A district court ruled that the Pension Benefit Guaranty Corp. cannot force the termination of a pension plan without a court order.
In PBGC v. Saint-Gobain Corp. Benefits Committee, the PBGC asked the U.S. District Court for the Eastern District of Pennsylvania for permission to terminate the plan, even though the company’s benefits committee did not agree to the plan termination.
Saint-Gobain Containers Inc., also known as Verallia North America, is a subsidiary of the French company Compagnie de Saint-Gobain. The American company sponsors a pension plan for 12,745 participating current and former employees, which is administered by the Benefits Committee. PBGC estimated that the pension plan is underfunded by $523.7 million.
The plan is a single-employer defined benefit pension plan that is covered by the Employee Retirement Income Security Act.
In January, Saint-Gobain agreed to sell its American branch to Ardagh, a glass and metal packaging company in Luxembourg. PBGC said that the sale to Ardagh would unreasonably increase the possible long-run loss to PBGC with respect to the pension plan.
Because the Benefits Committee did not agree to a plan termination, PBGC brought its case to the District Court, asking that the court adjudicate the pension plan terminatation, appoint PBGC as trustee for the plan and establish April 18, 2013, as the termination date of the pension plan. In its case, PBGC said that the district court needed to apply the Administrative Procedure Act’s “arbitrary and capricious” standard to determine if the plan should be terminated. That means the court would only need to look at the administrative record to make its recommendation.
The court concluded that the Administrative Procedure Act’s “arbitrary and capricious” standard does not apply in this case. The language in the statute indicates that Congress meant for the district court to make its own determination as to whether the “plan must be terminated in order to protect the interests of the participants or to avoid any unreasonable deterioration of the financial condition of the plan or any unreasonable increase in the liability of the fund.”
The court said it will make that determination afresh and will consider evidence outside the administrative record.