## Facts

- The Pension Benefit Guaranty Corporation (PBGC) administers ERISA Title IV’s mandatory pension plan termination insurance program and may terminate and restore covered defined-benefit plans.
- The LTV Corporation and subsidiaries sponsored three chronically underfunded, ERISA-covered pension plans, including collectively bargained plans not subject to voluntary termination by LTV.
- LTV filed for Chapter 11 reorganization and informed PBGC it could no longer fully fund the plans.
- PBGC sought involuntary termination under ERISA § 4042 to protect the insurance program from large losses, and a federal district court ordered termination.
- After termination, LTV and the United Steelworkers negotiated new pension arrangements that PBGC treated as “follow-on” plans designed to supplement PBGC-guaranteed benefits and approximate pre-termination benefit levels.
- Applying an internal anti–follow-on policy and concluding that LTV’s financial condition had improved, PBGC issued a notice restoring the terminated plans under ERISA § 4047, shifting responsibility for unfunded liabilities back to LTV.
- LTV refused to comply, and PBGC filed an enforcement action.

## Issues

1. Whether PBGC’s restoration of LTV’s pension plans under ERISA § 4047 was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” under APA § 706(2)(A).
2. Whether ERISA § 4047 substantively limited the factors PBGC may consider in deciding to restore a plan, including consideration of follow-on plans and employer financial condition.
3. Whether PBGC was required to use heightened procedures (such as rulemaking or trial-type hearings) rather than informal adjudication when issuing a restoration decision.

## Decision

- The Supreme Court reversed the Second Circuit and remanded.
- The Court held PBGC’s restoration decision was not arbitrary or capricious and was consistent with ERISA and the APA.
- The Court held ERISA § 4047 grants PBGC broad discretion to determine when restoration is “appropriate and consistent with its duties” under Title IV.
- The Court held PBGC could consider the existence of follow-on plans and LTV’s improved financial condition when deciding whether to restore.
- The Court held APA § 706(2)(A) does not itself impose extra procedural requirements beyond those found in the APA’s procedural provisions; informal adjudication was sufficient.

## Legal Principles

- Statutory language authorizing an agency to act when it determines action is “appropriate and consistent with its duties” can confer broad agency discretion, constrained by ordinary APA arbitrary-and-capricious review.
- APA § 706(2)(A) establishes a standard of judicial review and does not, by itself, require agencies to employ procedures beyond those specified elsewhere in the APA.
- An agency decision reached through informal adjudication is valid where the governing statute does not require formal rulemaking or formal adjudication and the agency provides a contemporaneous explanation adequate for judicial review.
- Under ERISA Title IV, PBGC may consider threats to the insurance program, including perceived manipulation through follow-on arrangements, when deciding whether restoration of a terminated plan is consistent with its duties.

## Conclusion

The Court sustained PBGC’s restoration of LTV’s terminated pension plans, holding that ERISA § 4047 grants PBGC broad discretion and that the restoration—made through informal adjudication and supported by a rational explanation tied to Title IV duties—survived arbitrary-and-capricious review under the APA.


Pension Benefit Guaranty Corp. v. LTV Corp., 496 U.S. 633 (1990)