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Pension Benefit Guaranty Corp. v. LTV Corp.

United States Supreme Court
496 U.S. 633 (1990)


The LTV Corporation (LTV) (defendant) was a steel company that offered three defined-benefit pension plans to its employees. The pension plans were subject to Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq., which created the Pension Benefit Guaranty Corporation (PBGC) (plaintiff) to insure private-sector participants against the termination of underfunded benefit plans. In 1986, LTV’s plans had unfunded liabilities totaling about $2.3 billion. About $2.1 billion of LTV’s unfunded liabilities were insured by PBGC. LTV sought to have PBGC terminate the plans and assume responsibility for LTV’s unfunded obligations, which would free LTV to negotiate new pension plans with its employees. PBGC decided to terminate the plans in order to protect the insurance program from an unreasonable risk of loss. LTV thereafter negotiated new pension agreements that, combined with PBGC insurance benefits, provided LTV’s employees with essentially the same pension benefits. PBGC believed the new pension agreements, known as follow-on plans, to be abusive of the insurance program. In 1987, PBGC determined that there was no longer an unreasonable risk of loss to the insurance program. PBGC notified LTV that the pension plans would be restored pursuant to section 4047 of ERISA, in part because of PBGC’s policy against follow-on plans and in part because there was no longer an unreasonable risk of loss. PBGC initiated an action to enforce the restoration in district court. The district court found that PBGC had exceeded its authority. The court of appeals affirmed, finding that the restoration was arbitrary and capricious. The United States Supreme Court granted certiorari.

Rule of Law


Holding and Reasoning (Blackmun, J.)

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