Court: PBGC Doesn't Have Fiduciary Duty to Correct US Airways Mistakes

March 28, 2005 ( - A federal court has ruled that the Pension Benefit Guaranty Corporation (PBGC) does not have a fiduciary duty to correct the mistakes of US Airways.

>US Airways calculated estimated benefits before the PBGC had the chance to fully process the terminated plan and make more formal determinations; however the PBGC did not have a duty to correct mistakes made in the initial estimated benefits, US District Judge James Robertson the US District Court for the District of Columbia ruled in a summary judgment.

In the judgment, Robertson found that US Airways retired pilots failed to show “what a fiduciary must do when presented with evidence that it has inherited flawed interim benefit calculations.”

In 2003, the retired pilots attempted to make sure that the PBGC was not allowed to pay less than legally required amounts to participants in US Airways’ retirement plan for pilots. The pilots had earlier been told that their retirement plan would be terminated under US Airways. In asking for a preliminary injunction against the PBGC, the pilots complained that the agency’s estimated benefit calculations were incorrectly low, primarily because of mistakes made by US Airways.

In the more recent ruling, Robertson relied on an earlier ruling that the PBGC does nothing more than mechanically apply its rules as a trustee, and thus did not have a fiduciary duty to correct mistakes made by the company whose plan is being taken over.

Robertson also granted summary judgment to the agency on the pilots’ claim that it failed to pay all guaranteed benefits as required by the Employee Retirement Income Security Act (ERISA). According to the ruling, the pilots had not exhausted their administrative remedies. However, once PBGC makes its formal benefit determination  then the pilots can file administrative appeals, Robertson noted.

Robertson also rejected the pilots’ claim that the agency did not explain the method by which benefits will be calculated, agreeing with the PBGC that when it acts as a statutory trustee of a terminated pension plan, it is not a plan administrator or plan sponsor. US Airways terminated the pension plan of its pilots in April, 2003 (See  PBGC Assumes US Airways Pension Plan ).

>The ruling in Boivin v. US Airways is available  here .