjustment factor is equal 

to: 

Form Adjustment Factor 

As you noted in your appeal, the Bethlehem Plan does not reduce your benefit to provide for 

the Five-Year C~rtain feature or the separate SSB. However, PBGC's benefits regulation requires 

PBGC to account for their values in the calculation of the MGB. PBGC's Actuarial Technical 

Manual establishes procedures for adjusting an SSB and accounting for the value it adds to a 

participant's Straight Life Annuity. 

Five-Year Certain Feature 

To adjust for the Certain feature, the MOB must be reduced by 1/24 of 1% for each of the 

first 60 months and I 112 of 1% for each month beyond 60 months for each whole month remaining 

in the certain period after the later ofthe Plan termination date or th~t's retirement date. 

Under the Bethlehem Plan, your Five-Year Certain benefit ended..._2008, which is 60 

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whole months after your-2003 retirement date. Your period-certain adjustment factor 

is: 

1.0 - (1/24 X 0.01 X 60) == 1.0 - 0.0250 = 0.9750 

Surviving Sr~ouse Benefit 

To adjust the MGB for the Plan's SSB, PBOC must compute an equivalent Joint and Survivor 

Annuity. As you know, PBGC uses the Weighted Average Method ("W AM"), which calculates the 

ratio ofthe SSB to the total benefit payable to the participant. To determine this ratio (which PBOC 

calls the "p%"), PBGC relies on actuarial factors such as age and mortality for three periods of the 

spouse's lifetime. As instructed by the Actuarial Technical Manual, PBGC applies these actuarial 

factors from the later ofthe Plan's termination date and the participant's retirement date, and adjusts 

the participant's MOB accordingly. 

Because PBGC's benefits regulation requires that PBGC calculate your MOB as ofyour date 

ofretirement, the value ofthe SSB is necessarily calculated before the amount ofthe SSB that would 

actually be paid to your spouse under the Plan can be determined. This is because the Social 

Security Offset in the SSB formula increases during your retirement because the Offset amount 

depends on ( l) an early-retirement factor that is calculated as ofthe date the Widow's Benefit is first 

payable, and (2) the cost-of-living adjustments ("COLAs") the Social Security Administration 

applies each year to your Social Security benefit. As a consequence, the Sodal Security Offset 

increases each month between a participant's retirement and his or her death. 

An SSB is first payable on the first day ofthe month following a participant's death. Under 

the W AM, PBOC calculates a weighted-average SSB that looks at three time intervals. The First 

Interval includes all SSB start dates before the spouse reaches age 60 (i.e., the earliest age a Widow's 

Benefit is payable under the Social Security Act). The Second Interval includes all SSB start dates 

between the spouse's age 60 and the age at which an unreduced Widow's Benefit is first payable 

(age 66 The Third Interval includes all SSB start dates after the age at which 

an is first payable. 

PBOC uses the GAM83 Unisex Mortality table specified in Rev. Rul. 95-5, 1995-1 C.B. 80, 

to calculate the probability that your spouse will start receiving her SSB (in other words, the 

probability that you will die) in each ofthe three intervals. Thus, "Prob 1 "is the probability she starts 

receiving her benefit during the First Interval; "Prob2" is the probability she starts receiving her 

benefit during the Second Interval; and "Prob3" is the probability she starts receiving her benefit 

during the Third Interval. 

Under PBGC's W AM, after calculating the above probabilities, PBGC calculates the median 

SSB that would be payable to an eligible spouse ifthe spouse's SSB started during the each of the 

three intervals. Thus, "Med 1" is the median benefit your wife would receive during her lifetime if 

she started receiving her benefit during the First Interval; "Med2" is the median benefit she would 

receive during her lifetime if she started receiving her benefit during the Second Interval; and 

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"Med3" is the median benefit that she would receive during her lifetime ifshe started receiving her · 

benefit during the Third Interval. 

The weighted-average SSB is the numerator of the p% ratio and is calculated as follows: 

Weighted-average SSB = (Probl x Medl) + (Prob2 x Med2) + (Prob3 x Med3) 

As discussed above, in order to calculate the median SSB payable during each of the three 

intervals, PBGC must make an assumption regarding the COLAs that the Social Security 

Administration ("SSA") will apply to your Social Security benefit between your date of retirement 

and your date ofdeath. For purposes ofcalculating the weighted-average SSB, PBGC predicted that 

all future annual COLAs would be 1.4%, which was the COLA in effect in December 2002 (the 

month in which the Plan terminated). 

According to your appeal, PBGC should have determined your p% based on actuarial factors 

that applied at the time you received your benefit determination, which was several years after PBGC 

became the Plan's trustee. However, the p% represents the percentage that the SSB constitutes of 

a participant's total benefit payable after the later of a plan's termination date and a participant's 

retirement date. As a percentage ofyour total benefit, the p% must be based on actuarial factors and 

assumptions that applied when you began receiving benefit payments. 

~icipant like you whose spouse is .years younger (based on "age nearest birthday" 

as of~2003), a Straight Life Annuity with a Five-Year Certain feature and a separate SSB 

is actuarially equivalent to a Joint and 24.63% Survivor Annuity. The form adjustment factor for 

a Joint and 24.63% Survivor Annuity with 60 months' certain is 0.9029. Note that the 0.9029 form 

adjustment factor includes the period certain adjustment discussed on page 4 of this decision. 

Using the factors shown above, your MGB is: 

$3,579.55 [age-65 MGB] X 0.5200 [age adjustment] x 0.9029 [fonn adjustment] 


= $1 ,680.63 per month, as a Straight Life Annuity with a Five-Year Certain feature and SSB 


SSB Payable To Your Spouse 

As discussed above, the Board found no basis for changing PBGC's determination that the 

SSB must be taken into account in determining your MGB. However, during the course of 

reviewing your appeal, the Board discovered a programming error in PBGC's formula for calculating 

the weighted-average SSB for participants whose benefits are affected by the MGB. Because ofthis 

programming error, PBGC's methodology for paying the SSB would produce SSB payments (as 

shown on the ARIEL print-out you received under FOIA) that result in a total benefit with an 

actuarial value that is less than the actuarial value of the MGB in the J&24.63%SA form. 

Due to the programming error, when PBGC calculated your spouse's weighted-average SSB, 

PBGC effectively assumed that the SSA's future COLAs would be 1.4% per year until your spouse's 

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age 66 (the beginning ofthe Third Interval) and 0% thereafter, instead of 1.4% throughout the period 

between your date ofretirement and your date ofdeath. As a result ofthe programming error, PBGC 

used assumptions that resulted in a higher value for the weighted-average SSB. 

We note that for persons like you whose benefit is affected by the MGB, PBGC would pay 

you and your spouse benefits that are actuarially equivalent to your MGB regardless ofwhich COLA 

assumptions PBGC uses so long as it uses the same COLA assumption to calculate both your 

spouse's weighted average SSB and the actual SSB that your wife will receive if you die first. 

Accordingly, to correct for the programming error in your case, the Appeals Board decided 

that PBGC will calculate the actual SSB your wife will receive using the same assumptions PBGC 

used to calculate your spouse's weighted-average SSB, namely, an annual 1.4% COLA from your 

retirement date to your spouse's age 66, and 0% from your spouse's age 66 to your date of death. 

Therefore, your spouse will receive a higher SSB than she would receive if the programming error 

were not corrected. 

Your PBGC-Guaranteed Benefit 

To determine the PBGC-guaranteed benefit for a participant like you whose Plan benefit is 

not a level amount for life, PBGC must "Jevelize" or express the Plan's benefit amounts as a single 

unchanging monthly amount that includes the value of any survivor benefits. Your levelized Plan 

benefit is $3,817.75 per month. The ratio of your MGB to your levelized benefit determines your 

PBGC Guarantee Ratio as follows: 

$1,680.63 [MGB] + $3,817.75 [levelized benefit]= 0.440214 [Guarantee Ratio] 

Thus, your PBGC-guaranteed benefit as a Straight Life Annuity with a Five-Year Certain feature 

(sipce expired) is: 

• 	 $1 631.74 per month ($3,706.69 times 0.440214) from your retirement date through 

2008 (age 62), and 

- • $1,706.96 per month ($3,877.55 times 0.440214) from- 2008 forward . 

Benefit Form 

As discussed above, the benefit form you and your spouse elected when you retired is a 

Your

Straight Life Annuity with a Five-Year Certain feature and a separate SSB. You said you and your 

spouse elected the Straight Life Annuity because it was the Plan's only higher-paying alternative to 

the Plan's automatic form for married participants (which is a Qualified Joint and 50% Survivor 

Annuity with a Five-Year Certain feature and a separate SSB). Now that the Plan is terminated and 

the SSB is no longer subsidized, you believe it is unfair to reduce your benefit to pay for a survivor 

benefit that neither you nor your spouse want. 

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You asked that, in the event the Appeals Board upholds your PBGC benefit determination, 

you be permitted to waive the SSB, with the consent ofyour spouse, and re-elect the Plan's Straight 

Life Annuity form without an SSB. You noted that the Board has granted such requests in the past. 

In particular, you cited a July 29, 2005 Appeals Board decision (the "NS&W Decision") for a 

participant in the Northwestern Steel & Wire Company Pension Plan (the "NS&W Plan"). 1 

The NS&W Decision addressed an appeal by a participant who retired on June 1, 2001. 

Subsequent to that date, PBGC promulgated a regulation that provides that "once payment of a 

benefit starts, the benefit form cannot be changed." 2 The "change in benefit fol:m" regulation became 

effective April 8, 2002. It has been PBGC's consistent practice to not allow participants with 

retirement dates afte~02 to change their benefit form after retirement. As noted above, 

you retired effective-2003. 

PBGC's policy allows participants to change their form of benefit in certain very limited 

circumstances. 3 None of the exceptions apply in your case. There is no exception that allows for 

waivers of the SSB by participants, such as you, whose PBGC benefit is affected by the MGB. 

Additionally, as discussed above, PBGC has clear procedures for determining the MGB when a 

benefit form includes the SSB common to many PBGC-trusteed plans in the steel, chemical and auto 

industries. PBGC's procedures do not provide the participant the opportunity, with spousal consent, 

to waive the SSB. 

The Appeals Board decided, based on PBGC's regulation, policies, procedures and its 

practice, that you should not be allowed to waive your SSB. The Appeals Board, in reaching this 

decision, concluded that its 2005 NS&W Decision is distinguishable from your appeal. While we 

are sympathetic to your situation, the Board found no basis for providing you the opportunity to 

change a benefit form that you validly elected. 

Special Pavment 

I 

Section 3.2(a) of the 1999 Steel Plan (nonrepresented salaried employees) provides for a 

"Special Payment" to a 70/80 retiree as follows: 

The amount of the Special Payment of a Participant who was entitled to receive a 

Vacation (hereinafter defined in paragraph 3 .2( d)) in the year of retirement or who 

1 The NS&W decision is published on PBGC's website at http://www.pbgc.gov/Documents/apbletter/Decision-­

Northwestern%20Steel%20and%20Wire%20Co%202005-07-29.pdf. 

2 PBGC has unifonnly applied the rule in subsection 4022.8(d) both ( 1) to participants who went into pay status after 

their plan's tennination date and (2) to participants who were in pay status on their plan's tennination date and who 

requested a benefit fonn change from PBGC after the termination date. 

3 PBGC's Operating Policy 5.5-7 ("Annuity Benefit Forms") allows participants to change their benefit elections under 

certain limited circumstances. These limited circumstances, however, do not apply in your case . 

. 8. 
would have been entitled to receive a Vacation in the year of retirement except for 

his retirement shall be calculated as follows: 

(1) 	 The Participant's Vacation Pay (hereinafter defined in paragraph 

3.2(d)) shall be multiplied by 13 (14 in the case of a Participant who 

is eligible for more than four ( 4) weeks of Vacation in the year of 

retirement). 

(2) 	 The amount calculated in (1) above shall be reduced by all Vacation 

Pay the Participant received for such year of retirement. 

Plan section 3.2(c)(2) provides that-­

The Special Payment shall be payable with respect to the first three (3) full months 

following the month in which retirement occurs. Such Special Payment shall be 

made in a lump sum within the first full calendar month following the month in 

which retirement occurs ... 

Thus, the Special Payment is a single payment payable for the first three calendar months following 

the month in which retirement occurs. 

Section 4022.3 ofPBGC's benefits regulation provides that PBGC will guarantee the amount, 

as of the termination date, of a benefit provided under a plan if, among other things, the "benefit 

qualifies as a pension benefit as defined in§ 4022.2 ..." That section defines pension benefit as a 

"benefit payable as an annuity, or one or more payments related thereto, . . . which 

payments ... provide a substantially level income to the recipient." 

The Special Payment does not qualify as a pension benefit under the benefits regulation 

because it does not provide a "substantially level income." Consequently, although the Special 

Payment provision has been in the Bethlehem Pension Plan for more than five years, PBGC cannot 1 	 guarantee it. However, PBGC can pay your PBGC benefit amount for each month of the 3-month 

Special Payment period. PBGC must recover as an overpayment the difference between the portion 

of your Special Payment paid from Plan funds ($27,801.72) and your PBGC-payable benefit of 

$1 ,631. 7 4 per month for the 3-month Special Payment period. 

Recoug.ment ofOverpayments 

When PBGC becomes trustee of a terminated plan, PBGC continues to pay retirees on an 

estimated basis until PBGC can collect plan records, audit plan data and determine the benefits it can 

legally pay. This process can be complex and time-consuming, especially in a Plan like Bethlehem's 

with eight component plans, complex Plan provisions and more than 90,000 participants. If the 

estimated benefit amounts are too high, PBGC must recover the overpayments and does so by 

reducing the participant's future benefit, generally by not more than 10%, until the overpayment is 

repaid. PBGC does not charge interest. 

-9­
Under section 4022.81(c)(l) of the benefits regulation, overpayments. made on and after 

December 18, 2002, the date the Bethlehem Plan terminated, must be repaid. In calculating the 

$33,593.07 overpayment amount shown on your August 24, 2010 benefit determination, PBGC 

assumed your benefit would decrease to the final amount on December l, 20 I 0. The table below 

shows that calculation. Please note that your final overpayment amount will be slightly lower 

because PBGC continued to pay you the $1,659.59 per month estimated benefit while your appeal 

has been pending. 

PBGC- Monthly

When Paid Amount Payable Overi(Under) Month Overpayment/

Paid Benefit payment s Underpayment 

Paid 

$1,631.74 $26,169.98 $26,169.98 

$1,631.74 ($ 1,631.74) 2 ($ 3,263 .48) 

$1,631.74 $ 2,078.97 7 $14,552.79 

$1,631.74 ($ 45.28) 54 ($ 2,445. I 2) 

$1,706.96 ($ 47.37) 30 ($ 1,421.11) 

Net Overpayment through $33,593.06 

11/1212010 

As explained above, PBGC must reduce your future PBGC payments by not more than 10% 

until the overpayment is repaid (without interest). For your information, the Appendix to this 

decision more formally explains the legal basis for this requirement. 

Decision 

Having applied the terms of the Plan, the provisions ofERJSA and PBGC regulations and 

policies to the facts in this case, the Appeals Board found no basis for changing PBGC's August 24, 

2010 determination that (1) the Plan's Surviving Spouse Benefit must be taken into account in 

determining your Maximum Guaranteeable Benefit and (2~titled (before recoupment) to 

a PBGC-payable benefit of$1 ,631. 7 4 per month from yo~2003 retirement date through 

-2008 (age 62), and to $1,706.96 per month (before recoupment) from- 2008 forward, 

payable as a Straight Life Annuity with a Five-Year Certain feature (since expired) and a separate 

Surviving Spouse Benefit. The Board further found that, in the event you predecease your spouse, 

PBGC will calculate the Social Security Widow's Benefit offset to her Surviving Spouse Benefit 

using an annual COLA assumption of I .4% until her age 66, and 0% thereafter. This is the Agency's 

final decision on this matter and you may, ifyou wish, seek court review of this decision. 

- I 0­
We will forward a copy of this decision to PBGC's Benefits Administration and Payment 

Department (BAPD), the group responsible for determining and paying benefits. BAPD will correct 

its records and implement this decision. 

Thank you for your patience whilewe completed our review. Ifyou have questions, please 

call PBGC's Customer Contact Center at I -800-400-7242. 

Sincerely, 

0-'-\_~J'

Linda M. Mizzi 

Member, Appeals Board 

. II . 
Appendix 

LEGAL BASIS FOR RECOUPING 0VERPA YMENTS 

A primary PBGC mission is to provide timely and uninterrupted pension payments to 

participants and beneficiaries in terminated pension plans trusteed by PBGC. To accomplish that 

mission, PBGC pays benefits on an estimated basis after a plan terminates and until final 

determinations of guaranteed benefits can be made. PBGC is committed to issuing its 

determinations ofguaranteed benefits as quickly as possible. Nevertheless, the processes associated 

with trusteeship of a terminated plan and calculation of benefits are often time-consuming, not 

always smooth, and may result in the underpayment or overpayment of guaranteed benefits to some 

participants. The delays that sometimes occur, however, do not give rise to claims that recoupment 

of overpayments should be waived, as is explained below. 

PBGC has determined that it is authorized to recoup payments that exceed a participant's or 

beneficiary's entitlement, and it is PBGC's policy to do so. Recoupment is made in accordance with 

PBGC's regulation 29 CFR § 40~2, Subpart E, PBGC Recoupment and Reimbursement of Benefit 

Overpayments and Underpayments. The regulation provides that PBGC may recoup overpayments 

as future benefit reductions if the participant has received, at any time, benefits in excess ofthose 

which he or she is entitled to receive under Title IV of ERlSA. The reduction in future benefit 

payments is determined actuarially and is generally limited to not more than 10 percent of the 

monthly guaranteed benefit. According to the regulation, benefit reductions will cease when the 

amount (without interest) of the net overpayment is recouped, and recoupment (as provided under 

the regulation) constitutes full repayment of the overpayment. 

PBGC's recoupment regulation is consistent with the agency's authority under ERlSA and 

a government agency's general authority to recover money owed to it. In U.S. V. Wurts, 303 U.S. 

414, 416 (1938), the Supreme Court held that a government agency may recover funds owed to it 

after several years and stated, "The Government's right to recover funds, from a person who received 

them by mistake and without right, is not barred unless Congress has "clearly manifested its 

intention" to raise a statutory barrier." Id. With respect to PBGC, Congress has not manifested any 

intent in ERlSA or other statutes to bar the agency from collecting overpayments it has made to 

participants in terminated pension plans. 

Courts have consistently upheld PBGC's recoupment authority. Most recently, in Davis v. 

PBGC, 2012 WL 1942678 (D.D.C. 2012), the United States District Court for the District of 

Columbia rejected a claim that PBGC was not permitted to recoup overpayments it issued to 

participants in the Retirement Income Plan for Pilots ofUS Airways, Inc. In upholding PBGC's 

authority to recoup overpayments, the court cited Bechtel v. P BGC, a previous case in which the 

court stated the following: 
[I]t was inevitable under this statutory scheme that between the plan termination date 

and the date by which guaranteed levels had been calculated, payments would be 

made at a level other than the guaranteed level. By imposing limits on the amount 

the PBGC may pay, the statute necessarily anticipates that such overpayments will 

be recouped ... Thus, finding no persuasive evidence to the contrary, we conclude 

that PBGC may recoup payments in excess of guaranteed levels. 781 F .2d 906, 907 

(D.C. Cir. 1986). 

As this statement indicates, the statutory scheme Congress created under Title IV ofERISA 

envisions that PBGC may collect overpayments it issues to participants. Furthermore, even when 

PBGC has delayed in issuing formal benefit determinations and recouping overpayments, "Congress 

did not intend such delays ... to create a windfall for some ERISA beneficiaries at the expense of 

others and the guaranty system as a whole." Id. Therefore, PBGC may recoup benefit overpayments, 

even years after they have been made. 

Some participants have questioned whether PBGC may recoup benefit overpayments after 

periods ofsubstantial delay. For example, in Pineiro v. PBGC, 318 F. Supp.2d 67 (S.D.N.Y. 2003), 

a group ofplan participants claimed that PBGC' s recoupment oftheir benefits violated the agency's 

fiduciary duties under ERISA. The court rejected the participants' claim. It noted that PBGC is 

"trustee ofhundreds ofterminated plans" and must balance scarce resources in administering those 

plans. Id at 90. Therefore, the court did not find that PBGC's eight year delay in issuing formal 

benefit determinations "was necessarily unreasonable in light of the multitude of complex tasks 

involved," and it held that PBGC's delay was not a breach of fiduciary duty under ERISA. Id 

In Szydlowski v. PBGC, 2006 WL 903246 (E.D. Mo. 2006), a participant raised a similar 

claim that PBGC's recoupment ofhis benefit was a breach offiduciary duty under ERISA. The court 

rejected the participant's argument. Since PBGC recoups a maximum often percent ofa participant's 

monthly benefit payments, without interest, the court concluded that PBGC's recoupment was the 

equivalent of providing the participant with a no interest loan for several years. It found that such 

actions do not harm the participant, and therefore, could not constitute a fiduciary breach. Id. at *8. 

Based on the above, PBGC has authority to recoup overpayments made to participants and 

beneficiaries.