Central States Areas v. Safeway, Inc

In the
United States Court of Appeals
For the Seventh Circuit

Nos. 99-3724 & 99-3822

Central States, Southeast and Southwest
Areas Pension Fund, and Howard McDougall,
trustee,

Plaintiffs-Appellees, Cross-Appellants,

v.

Safeway, Inc.,

Defendant-Appellant, Cross-Appellee.

Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 2005--Harry D. Leinenweber, Judge.

Argued March 30, 2000--Decided October 6, 2000

Before Bauer, Diane P. Wood, and Williams, Circuit
Judges.

Diane P. Wood, Circuit Judge. The Central States,
Southeast and Southwest Areas Pension Fund
(Central States) is a well known multiemployer
pension plan that serves members of the
International Brotherhood of Teamsters who work
in the midwestern United States. For years,
Safeway operated many grocery stores in Central
States’ coverage area. The employees in these
stores were covered by collective bargaining
agreements with the Teamsters. As part of those
arrangements, Safeway was required to make
contributions to the plan for more than 1500
employees. In the late 1980s, Safeway sold the
divisions that employed most of the plan members.
By 1989, Safeway owned only one store that
employed plan participants. This was its Eau
Claire, Wisconsin, store, where 16 plan members
worked. This case concerns the payments Safeway
must make to Central States as a result of these
changes in its business--changes known as
"partial withdrawals" from the pension fund. The
district court concluded that Safeway owed
approximately $1.9 million for a 1993 partial
withdrawal assessment. We affirm.

I
 Employers who are part of multiemployer plans
make contributions on the basis of the number of
their employees covered by the plan (who are
converted into the antiseptic-sounding
"contribution base units"). So, if an employer’s
workforce shrinks or the employer goes out of
business, that employer reduces or ends its
contributions to the plan. This could cause
problems, because plan participants continue to
enjoy their right to benefits upon retirement. If
employers could simply stop contributing when
they go out of business, downsize, or, as in this
case, sell the divisions employing plan
participants to somebody else, a plan could find
itself substantially underfunded. To deal with
this problem, Congress enacted the Multiemployer
Pension Plan Amendments Act of 1980 (MPPAA), Pub.
L. No. 96-364, 94 Stat. 1208 (codified in
scattered sections of 29 U.S.C.). The MPPAA
creates "withdrawal liability" for employers that
leave plans. Basically, when an employer pulls
out, the plan in which it participated is
permitted to approximate the degree to which it
is underfunded (its "unfunded vested benefits,"
or UVBs), and then charge the employer for its
share of those UVBs. Moreover, under 29 U.S.C.
sec. 1385, employers are subject to partial
withdrawal liability when their contributions
decline substantially over a period of several
years. This is what happened to Safeway.

Under the rules for determining when a partial
withdrawal occurs, Safeway first incurred
withdrawal liability in 1990 for its 1987 and
1988 asset divestitures. Central States demanded
$16.3 million from Safeway; eventually, they
settled on $12.6 million. This settlement was
confirmed in November 1993. In 1995, Central
States came calling again, this time claiming
that Safeway incurred partial withdrawal
liability for 1993. The gross assessment was
$11,299,544, but Safeway received a credit for
its 1990 payment, making the net demand
$1,985,363. Despite the hefty reduction that took
into account the earlier payment, Safeway argued
that it was entitled to an even greater credit.
Central States disagreed, relying on the credit
rules that are contained in the regulations
issued by the body responsible for overseeing
Employee Retirement Income Security Act (ERISA)
plans, the Pension Benefit Guarantee Corporation
(PBGC). Safeway responded that those regulations
are unreasonable since their use resulted in a
nearly two million dollar assessment even though
no additional assets were sold. Its 1993
liability rested instead only on the statutory
definition of a "partial withdrawal."

Anticipating that plans and employers will
occasionally have disputes over the applicability
of the rules, the MPPAA creates a "pay first,
fight later" regime under which a dispute over
withdrawal liability is referred to arbitration,
but only after the employer turns the disputed
amount over to the plan. See 29 U.S.C. sec.
1401(d). This is the path Safeway followed. It
initiated an arbitration proceeding to contest
the fund’s calculation of its 1993 withdrawal
liability and the credit method the fund used. In
an interim decision, the arbitrator first decided
that the settlement agreement with respect to the
1990 withdrawal assessment (which led to the
$12.6 million figure mentioned above) did not
operate as a bar of the 1993 partial withdrawal
demand. Second, the interim decision held that
the fund was not estopped from applying its
credit method because it had not specifically
notified Safeway that it was going to change its
practice. The change arose from a final credit
regulation published in the Federal Register, 57
Fed. Reg. 59,808 (Dec. 16, 1992), which was
notice to the world that the fund would be
required to change its method. Last, the
arbitrator decided that the fund’s calculation of
Safeway’s 1993 withdrawal liability was flawed.
The fund used what is called the "modified
presumptive method" of calculating withdrawal
liability established in ERISA sec. 4211(c)(2).
But it applied a 10-year allocation period, found
in a separate subsection of ERISA, sec.
4211(c)(5)(C). The arbitrator found that the fund
could not put these together and thus could not
use a 10-year allocation period consistently with
ERISA sec. 4206 and the applicable credit
regulations. Instead, it had to use the five-year
period found in credit regulation 29 C.F.R. sec.
2649.4. In accordance with the arbitrator’s
ruling, Central States recalculated Safeway’s
withdrawal liability using the five-year
allocation period, but that led it to revise its
1993 demand upward, to approximately $2.2
million. In his final decision, the arbitrator
essentially threw up his hands in dismay. He
expressed the opinion that he was "convinced that
the Fund is due additional payment because of the
1993 partial withdrawal and that the Employer is
entitled to a reasonable credit for the payment
that it made because of the prior withdrawal."
But he ultimately concluded that the regulations
were so irrational that they did not provide
direction to the fund to calculate a proper
credit and thus that its demand for payment had
to be set aside.

Central States then appealed to the district
court, as permitted by 29 U.S.C. sec. 1401(b).
Safeway argued, as it had before, that the
agreement that settled the 1990 dispute precluded
Central States’ request, that Central States was
estopped from demanding money for the 1993
withdrawal by virtue of statements made by one of
its representatives, and that the regulations
providing for subsequent withdrawal liability
were so incoherent as to be irrational and
unenforceable. It also urged that the regulation
was unconstitutional as applied to it, either as
a taking or as a violation of substantive due
process. The district court, properly reviewing
the arbitrator’s legal conclusions de novo, see,
e.g., Joseph Schlitz Brewing Co. v. Milwaukee
Brewery Workers’ Pension Plan, 3 F.3d 994, 999
(7th Cir. 1994), affirmed on other grounds, 513
U.S. 414 (1995), disagreed with all of Safeway’s
arguments and vacated the arbitration award. It
also concluded that the arbitrator had erred in
finding that Central States could not use a 10-
year allocation period for its 1993 demand.
Consequently, the court held that Safeway was
liable for the $1,985,363 originally demanded by
Central States and that, since Safeway had paid
up, Central States could simply keep the money
and the case was closed. Safeway now appeals;
Central States, having seen what the five-year
period would do for it, has cross-appealed to
argue that this is the one that should apply.

II
Before we can consider the district court’s
reasoning, we must address a jurisdictional
argument that Central States has presented. It
claims that the district court lacked
jurisdiction over Safeway’s request to enforce
the arbitrator’s award because it came too late.
Under 29 U.S.C. sec. 1401(b)(2), a party has 30
days to bring an action in district court to
"enforce, vacate, or modify" an MPPAA arbitration
award. The arbitrator’s final decision was dated
March 21, 1998; Central States filed its action
to vacate the award on April 1, 1998, but Safeway
did not file its counterclaim until May 29, 1998,
well more than 30 days beyond the arbitrator’s
decision. Central States seems to think that this
leaves the arbitrator’s award in some state of
limbo, under which it is not enforceable, because
no timely petition for enforcement was filed. It
follows, according to Central States, that it can
keep the money. This, we think, is a real stretch
at best, and at worst a serious misunderstanding
of the position in which the party who is content
with an arbitral award finds itself. But there
are other reasons as well for rejecting Central
States’ argument.

Central States’ position is premised on two
points: first, that the 30-day period provided by
sec. 1401(b)(2) applies here, not the six-year
limitations period for ERISA actions contained in
29 U.S.C. sec. 1451(f) (or the three-year period
that applies when the plaintiff knows or should
know of the cause of action), and second, that
the 30 days given by sec. 1401(b)(2) are
jurisdictional in the strong sense of the term--
that is, nonwaivable and not subject to doctrines
like estoppel. The district court, relying on the
reasoning of the Third Circuit in Trustees of
Amalgamated Ins. Fund v. Sheldon Hall Clothing,
Inc., 862 F.2d 1020 (3d Cir. 1988), found that
sec. 1451(f) was the more apt statute and thus
that its six-year period applied. Sheldon Hall
Clothing found that although the 30-day limit
should apply when a party wants to vacate or
modify an award, it was not reasonable to impose
a 30-day limit on an action to enforce the award.
Consequently, it concluded that the more general
six-year period applies to an action solely to
enforce an arbitral award.

We are doubtful about this. The language of
sec. 1401(b)(2) says that it applies to actions
to "enforce, vacate, or modify"; the statute
draws no distinction among these types of
actions. Nor, as the parties’ extensive
argumentation in this case illustrates, is it
easy to distinguish one type of action from
another. Safeway claims that it merely wants the
award enforced, while Central States says that
Safeway really wants a modification. The Third
Circuit in Sheldon Hall Clothing was concerned
that the limitations period provided in sec.
1401(b)(2) might be too short, since a party may
need more than 30 days to determine if the loser
in arbitration is willing to comply with the
terms of the award. Moreover, the Third Circuit
thought that it made little sense to allow a
party to escape an arbitration award merely by
waiting 30 days and then ignoring the award with
impunity. But this assumes that a party wishing
to enforce an arbitration award under sec.
1401(b)(2) must wait until the losing party has
violated the award in order to bring its action
in the district court. This is not the way sec.
1401(b)(2) reads. Instead, it says that "any
party [to the arbitration] may bring an action to
enforce." The reference to "any party" (rather
than, say, "any party aggrieved") undercuts the
notion that only the loser in arbitration can
bring an action. Nor does such a rule comport
with practice. See, e.g., Central States,
Southeast and Southwest Areas Pension Fund v.
Paramount Liquor Co., 203 F.3d 442, 445 (7th Cir.
2000) (holding that suits brought by victorious
employer and losing plan in separate venues were
equally appropriate). Victorious in arbitration,
Safeway could have then gone to court to reduce
its arbitration award to a judgment pursuant to
sec. 1401(b)(2).

We need not decide, however, if there are ever
circumstances under which the longer statute
might apply. There can be no doubt that an action
is proper within 30 days, and if there are ways
of extending that period, the action would also
satisfy the 30-day rule. The question thus is
whether the 30-day period has any flexibility, or
if it is rigidly jurisdictional such that the
district court has no power over the case if the
appeal is filed too late. We stated in Central
States, Southeast and Southwest Areas Pension
Fund v. Navco, 3 F.3d 167, 173 (7th Cir. 1993),
that "periods of limitation in federal statutes
. . . are universally regarded as
nonjurisdictional." This refers, however, to time
periods that are properly characterized as a
statute of limitations, and not a limitation on
judicial power. Examples of the latter include 28
U.S.C. sec. 2101 (specifying the time in which an
appeal or a writ of certiorari must be filed with
the Supreme Court) and Fed. R. App. P. 4
(specifying the time for filing a notice of
appeal in the court of appeals). In those cases,
the passage of too much time deprives the court
of jurisdiction, regardless of what the parties
may wish. On the other hand, a true statute of
limitations may be waived by the parties’
agreement or conduct.

The question is thus what kind of rule is
established by sec. 1401: a limitations period,
or a limit on judicial power? The fact that
occasional opinions can be found calling sec.
1401 a "jurisdictional" statute is not
dispositive, because some "jurisdictional" rules
(such as those governing personal jurisdiction)
really describe personal rights that can be
waived, see Insurance Corp. of Ireland, Ltd. v.
Compagnie des Bauxites de Guinee, 456 U.S. 694,
702 (1982), and others do not. Thus, we do not
agree with Central States that the Third
Circuit’s passing reference to sec. 1401 as
"jurisdictional" in Crown Cork and Seal, Inc. v.
Central States, Southeast and Southwest Areas
Pension Fund, 982 F.2d 857, 860 (3d Cir. 1992),
resolves the matter. A closer look at Crown Cork
and Seal shows that the court was describing the
source of the federal question, not the question
of the proper way to regard the 30-day time
period. Our decision in Navco, holding that the
general ERISA limitations period in sec. 1451(f)
is not jurisdictional, is more directly on point.
See Navco, 3 F.3d at 173. In addition, we note
that the Supreme Court normally treats a
statutory time period within which litigation
must be commenced as non-jurisdictional. See,
e.g., Irwin v. Department of Veterans Affairs,
498 U.S. 89, 95-96 (1990); Zipes v. Trans World
Airlines, Inc., 455 U.S. 385, 393 (1982). We
conclude that sec. 1401 should be treated the
same way as sec. 1451(f), and thus that its 30-
day period is better conceived of as a
limitations period subject to the normal rules of
waiver and estoppel.

Estoppel (or waiver) is Safeway’s alternative
argument to preserve its appeal, and we find it
persuasive on these facts. In conjunction with
its petition to the district court, Central
States sent Safeway a letter to confirm that
Safeway’s local counsel would receive service of
process. In that letter, Central States "agree[d]
that Safeway has thirty days from today’s date to
answer or otherwise plead in response to this
complaint." The letter was dated April 29,
exactly 30 days before Safeway filed its
counterclaim. We agree with Safeway that through
this letter Central States waived any limitations
objection it might otherwise have had. Both parts
of this case (i.e. Safeway’s effort to enforce
the award, and Central States’ challenge to it)
are thus properly before us, and we can now turn
to the merits.

III
A.

The statutory and regulatory apparatus under
which Central States was operating are not models
of clarity--at least not to those who are
uncomfortable operating in a world dominated by
numbers and mathematical formulas. Nonetheless,
neither Central States’ actions nor Safeway’s
challenges will be comprehensible unless we take
a moment to review the governing laws and
regulations.

Safeway’s asset sale resulted in a "partial
withdrawal" for MPPAA purposes by virtue of 29
U.S.C. sec. 1385(a)(1), which imposes partial
withdrawal liability for any plan year during
which there is a "70 percent contribution
decline." The first question is thus how a 70%
contribution decline is calculated. Congress
could have chosen to define this in a simple way-
-if an employer’s contribution is less than 30%
of the prior year’s level, then it incurs
liability. This, however, would have caused
problems for employers with relatively volatile
year-to-year contributions but a consistent
contribution pattern over time. In order to
address that concern, Congress chose instead to
create an eight-year rolling window divided into
two parts: a three-year "testing" period that
consists of the three most recent plan years and
a five-year period (usually called the "lookback
period"), which is comprised of the five plan
years prior to the beginning of the testing
period. See 29 U.S.C. sec. 1385(b)(1)(B). A
partial withdrawal occurs when an employer’s
contribution level for every year during the
testing period is lower than 30% of the average
of the two highest contribution years during the
lookback period. See 29 U.S.C. sec.
1385(b)(1)(A).

Although this method reduces problems related to
business volatility, it introduces another
problem. Because partial withdrawal liability is
determined annually and independently of any
prior partial withdrawals, an employer that
permanently reduces its contribution levels as a
result of an asset sale or other business change
will probably incur withdrawal liability several
times. The reason is that as years pass, the
lookback period will continue to reach the pre-
asset sale, high contribution years. This makes
it likely that the testing period contribution
levels (i.e. amounts paid in each of the most
recent three years) will be less than 30% of the
average of the two highest lookback years (i.e.
the period from eight years ago through four
years ago). That is what happened to Safeway. It
sold its assets primarily in 1987 and 1988. Under
these formulas, this meant that it first incurred
withdrawal liability in 1990 (because the formula
for partial withdrawal requires that the
contribution level for every testing period year
must be 70% less than the average of the two
highest lookback years, so a few years have to
pass before the employer becomes liable). At the
end of 1993, the testing period was calendar
years 1991, 1992, and 1993; the lookback period
stretched all the way to 1986. Because Safeway
had high contribution levels in 1986 and 1987
(i.e. before it sold its midwestern stores), it
incurred partial withdrawal liability for 1993.
(It also incurred such liability for 1991 and
1992, but it received a credit for its 1990
payment that covered the entire balance.)

In order to deal with the possibility that a
withdrawing employer could be overburdened by
application of the MPPAA partial withdrawal
formula, Congress also provided a credit
mechanism for partial withdrawal liability.
Initially, this was a simple dollar-for-dollar
credit for any amount previously paid to the
plan. See 29 U.S.C. sec. 1386(b)(1). In Safeway’s
case, that would mean that it would receive a
full credit against its 1993 liability for the
$12.6 million that it paid Central States in
conjunction with its 1990 withdrawal (here, of
course, leaving no net payment due, because the
1993 charge was about $11.3 million). The dollar-
for-dollar system, however, risked being too
generous: liability for some additional UVBs
would continue to accrue, even while some
existing liabilities were satisfied. In other
words, even if the total amount of UVBs remains
the same, the composition of the liabilities will
be different. Giving withdrawing employers a full
credit for prior payments places all of the
burden of new UVBs on remaining employers, which
was precisely what the MPPAA was designed to
prevent.

This wrinkle led Congress to authorize PBGC to
issue regulations that "provide for proper
adjustments in [the credit] . . . so that the
liability for any complete or partial withdrawal
in any subsequent year . . . properly reflects
the employer’s share of liability with respect to
the plan." See 29 U.S.C. sec. 1386(b)(2). PBGC
did so, with temporary regulations in 1987, which
it finalized in 1992. Under these regulations,
the credit phases out over time, thereby roughly
capturing the change in the composition of the
liability pool and allocating withdrawal
liability accordingly. See generally 29 C.F.R.
sec. 4206.1 et seq.

This, in general terms, is the system Central
States was applying when it determined that
Safeway was liable for a partial withdrawal in
1993. Safeway’s opening argument is really a
broadside attack on Congress’s entire reasoning.
Safeway points out that if it had withdrawn
completely from Central States in 1988, it would
have incurred only its liability for that year
and an additional $135,000 in future liability.
How, it asks, can it be rational for the statute
and the PBGC regulations to impose nearly $2
million more in liability in 1993? This in its
view cannot possibly "properly reflect" its share
of liability to Central States for the UVBs, as
required by sec. 1386(b)(2). It concludes that
only the original dollar-for-dollar formula can
be valid.

Given that Congress has entrusted PBGC with the
responsibility of filling out the MPPAA’s
regulatory scheme, we review its work
deferentially and will uphold its regulations if
they are based on a permissible construction of
the MPPAA. See, e.g., Production Workers’ Union
of Chicago and Vicinity v. NLRB, 161 F.3d 1047,
1050-51 (7th Cir. 1998). We consider those
regulations here in the context of Safeway’s
challenge to their application.

Applying the rules for partial withdrawals,
Central States concluded that Safeway was still
liable for a partial withdrawal in 1993. It then
applied a statutory formula to calculate the
amount of the liability. Central States uses the
"modified presumptive method" that is permitted
under 29 U.S.C. sec. 1391(c)(2). Under this
provision, a plan’s UVBs are divided into two
groups, which the parties call Pool 1 and Pool 2.
Pool 1 liabilities are liabilities that were
incurred before 1980 (when the MPPAA went into
effect); Pool 2 consists of post-1980
liabilities. A particular employer’s share of
Pool 1 and Pool 2 liabilities is calculated
separately; the sum of these two is the total
withdrawal liability. The statutory verbiage is
complicated, but in essence this is what happens:
the employer’s share is determined by multiplying
each pool by the portion of all contributions to
the plan made by the withdrawing employer for the
last ten years of the pool in question (sec.
1391(c)(2) provides for five years, but Central
States exercised its option under 29 U.S.C. sec.
1391(c)(5)(C) to lengthen this to ten years). In
other words, Congress opted to allocate UVBs
according to the relative size of an employer’s
contribution. PBGC followed this lead in the
credit regulations, which also use a similar
proportional method for determining the amount of
an employer’s credit. 29 C.F.R. sec. 4206.5.

The interaction of the various MPPAA formulas
that are used to determine when a withdrawal
occurs, the employer’s share of liability in the
event of a withdrawal, and the credit that an
employer is to receive all contain some factors
that in this instance worked to Safeway’s
disadvantage. For example, the amount of credit
that Safeway receives for Pool 2 liabilities is
reduced on a straight-line basis over, in this
case, a ten-year period even though there is no
similar reduction when liability is calculated in
the first place. Compare 29 C.F.R. sec.
4206.5(b)(2) (reducing the credit) with 29 U.S.C.
sec. 1391(c)(2)(C) (calculating the employer’s
share of Pool 2 liabilities). Along similar
lines, 29 C.F.R. sec. 4206.5(b) (which provides
the applicable methodology for calculating
Safeway’s credit, subject to the modification
allowed by sec. 4206.9 for Central States’ use of
a ten-year period in calculating its allocation
fractions) determines the amount of the credit on
the basis of "the end of the plan year preceding
the withdrawal for which the credit is being
calculated." It appears that Central States
interpreted the "withdrawal for which the credit
was being calculated" as the 1993 withdrawal,
meaning that it used that year’s liability
values. This is not the only possible reading of
this regulation; perhaps the withdrawal to which
the regulation refers is the 1990 withdrawal, in
which case Safeway would receive a larger credit.

On appeal, Safeway does not mention either of
these issues, so naturally any arguments relating
to them are waived. International Union of
Operating Engineers v. Rabine, 161 F.3d 427, 432
(7th Cir. 1998); Ricci v. Village of Arlington
Heights, 116 F.3d 288, 292 (7th Cir. 1997).
Instead, it focuses its energy on a single factor
in its withdrawal liability calculation: the
changing mixture of Pool 1 and Pool 2 liabilities
in Central States’ overall unfunded benefit
levels from 1990 until 1993.

Safeway’s major problem comes from the statutory
method for determining the amount of Pool 1 and
Pool 2 liabilities. At the end of any particular
plan year, Central States’ actuaries determine
the total amount of UVBs by estimating the
aggregate level of vested benefits and then
comparing this to the plan’s assets. Congress
prescribed the formula for dividing these UVBs
into Pool 1 and Pool 2. First, a plan amortizes
its Pool 1 liabilities on a straight-line basis
over 15 years, meaning that it takes the 1980
level, then reduces it by 1/15 for each year that
has passed since 1980. (Note that this also means
that the problem we face here is a disappearing
one.) This reduction accounts for the commonsense
intuition that the further one gets from 1980,
the smaller the portion of total UVBs that are
properly allocable to this period. Pool 2 is then
defined as the residual amount of UVBs (i.e.
total UVBs less Pool 1). As a consequence of this
formula, a plan’s total UVB level can remain
constant while the mix between Pool 1 and Pool 2
changes (as Pool 1 gets amortized away).

In Safeway’s case, this change in the mix of
liabilities happened very quickly. Precisely how
quickly is unclear from the record. Central
States’ assessment forms indicate that in 1990,
Pool 1 comprised roughly 95.5% of total UVBs,
whereas in 1993, Pool 1 had dropped to about 70%
of the total. Safeway paints a much more dramatic
picture, arguing that by 1993, Pool 1 represented
only a trivial portion of total UVBs. The reasons
for this apparent disagreement are not clear, but
what matters in this case is the direction, not
the magnitude, of the change. The reason that the
change matters is because, as discussed above,
liabilities and credits are calculated separately
for each pool, then added together to determine
an employer’s net position. This means that in
1990 Safeway paid a lot of money based mostly on
Pool 1 liabilities. Then, in 1993, Central States
was entitled to take a fresh look at Safeway’s
withdrawal. The company’s new liability and
credit were then based on the new Pool 1 and Pool
2 levels. But since Pool 1 has shrunk, so has
Safeway’s credit. Meanwhile, its liability for
Pool 2 increased. So Safeway owes again.

As we have already noted, Safeway’s argument
that it was entitled to a full credit for its
1990 payments rests on the assumption that it
does not make any sense for it to incur
withdrawal liability multiple times when it
downsized only once. It believes that its
predicament is just an unintended (and
irrational) consequence of the rote application
of the MPPAA’s formula for determining when a
partial withdrawal occurs. To the extent Safeway
argues that multiple instances of partial
withdrawal liability are patently irrational and
that the PBGC regulations are invalid if they
fail to correct the problem, we disagree. Far
from being a freak occurrence, multiple instances
of withdrawal liability are virtually guaranteed
by application of the sec. 1385 formula, and the
formula itself was rationally designed to address
a number of problems with multiple employer
plans. Congress was aware that sequential
payments would be required, as the numerical
example that appears in the MPPAA’s legislative
history shows. See H.R. Rep. No. 96-869, pt. 2,
at 51 (1980). Consequently, we reject any notion
that the PBGC credit regulations must fully
correct for multiple instances of partial
withdrawal liability that arise out of the same
business event. Rather, our focus is on the
particulars of Safeway’s problem and the credit
method’s treatment of its case.

Safeway decries the change in the mix of
Central States’ UVBs, calling it a "spillover" of
liabilities from Pool 1 into Pool 2. Safeway
maintains that these are really the same UVBs,
that nothing meaningful happened between 1990 and
1993, and that the conversion from Pool 1 to Pool
2 is just an accounting fiction for which it
should not have to pay. But something important
did happen: time passed. And as time passed, the
mix of Central States’ UVB pool changed
substantially. In 1990, most of the UVBs were
"old" (pre-1980), whereas in 1993 many more of
them were "new" (post-1980). It is true that this
is primarily a product of the accounting method
that Congress chose to age the benefits, but the
same could be said of any attribution of benefits
to a particular plan year or set of years. (We
also see nothing that would systematically harm
all employers; the movement from one pool to
another will cause some to gain and others to
lose, depending on the composition and stability
of the workforce.)

Some method is necessary to handle the aging of
benefits; otherwise, there will be no match
between the time during which an employer
participated in a plan and the liabilities for
which it is responsible. Congress chose a very
simple method, placing a plan’s liabilities into
one of two categories: old (i.e. Pool 1) and new
(i.e. Pool 2). Furthermore, it picked a simple
method for determining the portion of total UVBs
properly included in each of the pools: 15-year
straight-line amortization. Over time, the
proportion attributable to each pool will
inevitably change, as it did here. It would be
easy to scoff at this as accounting fiction since
the coarseness of the actuarial method is so
apparent. And certainly Congress could have come
up with (or could have had PBGC come up with)
more sophisticated methods that would more
perfectly match a plan’s UVBs with a particular
plan year. But it is only accounting fiction
because Safeway is unhappy with the result.
Everywhere else, it is just accounting.

Safeway’s position, then, boils down to a claim
that the regulations are unreasonable for failing
to correct the actuarial imperfections in the
system for aging benefits that Congress
authorized plans such as Central States to use.
We see nothing in sec. 1386(b)(2) that places
such a heavy burden on PBGC. As our discussion of
the methods underlying the calculation of MPPAA
withdrawal liability shows, there are a variety
of assumptions and tradeoffs implicit in this
system. One of these is a simplified method for
aging a plan’s UVBs. Section 1386(b)(2) requires
the regulations to adjust an employer’s credit so
that it "properly reflects" the employer’s
liability, but this mandate must be read in light
of the other provisions of the MPPAA, including
sec. 1391(c)(2)’s approach to aging benefits. The
PBGC regulations appear to do a fairly good (or
at least not unreasonable) job of following
Congress’s simple actuarial method, insofar as
the same division (between old and new UVBs) is
used to determine both liability and credit.
There is no irrationality in PBGC’s decision to
apply the same rules on both the liability and
credit sides of the fence. While a more
complicated method might help Safeway, Congress
was not compelled to choose one. Because PBGC was
not under an obligation to make an imperfect
system perfect, it was by the same token not
under an obligation in Safeway’s case to reverse
what Safeway calls the spillover from Pool 1 into
Pool 2.

B.

Next, Safeway argues that the district court
reached an entirely wrong conclusion because it
applied the wrong regulation in the first place.
Central States now agrees, though the two sides
see radically different results stemming from
this argument. The fund argues that the
applicable regulation is 29 C.F.R. sec. 4206.5.
This section provides the credit method for plans
that use the modified presumptive method for
determining liability. The modified presumptive
method normally looks back five years in
determining an employer’s partial withdrawal
liability. See 29 U.S.C. sec. 1391(c)(2)(B) and
(C). As we have noted, Central States took
advantage of a provision that allowed it to
extend this five-year window to ten years. 29
U.S.C. sec. 1391(c)(5). This difference led the
district court to choose 29 C.F.R. sec. 4206.9,
which covers plans that have "adopted an
alternative method of allocating unfunded vested
benefits pursuant to [29 U.S.C. sec.
1391(c)(5)]." Under the regulation, plans must
adopt credit methods "consistent with the rules
in [29 C.F.R.] sec.sec. 4206.4 through 4206.8 for
plans using the statutory allocation method most
similar to the plan’s alternative allocation
method." If this section applies, the upshot is
that Central States should use the method that
appears in sec. 4206.5, but with a modification
for its use of the ten-year period. The
difference between using the five- and ten-year
windows isn’t trivial. If Central States is
allowed to use the five-year period, it is
entitled to another $225,000. Safeway teams up
with Central States in attacking the district
court’s acceptance of 29 C.F.R. sec. 4206.9, but,
unsurprisingly, draws a very different conclusion
from its inapplicability. Safeway maintains that
none of the regulatory methods prescribed by PBGC
is applicable, thereby creating a sort of
"regulatory limbo." Absent a governing
regulation, Safeway maintains that we must go
back to the statutory standby, which was the
dollar-for-dollar credit of 29 U.S.C. sec.
1386(b)(1). Since Safeway paid $12.6 million in
connection with its 1990 partial withdrawal and
Central States’ assessment for 1993 was only
$11.3 million, it would owe nothing under this
rule.

The district court concluded that the
"alternative method" regulation applied (and thus
that Central States was obliged to stick with the
ten-year period it had formally chosen) because
it refers to the "alternative method of
allocating unfunded vested benefits pursuant to
[29 U.S.C. sec. 1391(c)(5)]." 29 C.F.R. sec.
4206.9. The statutory provision that allows
Central States to use a ten- rather than five-
year window is 29 U.S.C. sec. 1391(c)(5)(C)
(allowing plans to use any period between five
and ten years for computing the various statutory
fractions), meaning that the regulation applies
on its face. Notwithstanding the fact that the
regulation refers to all of sec. 1391(c)(5),
Safeway and Central States both argue that PBGC
really meant to refer only to subsections (A) and
(B), not (C). Their main support for this
contention is that the words "alternative
methods" appear in (A) and (B) but not (C).

The arbitrator accepted this argument, but, like
the district court, we are not convinced. First,
neither sec. 1391(c) (5)(A) or (B) actually
prescribes an alternative method. Rather, (A)
simply gives PBGC the authority to approve
alternative methods for determining liability
that the plans themselves create. Likewise, (B)
authorizes PBGC to issue standardized approaches
to permit plans to create their own methods of
assessing liability without the need for specific
PBGC approval. Neither actually creates an
alternative method. Both relate instead to
precisely the same issue that subsection (C)
covers, which is the authority of plans to modify
their method of determining liability. No one has
suggested a good reason not to take sec. 4206.9
at face value.

Second, and more importantly, the reading the
district court chose avoids the strange results
that would flow from either Safeway’s or Central
States’ position. Safeway’s argument (that no
section applies and that, consequently, the
dollar-for-dollar approach governs) creates an
enormous loophole in an otherwise comprehensive
regulation that PBGC spent more than five years
developing. Central States’ (post-litigation)
position (that sec. 4206.5’s five-year credit
amortization applies) makes equally little sense.
If a plan is using a ten-year window to determine
liability (which Central States is not willing to
give up), it should also use a ten-year period to
determine an employer’s credit. That is the
overall point of sec. 4206.9, which directs plans
that do not follow one of the statutory methods
for computing withdrawal liability to adapt their
credit mechanisms accordingly. That was also
Central States’ pre-litigation understanding of
the regulation, as evidenced by its adoption of
a credit rule that uses a ten-year amortization
period. Given all of that, we conclude that sec.
4206.9 applies, and Central States’ original
assessment used the correct regulation.

C.

Failing all other possible avenues of attack,
Safeway turns to the Constitution. It argues that
the effect of the partial withdrawal liability
credit regulations is so unfairly skewed against
it as to amount to an unconstitutional taking.
Pointing to Connolly v. Pension Benefit Guarantee
Corp., 475 U.S. 211 (1986), which upheld the
MPPAA against a takings challenge rooted in the
employer’s contract with the plan, Safeway relies
on a concurrence in which two members of the
Court suggested that "the imposition of
withdrawal liability under the MPPAA . . . may in
some circumstances be so arbitrary and irrational
as to violate the Due Process Clause of the Fifth
Amendment." 475 U.S. at 228 (O’Connor, J.,
concurring). This is just the case Justice
O’Connor had in mind, Safeway tells us. But it is
important to note what Safeway has not argued. It
has not challenged the constitutionality of the
actuarial method used to age unfunded benefits in
the first place. Rather, its argument is that the
PBGC regulations are unconstitutional for failing
to correct adequately for what it perceives as
distortions in the calculation of partial
withdrawal liability. By itself, this is an
uphill battle. The real death knell for Safeway’s
position, however, is sounded by the statutory
requirement that any PBGC method used to
determine an employer’s credit "properly reflect
the employer’s share of liability with respect to
the plan." 29 U.S.C. sec. 1386(b)(2). The
Connolly concurrence suggests the possibility of
lurking Due Process and Takings concerns where
MPPAA withdrawal provisions "may lead to
extremely harsh results" that are "not easily
traceable to the employer’s conduct." 475 U.S. at
235 (O’Connor, J., concurring). Since sec.
1386(b)(2) cabins PBGC’s discretion and instructs
it to create regulations that "properly reflect"
an employer’s share, a set of regulations that
passes the statutory test will, therefore, also
pass constitutional muster. For the reasons we
have already described, we conclude that the set
of possibilities allowed by sec. 1386(b)(2) and
reflected in the regulations is a subset of all
constitutionally permissible regulations. Our
conclusion that the regulation is within PBGC’s
statutory authority therefore also resolves the
constitutional question against Safeway.

D.

Safeway makes two final arguments. First,
Safeway argues that a provision of the agreement
settling the 1990 demand precludes Central
States’ current claim. Second, it claims that
Central States is estopped from making a change
away from the dollar-for-dollar system, because
of some oral representations an employee made in
June 1992. For the reasons stated by the district
court, we find these points and any others
Safeway has presented here that we have not
specifically discussed to be without merit.

IV

It is easy to understand why Safeway regards
itself as a victim of circumstances. The timing
of its midwestern asset sales, along with the
many approximations and balances that are part of
the MPPAA’s attempt to regulate the enormously
complex area of multiemployer pensions (the
manner in which the MPPAA "ages" an employer’s
liabilities, the possibility of successive
partial withdrawals as a result of the three-year
testing and five-year lookback periods, and
Congress’s decision to allow plans to use ten
years of contribution history to determine an
employer’s allocable share), all combined to
produce an expensive result. But we cannot say
that it was a fundamentally unfair result, nor a
result outside the boundaries of the statutes and
regulations. We therefore Affirm the judgment of
the district court.