United States District Court, D. Idaho
MEMORANDUM DECISION AND ORDER
HONORABLE CANDY W. DALE, UNITED STATES MAGISTRATE JUDGE
action arises under Title IV of the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C.
§§ 1301-1461 (2012 & Supp. II 2014) (ERISA).
Pension Benefit Guaranty Corporation (PBGC) brings the action
under 29 U.S.C. § 1303(e)(1) to enforce the provisions
of Title IV of ERISA, and to enforce a final agency
determination that violations of Title IV occurred with
respect to the Idaho Hyperbarics, Inc. Defined Benefit
Pension Plan (the “Plan”) based on a review of
the agency's administrative record under 5 U.S.C. §
the Court is PBGC's motion for summary judgment,
requesting that the Court uphold PBGC's administrative
determination that Idaho Hyperbarics, Inc. (IHI) failed to
complete the standard termination of the Plan in accordance
with the Plan's provisions and under ERISA. PBGC contends
the Administrative Record (AR) supports its determination
that IHI improperly reduced the benefits of approximately 17
Plan participants by: (1) failing to pay Plan participants
the full cash surrender value of their Plan insurance
contracts upon Plan termination as required under 26 U.S.C.
§ 411(b)(1)(F); (2) failing to pay the full amount of
benefits elected by one of the participants; (3) failing to
vest certain Plan participants upon the Plan's
termination as required under 26 U.S.C. § 11(d)(3); and
(4) improperly reducing of the benefits of Plan participants
who were not majority owners eligible to waive their benefits
under 29 C.F.R. § 4041.2. PBGC contends over $370, 000
in additional benefits are owed to Plan participants.
argues that a third party bears responsibility for any
improper administration of the Plan and its assets, and that
if the Court finds in favor of PBGC, IHI likely will file for
bankruptcy, which is not in the plan participants' best
Court conducted a hearing on May 1, 2018, at which the
parties appeared.Having considered the record, the
pleadings, relevant authority, and being fully advised, the
Court concludes PBGC's Final Determination was neither
arbitrary nor capricious. Accordingly, the Court will grant
PBGC's motion for summary judgment.
a wholly owned United States government corporation
established under 29 U.S.C. § 1302 to administer and
enforce the provisions of the plan-termination insurance
program under Title IV of ERISA. 29 U.S.C. § 1302. IHI
is a wound care and hyperbaric treatment provider
incorporated in the State of Idaho. Am. Compl. ¶ 9; Ans.
¶ 9. IHI's primary place of business is in
Pocatello, Idaho. Id.; Ans. ¶ 9. IHI adopted
the Plan effective December 27, 2004. AR 39-67, 623-25,
Plan was a single-employer, defined benefit pension plan
covered under Title IV of ERISA. AR 36-67, 74, 470-72,
291-92, 623-25, 697-794. The Plan was established as an IRC
Section 412(i) plan, which is fully and solely funded through
insurance policies. AR 181, 255-60, 1090-2052. The insurance
policy which funded the Plan was issued by MONY Life
Insurance Company of America (“MONY”). AR 181,
255-60, 1090-2052; Am. Compl. ¶ 23; Ans. ¶ 23. IHI
was the Plan's contributing sponsor, within the meaning
of 29 U.S.C. § 1301(a)(13), and the Plan administrator,
within the meaning of 29 U.S.C. §§ 1002(16) and
1301(a)(1). AR 36-67, 74, 470-72, 291-92, 623-25, 697-794.
27, 2009, IHI filed a Form 500 with PBGC, with a proposed
termination date of December 26, 2008. AR 1-5, 162-65. On
November 15, 2010, IHI filed a Form 501 with PBGC, certifying
that all benefit liabilities under the Plan were satisfied.
AR 13-14. On the Form 501, IHI stated that it paid a total of
$575, 900 to fifteen Plan participants no later than March
19, 2009, more than two months before IHI filed the Form 500.
January 4, 2011, PBGC notified IHI that the Plan would be
audited. AR 14. On April 28, 2011, PBGC issued an audit
initiation letter to IHI, stating that the Plan's
standard termination had been selected for audit because, in
violation of Title IV of ERISA, Plan assets were distributed
to participants before filing the Form 500. The letter also
requested certain information for the audit. AR 15-16.
the audit, PBGC determined that, contrary to the information
reported on the Form 501, there were seventeen (rather than
fifteen) Plan participants. AR 390-406, 474-490, 731-47,
981-82. Of those participants, two received no distribution,
twelve received their distributions between April 14, 2011,
and May 5, 2011; two received their distributions on April
27, 2009; and one received her benefit on March 1, 2010. AR
842-45, 963-67, 2054-60, 2063-81, 2175-76. All distributions
were tendered after the date of proposed termination and
March 19, 2009, the last date of distribution reported on the
Form 501. AR 842-45, 963-67, 2054-60, 2080-81.
the audit, IHI submitted documentation showing that, pursuant
to its insurance policy surrender requests to MONY, IHI
received $575, 900 in insurance policy surrender checks from
MONY on or about March 29, 2009. AR 321-34, 523-42, 2221- 50.
Also, IHI submitted documentation showing that only a total
of $228, 884 was paid to the fifteen participants who did
receive a distribution, less than the $575, 900 aggregate
value of the cash surrender checks from MONY and the total
distribution amount reported on the Form 501. AR 826-45,
962-67, 2054-2060, 2080-81, 2175-76, 2221-50, 2263-78.
15, 2014, upon completion of the Plan audit, PBGC issued its
initial determination to IHI with respect to its audit (the
“Initial Determination”). AR 2203-06. In the
Initial Determination, PBGC found that IHI did not pay the
Plan participants the full cash surrender value of their
contracts, as required under IRC Section 411(b)(1)(F),
because the total distribution amount to participants was
only $228, 884 - not the $575, 900 that IHI certified that
they distributed and less than the full cash surrender value
of the participants' insurance contracts (“Finding
1”). AR 13, 826-45, 842- 45, 962-67, 2054-2060,
2080-81, 2175-76, 2203-06, 2221-35, 2263-78.
Initial Determination, PBGC found that, in addition to not
receiving the full cash surrender value of his insurance
contract, Participant A did not receive the full amount
reported on his benefit election form and Form 1099-R
(“Finding 2”). AR 2203-06. Participant A received
only $6, 346.62 when his insurance contract's full cash
surrender value was $29, 252.04, and the benefit amount that
was reported on that participant's benefit election and
Form 1099-R was $10, 433.27. AR 820, 832, 962, 966, 971,
Initial Determination, PBGC found that two participants who
terminated employment before Plan termination, Participant B
and Participant C (who IHI failed to account for on the Form
501), were not vested 100% in their benefits upon Plan
termination as required by law (“Finding 3”). AR
288-90, 292-93, 495, 509, 656, 962, 1004-11, 1039-41,
Initial Determination, PBGC found that the benefits for
non-majority owners had been incorrectly waived because IHI
failed to submit evidence that the participants were majority
owners eligible to waive benefits (“Finding 4”).
AR 897, 2203-06.
Finding 1, Finding 2, and Finding 3, the Initial
Determination required IHI to (a) calculate the underpayments
due to participants by determining the difference between the
amount each participant actually received and the full cash
surrender value of their annuity contract and adding a
reasonable rate of interest to the additional amounts due,
(b) submit such calculations for PBGC's review, and (c)
pay participants the additional amounts due. AR 2203-06.
Finding 4, the Initial Determination requested proof of
majority ownership for participants that reportedly waived
their benefit. Id. By letter dated November 12,
2014, IHI, through counsel, requested reconsideration of
PBGC's Initial Determination and supplemented the request
for reconsideration by an email dated ...