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GILLIS v. HOECHST CELANESE CORP.

June 26, 1995

LEONARD GILLIS and VALDO SARGENI, on behalf of themselves and all others similarly situated V. HOECHST CELANESE CORPORATION and HOECHST CELANESE RETIREMENT PLAN


The opinion of the court was delivered by: J. WILLIAM DITTER, JR.

 Ditter, J.

 June 26, 1995

 A. Introduction

 In August of 1989, Hoechst Celanese Corporation sold its Delaware City PVC division to the American Mirrex Corporation. *fn1" Plaintiffs, Leonard Gillis and Valdo Sargeni, worked for Hoechst at the Delaware City plant. The sale to American Mirrex terminated their employment with Hoechst. Even though they became American Mirrex employees, they now contend on their own behalf, and on behalf of other former Hoechst employees, that they lost various employment benefits as a result of the sale.

 Plaintiffs filed an eight count complaint and now move for summary judgment on counts I, II, and III. Count I alleges that defendants failed to issue summary plan descriptions, summary plan annual reports, and summary change descriptions consistent with ERISA. 29 U.S.C. §§ 1021-1023. Count II alleges that defendants failed to produce documents upon specific written request as they were required to do under ERISA. 29 U.S.C. §§ 1001-1371. Count III alleges that defendants transferred insufficient funds to the American Mirrex Retirement Plan to fund plaintiffs' early retirement benefits. 29 U.S.C. § 1058.

 B. Count III: Underfunding Early Retirement Benefits

 Although defendants were permitted to transfer their liability for early retirement benefits to the American Mirrex Retirement Plan, *fn2" they needed to transfer sufficient assets to fund those benefits. *fn3" In count III, the parties' dispute centers around the sufficiency of defendants' transfer. Specifically, plaintiffs challenge the actuarial assumptions that defendants relied upon in conducting the required "termination basis" calculation. Plaintiffs argue that defendants were required to rely on the Pension Benefit Guarantee Corporation's actuarial assumptions codified at 26 C.F.R. § 2619. *fn4" Defendants argue that although the PBGC's assumptions provide an effective "safe harbor," their reliance on "reasonable actuarial assumptions" was also permissible. Thus, the issue is whether defendants were required to use the PBGC assumptions or whether they were allowed to rely upon "reasonable actuarial assumptions."

 This issue raises two independent questions. Were defendants required to use the PBGC's actuarial assumptions in their valuation of the transferred assets? If so, then summary judgment is properly granted for plaintiffs because defendants concede that they did not use the PBGC assumptions. If not, and defendants were entitled to rely on "reasonable actuarial assumptions," I must consider whether defendants have proffered sufficient evidence to preclude summary judgment. *fn5"

 Plaintiffs' position that "the termination basis calculation must follow 29 C.F.R. § 2619" is incorrect. The propriety of the purported transfer is controlled by 29 U.S.C. § 1058. See Gillis, 4 F.3d at 1147, 1149. Section 1058 of Title 29 is parallel to section 414(l) of the Internal Revenue Code. 26 U.S.C. § 414(l). As noted by the Third Circuit, interpretation of ERISA's provisions is guided by sources which interpret IRC counterpart provisions. Gillis, 4 F.3d at 1144. Thus, sources that interpret IRC section 414(l) are useful in understanding 29 U.S.C. § 1058. See id. at 1150 (Alito, J. concurring); Malia v. General Elec., Co., 23 F.3d 828, 830 (3d Cir.), cert. denied, 130 L. Ed. 2d 328, 115 S. Ct. 377 (1994) (relying on treasury regulations in interpreting 29 U.S.C. § 1058). The Secretary of the Treasury has promulgated regulations interpreting section 414(l) which are codified at 26 C.F.R. § 1.414(l)-1(b)(5). Those regulations provide that:

 
(5) Benefits on a termination basis.
 
(ii) For purposes of determining the benefits on a termination basis, the allocation of assets to various priority categories under section 4044 of ERISA must be made on the basis of reasonable actuarial assumptions. The assumptions used by the Pension Benefit Guaranty Corporation as of the date of the merger or spinoff are deemed reasonable for this purpose.
 
26 C.F.R. § 1.414(l)-1(b)(5)(ii) (1994) (emphasis added).

 It is clear from the regulation that the PBGC actuarial assumptions merely provide a "safe harbor" -- i.e., a calculation method that is per se reasonable. However, any "reasonable actuarial assumptions" that underlie a "termination basis" calculation will satisfy ...


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