ERISA-Ninth Circuit Upholds The Plan Board’s Calculation Of Withdrawal Liability

In Plan Board of Sunkist Retirement Plan v. Harding & Leggett, Inc., No. 10-55745 (9th Cir. 2011) (Unpublished Opinion), the Court faced the question of whether it should uphold the determination by the plaintiff, Plan Board of Sunkist Retirement Plan (the “Plan Board”), of the liability of the defendant, Harding & Leggett, Inc. (” H&L”), for its withdrawal from a multiple-employer pension plan (the “Plan”). H&L argued that the Plan Board abused its discretion in calculating the withdrawal liability amount. The Court concluded that the Plan Board’s determination should be upheld. In doing so, the Court dealt with three issues.

First, H& L had argued that the interest rate assumption utilized to calculate its withdrawal liability was unreasonably low and selected for the purpose of exaggerating its liability. The Court did not agree. It said that the record supports a finding made by the district court that, in this case, the combination of the Pension Benefit Guaranty Corporation’s (“PBGC”) interest rate assumptions with its mortality rate assumptions approximates insurance annuity market pricing. Thus, the Court upheld the Plan Board’s chosen interest rate assumptions.

Second, H&L had contended that-due to the provisions of the Plan- the Plan Board improperly included a job elimination benefit in its calculation. Again, the Court did not agree. It said that testimony at trial established that the omission of the job elimination benefit from the plan document was simply a clerical error, and that the benefit was received by at least one H&L employee during the time the language was missing from the document. Further, the district court had made a factual finding that the benefit was added to the Plan through an amendment in 1997, and was included in the Plan at the time of H&L’s withdrawal.

Finally, H & L argued that the Plan Board erroneously included missing and deceased participants in its withdrawal liability calculation. Disagreeing again, the Court said that the ERISA regulations require that, “[i]n the absence of proof of death, individuals not located are presumed living.” (citing 29 C.F.R. § 4050.2 (definition of “missing participant”)). This refutes H&L’s assertion that certain missing participants should be presumed dead and not included in the withdrawal liability calculation. Moreover, the Plan Board regularly conducted mortality audits and utilized a commercial locator service to search for missing participants, as required by the ERISA regulations (citing 29 C.F.R. § 4050.4(b)(3)).

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