Stephens v. US Airways Group, Inc.
396 U.S. App. D.C. 50
D.C. Cir.2011Background
- Stephens and Mahoney, retired U.S. Airways pilots, each received a lump-sum pension instead of the default annuity.
- The Plan paid lump sums 45 days after the annuity start date, delaying receipt of funds but not accruing interest for that delay.
- Plaintiffs alleged ERISA § 1054(c)(3) required actuarial equivalence and that the 45-day delay violated the statute.
- PBGC became trustee of the Plan after U.S. Airways' bankruptcy and the case was moved to D.C. District Court.
- District Court denied relief; the court of appeals reversed in part, remanding for calculation of amounts due and denying fees.
- IRS regulation 26 C.F.R. § 1.401(a)-20 was invoked to argue that reasonable delays can occur without affecting actuarial equivalence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does delay in lump-sum payment violate actuarial equivalence? | Stephens & Mahoney: lump sums were actuarially equivalent at start date, but delay reduced value. | PBGC: actuarial equivalence is measured at calculation date; delay unrelated to value remains permissible. | Actuarial equivalence satisfied at start date; however, the 45-day delay was unreasonable and entitled plaintiffs to interest. |
| Are plaintiffs entitled to interest for the delayed lump-sum payments? | Interest should accrue on the 45-day delay because value declined over time. | Only reasonable delays are allowed; if delay is administrative, interest may not be due. | Yes, plaintiffs are entitled to interest for the unreasonable 45-day delay. |
| Can plaintiffs recover attorney's fees against PBGC under ERISA or 28 U.S.C. § 2412(b)? | ERISA or § 2412(b) may allow fees; PBGC is subject to some fee provisions. | ERISA does not authorize fees against PBGC; § 2412(b) does not apply here. | No attorney's fees awarded against PBGC. |
| Does IRS regulation 26 C.F.R. § 1.401(a)-20 govern the reasonableness of delays for lump sums? | Regulation supports delaying payments for calculation, but only as to reasonableness and with full value retained. | Regulation limits delays; the 45-day delay was not reasonable. | IRS regulation supports reasonable delays but does not permit unaddressed loss of value; delay here was unreasonable. |
Key Cases Cited
- Esden v. Bank of Boston, 229 F.3d 154 (2d Cir.2000) (actuarial equivalence requires lump sums to be at least as valuable as the annuity)
- Contilli v. Local 705 Int'l Bhd. of Teamsters Pension Fund, 559 F.3d 720 (7th Cir.2009) (payments skipped must be made up with interest or adjusted in ongoing benefits)
- Miller v. Xerox Corp. Retirement Income Guarantee Plan, 464 F.3d 871 (9th Cir.2006) (actuarial equivalence and offsets in distributions)
- Berger v. Xerox Corp. Retirement Income Guarantee Plan, 338 F.3d 755 (7th Cir.2003) (present value vs. future value in actuarial equivalence discussions)
- Rose v. Long Island R.R. Pension Plan, 828 F.2d 910 (2d Cir.1987) (IRS regulation on deferral of payment and synopsis of delaying payments)
- Winder v. Erste, 566 F.3d 209 (D.C.Cir.2009) (de novo review standard on ERISA issues)
- McDermott Int'l, Inc. v. Wilander, 498 U.S. 337 (1991) (actuarial equivalence defined through present value under assumptions)