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b ' #b Pension Benefit Guaranty Corporation A PE V,--mU-. 1200 K Street, N.W., Washington, D.C. 200054026 

~e:~ase 190028, Thorn Apply Valley-Smoked 

Meats Hourly Employees' Pension Plan (the "Plan") 

The Appeals Board reviewed. your .appeal -of PBGC's 

December 23, 2002 determination of your benefit under the Plan. 

As explained below, the Board found no basis presented in your 

appeal for changing PBGC's determination.. 

Benefit Determination and Auweal 

PBGC's letter stated that.you are entitled to a single lumpsum payment of $3,126.00, plus interest from the date of Plan 

termination. In your March 23, 2003 appeal, you raised five 

issues which will be discussed below. : 

Discussion 

(1) As your first. issue, you contend that PBGC's policies 

on withholding federal taxes from lump-sum payments violate the 

rules restricting assignment and alienation of benefits set 

forth at 29 U.S.C.A, § 1056(d) (2) -- or, equivalently ERISA § 

206 (d) (2) or IRC § 401 (a) (13) . 

PBGC is not only permitted to.withhold for federal income 

tax, we are reauired to do so. With respect to your argument 

regarding the assignment and alienation of benefits, please note 

that Treas. Reg. § 1.401(a)-13(cl (2) (ii) specifically provides 

that. withholding of federal tax from plan benefit payments is 

not an "assignment or alienation," as those terms are used under 

IRC § 401 (a) (13). Instead, like every other payor of an 

eligible rollover distribution, PBGC is required to withhold 20% 

of the distribution, under IRC § 34O5(c). This rule applies to 

all eligible rollover distributions, which are basically all 

lump sum payments made to the participant or their spouse 

(rather than to an estate or beneficiary). The only exception to 

this withholding requirement is when an eligible rollover 
distribution is directly rolled over to an eligible ret-irement 

plan. . 

(2) The second issue that youaraise is 'Whether PBGC erred 

in its calculation of participant's lump-sum pension plan 

distribution?" The Board found that PBGC determined your lumpsum benefit in accordance with the rules and factors set forth 

in the regulation which governs PBGC's valuation of benefits (29 

Code of Federal Regulations, *CFR", 55 4044.51 through 4044.57) . 

In this section, you also contend that 'PBGC erred in its 

assessment and determination of participant's earliest unreduced. 

retirement date, earliest retirement date, and adjustment factor 

for earliest retirement date. 29 U.S.C.A. § 1056(a) (31" Section 

3.4 .of the Plan provides that your earliest unreduced retirement 

age is' sixty; that. your earliest retirement age is 55; and, that 

your benefit is subject to a reduction of one-half of one 

percent (0.5%) for each month that your early-retirement date 

precedes your attainment of age sixty (60). PBGC followed .the 

terms of the Plan in its determination of your earliest 

- unreduced retirement age, earliest retirement age, and early 

retirement adjustment factors. 

In your appeal, you do not state what you consider to be the 

correct early retirement ages or factors. You simply contend 

that PBGC's determination is wrong and then cite 2.9 U.S.C.A. 5 

1056(a) (3), which is identical to ERISA § 206(a) (3). This 

section of ERISA requires that a separated .deferred vested 

participant, such as yourself, who has met a plan's service but 

not fhe plan's age requirements for an early retirement benefit, 

must be entitled upon reaching the plan's early retirement age 

tb receive a benefit that is not less than the actuarial 

equivalent 'of the participant's benefit payable at normal 

retirement age. 

Section l.l(gg) of the Plan defines Normal Retirement Age 

as sixty-five (651. Section 6.5-2 of PBGC's Operating Policy 

Manual provides that if a Plan's early retirement factors do not 

meet the standards of Section 206 of ERISA, then PBGC will 

substitute the factors set forth at 29 CFR 5 4022.23(c). These 

factors provide for a 55% reduction at age 55. In your case, the 

Plan provides for a 30% reduction at age 55. Thus, the Plan's 

early retirement reduction factors are significantly more 

favorable than those set forth at 29 CFR 5 4022.23(c). 

Therefore, the Board found that the Plan's early retirement 
factors meet thk standards set forth in Section 206(a) (3) of ERISA. 

(3) The third issue that you raise, also, pertains to PBGC1s 

determination of your earliest retirement date. You contend that 

your benefit should have been calculated from the earliest date 

that you could have elected to receive benefits. As noted, PBGC 

based its determination of your earliest retirement date.'on the 

terms of the Plan.' The Board found no basis presented in. your 

appeal for concluding that you could have elected to receive 

benefits at any age earlier than the age provided under the 

terms of the Plan. 

(4) The fourth issue is "Participant contends that the 

employee benefit plan (TAV-SMHE)' is liable to participant for 

interest on -distribution amount of lump-sum payment of early 

retirement benefit between date for distribution (June 25, 1993) 

until the present date/lump-sum payment date) under terms of 

plan and date which distribution was actually made." You appear 

to be arguing .that your lump-sum distribution shbuld have been 

effective as of your date of termination of employment, June 25, 

1993, and that interest on your lump-sum distribution should ,be 

calculated accordingly. The Plan, ho.wever, did not provide for 

the payment of your early retirement benefit in the form of a 

lump sum, nor was the Plan required to do so by law. Thus, you 

were not entitled to receive a lump-sum payment prior to Plan 

termination. After Plan termination, however, PBGC exercised its 

legal right to offer you the choice of a lump-sum payment rather 

than an annuity, because the -present value of your benefit was 

less than' or equal to '$5,000.00 as of the date of Plan 

termination. 

(5) The fifth issue is "Whether participant's lump-sum early 

retirement pension benefit plan will be forfeitable should the 

plan terminate?". Please note that the Plan did terminate (on 

August 26, 1999); that you earned a nonforfeitable right to your 

benefit under the terms -of the Plan prior to Plan termination; 

and, that, upon Plan termination, your full accrued benefit 

under the Plan became fully guaranteed by the PBGC (whether you 

choose to receive it in the form of a lump sum or an annuity). 

Accordingly, in this section of your appeal, you do not appear 

to be seeking a specific remedy with respect to any appealable 

issue. 

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? . Decision 

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? Having applled the law, PBGC's rules, and the Plan's 

A provisions to the facts in your case, the Board found no basis 

d 

u presented in your appeal for changing PBGC's determination. This 

, ti is the agency's final action regarding your appeal. You may, if 

you wish, seek court review of this decision. If you need other 

information from PBGC, please call our Customer Contact Center 

at 1-800-400-7242. 

Sincerely, 

LJ& 2. a 

William D. Ellis 

Acting chair, Appeals Board