Opinion ID: 441966
Heading Depth: 2
Heading Rank: 3

Heading: The Alleged Breach of Fiduciary Duty by the PBGC

Text: 24 The statute clearly permits the PBGC to appoint itself trustee of a termination plan for which it also serves as statutory guarantor. Plaintiffs argue, however, that in this case the PBGC exercised discretion to deny benefits in a manner inconsistent with its fiduciary obligation as a trustee to administer the plan for the exclusive purpose of ... providing benefits to participants and their beneficiaries. 29 U.S.C. Sec. 1104(a)(1)(A)(i). 25 The dual role of trustee and guarantor, a role that Congress has specifically authorized for the PBGC, undoubtedly has some built-in potential for a conflict of interest. Although we do not suggest that this role can never give rise to a conflict of interest leading to a breach of the fiduciary obligations of a plan trustee, in this case the PBGC has done nothing inconsistent with its statutory obligations as trustee. Among the powers ERISA specifically grants to a plan trustee is the power to limit payment under the plan to basic benefits: i.e., benefits guaranteed under sections 4022(a) and (b) of ERISA, 29 U.S.C. Secs. 1322(a), (b). Furthermore, a plan trustee is required to discharge its duties in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this title. 29 U.S.C. Sec. 1104. There is no suggestion that the plan or the CREEP provision, as construed by the PBGC, was inconsistent with the requirements of ERISA at the time of termination. We have already held that the PBGC's construction of the Hourly Plan's CREEP provision resulting in a denial of benefits was virtually inescapable. The PBGC's decision that the benefits of plaintiffs Piech and McBride were not vested under the plan was in no way inconsistent with its duties as a plan trustee. 26 Although we have overturned the PBGC's decision to deny guaranteed benefits to the remaining plaintiffs, we find no violation of its fiduciary duty. It was in its capacity as the agency responsible for the administration of ERISA that the PBGC devised the policy of phasing-in ERISA-mandated vesting improvements. We have concluded that its decision does not present a reasonable exercise of agency discretion granted by Congress. However, the PBGC as trustee of the Midvale plan did nothing more than mechanically apply the PBGC's rules to the particular circumstances. 27 It appears to be the plaintiffs' contention that in cases in which an independent trustee might question the PBGC's decisions as statutory guarantor and administrator of ERISA, the PBGC as trustee is unlikely to do so because of concern over the size of its pension insurance fund, and that the failure to do so as a result of such conflicting interests constitutes a breach of fiduciary duty. Although it may in many ways be desirable for plan participants to have a trustee who is prepared to advocate their interests in opposition to the PBGC, Congress has evidently not envisioned such a role for the plan trustee. First, Congress has provided that the [PBGC] may request that it be appointed as trustee of a plan in any case, without limiting that power in cases in which PBGC regulations or policy result in the denial of guaranteed benefits to some participants. 29 U.S.C. Sec. 1342(b). Furthermore, Congress has sharply limited the power of any trustee to advocate the interests of the plan participants in a manner adverse to the PBGC. Thus, a trustee has the power to commence, prosecute, or defend on behalf of the plan any suit or proceeding involving the plan, except to the extent that the [PBGC ] is an adverse party in a suit or proceeding. 29 U.S.C. Sec. 1342(d)(1)(B)(iv) (emphasis added). On the other hand, the statute permits any participant, beneficiary, plan administrator or employee adversely affected by any action of the PBGC to bring suit against the agency in federal court. 29 U.S.C. Sec. 1303(f). 28 Congress apparently did not contemplate that plan trustees would undertake the task of testing the legal merits of participants' claims against the PBGC as guarantor. ERISA leaves that task instead to advocates of individual participants themselves in lawsuits like this one. Congress is of course free to make such a decision. Given that decision, Congress quite reasonably authorized the appointment of the PBGC as trustee even in cases like this one where the policies of the PBGC as guarantor may be questioned. We therefore conclude that the PBGC has done nothing in its role as trustee of the Midvale plan that is inconsistent with its fiduciary obligations to plan participants as envisioned by Congress. Hence, we reject this challenge by the plaintiffs to the PBGC's actions in this case.