PBCIC Pension Benefit Guaranty Corporation

Prt.otI,,g Am.dc.'s P.n.Irn,. 1200 K Street, N.W., Washington, D.C. 20005-4026

NOV 1 8 2005

 

 

 

 

Re: 

Appeal Weirton Retirement Program, Case #197614

Appeal Weirton Steel Corporation Retirement Plan, Case #201097

(the Plans)

Dear :

The Appeals Board has reviewed the appeals you filed on behalf of your client,

 . As explained below, we are denying the appeals.

PBGC's Determinations and Your Appeals

PBGC's October 2004 determination letter told hat the $86.89 per month

benefit she is currently receivin Weirton Retirement Program is correct. By letter dated

December 2004, PBGC sent its determination of her benefit under the Weirton Steel

Corporation Retirement Plan, which stated that the monthly benefit of $37.32 she currently receives

under the Plan is the correc ch determination letter pointed out that the benefit amount

shown is the same amount received from the prior Plan administrator (i.e., before the

Plans terminated and PBGC became responsible for payment of benefits).

Your December , 2004 and January 2005 letters of appeal said that you reviewed

pension plan documentation that PBGC provided you pursuant to your 004 information

request and "noticed that my client is not receiving the automatic qualified joint and survivor

annuity (QJSA)' guaranteed under federal law." You noted that PBGC provided you only one side

of the Weirton Post-Retirement Option Election andCertjfIca:ions form (Option Form). You stated

that, based on the documentation you received from PBGC and your client, it is your position that

Your December 2004 appeal letter includes reference to a pre-retirement survivor annuity

(PRSA), which is not applicable in this case since the participant died after retiring.
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any "purported waiver ofthe QJSA is invalid under the strict rules concerning waiver of the QJSA"

under the Employee Retirement Income Security Act (ERISA), federal regulations, and the terms

of the Plan. Specifically, you asserted that the waiver is invalid because:

The Option Form lacks the signature (and seal) of a notary public required under

page 18 of the Summary Plan Description (SPD) for the Weirton Retirement

Program;

2. The Plans failed to provide the retiree and spouse with a written explanation

concerning the QJSA and the effects of waiving the QJSA;

3. The retiree and spouse did.not receive a written explanation of the relative financial

effects of waiving the QJSA in comparison with other optional forms ofbenefits; and

4. The Option Form "fails to advise the retiree and spouse as to the availability of any

additional information or how they may obtain such information."

You contended that your client is entitled to the full amount of the QJSA.

In a letter dated May 4, 2005, you submitted the written "expert opinion" of Professor

Colleen E. Medill of the University of Kansas School of Law. Professor Medill had reviewed the

information on a "Post Retirement Option Election and Certifications"(Exhibit C to Professor

Medill 's opinion) and an "Explanation ofPost Retirement Option" (Exhibit D to her opinion), which

were documents that Weirton had used in processing benefit elections under the Plans. Professor

Medill opined that the written content of Exhibit C failed to satisfy the legal standards under ERISA

and applicable regulations for a QJSA waiver because the form:

• uses technical defined terms to describe the election options for the participant and the

spouse, which are not defined or explained on the form;

does not present a general explanation, written in nontechnical language, of the relative

financial effect of an election to waive the QJSA form of benefit payment;

contains no reference to the availability of additional information specified in Treasury

Regulation § I .401(a)-I l(c)(3)(iii), or how a participant may obtain this information; and

does not meet the requirements in Treasury Regulation § 1:401 (a)-20, Q&A-36, which is

applicable for Plan years beginning after December 31, 1988, concerning disclosure of

additional information concerning the relative values of the optional forms of benefit

payment as compared with the QJSA benefit. The form fails this additional information

requirement because it does not explain which optional forms ofP Ian benefits are subsidized

in comparison with the QJSA form of benefit payment and does not reveal the interest rates

used to calculate the optional benefit forms of payment.
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Professor Medill further concluded that, even ifthe Exhibit C form is supplemented by the

Exhibit D document, the form fails to satisf' the legal standards for a valid QJSA waiver because:

As with Exhibit C, Exhibit D fails to provide a general description of the technical terms

"Surviving Spouse Benefit," "100% Co-Pensioner," and "50% Co-Pensioner";

The method ofpresentation in the table at the bottom of Exhibit D fails to adequately explain

the relative financial effect of an election to waive the QJSA form.. For example, Exhibit D

does not explain that the "Surviving Spouse Benefit" on line I of the Table is a separate and

unrelated type of benefit to the QJSA monthly pension that is shown on line 2, and that

therefore the decision of whether or not to waive the QJSA form does not affect the amount

of the Surviving Spouse Benefit; and

As is the case with Exhibit C, Exhibit D does not meet the requirements in Treasury

Regulation § 1.40 t(A)-20, Q&A-36 concerning the relative values of the optional forms of

benefit payment as compared with the QJSA benefit.

Professor Medill asserted that, for plan years beginning after December 31, 1984, a waiver

ofthe QJSA is not valid unless "it has been executed in full and complete compliance with all of the

technical legal requirements for such consent." She therefore asserted that, if the spouse of a

participant in the Plan has not executed a valid waiver, the spouse as a Plan beneficiary is entitled

to receive the benefit due in the absence of a valid waiver, which under the Retirement Equity Act

amendments to ERISA must be a QJSA.

Backround

According to the record btained from Weirton Steel Corporation

(Company), your client's husband, retired from the Company on June 1984.

On May , 1984, he signed the Company's Option Form, waiving the Automatic 50% Spouse's

Option (the QJSA) and electing instead to receive his benefit as a Life Annuity. The Option Form

applied to his benefits under both Plans.2

In addition to the QJSA and other benefit options, both Plans provided a sur ving spouse

benefit at no reduction to the participant's benefit. died on March 2000, and

 began receiving the surviving spouse benefits from both Plans effective April 2000.

The Weirton Retirement Program terminated as of December 6, 2002, and the Weirton Steel

Corporation Retirement Plan terminated as of October 21,2003. PBGC is the trustee of both Plans.

While the wording on the Option Form does not specifically indicate that the Form covers both

Plans, the files show that estimated benefit amounts on the Option Form are for participation in both

Plans. Please n Weirton Steel Corporation Retirement Plan was established in January 1984, only a few

months before retired; thus, he earned a very small benefit under that Plan.
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The Option Form is a one page, two-sided document. Unfortunately, only the front page

of Option Form was initially included on PBGC's automated system, which is the

reason you did not previously receive a complete copy of the document. We regret this oversight

on PBGC's part. Enclo which the Appeals Board obtained from PBGC, is a complete copy

of the Option Form that signed when he retired from the Company.

Discussion

The Retirement Equity Act (REA), Public Law 98-397,98 Stat. 1426 (August 23, 1984),

required spousal consent for waivers of the Joint and Survivor Annuity (J&SA) or the QJSA.

However, the spousal consent requirements under REA for J&S waivers applied only to annuity

starting dates on or after January 1, 1985. These REA provisions also applied only if the participant

had at least one our of service or paid leave under the plan on or after August 23, 1984. 

retired on June , 1984. Thus,.REA did not apply to him for two reasons, i.e., his annuity starting

date was before January , 1985, and he did not have an hour of service or paid leave after

August , 1984.

Prior to REA's effective date, spousal consent was not required unless the provisions ofthe

specific required it. While the normal form of benefit for married participants at the

time of retirement was the Automatic 50% Spouse's Option, the Plan document in

effect at that time (i.e., the Pension Agreement between the Weirton Steel Division of the National

Steel Corporation and the independent Steelworkers Union, that became effective July 31, 1980)

did not require that the spouse consent to the participant's election to waive the Automatic 50%

Spouse's Option. As shown in Enclosure 2, section 3.1 5(a)(3) of the Summary Plan Description

states:

A participant may revoke the Automatic 50% Spouse Option by written notice duly

filed with the Company at any time within the 90-day period prior to the date the

pension payments commence, or within 90 days following the date on which the

Company provides written notice to the participant regarding the Automatic 50%

Spouse Option, or, if the participant has not been given specific information

regarding the terms and conditions of such Option and the financial effect upon his

pension of electing such Option and within 60 days of receiving such notice

regarding the Option makes a written request for such specific information, within

90 days following the date on which the Company provides such information,

whichever is later, and -

(i) receive the regular pension otherwise payable under

this Agreement during his lifetime, or

(ii) elect a Co-Pensioner Option in accordance with the

provision Set forth in paragraph 3.16.

Section 3.15 (d) states: "Any revocation of the Automatic 50% Spouse Option shall be

executed on the form prescribed for this purpose by the Company and shall be deemed to be duly

filed when it shall have been received by the Company.
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Section 3.15 (e) states: "Satisfactory proofof marriage of the participant and his spouse and

the age of the participant's spouse will be required prior to the payment of monthly installments

under this coverage [the Automatic 50% Spouse Optionj. No consent shall be required of the

participant's spouse f the participant desires to revoke the Automatic 50% Spouse Option."

[Emphasis added.J

Accordingly, Optio e Application for Post Retirement Option

prescribed by Weirton) does not include ignature as it was not required under Plan

provisions. Therefore, your arguments regarding spousal notification and consent do not apply in

his case.

The Option Form does provide for a witness to signature waiving the 50%

Spouse Option. The Plan document applicable to him, however, does not require that the witness

be a notary public. As shown on the form, ignature was witnessed by a Plan

representative, M. J. Bish. This signature by a Plan representative met applicable statutory

requirements.

You contended that the Plans did not provide the written explanation of the waiver required

by ERISA section 205(c)(3) and Treasury Regs. 1.401(a)-il (c)(3) and 1.417(e)-i (b)(2), and forthat

reason the waiver on the Option Form is invalid. 3 However, the Option Form itself demonstrates

that the Company, as the Plans' Administrator, made an effort to comply with applicable statutory

and regulatory requirements. The reverse side of Option Form shows the various

forms of benefits available to him and the benefit amount under each form. On the front side of the

form, by way of his signature, certified that the benefit options set forth on the reverse

side had been explained to him and acknowledged that he understood the effects of election.

What you appear to be suggesting, however, is that the Company's efforts fell short of fully

complying with the detailed requirements for QJSA waiver explanations that are set forth in

Treasury Regs. 1.401(a)-I 1(c)(3) and I .417(e)-i (b)(2), and for that reason the waiver should be

found to be invalid. However, courts have held that procedural defects, such as a failure to comply

fully with ERISA disclosure requirements, do not require a substantive remedy, unless they caused

a substantive violation or themselves worked a substantive harm. Davis v. Combes, 294 F.3d 931

(7th Cir. 2002) (in ERISA cases, plan administrator's substantial compliance with the statute and

regulations is sufficient); Lewandowski v. Occidental Chemical Corp., 986 F.2d 1006 (6tI Cir. 1993);

Ellenburg v. Brockway, Inc., 763 F.2d 1091 (9th Cir. 1985). Cf Hozier v. Midwest Fasteners, Inc.,

908 F.2d 1155 (3d Cir. 1990) (failure to comply with ERISA's disclosure provision does not provide

participants with substantive rights with respect to claims forbenefits in the absence ofextraordinary

circumstances). Accordingly, based on these legal precedents, the appropriate question appears to

be whether in case there was at least substantial compliance with the applicable

requirements fo anation.

Your appeal refers to the statutory and regulatory provisions that apply to post-ItEA benefit

elections. The pre-REA requirements were somewhat different and less stringent See Treasury Decision 7458,

1977-1 C. B. 99(1977). However, the discussion that follows, which refers to the post-REA requirements, applies

with equal force to the pre-REA requirements.
 

As noted earlier, a Plan representative presented the retirement form(s) to nd

witnessed his signing of the form(s). This occurred more than 18 years before PBGC became

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responsible for payment of benefits under the Plans. Neither PBGC nor the Appeals Board

participated in the retirement session(s) the Company had with Therefore, we have no

way of knowing what documents were given to him (other than the Option Form),4 nor do we know

what he was told. However, it is the Board's view that a Plan representative likely would be

knowledgeable about the provisions of the Plan and the policies and procedures for retiring and

would communicate them to the retiring participant. Additionally, ertified that the

benefit options under the Plans had been explained to him, and he acknowledged that he understood

the effects ofhis decision. The Appeals Board concluded that the above circumstances are sufficient

to establish a presumption that the Plan administrator had achieved, at minimum, substantial

compliance with the statutory and regulatory requirements with respect to explanations concerning

J&SA waivers.

You have not provided any specific information concerning aiver that would

rebut this presumption. For example, there is no evidence showing that any questions he may have

had regarding his retirement were unanswered, or he was not provided with all the information he

needed or requested. Therefore, the Appeals Board rejects your contention that waiver

should be held invalid and ineffective as a matter of law.

Further, the Appeals Board is unable to determine, based on the information in your appeal

and in PBGC's records, whether or not would have chosen a different benefit option

regardless of whether he had been provided with additional information. We further observe that

over 20 years have elapsed since igned the waiver form and that, until these appeals

were filed, there was no record that either or had disputed the form of his benefit.

The Board concluded that it would be inappropriate under these circumstances to allow the election

of a different form of benefits after the passage of this length of time.

As Mr. Eric Rofel's December 2004 letter on behalf of the Appeals Board stated, in

accordance with the Rules for Administrative Review of Agency Decisions, an opportunity to appear

before the Appeals Board and an opportunity to present witnesses will be permitted at the Appeals

Board's discretion. In general, an opportunity to appear will be permitted if the Appeals Board

determines that there is a dispute as to material fact (see 29 Code of Federal Regulations §4003.55).

There is no dispute of material fact in this case. Therefore, your request for a hearing before the

Board is denied.

The Appeals Board concluded that the validity of waiver should not be determined

solely by examining the language on the Option Form. While the statutory and regulatory provisions you cite

require that a participant be provided certain information about benefit options in writing, they do not require that the

information be provided on the form itself,
 

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Decision

For the reasons discussed above, the Appeals Board found that waiver of the

J&SA was properly ex d. Your appeals are therefore denied. This the Agency's

final action regarding PBGC October 28, 2004 and December , 2004 benefit

determinations. Your client may, if she wishes, seek court review of this decision.

Sincerely,

Sherline M. Brickus

Member, Appeals Board

Enclosures (2)

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