Opinion ID: 736207
Heading Depth: 3
Heading Rank: 2

Heading: The Nature of Actuarial Valuation Reports

Text: 27 An actuarial valuation report is a document, prepared by the plan's actuaries, that describes a plan's current funded status and future funding obligations. R. Weinberg, The Actuarial Process, Trustees Handbook: A Basic Text on Labor-Management Employee Benefit Plans 208, 208 (Marc Gertner ed., 4th ed. 1990). Such a report includes development of contribution and funding policy requirements, summaries of actuarial methods and assumptions employed, and a summary of plan provisions valued by the actuary. Id. at 210; see also D. McGinn, Pension Funding: Actuarial Primer for Corporate Management 69 (2d ed. 1982) (actuarial valuation reports describe the ability of the plan ... to meet future benefit commitments); L. Rappaport & S. Arpin, A Primer on Due Diligence in the Employee Benefits Area, Conducting Due Diligence 1996, at 995, 1008 (PLI Corp. Law & Practice Course Handbook Series No. B4-7131, 1996) (actuarial valuation reports contain demographic information regarding the plan participants, a summary of plan provisions, a complete list of all the assumptions utilized and, frequently, a historical summary of important cost measures). 28 ERISA requires that plan actuaries make an actuarial valuation of the plan for every third plan year. See 29 U.S.C. § 1023(d). The statute contains no requirement that an actuarial valuation report be prepared at shorter intervals unless the actuary thinks a more frequent valuation is needed to support the opinion that is to be included in Schedule B of the plan's annual report. See id. Nor does ERISA require that the actuarial valuation report be reproduced in toto in the plan's annual report. Rather, the annual report need only contain a summary statement of the plan's actuarial valuation, i.e., Schedule B. See id. §§ 1023(a)(1)(B)(ii) and (d). As a part of the annual report, of course, Schedule B is expressly subject to disclosure under § 104(b)(4). 29 As Weinstein's counsel stated at oral argument of this appeal, plan fiduciaries are not required to accept the recommendations made in an actuarial valuation report. Although such a report contains pertinent information about the plan, the administrators and trustees are not bound by the report and need not use its data in their decisions, for while the report may describe various rights and obligations, the report itself does not establish those rights, or the policies or procedures for calculating the benefits to which plan participants are entitled, or the procedures that are prerequisite to obtaining benefits, or the duties, obligations, or contracts of the plan fiduciaries. Thus, actuarial valuation reports are more akin to status reports or advisory opinions than to the formal instruments governing a plan's operations. The mere presence of a description of rights or obligations that are established elsewhere does not make the descriptive document an instrument[ ] under which the plan is operated. 30 Since actuarial valuation reports are not mentioned in § 104(b)(4), are not required to be reproduced within any of the documents that that section does mention, are not sources of data that plan administrators are required to use, and are not sources of the rights or obligations of any of the participants, beneficiaries, or fiduciaries, we conclude that actuarial valuation reports are not within the scope of § 104(b)(4). Though such reports doubtless contain information that plan participants might find interesting or useful, we agree with the Fourth Circuit's decision in Faircloth v. Lundy Packing Co., which ruled that § 104(b)(4) is not sufficiently broad to require disclosure of any and all documents that would assist participants and beneficiaries in determining their rights under a plan and in determining whether a plan is being properly administered, 91 F.3d at 653. 31 [I]f Congress had intended § 104(b)(4) to encompass all documents that provide information about the plan and benefits, Congress could have used language to that effect. Instead, Congress used language limiting § 104(b)(4) to instruments under which the plan is established or operated. The clear and unambiguous meaning of this statutory language encompasses only formal or legal documents under which a plan is set up or managed. 32 Id. at 654. 33 We note that the Internal Revenue Code too requires that a pension plan file an actuarial report, 26 U.S.C. § 6059(a); the regulations thereunder make clear, however, that that report is the same summary statement that is included as Schedule B of a plan's annual report, see 26 C.F.R. § 301.6059-1(a) (1996) (The actuarial report must be filed by the plan administrator ... on Schedule B as an attachment to the annual Return/Report of Employee Benefit Plan (Form 5500 series).); see also 29 U.S.C. § 1023 official commentary (Secretary of the Treasury and Secretary of Labor to take such steps as may be necessary to assure coordination to the maximum extent feasible between the actuarial reports required by [ERISA] and ... [the] Internal Revenue Code). Thus, the Internal Revenue Code requires no more than does ERISA. 34 Weinstein has also called to our attention a July 1996 advisory opinion issued by the Department of Labor, several months after entry of the judgment at issue here, in an unrelated matter. In that opinion, the Department stated, with respect to § 104(b)(4), that 35 any document or instrument that specifies procedures, formulas, methodologies, or schedules to be applied in determining or calculating a participant's or beneficiary's benefit entitlement under an employee benefit plan would constitute an instrument under which the plan is established or operated.... Accordingly, studies, schedules or similar documents that contain information and data ... that, in turn, serve as the basis for determining or calculating a participant's or beneficiary's benefit entitlements under an employee benefit plan would constitute instruments under which the plan is ... operated. 36 Pension and Welfare Benefits Administration Opinion Letter 96-14A, 5A Pens. Plan Guide (CCH) p 19,984R, at 22,491-96 to -97 (July 31, 1996). The broad interpretation given by the Department in that opinion, which neither mentioned nor concerned actuarial valuation reports, has not been promulgated as a regulation, and we do not regard it as pertinent to the issue before us. The question before the Department was whether § 104(b)(4) required administrators of a welfare benefit plan to disclose to plan participants the plan's fee schedule pursuant to which the dollar amount that would be paid for health claims was to be determined. The Department's affirmative answer to that question was issued pursuant to an administrative procedure that specifies that [o]nly the parties described in the request for opinion may rely on the opinion, and they may rely on the opinion only to the extent that ... the situation conforms to the situation described in the request for opinion. Employee Benefit Plans, Advisory Opinion Procedure, 41 Fed.Reg. 36281, 36283 (1976). The advisory opinion, which dealt with fee schedules, thus has no applicability to the actuarial valuation reports that are at issue in the present appeal. 37 The Sixth Circuit in Bartling v. Fruehauf Corp., 29 F.3d 1062 (6th Cir.1994), reaching a conclusion contrary to the one we reach here, has ruled that disclosure of such reports is required under § 104(b)(4) upon demand by plan participants. The Bartling court found in ERISA a presumption in favor of disclosure, see id. at 1070 (all other things being equal, courts should favor disclosure where it would help participants understand their rights), and concluded that actuarial valuation reports are instruments under which the plan is ... operated [b]ecause an actuarial valuation report is required for every third plan year, § 1023(d), and such a report is indispensable to the operation of the plan. 29 F.3d at 1070. We disagree with this rationale. First, all other things are not equal, for Congress made express provision in § 104(b)(4) for certain types of documents to be disclosed upon demand of plan participants. As discussed in Part II.B.1. above, we infer from Congress's use of the limited term instruments in § 104(b)(4) for the disclosures that administrators must make when requested by plan participants, rather than broader terms such as documents, records, or reports, as used elsewhere in ERISA to require disclosures to others, that Congress did not mean the duty imposed in § 104(b)(4) to extend to all documents, records, and reports. In light of the precise language used by Congress in the various sections of ERISA, we see no presumption favoring disclosure to participants beyond what is required by § 104(b)(4). Accord Faircloth v. Lundy Packing Co., 91 F.3d at 654 (We find nothing in the clear and unambiguous statutory language to support [the Bartling court's] presumption.). Second, as discussed above, the fact that ERISA requires that an actuarial valuation report be prepared every three years is unpersuasive given that such reports do not set the rights or obligations of participants or fiduciaries and do not contain data that plan administrators are required to use. Finally, the view that an actuarial valuation report must be disclosed because it is indispensable to a plan's operation is unpersuasive because it provides no meaningful standard. We would suppose, for example, that lists of plan participants and lists of the plan's bank account numbers would also be indispensable. Under an indispensable-document test, virtually any report or record generated in the administration of a pension plan might be subject to disclosure. Had Congress meant to require unlimited disclosure, or even disclosure of all documents that would be useful to plan participants, it would not have used the restrictive instruments under which language. 38 For all of the foregoing reasons, we conclude that the district court correctly ruled that actuarial valuation reports are not governing documents and hence are not instruments under which a plan is established or operated.