ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA.
Aldisert, Gibbons and Higginbotham, Circuit Judges.
Pension Benefit Guaranty Corporation (PBGC) appeals from an order of the District Court for the Middle District of Pennsylvania establishing November 11, 1977 as the termination date of a pension plan (Plan) maintained by Syntex Fabrics, Inc. (Syntex) and covered by Subtitle B of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1321-1323 (1976 & Supp. V 1981). PBGC is joined in its appeal by Raymond Ohnmeiss, Jr. and Donald L. Livermore, members of the committee which administers the Plan, and Local 186, Textile Workers Union of America (Union), which negotiated as a collective bargaining representative for the Plan. Syntex and John Hancock Mutual Life Insurance Co. (John Hancock), a third party defendant which purchased annuities for the Plan, contend that the termination date fixed by the district court was consistent with the goals of ERISA. We reverse.
The Termination Insurance Scheme
In Subchapter III of ERISA Congress established a self-financing program to insure, inter alia, the participants of qualified private pension plans against the consequences of plan termination when assets are insufficient to pay vested benefits in full. 29 U.S.C. § 1001(a) (1976); Nachman Corp. v. PBGC, 446 U.S. 359, 362, 100 S. Ct. 1723, 64 L. Ed. 2d 354 (1980). To administer this program, Congress created PBGC, a United States Government corporation intended to further the following statutory goals:
(1) to encourage the continuation and maintenance of voluntary private pension plans for the benefit of their participants,
(2) to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries under plans to which this subchapter applies, and
(3) to maintain premiums established by [PBGC] under section 1306 of this title at the lowest level consistent with carrying out its obligations under this subchapter.
29 U.S.C. § 1302(a) (1976). PBGC guarantees the payment of vested benefits under qualified pension plans, subject to a monthly limit of the lesser of $750 multiplied by a fractional amount that reflects the contribution and benefit base or the employee's average monthly gross income during his highest paid five years. 29 U.S.C. § 1322(b) (3) (1976 & Supp. V 1981). If the plan has been in effect for less than five years, then monthly benefits are guaranteed only up to the greater of twenty dollars or twenty percent multiplied by the number of years the plan was in effect. 29 U.S.C. § 1322(b) (7) (1976 & Supp. V 1981).
The cost of this insurance is subsidized by the payment of annual premiums by all covered pension plans. 29 U.S.C. §§ 1306, 1307 (1976 & Supp. V 1981). PBGC can also recoup some of its costs from two additional sources. An employer who maintained a terminated plan which caused PBGC to be liable on its guarantee is itself liable for the lesser of the difference between plan assets and liabilities on the termination date or 30 percent of the employer's net worth on the date of PBGC's choice within the 120 day period preceding the termination date. 29 U.S.C. § 1362(b) (1976 & Supp. V 1981).*fn1 In addition, PBGC may recover limited amounts of benefits paid under the pension plan to participants after the termination date. 29 U.S.C. § 1345 (1976).
Because the extent of PBGC's liability on its guarantee is dependent on such factors as plan liabilities to holders of vested pension rights, plan assets, recapture of benefit payments, and the net worth of employers, all of which vary with the passage of time, the termination date of a pension plan is of critical importance. PBGC v. Heppenstall Co., 633 F.2d 293, 296 (3d Cir. 1980). The termination of a single-employer plan may be initiated by either the plan administrator or PBGC. Under the former method, governed by 29 U.S.C. § 1341, the plan administrator must notify PBGC at least ten days in advance of the proposed termination and must withhold all payouts for at least ninety days after the proposed date. 29 U.S.C. § 1341(a) (1976 & Supp. V 1981). During this period, PBGC is expected to determine the solvency of the plan. If the plan's assets are sufficient to ...