# Brady v. Dow Chemical Co. Retirement Board

> Court of Appeals for the Fourth Circuit · February 18, 2009 · 311 F. App'x 626

URL: https://www.frixlaw.com/law-library/cases/1027887

## Case

- **Full name:** Dennis P. BRADY, Plaintiff-Appellee, v. the DOW CHEMICAL COMPANY RETIREMENT BOARD; Union Carbide Employees’ Pension Plan, Formerly Known as Retirement Program Plan for Employees of Union Carbide Corporation and Its Participating Subsidiary Companies, Defendants-Appellants
- **Court:** Court of Appeals for the Fourth Circuit
- **Decided:** February 18, 2009
- **Citations:** 311 F. App'x 626
- **Precedential status:** Unpublished
- **Opinion:** Opinion
- **Judges:** Per Curiam
- **Cited by:** 5 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 07-2040

DENNIS P. BRADY,

Plaintiff - Appellee,

v.

THE DOW CHEMICAL COMPANY RETIREMENT BOARD; UNION CARBIDE
EMPLOYEES' PENSION PLAN, formerly known as Retirement
Program Plan for Employees of Union Carbide Corporation and
its Participating Subsidiary Companies,

Defendants - Appellants.

Appeal from the United States District Court for the Southern
District of West Virginia, at Charleston. Robert C. Chambers,
District Judge. (2:06-cv-00025)

Argued: December 3, 2008 Decided: February 18, 2009

Before NIEMEYER and MICHAEL, Circuit Judges, and Rebecca Beach
SMITH, United States District Judge for the Eastern District of
Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Robert Matthew Martin, PAUL, HASTINGS, JANOFSKY &
WALKER, Atlanta, Georgia, for Appellants. John Francis Dascoli,
Charleston, West Virginia, for Appellee. ON BRIEF: Erin E.
Magee, JACKSON & KELLY, P.L.L.C., Charleston, West Virginia, for
Appellants.
Unpublished opinions are not binding precedent in this circuit.

2
PER CURIAM:

This appeal involves a dispute about whether the Dow

Chemical Company Retirement Board (the “Dow Retirement Board,”

“Dow Board,” or the “Board”) and the pension plan it administers

for employees of the Union Carbide Corporation (“UCC”) failed to

provide plan participants adequate notice of substantial plan

amendments pursuant to the requirements of 29 U.S.C. § 1054(h).

Dennis Brady sued the Board and the amended plan under the

Employee Retirement Income Security Act of 1974 (“ERISA”), 29

U.S.C. § 1132, alleging a violation of those notice

requirements. The district court granted summary judgment to

Brady. We affirm.

I.

Effective February 6, 2001, UCC became a wholly owned

subsidiary of Dow Chemical Company (“Dow”). For the next two

years the Dow Retirement Board continued to administer the

traditional defined benefit pension plan that had been available

to UCC employees: the Retirement Program Plan for Employees of

Union Carbide Corporation and its Participating Subsidiary

Companies (the “Prior UCC Plan”). As of February 7, 2003,

however, the Board substantially amended the Prior UCC Plan and

renamed it the Union Carbide Employees’ Pension Plan (the

“UCEPP”).

3
The changes transformed the Prior UCC Plan into a

pension equity plan whereby benefits accrued under a different

formula than under the Prior UCC Plan. The UCEPP also uses

different variables in its formula than the Prior UCC Plan.

Benefits became available under the new UCEPP formula on

February 7, 2003, but the UCEPP also grandfathered in certain

Prior UCC Plan benefits. The UCEPP guaranteed plan participants

the benefits that would have been available to them under the

Prior UCC Plan had they retired on February 6, 2003. The Board

refers to this as the “frozen February 6, 2003 pension benefit”

or “the February 6, 2003 grandfather benefit.” J.A. 118; 195.

The UCEPP also provided that plan participants would continue to

earn benefit accruals under the Prior UCC Plan through December

31, 2005. The Board refers to this as the “December 31, 2005

grandfather benefit.” J.A. 196.

The Prior UCC Plan provided both normal retirement

benefits and early retirement benefits. Normal retirement

benefits were payable to those age 65 or older with one month of

service, those age 62 or later with 10 years of service, or

those whose age plus years of service totaled 85 (the parties

refer to these participants as having 85 “points”). Plan

participants not yet eligible for normal retirement benefits

were nevertheless eligible for early retirement benefits in the

form of a percentage of their full retirement benefits. This

4
percentage -- or “reduction factor” -- was based on length of

service and age and was slightly more generous for individuals

who were forced to retire early than for individuals who retired

early voluntarily. The applicable reduction factors appear in

Table 1 and Table 2 of the Prior UCC Plan. Table 1 was

applicable to those individuals who retired early voluntarily,

and Table 2 was applicable to those individuals terminated early

involuntarily. Table 2 incorporated a benefit that “bridged”

individuals from 83 to 85 points. That is, those individuals

whose age plus years of service exceeded 83 were eligible for

full benefits under Table 2.

Dennis Brady was employed by UCC until July 31, 2004,

at which time he was involuntarily terminated. At the time of

his forced retirement, Brady’s age and years of service equaled

83.01: he was fifty-five years and five months old and had

worked for UCC for twenty-seven years and seven months. Brady

sought benefits under the December 31, 2005, grandfather benefit

of $2,642.97 per month. He argued that he was eligible for full

retirement benefits unreduced by a reduction factor because his

age plus years of service exceeded 83, which meant that he was

bridged from 83 to 85 under Table 2 of the Prior UCC Plan. He

based his argument on the materials that Dow had distributed to

plan participants; those materials indicated that the plan

5
amendments extended benefit accrual under the Prior UCC Plan

through December 31, 2005.

The UCEPP administrators determined that Brady was

only entitled to $2,361.00 per month. The December 31, 2005,

grandfather benefit was applicable as an early retirement

benefit, but the plan amendment specified that the applicable

reduction factors were those indicated under Table 1 of the

Prior UCC Plan without regard to whether a participant retired

early voluntarily or involuntarily. In short, Table 2 was

eliminated for purposes of the December 31, 2005, grandfather

benefit. Pursuant to Table 1 the UCEPP administrators

determined that a reduction factor of 0.9021 was applicable to

Brady’s benefits. Brady does not contest whether the UCEPP did

in fact eliminate Table 2 for purposes of calculating the

December 31, 2005, grandfather benefit.

Brady’s complaint concerns the adequacy of the notice

that the Dow Retirement Board provided to prior UCC Plan

participants when they converted to the UCEPP. The plan

amendments triggered a statutory notice requirement known as

“204(h) Notice.” See ERISA, Pub. L. No. 93-405, § 204(h), 88

Stat. 829 (codified as amended at 29 U.S.C. § 1054(h) (2000)).

The Board did provide Prior UCC Plan participants a document

that it identified as a 204(h) Notice. But Brady argues that

the 204(h) Notice was deficient because it failed to adequately

6
inform plan participants about the elimination of Table 2 from

those benefits grandfathered into the UCEPP through December 31,

2005. Further, Brady argues that this deficiency is an

“egregious failure” to satisfy § 204(h). Section 204(h)

requires notice for certain plan amendments, but it only affords

a remedy to plan participants for an “egregious failure” to

comply with those requirements. 29 U.S.C. § 1054(h)(6). In the

event of such a failure, plan participants are entitled to the

greater of those benefits available prior to the plan amendment

and those benefits currently available under the amended plan.

Id. § 1054(h)(6). Brady thus argues that he is entitled to the

greater benefits he would have received under Table 2 of the

Prior UCC Plan.

Brady filed his complaint in U.S. District Court under

ERISA. See 29 U.S.C. §§ 1132, 1054. The parties stipulated

that the UCEPP is an “employee pension benefit plan” within the

meaning of 29 U.S.C. § 1002(2) and may be sued in its own name

under 29 U.S.C. § 1132(d)(1). Brady’s complaint alleges that

the Dow Retirement Board failed to provide adequate 204(h)

Notice under ERISA (Count I) and that UCEPP administrators

improperly calculated his benefits under a qualified domestic

relations order (Count II). The parties filed cross-motions for

summary judgment. The district court granted summary judgment

to Brady on Count I, but granted summary judgment to the Dow

7
Board on Count II. The Board appeals the grant of summary

judgment to Brady as to Count I. Brady does not appeal the

summary judgment against him as to Count II.

II.

The Dow Retirement Board argues that the notice it

issued met the requirements of ERISA § 204(h). In the

alternative, it argues that it made a reasonable, good faith

effort to comply with the statutory requirements sufficient to

satisfy transitional rules applicable at the time the Prior UCC

Plan was amended. Finally, the Board argues that in no event

did any deficiencies in its notice constitute egregious

violations of § 204(h).

We review de novo a district court’s ruling on a

motion for summary judgment. Eckelberry v. Reliastar Life Ins.

Co., 469 F.3d 340, 343 (4th Cir. 2006). Summary judgment is

only appropriate when the moving party demonstrates that “no

genuine issue of material fact exists and that the moving party

is entitled to judgment as a matter of law.” Kimmell v. Seven

Up Bottling Co., 993 F.2d 410, 412 (4th Cir. 1993).

III.

We first consider whether the 204(h) Notice issued by

the Dow Retirement Board in this case was deficient.

8
Specifically, Brady alleges that the Dow Board failed to provide

adequate notice with respect to the elimination of Table 2 for

purposes of the December 31, 2005, grandfather benefit. Section

204(h) requires notice of “a significant reduction in the rate

of future benefit accrual.” 29 U.S.C. § 1054(h). A separate

ERISA provision makes clear that “a plan amendment which

eliminates or reduces any early retirement benefit or

retirement-type subsidy (within the meaning of subsection

(g)(2)(A)) shall be treated as having the effect of reducing the

rate of future benefit accrual.” Id. § 1054(h)(9). The Board

does not dispute that the reduction in Brady’s benefits that

resulted from the elimination of Table 2 constituted a reduction

in early retirement benefits or retirement-type subsidies. See

also S. Rep. No. 98-585, at 30 (1984), reprinted in 1984

U.S.C.C.A.N. 2457, 2576 (noting that “a subsidy that continues

after retirement” is considered a “retirement-type subsidy”

under 29 U.S.C. § 1054(g)(2)(A) and contrasting it with

disability benefits, death benefits, social security

supplements, or medical benefits).

In determining whether the reduction in benefits in

Brady’s case was significant, we compare the amount of the

benefit under the plan as amended with the amount of the benefit

under the plan prior to the amendment. See Treas. Reg.

§ 1.411(d)-6, Q&A(7) (2003) (valid through April 9, 2003) (see

9
68 Fed. Reg. 17,277, 17,278 (Apr. 9, 2003)); see also Davidson

v. Canteen Corp., 957 F.2d 1404, 1407 (7th Cir. 1992). The

parties’ stipulate that Brady would have been entitled to an

additional $281.97 per month under Table 2 of the Prior UCC

Plan. Thus, the applicable plan amendments resulted in a 10.7

percent reduction in benefits for Brady. We conclude that a

reduction of this magnitude is significant. See Davidson, 957

F.2d at 1407 (finding reductions in annual pensions of $17,000

and $13,000 significant); Koenig v. Intercont’l Life Corp., 880

F. Supp. 372, 375 (E.D. Pa. 1995) (finding reductions in

pensions between 22 percent and 32 percent significant). We

also conclude that the Board could anticipate decreases in

benefits of this magnitude at the time the amendment was

adopted. See Treas. Reg. § 1.411(d)-6, at Q&A(7) (noting that

whether an amendment provides for a significant reduction in

benefits is determined “based on reasonable expectations taking

into account the relevant facts and circumstances at the time

the amendment is adopted”).

Because the elimination of Table 2 caused a

significant reduction in retirement benefits, adequate notice

was required under ERISA § 204(h). This notice must be “written

in a manner calculated to be understood by the average plan

participant and [must] provide sufficient information . . . to

allow applicable individuals to understand the effect of the

10
plan amendment.” 29 U.S.C. § 1054(h)(2). The Board’s 204(h)

Notice issued to Brady and other plan participants failed in one

respect: it did not provide adequate information about the

elimination of Table 2 for purposes of the December 31, 2005,

grandfather benefit.

The 204(h) Notice included the following information

under the heading, “Grandfathered Provisions”:

It is important to note that when you retire on or
after February 7, 2003, you will continue to have the
right to elect to receive the monthly pension benefit,
and associated eligibility dates and payment options
you earned under the [Prior UCC Plan] through February
6, 2003. You will not receive a monthly pension
benefit less than what you had earned before February
7, 2003.

In addition, to further ease the transition to UCEPP,
you will continue to earn benefit accruals under the
[Prior UCC Plan] formulas through December 31, 2005.
[Except for two modifications inapplicable to the
current dispute that relate to how length of service
is calculated and which indicia of earnings is used],
[t]his benefit will serve as a minimum monthly pension
benefit when you retire.

J.A. 164. This provision affirmatively suggests that the

formulas used under the Prior UCC Plan will continue to be

available through December 31, 2005, with two explicitly

identified modifications but no other exceptions. Indeed, the

February 6, 2003, grandfather benefit retained Table 2,

furthering an understanding that Table 2 is part and parcel of

the Prior UCC Plan formulas a plan participant would expect to

be used in a grandfathered benefit.

11
The Dow Retirement Board argues that the language

makes clear that only “benefit accruals -- not early retirement

subsidies” -- continue through December 31, 2005. Appellant Br.

at 17. We disagree that the Board’s use of the term “benefit

accruals” meant that “early retirement subsidies” were excluded.

The statutory scheme treats benefit accruals as a term of art

that includes retirement subsidies. See Economic Growth and Tax

Relief Reconciliation Act of 2001 (“EGTRRA”), Pub. L. 107-16

§ 659(b), 115 Stat. 38 (codified as amended at 29 U.S.C.

§ 1054(h)(9)) (making clear that early retirement subsidies

should be treated as benefit accruals for purposes of ERISA

§ 204(h)). When Dow used the term “benefits accruals,” it was

incorporating the statutory definition. We therefore conclude

that average plan participants would understand the 204(h)

Notice language quoted above to grandfather into the December

31, 2005, grandfather benefit the formulas used under the Prior

UCC Plan, which incorporate Table 2’s reduction factors.

Other provisions of the 204(h) Notice further this

understanding. The “Questions and Answers” section says,

Q3. What will happen to the pension benefit I earned
under the current Union Carbide Retirement Program?

A3. You will not lose the benefit you have already
earned under the Union Carbide Retirement Program. In
addition, Dow has put transition credits and
grandfathered provisions in place to help you
transition to UCEPP.

12
J.A. 165. The import of this provision is to assure plan

participants that the benefits available under the Prior UCC

Plan, which included Table 2, would remain available under the

UCEPP during the transition. Certainly, nothing in the 204(h)

Notice flags the elimination of Table 2 in the December 1, 2005,

grandfather provision. Insofar as the language of the 204(h)

Notice is misleading about whether Table 2 is retained, it is

inadequate under 29 U.S.C. § 1054(h)(2). See Amara v. Cigna

Corp., 534 F. Supp. 2d 288, 339 (D. Conn. 2008) (finding that

204(h) Notice containing affirmatively misleading statements was

not “written in a manner calculated to be understood by the

average plan participant”). At the very least, the 204(h)

Notice fails to provide sufficient information from which an

average plan participant could understand that Table 2 would not

be available under the December 31, 2005, grandfather benefit.

We therefore agree with the district court’s conclusion that the

204(h) Notice issued in this case was deficient in that respect.

IV.

The deficient notice raises the question of whether

the Dow Retirement Board should nevertheless be treated as

having complied with the requirements of § 204(h) by virtue of

triggering a transitional good faith safe harbor that Congress

created in its 2001 amendments to ERISA. See EGTRRA

13
§ 659(c)(2). Before it reached that question, the district

court analyzed whether the Board committed an egregious failure

to meet the requirements of § 204(h). We proceed in the same

order of analysis for clarity of explanation.

Section 204(h) provides a remedy to plan participants

in the event of an egregious failure to meet its requirements.

29 U.S.C. § 1054(6)(A). The statute provides that

there is an egregious failure to meet the requirements
of [§ 204(h)] if such failure is within the control of
the plan sponsor and is

(i) an intentional failure (including any failure to
promptly provide the required notice or information
after the plan administrator discovers an
unintentional failure to meet the requirements of this
subsection),

(ii) a failure to provide most of the individuals with
most of the information they are entitled to receive
under this subsection, or

(iii) a failure which is determined to be egregious
under regulations prescribed by the Secretary of the
Treasury.

29 U.S.C. § 1054(h)(6)(B). The district court determined that

both subparagraphs (i) and (ii) were implicated in the present

case, although it declined to conclude “that Defendants

intentionally failed to mention the elimination of Table 2 in

the first instance.” J.A. 316. The court instead concluded

that subparagraph (i) was only implicated to the extent that the

Board failed to provide required notice after becoming aware of

an unintentional failure to meet the § 204(h) requirements.

14
We first consider whether the district court properly

determined that the Dow Board failed “to provide most of the

individuals with most of the information they [were] entitled to

receive under this subsection [§ 204(h)].” 29 U.S.C.

§ 1054(h)(6)(B)(ii). We conclude that the evidence proffered by

Brady in support of that determination was not sufficient. It

is not enough that a “discernable subclass of employees” was not

provided “adequate information.” Brady v. Dow Chem. Co. Ret.

Bd., No. 2:06-cv-00025 (S.D. W. Va. Sept. 13, 2007). The

statute requires a court to find that “most of the individuals”

did not receive “most of the information they [were] entitled to

receive.” 29 U.S.C. § 1054(h)(6)(B)(ii). Used as an adjective,

“most” means “the greatest number of,” “the majority of,“ or

“greatest in quantity, extent, or degree.” Webster’s Third New

International Dictionary 1474 (2002). Thus, § 1054(h)(6)(b)(ii)

requires a determination that at least a majority of “applicable

individuals,” as that term is defined in § 1054(h)(8)(A), did

not receive a large degree of information they were entitled to

receive.

The correct denominator for concluding whether “most

of the individuals” received sufficient information is the

number of “applicable individuals” -- or those individuals whose

rate of future benefit accrual is reasonably expected to be

significantly reduced. 29 U.S.C. § 1054(h)(1)(requiring notice

15
to “each applicable individual”); id. § 1054(h)(8) (defining

“applicable individuals” to include “each participant in the

plan”); Treas. Reg. § 1.411(d)-6, at Q&A(9) (requiring notice

only to those individuals whose benefits are reasonably expected

to be significantly reduced). In the present case, the

amendments converting the Prior UCC Plan to the UCEPP affected

every plan participant. The record indicates that 100 percent

failed to receive notice of the elimination of Table 2 in the

December 31, 2005, grandfather benefit.

But the district court did not determine whether plan

participants and other applicable individuals failed to receive

a large degree of information that they were entitled to receive

under § 204(h). A district court must in some way compare the

magnitude of the deficiency in information to the magnitude of

the information required under § 204(h) to find that “most of

the individuals” did not receive “most of the information they

[were] entitled to receive.” See 29 U.S.C. § 1054(h)(6)(B)(ii).

Because the district court failed to make such a comparison, it

could not conclude that there was an egregious violation under

§ 1054(h)(6)(B)(ii).

We next examine whether the district court properly

concluded that the Board “fail[ed] to promptly provide the

required notice or information after the plan administrator

discover[ed] an unintentional failure to meet the requirements

16
of this subsection [§ 204(h)].” 29 U.S.C. § 1054(h)(6)(B)(i).

The court determined that “Defendants clearly knew that

employees were questioning the elimination of Table 2 prior to

Plaintiff’s involuntary separation.” J.A. 316. Undisputed

evidence in the record makes clear that UCEPP administrators

knew that multiple plan participants were confused about the

status of Table 2. Dow’s pension plan leader emailed plan

personnel to inform them that there had been “several inquiries

by UCC employees questioning the elimination of the ‘bridging’

provision as it relates to the grandfathered UCC pension

benefit.” J.A. 24. Moreover, as the court noted, Brady

participated in a lengthy email exchange with Dow’s pension plan

leader in which Brady described why the 204(h) Notice was

misleading with respect to whether the December 31, 2005,

grandfather benefit would retain Table 2’s reduction factors.

Brady explained that the relevant language in the 204(h) Notice

affirmatively suggested that the December 31, 2005, grandfather

benefit would “contain both adjustment tables (a ‘voluntary’

table, and a ‘involuntary’ table).” J.A. 25. Based on this

information, the district court properly concluded that the

Board discovered its failure to provide sufficient information

to allow average plan participants to understand that the plan

amendment would eliminate Table 2 with respect to the December

31, 2005, grandfather benefit.

17
Moreover, the record reveals that the Dow Board failed

to promptly rectify its deficient notice after being put on

notice of it. The Board argues that it notified Brady “on at

least four separate occasions that he would not receive an early

retirement subsidy.” Appellant Br. at 22. The first such

occasion occurred by email in October 2003. That email

described how to calculate Brady’s February 6, 2003, benefit,

for which Table 2 was retained. It did not explain that Table 2

was eliminated for purposes of the December 31, 2005,

grandfather benefit, and it was not adequate under 29 U.S.C.

§ 1054(h)(6)(B)(i). The remaining three occasions cited by the

Board also did not rectify the deficient notice. They occurred

immediately prior to or after Brady retired and were a part of

its communications denying him full retirement benefits under

the bridging benefit of Table 2. We need not reach the question

of what “notice or information” is minimally required under the

statute. It is enough to conclude that the information that the

Board relayed to Brady while denying him retirement benefits was

not sufficient. Congress did not intend for pension plans to be

able to satisfy the strictures of § 204(h) -- a notice

requirement -- by communicating benefits reductions individually

to plan participants at the time they seek and are denied ceased

benefits. We thus agree with the district court that the Dow

18
Board committed an egregious violation of the 204(h) notice

requirements under § 1054(h)(6)(B)(i).

V.

We turn finally to whether the good faith safe harbor

provision requires us to treat the Dow Retirement Board as

meeting the requirements of § 204(h) irrespective of our

conclusions in parts III and IV, above. Congress’s 2001

amendments to ERISA, which made clear that 204(h) Notice was

required for reductions in early retirement benefits and

retirement-type subsidies (in addition to benefit accruals for

normal retirement benefits), provided for a transitional good

faith safe harbor.

Until such time as the Secretary of the Treasury
issues regulations under sections 4980F(e)(2) and (3)
of the Internal Revenue Code of 1986, and section
204(h) of the Employee Retirement Income Security Act
of 1974, as added by the amendments made by this
section, a plan shall be treated as meeting the
requirements of such sections if it makes a good faith
effort to comply with such requirements.

EGTRRA § 659(c)(2). In the regulations subsequently

promulgated, the Secretary of the Treasury similarly provided

that for plan amendments taking effect before the September 2,

2003, effective date of the regulations, the requirements of

“section 204(h), as amended by EGTRRA, are treated as satisfied

if the plan administrator makes a reasonable, good faith effort

19
to comply with those requirements.” 68 Fed. Reg. 17,277,

Q&A(18) (Apr. 9, 2003)(to be codified at 26 C.F.R. pts 1, 54,

and 602). 1 The Dow Board argues that its efforts to satisfy

§ 204(h), even if technically deficient, were reasonable, made

in good faith, and are thus insulated under the above

transitional safe harbor.

The district court concluded that except for the two

respects in which it determined that the Board egregiously

violated § 204(h), “it cannot be said that Defendants failed to

make a ‘reasonable, good faith effort to comply’ with the

statutory requirements.” J.A. 318. Our review is therefore

limited to whether there was an unreasonable or bad faith effort

to comply with § 204(h) as a result of the two egregious

violations identified by the district court. It is further

limited by our conclusion above that there was not sufficient

evidence in the record to allow a determination that the Dow

Board failed to provide “most of the individuals with most of

the information they are entitled to receive.” See 29 U.S.C.

§ 1054(h)(6)(B)(ii). Summary judgment is nevertheless

appropriate if the Dow Board’s failure to promptly rectify its

1
Because we conclude that Dow did not make a good faith
effort to comply with the requirements of § 204(h), we need not
decide whether the “reasonable, good faith effort” contemplated
in the Treasury regulations is the same as a “good faith effort”
under EGTRRA § 659(c)(2).

20
deficient 204(h) Notice was tantamount to an unreasonable or bad

faith effort to comply with § 204(h)’s requirements.

The district court concluded that there was a failure

to provide notice after the plan administrator discovered an

inadvertent deficiency in the plan’s 204(h) Notice. The

district court expressly declined to conclude that there was an

intentional failure “in the first instance.” J.A. 316. We must

thus determine whether the failure that did occur is sufficient

to establish that the plan failed to “make[] a reasonable, good

faith effort to comply with [the] requirements [of section

204(h)].” 68 Fed. Reg. 17,277 Q & A(18). We conclude that it

does.

The Board is not protected under the good faith safe

harbor unless it acted in good faith in its efforts to comply

with all of § 204(h)’s requirements. Those requirements include

a continuing obligation to supplement a deficient § 204(h)

notice. The statutory safe harbor provides that “Until such

time [as regulations are issued interpreting IRC § 4980F and

ERISA § 204(h)] a plan shall be treated as meeting the

requirements of such sections if it makes a good faith effort to

comply with such requirements.” EGTRRA § 659(c)(2). This

language indicates that the good faith effort contemplated by

Congress was an ongoing obligation. It is not enough to have

21
made a good faith effort at the outset of a plan amendment. The

text of § 204(h) further supports this understanding:

[T]here is an egregious failure to meet the
requirements of this subsection [§ 204(h)] if [there
is a] failure to promptly provide the required notice
or information after the plan administrator discovers
an unintentional failure to meet the requirements of
this subsection [§ 204(h)].

29 U.S.C. § 1054(h)(6)(B) (emphasis added). This provision

affirms that there is a continuing obligation to correct a

deficient § 204(h) notice. An act constituting an egregious

failure to meet the requirements of § 204(h) necessarily

constitutes a violation of § 204(h). 2 Congress may have been

concerned about the ability of pension plans to satisfy the

requirements of § 204(h) before Treasury clarified those

requirements, but it apparently concluded that it was affording

pension plans sufficient protection by placing any pension plan

acting in good faith into its safe harbor.

We affirm the district court’s conclusion that

irrespective of whether the Board acted in good faith when it

2
We do not reach any conclusions about the applicability of
Internal Revenue Code (IRC), 26 U.S.C. § 4980F, which imposes a
tax on pension plans that fail to exercise reasonable diligence
in complying with notice requirements or fail to correct
inadequate notice within thirty days “beginning on the first
date such person knew, or exercising reasonable diligence would
have known, that such failure [to provide adequate notice]
existed.” 26 U.S.C. § 4980F(c)(2). In particular, we do not
offer an opinion on what reasonable diligence entails.

22
originally published its 204(h) Notice, it was no longer acting

in good faith when it failed to promptly supplement its 204(h)

Notice upon discovering a deficiency. The plan administrator

received a coherent and compelling explanation that the 204(h)

Notice was misleading with respect to whether the December 31,

2005, grandfather benefit retained Table 2’s benefits. The

language of the 204(h) Notice patently failed to provide

sufficient information for an average plan participant to glean

that Table 2’s benefits would be eliminated with respect to the

December 31, 2005, grandfather benefit. The record also

contains undisputed evidence that the Board knew that multiple

employees were in fact confused about this aspect of the plan

amendment. This evidence supports the district court’s

determination that the Board failed to act in good faith when it

declined to clarify its misleading (and thus deficient) 204(h)

Notice.

VI.

In sum, we hold that the district court properly

concluded that the § 204(h) Notice the Dow Retirement Board

provided to plan participants was deficient. Moreover, the

deficiency amounted to an egregious failure to provide adequate

§ 204(h) notice because the Board failed to promptly provide

additional notice or information upon discovering the

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deficiency. We also conclude that summary judgment was

appropriate notwithstanding the transitional safe harbor that

insulates reasonable and good faith efforts to comply with

amended § 204(h). The Board did not act reasonably and in good

faith to satisfy its continuing obligation to supplement its

deficient notice. Accordingly, the district court’s order

granting summary judgment to Dennis Brady is

AFFIRMED.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/1027887. Public record. Not legal advice.