PBGC " 

Protecting America's Pensions 

Pension Benefit Guaranty Corporation 

1200 K Street. N.W.. Washington. D.C. 20005-4026 

June 9, 2006 

Re: I PBGC Case No. 189580, 

Jewelmont Corporation Employee's Pension Plan ("Plan") 

Dear LI _______ ~ 

The Appeals Board has reviewed the appeal you filed on 

behalf of your client, I I regarding the PBGC' s 

October 31, 2001 determination of his PBGC benefits under the 

Plan. For the reasons stated below, we are denying the appeaL 

We appreciate your patience while the appeal has been pending. 

PBGC's Determination and Your Appeal 

PBGC determined that I I is entitled to receive 

$1,653.48 per month payable as a 100% Joint and Survivor Annuity. 

PBGC's benefit statement, which was enclosed with its 

determination letter, showed that the $1,653.48 amount equaled 

the "Maximum Guaranteed Benefit" limit ("MGB") for I I '-------

While the MGB is the maximum benefit amount that PBGC is 

permitted to guarantee under the Employment Retirement Income 

Security Act (ERISA), in some cases PBGC pays more than the MGB 

based upon an allocation of the pension plan's assets. The Plan 

had sufficient assets to pay benefits tol lin excess of 

the MGB. PBGC determined, however, that I Ihad waived his 

entitlement to PBGC benefits above the MGB amount. 

,-_~PBGC's determination letter also explained that, because c=J ~,-~I received estimated monthly payments of $3,003.33, he had 

been overpaid $47,761.90, whi~h PBGC will collect by reducing the 

$1,653.48 by $165.35 per mont~. Please note that the estimated 

$3,003.33 monthly payments h&irTe continued while I I 

appeal has been pending. Although the total overpayment has 

grown, the $165.35 monthly pay-back amount will not be increased. 

Your December 11, 2001 appeal on behalf of '---___ ---"1 asked 
2 

that he continue to receive his current level of benefits, or, in 

the alternative, the amount that he would be entitled to receive 

in the absence of his benefit waiver. You also sought the 

voiding of any repayment liability. While you acknowledged that 

I I signed a waiver of a portion of his benefits, you 

asserted that it is invalid because he was not provided with 

sufficient information to understand the impact of the waiver on 

his benefits. You also contended that the waiver is 

unenforceable for reason of lack of consideration. 

Law, Regulations, and PBGC Policy 

PBGC, as the trustee of a terminated pension plan, pays 

benefits to participants according to the terms of the plan, 

subject to ERISA's requirements and guarantee limits. 

When a plan with insufficient assets terminates, ERISA 

section 4062(b) (1) (A) gives PBGC a claim against the plan sponsor 

and its controlled group for the shortfall. Congress defined the 

amount of this termination liability as the "total amount of the 

unfunded benefit liabilities (as of the termination date)" -

which we refer to in this decision as "UBL." To determine the 

amount of a pension plan's UBL, the value of the plan's assets is 

subtracted from the value of its benefit liabilities. ERISA 

section 4001 (a) (18) . 

PBGC's Plan Termination Regulation permits a "majority 

owner" to elect to forgo receipt of all or part of his or her 

benefit. See 29 Code of Federal Regulations ("CFR") section 

4041.21(b) (2) (standard termination) and section 4041.47(d) 

(distress termination). In the case of a corporation, PBGC 

regulations define a "majority owner" as "an individual who owns, 

directly or indirectly, 50 percent or more . . . . of either the 

voting stock of a corporation or the value of all of the stock of 

a corporation." 29 CFR section 4041.2. 

In addition, a PBGC Policy - "Assignment and Alienation of 

Benefits" - permits a majority owner in a PBGC-trusteed plan to 

agree to forgo receipt of all or a portion of his or her 

termination benefit to reduce the amount of UBL. Such an 

agreement to forgo receipt ofbeIjefits must be in writing, and, 

if the participant was married on the plan termination date, the 

participant's spouse must also consent in writing. This PBGC 

Policy applies to pension plgns that were terminated in a 

distress termination or that were terminated by PBGC. See ERISA 

sections 4041-42. 

The MGB provision, which is found in ERISA section 
3 

4022(b) (3), provides that the amount of monthly benefits that 

PBGC guarantees with respect to a pension plan cannot exceed the 

actuarial value of $750 per month in the form of a life annuity 

commencing at age 65, adjusted for changes in the Social Security 

contribution and benefit base. The monthly maximum guaranteed 

benefit for a plan that terminated in 1999 (as was the case with 

the Plan) is $3,051.14, if the benefit is paid starting at age 65 

in the life annuity form. PBGC's guaranteed benefit regulation, 

among other things, details how PBGC adjusts the MGB based on the 

participant's age and the form of the benefit. 29 CFR section 

4022.21 - 4022.23. 

Background 

PBGC's records show that 

In 

March 1999, Jewelmont filed a Distress Termination Notice with 

PBGC that sought the termination of the Plan. Jewelmont's 

distress termination filing alerted PBGC that: (1) the Plan was 

underfunded, (2) Jewelmont was insolvent, and (3) the company was 

attempting to liquidate through an asset sale that was scheduled 

for March 30, 1999. Under a proposed creditor settlement 

agreement - which had the support of Jewelmont, its secured 

creditors, and the asset purchaser - unsecured creditors would 

receive a 20% payout on their claims upon completion of the asset 

sale. The proposed asset sale was contingent upon 90% of the 

unsecured creditors agreeing to the 20% payout. 

In telephone conversations on March 25 and 29, 1999, PBGC 

discussed termination of the plan and PBGC's UBL claim with 

Jewelmont. In these conversations, Jewelmont was represented by 

its CFO (Stephen D'Angelo) and by both a benefits attorney 1 

I I and an attorney who was representing Jewelmont with'-----~ 

respect to the asset sale 1 I. The possibility that 

1 1 would waive his benefits to reduce the Plan's 

underfunding arose during these discussions. On March 30, 1999, 

I Isent PBGC a revised Creditor Settlement Agreement, which 

stated that: (1) Jewelmont proposed to pay PBGC 20% of the 

Company's good faith estimate of the amount owed to PBGC in 

exchange for PBGC's release of its claims against Jewelmont and 

the asset purchaser; and (2) to t~e extent the claim of PBGC is 

computed based on waivers of benefits, the release by PBGC of its· 

claims is dependent upon PBGCo1,;s receipt of "all necessary waivers 

consistent with statutes and ',regulations." 

On April 2, 1999, I I executed a Waiver of Pension 

Benefits and~1 ~ ____ ~~ __ -e~,-~Iexecuted a Consent to Waiver of 

Pension Benefits. Both of these documents were signed before a 
4 

notary public. Iwai ver states in pertinent part: '--------~ 

"I I I 

"------=---------o-~~-_c__o_--~I hereby waive and 

release any and all rights and claims which I may now 

have, or hereafter acquire, against [the Plan] to 

receive benefits under the terms of the Plan and/or to 

receive pension benefits from [PBGC] . . . , but only 

with respect to that portion of my pension benefits 

which exceeds the maximum guaranteed benefits as 

determined under ERISA § 4022 and the regulations 

issued thereof. 

I acknowledge that I have had the opportunity to 

consult counsel to discuss the effects of this Waiver. 

Based upon my full understanding of the effects of 

this Waiver, I knowingly and voluntarily execute this 

Waiver. fI 

PBGC received the waiver documents on April 6, 1999, which was 

also the date that the asset sale of Jewelmont was completed. 

Between April 13 and April 16, 1999, PBGC and Jewelmont had 

discussions concerning possible settlement of the UBL claim. 

Jewelmont proposed to pay PBGC $85,000.00, and on April 28, 1999, 

PBGC accepted this offer. On May 3, 1999, PBGC received payment 

of the $85,000 and executed a Satisfaction and Release of Claim 

with respect to any liability by Jewelmont and/or its asset 

purchaser for the termination of the Plan. 

Effective September 30, 1999, PBGC and Jewelmont entered 

into an agreement providing that the Plan was terminated and 

trusteed by PBGC under ERISA § 4042, with a plan termination date 

(as provided in ERISA § 4048) of April 6, 1999. 

Discussion 

1. Your assertion that I I was not provided with 

sufficient informati~o-n-.---~ 

. , 

,-------'y'-'o.c!u"'r"---"'lafPeal did not take "exception to PBGC's calculation of 

"---_____ ~. MGB as $1,653.48 ~er month. ' You contended, however, ,.7 

Your appeal stated that two PBGC actuaries told you how the 

$1,653.48 amount was calculated. They explained that the 1999 MGB amount of 

$3,051.14 for a life annuity at age 65 was adjusted by (1) increasing it for 

late retirement, (2) decreasing it for joint and 100% survivor benefit form, 
5 

that his waiver of PBGC benefits above his MGB is unenforceable 

because he was not provided with sufficient information to 

understand the impact of the waiver on his benefits. Referring 

to the rules under section 417 of the Internal Revenue Code, you 

contended that the waiver "is not valid in the absence of at 

least minimal disclosure." 

The requirements of Internal Revenue Code § 417 and the 

regulations issued pursuant to it, however, are limited to the 

election and waiver of the Qualified Joint and Survivor Annuity 

or Qualified Preretirement Survivor Annuity forms of benefits. 

Accordingly, these requirements do not govern a majority owner's 

waiver, which is based on a regulation that PBGC issued pursuant 

to its rulemaking authority under ERISA § 4002(b) (3). We further 

note that, in the case of I f the I I 

I I waiver did not alter their benefit form, since they 

retained the joint and 100% survivor benefit form that they 

previously had elected. 

The I I waiver documents executed by I I 

and I I were in full compliance with PBGC's regulations and 

policies. The language in the documents also was clear as to the 

portion of the benefit that I I and I Iwere waiving. 

Furthermore, PBGC's regulation and policies do not provide that a 

majority owner waiver can be revoked or rendered ineffective 

based on a lack-of sufficient information, or for similar 

reasons. Accordingly, we found no basis for concluding that the 

waiver is invalid. 

Some courts have held that the waiver of an ERISA claim is 

unenforceable if the claim is not knowingly and voluntarily 

released. Leavitt v. Northwest Bell Telephone Co., 921 F.2d 160 

(8 th Cir. 1990); see also Morais v. Central Beverage Corp. Union 

Employees' Supplemental Retirement Plan, 167 F.3d 709 (pt Cir. 

1999). The holdings in Leavitt and similar cases, however, 

involve the common case where an ordinary participant waives a 

benefit right under ERISA. We believe these cases are 

distinguishable from the case of I I who as both a 

majority stockholder of the pension plan sponsor and a plan 

participant is expressly permitted to waive his ERISA benefits 

under a specific PBGC regulation.' 

In any event, the Appeats Board concluded that the record in 

taking into account the age difference between I I and I I and (3) 

decreasing it for the amount of his Plan benefit being paid directly by 

Travelers Insurance company. The Appeals Board confirmed that these are the 

adjustments that PBGC had made in determining I I MGB. 
6 

this case establishes that I Iwaiver was knowing and 

voluntary. I Iwas 1,-b~~~~~d:C=-'--"=-==-==="'----==--, 

Jewelmont, which designed, manufactured, and distributed jewelry. 

Jewelmont was a business of some size, as evidenced by the fact 

that the Plan had over 100 participants. I Icertainly had 

the general business experience to make an lnformed decision with 

respect to the waiver. 

The record also indicates that the possibility of the waiver 

arose in discussions between PBGC and Jewelmont on March 25, 

1999, which was more than a week before the waiver documents were 

signed before a notayv public [APril 2, 1999). Therefore, it 

does not appear that_ .lacked adequate time to consider 

the waiver. Moreover, I plearly had the opportunity to 

consult counsel; indeed, the waiver document expressly provides 

that he had "the opportunity to consult counsel to discuss the 

effects of this Waiver." 

You suggested that I I "in essence" was led to believe 

that he would continue to receive approximately $3,000 per month 

in benefits after the waiver, because the unadjusted MGB for a 

pension plan terminating in 1999 was $3,051.14. 

PBGC did not have any direct contact withl lor = 

,----,Iprior to or at the time when they signed the waiver 

documents before a notary public. Therefore, PBGC 

representatives did not have any first-hand knowledge of what 

information was given to them before the documents were executed. 

Additionally, while your appeal contains statements as to what 

I I"presumably" knew and what he "in essence" was led to 

believe, such statements do not constitute specific evidence with 

respect to what information had been given to him and I I 

before they executed the waiver documents. 

But even if I Iwas not presented with specific 

calculations of his benefits and if he had also assumed that any 

reductions to his benefits would have been minimal, the Appeals 

Board concluded that the waiver would be valid. As discussed 

above, the possibility of the waiver arose during conversations 

between PBGC and Jewelmont concerning PBGC's UBL claim. It was 

also clear to the parties that t~ere would be a substantial 

reduction in PBGC's claims for UBL as a result of the waiver. 

This should have alerted I I to the possibility that the 

benefit amount he currently was receiving from the Plan was 

subject to a significant reduction fOllowinr plan termination, if 

he agreed to the waiver . Given I . general business 

experience and that the waiver document itself states that he had 

a "full understanding of the effects of this Waiver," the Appeals 
7 

Board found that the totality of the circumstances establishes 

that the waiver was knowing and voluntary. 

2. Your contention that the waiver is unenforceable for 

lack of consideration. 

Your appeal also asserted that the waiver was invalid for 

lack of consideration. You stated that PBGC did not have any 

recourse againstl I personally, and that in the absence of 

such personal claims he waived his benefits in exchange for 

nothing. 2 

,-____ ~As discussed above, the waiver documents executed by c=J 

I I and I I were in full compl iance with PBGC's 

regulations and policies. Furthermore, there is nothing in 

PBGC's regulations and policies that indicates that consideration 

is required in order fori f'iaiver to be 

enforceable. Because I ~ waiver was in compliance with 

statutory and regulatory provisions, the defense of lack of 

consideration - which applies to contractual rather than statuory 

claims - does not provide a basis to invalidate the waiver. 

In any event, the Appeals Board disagreed with your 

contention that I Ibenefit waiver was without 

consideration. By waiving a portion of his benefit in accordance 

with the majority waiver rules in PBGC's regulation, I ~ 

obtained a reduction in the amount of UBL that I r 

I I J ewe I mont, owed to PBGC unde r sec t i onL--.4-0"6"2°--o'fr----.E"'R~I'"SOO-A.,-J. 

This alone establishes that the waiver was supported by 

consideration. 

You further argued that the waiver lacks consideration 

because (1) there is no apparent connection between it and 

settlement of PBGC's claims, (2) neither the waiver nor the 

settlement documents refer to each other, and (3) a space of one 

month separates their execution. The record, however, clearly 

establishes a link between the waiver and the settlement. The 

reduction in PBGC's UBL claim - which had occurred as a direct 

result of the waiver - clearly was relevant to PBGC's decision to 

accept Jewelmont's settlement offer. Thus, the waiver and the 

settlement cannot be viewed as totally independent events, 

notwithstanding that the settlem~nt documents and the waiver 

2 

benefit. 

You noted that no other shareholder was asked to waive his 

PBGC's requlation at 29 C.F.R. § 4041 I I 
8 

documents do not specifically refer to each other. 

3. Recoupment of Overpayments 

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 section 4022, Subpart E, "PBGC 

Recoupment and Reimbursement of Benefit Overpayments and 

Underpayments." The regulation provides that recoupment will be 

in the form of future benefit reductions, which are determined 

actuarially and generally limited to no more than 10 percent of 

the monthly guaranteed benefit. Fori I PBGC' s benefit 

determination letter provided that his future benefits will be 

reduced by $165.35 per month, which is 10% of the monthly amount 

he is entitled to receive from PBGC. The Appeals Board is unable 

to change PBGC's decision concerning recoupment, since PBGC's 

proposed reduction is in accordance with its regulation. 

Decision 

For the reasons stated above, the Board denied your appeal. 

This is the PBGC's final action inl Fase and he may, if 

he wishes, seek court review of this decision. If you orl I 

I Ineed other information from PBGC, please call the Customer 

Contact Center at 1-800-400-7242. 

Sincerely, 

Charles W. Vernon 

Chair, Appeals Board 

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