Opinion ID: 185503
Heading Depth: 2
Heading Rank: 2

Heading: The Interested Parties Regulations

Text: 17 In I.R.C. 7476, Congress expressly delegated authority to the Secretary of the Treasury to elucidate a specific provision of the statute by regulation. Chevron USA Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 844 (1984). 18 The legislative regulation promulgated pursuant to that explicit grant of authority is accorded controlling weight. As the Supreme Court recently noted in United States v. Mead Corp., 121 S. Ct. 2164, 2171 (2001): 19 When Congress has explicitly left a gap for an agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation, Chevron, 467 U.S., at 843-844, 104 S. Ct. 2278, and any ensuing regulation is binding in the courts unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute. 20 See also Arent v. Shalala, 70 F.3d 610, 616 (D.C. Cir. 1995) (where there is no question that an agency had authority to issue regulations under a statute, the only issue is whether the agency's discharge of its authority is reasonable). There is no doubt here that the Secretary promulgated a legislative regulation pursuant to an express delegation of authority from Congress. There are no procedural, substantive, or statutory infirmities denigrating the regulation. Therefore, under Mead, the regulation is binding. 21 By its plain language, the statute limits standing to an employee who has qualified under regulations prescribed by the Secretary as an interested party. I.R.C. 7476(b)(1). As evidenced by this wording, the statute contemplates that some employees will qualify under the regulations, while others will not. Otherwise, there would be no need for the Secretary to prescribe regulations setting forth the categories of qualified employees. 22 In their briefs, the parties quibble over the significance of the legislative history underlying the statute. Appellants cite a report of a committee of the House of Representatives suggesting that plan participants will be able to bring an action, see H.R. Rep. No. 93-779, at 106 (1974) (Report of the Committee on Ways and Means), while appellee counters that the final Conference Report speaks only of employees, see H.R. Conf. Rep. No. 93-1280, at 331 (1974). This debate is much ado about nothing. The statute's plain language clearly shows that Congress did not intend for every participant to have standing under 7476. The only remaining question is whether it was reasonable for the Secretary to exclude vested former employees from qualification in situations involving plan amendments. 23 Appellants do not deny that the statute authorizes the Secretary to bar some employees from access to the declaratory judgment remedy, but they argue that it was unreasonable to exclude all former employees automatically. They suggest that the regulations should be revised to grant standing to any plan participant who can demonstrate that his interests may be adversely affected by the grant or denial to the plan of a favorable qualification determination. Br. for Appellants at 27. Appellants may have a point in suggesting that the regulations would have been better written to grant standing to any participant with an interest at stake, rather than granting standing based on a categorical distinction between current and former employees. This does not mean, however, that the existing regulations are arbitrary and unreasonable. 24 Appellants argue that the regulatory scheme is irrational, because some former employees with no real stake in the termination of a plan are nonetheless allowed to challenge it, while all former employees are barred from challenging plan amendments even when approval could adversely affect their benefits. This example of alleged regulatory irrationality is hardly convincing, for it focuses solely on the treatment of different categories of former employees, not on the treatment of former versus current employees. The example therefore has little relevance to the instant case. Furthermore, the fact that some former employees may be able to challenge determinations relating to plan terminations in which they no longer have a stake does not mean that it is irrational to exclude former employees where plan amendments are concerned. Put another way, the fact that the rule for plan terminations may be overinclusive does not necessarily show that the rule for plan amendments is unreasonably underinclusive. 25 In any event, the fact that the division between current and former employees does not map perfectly onto the categories of plan amendments and plan terminations does not render the regulatory scheme irrational. First, appellants do not dispute that former employees ordinarily are not affected by amendments made to a plan after they terminate their employment. See Reply Br. for Appellants at 16. They also acknowledge that regulatory simplicity and ease of administration may have been among the Secretary's reasonable objectives in drafting the regulations. Br.for Appellants at 27. We find nothing in the statute requiring the Secretary to adopt an individualized, case-by-case approach to standing. Nor does the statute rule out a categorical approach to standing that corresponds roughly to categories of employees whose interests are affected by plan terminations and amendments respectively. If former employees are only rarely affected by plan amendments made after their employment is over, it is eminently reasonable to limit standing to current employees, whose benefits will almost always be affected by amendments. 26 Second, the regulatory distinction between current and former employees does not leave the latter group entirely without recourse when a plan amendment arguably affects their benefits. As appellants recognize, they and other former employees in their position can seek redress by filing civil actions under ERISA 502(a), 29 U.S.C. 1132(a). Indeed, plan participants have had some success bringing civil actions in district court to challenge violations of the backloading rules. See, e.g., Carollo v. Cement & Concrete Workers Dist. Council Pension Plan, 964 F. Supp. 677, 682-84 (E.D.N.Y. 1997). In other words, it is not unreasonable for the Secretary to issue regulations that leave former employees with one remedy, rather than two. 27 In sum, appellants' challenge to the regulations fails because they are unable to demonstrate that the basic division between current and former employees in the plan amendment context is arbitrary and capricious. The Secretary's regulations need not perfectly accommodate all anomalous situations in order to be reasonable under the statute, particularly when another remedy is available to those who are excluded. Because the regulations are plainly consistent with the statutory delegation to the Secretary and are based on a reasonable division between present and former employees, they are valid.