Compliance May 3, 2006

Court System Last Resort for Challenges to the PBGC

May 3, 2006 (PLANSPONSOR.com) - The 2nd US District Court of Appeals ruled that pension plans absorbed by the Pension Benefit Guaranty Corporation (PBGC) must exhaust all other administrative remedies before challenging the agency in the court system.
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Former US Airways pilots filed the suit in November 2003 against the PBGC in an effort to force the agency to correct calculation errors in the estimated benefits the pilots were guaranteed under the Employee Retirement Income Security Act of 1974 (ERISA) and the airline’s retirement plan (See Court: PBGC Doesn’t Have Fiduciary Duty to Correct US Airways Mistakes ).

Before filing the suit, the pilots did not wait for the PBGC to complete its final determinations, claiming the agency breached its fiduciary and agency-guarantor obligations.

The appeals court dismissed these claims and ruled that the pilots did not do everything they could – outside the court system – to remedy the miscalculations with the PBGC.

In his opinion, Circuit Judge Merrick Garland wrote that in the case of ongoing pension plans, “barring exceptional circumstances, parties aggrieved by decisions of pension plan administrators must exhaust the administrative remedies available to them under their pension plans before challenging those decisions in court” under ERISA.

The court said it recognized that miscalculations caused the former pilots financial hardship, but “cannot conclude that such a temporary (if later proven erroneous) reduction warrants exemption from the generally applicable requirement of exhaustion.”

The case is Charles Boivin, et al v. U.S. Airways, Inc., et al., No. 05-5165, 05.02.06.

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