                                                                      [PUBLISH]


                IN THE UNITED STATES COURT OF APPEALS
                                                                   FILED
                        FOR THE ELEVENTH CIRCUIT           U.S. COURT OF APPEALS
                        ___________________________          ELEVENTH CIRCUIT
                                                               AUGUST 11, 2000
                                                              THOMAS K. KAHN
                                 No. 99-10640                      CLERK
                         ___________________________

                      D.C. Docket No. 97-00980-1-CV-JOF


JERRY L. LYONS,
individually and on behalf of all other persons
similarly situated,

                                                        Plaintiff - Appellant,

                                       versus


GEORGIA PACIFIC CORPORATION
SALARIED EMPLOYEES RETIREMENT PLAN,
GEORGIA PACIFIC CORPORATION
                                                        Defendants - Appellees.


                        ____________________________

                   Appeal from the United States District Court
                      for the Northern District of Georgia
                       ____________________________
                               (August 11, 2000)


Before CARNES, BARKETT and WILSON, Circuit Judges.
CARNES, Circuit Judge:

        This is an Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.

§ 1001, et. seq., case in which we are called upon to decide issues about how to

calculate a consensual, lump sum payout in a front-loaded, defined benefit, cash

balance pension plan with fixed interest credits. The principal issue is whether

such a payout must be calculated using the present value methodology set out in

Treasury Regulations 1.411(a) - 11 and 1.417(e)-1,1 the former of which the

district court held to be invalid. See Lyons v. Georgia-Pacific Corp. Salaried

Employees Retirement Plan, 66 F.Supp.2d 1328, 1336 (N.D. Ga. 1999). For

reasons we will explain, we are convinced that those Treasury regulations are valid

and control the calculation of consensual lump sum payouts, at least insofar as they

apply to distributions that occurred prior to the effective date of the amendments

that the Retirement Protection Act of 1994 made to ERISA § 203(e), 29 U.S.C. §

1053(e).




    1
     Treasury Regulations 1.411(a)-1 and 1.417(e) were promulgated in 1988 and were later
amended in 1994. All of our references to these regulations refer to the 1988 versions.

                                           2
                               I. BACKGROUND

                                    A. The Plan

      There are two basic types of pension plans, defined contribution plans and

defined benefit plans. A defined contribution plan provides for each participant a

separate account to which contributions are made, with the retirement benefit

depending on the amounts that have been contributed to the account and the

investment gains and losses on the amounts in the account. See ERISA § 3(34), 29

U.S.C. § 1002(34); see also Barbara J. Coleman, Primer on Employee Retirement

Income Security Act 32-33 (4th ed. 1993). No specific, defined retirement amount

is promised under a defined contribution plan. See id. The plan involved in this

case is not of that type.

      Instead, this case involves a defined benefit plan, which is one where the

retirement benefit is expressed as a certain annual amount to be paid by the

employer over the employee’s lifetime, beginning at the employee’s retirement.

See ERISA § 3(35), 29 U.S.C. § 1002(35). Such a plan promises a specific defined

benefit the calculation of which is not dependent upon investment gains or losses.

See Coleman, supra, at 32-33. There are subtypes of defined benefit plans. The one

involved in this case is a cash balance defined benefit plan.




                                          3
       At all times relevant to this case, the Georgia-Pacific Corporation Salaried

Employees Retirement Plan (“the Plan”) has been a cash balance plan, which is a

defined benefit plan that determines benefits for each employee by reference to the

amount of the employee’s hypothetical account balance. An employee’s

hypothetical account balance is credited by the employer with hypothetical

allocations and hypothetical interest earnings determined under a formula set forth

in the Plan. The hypothetical allocations and hypothetical earnings are designed to

resemble actual contributions and earnings under a defined contribution plan. See

I.R.S. Notice 96-8, 1996-1 C.B. 359. One benefit of cash balance plans is that they

“allow younger workers to take a larger benefit with them when changing jobs.”

Give Employees Meaningful Information When Pensions are Changed to Cash

Balance Plans, Says Actuary, PR Newswire, May 7, 1999.2

       Section 3.1 of the Plan requires that a hypothetical bookkeeping account –

the Personal Account – be established and maintained for each participant. Each

  2
     The first cash balance plan was introduced in 1985 for BankAmerica Corporation. See Lindsay
Wyatt, “Hybrid” Plans Fit Evolving Workforce, Pension Management, March, 1996; see also
Richard D. Brown, An Introduction to Basic Employee Retirement Benefits, 340 P.L.I. 7, 82 (1993)
(“The Cash Balance Plan is a modified form of defined benefit pension plan which was introduced
by the actuarial firm of Kwasha Lipton in the mid-1980's.”). Since then, many large companies such
as BellSouth Corp., Xerox Corp., Countrymark Cooperative, and Blue Cross/Blue Shield of New
Jersey have adopted these plans. See Wyatt, supra. More than 300 companies, with hundreds of
billions of dollars in pension assets, have switched from traditional pension plan formulas to cash
balance plans. See Q-and-A: What You Need to Know About Today’s “Cash-Balance” Plans,
Payroll Manager’s Report, Feb. 2000, at 3.


                                                4
month the participant’s Personal Account is credited with (1) service credits, a

specified percentage of the participant’s compensation for that month; and (2)

interest credits, which are derived by multiplying the hypothetical balance in the

Personal Account by the Periodic Adjustment Percentage. That adjustment

percentage is computed under the Plan by determining the Pension Benefit

Guaranty Corporation (“PBGC”)3 twelve-month “immediate” annuity interest rate

for the preceding year, then adding .75% to that rate, and, lastly, dividing this

composite annual rate by 12. Under ERISA the Plan could have used an

adjustment percentage equal to the prescribed maximum PBGC rate, but instead it

used a higher rate. If the Plan had not used a higher adjustment rate, the dispute in

this case would never have arisen, but more about that later.

        Although service credits cease when the participant leaves employment,

interest credits continue until the participant’s Benefit Commencement Date. That

is why the Plan is said to be a “front- loaded” interest credit plan, defined as one in

which “future interest credits to an employee’s hypothetical account balance are

not conditioned upon future service.” I.R.S. Notice 96-8 at 4. In the case of an


    3
     The Pension Benefit Guaranty Corporation is “a wholly owned United States Government
corporation . . . modeled after the Federal Deposit Insurance Corporation,” whose Board of Directors
“consists of the Secretaries of the Treasury, Labor, and Commerce.” Pension Benefit Guaranty Corp.
v. LTV Corp., 496 U.S. 633, 636-37, 110 S.Ct. 2668, 2671 (1990). It “administers and enforces Title
IV of ERISA.” Id. at 637, 110 S. Ct. at 2671.

                                                 5
annuity form of benefit under this Plan, the Benefit Commencement Date is the

date that the annuity is payable. Thus, if the participant is entitled to an annuity

that is payable at age 65, under the front-loaded aspect of the Plan, interest credits

continue to accrue until age 65, even if the participant separates from employment

with Georgia-Pacific before age 65.

         Under the Plan a participant may elect, under certain specified conditions, to

receive his accrued pension benefits in an optional lump sum form, payable

immediately, rather than as an annuity commencing at age 65. If the participant

elects this option, the amount payable under the Plan is a single sum equal to the

amount in the participant’s Personal Account (the hypothetical bookkeeping

account).4      It is this feature of the plan – the provision that the lump sum payout

is the amount in the Personal Account at the time – that is at issue in this case.



                                            B. Facts




   4
       Under the Plan at Section 6.4(a), “Option C” is:

         A single lump sum payment equal to the amount credited to the Participant’s
         Personal Account as of the end of the month preceding his Benefit Commencement
         Date.



                                                 6
      From 1965 until 1990, Jerry L. Lyons was employed as a paper inspector

and paper tester for Great Northern Corporation. In 1990, Georgia-Pacific

Corporation acquired Great Northern. As a result of the acquisition, Lyons

became an employee of Georgia-Pacific, Great Northern’s pension plan was

merged with the Georgia-Pacific Salaried Employees Retirement Plan (which we

are calling “the Plan”), and Lyons became a participant of it.

      On January 5, 1991, Lyons left employment at Georgia-Pacific. In

accordance with Article 4 of the Plan, Lyons was entitled to a vested benefit,

because he had worked for Georgia-Pacific and Great Northern for at least five

years. Pursuant to section 1.1 of the Plan, Lyons’ accrued pension benefit was an

annuity commencing at age 65. In November 1992, Lyons elected to receive his

accrued pension benefit in the optional lump sum form, payable immediately, as he

was permitted to do under section 6.4(a) of the Plan. Consistent with the Plan’s

payout provision for lump sums, Georgia-Pacific distributed to Lyons in January of

1993 a lump sum equal to the amount credited to his Personal Account –

$36,109.15. See Lyons, 66 F. Supp. 2d at 1329, 1332.




                                         7
         Two months after receiving his lump sum, Lyons consulted with the

National Center for Retirement Benefits (“NCRB”)5 and was told by it that

Georgia-Pacific had distributed to him substantially less than the amount he was

entitled to receive under ERISA § 203(e), see 29 U.S.C. § 1053(e), at least as that

statutory provision had been interpreted in Treasury Regulation 1.411(a) - 11 and

Treasury Regulation 1.417(e)-1.

         We will discuss those Treasury regulations more later, but at this juncture it

is enough to say that Georgia-Pacific did not follow them. If it had, instead of

merely paying Lyons a lump sum equal to the amount credited to his Personal

Account, which was $36,109.15, Georgia-Pacific would have taken the value of

the annuity Lyons would have received at age 65 and discounted it to present value

by using the PBGC rate.6 That approach, following the Treasury regulations,

would have yielded Lyons a lump sum payout of $49,341.83. See Lyons, 66




  5
   The NCRB is a for-profit consulting firm that works on a contingent fee basis reviewing pension
payouts on behalf of individual participants and advocating for them at the administrative level. See
Senate Committee Holds Hearing on Pension Benefit Miscalculations, Pension & Benefits Week
Newsletter (RIA Group), June 23, 1997. Where its administrative representation proves
unsuccessful, the NCRB has been known to refer cases to attorneys for class action lawsuits. See
Mathews v. Sears Pension Plan, No. 95 C 1988, 1996 WL 199746, at *5 (N.D. Ill. April 23, 1996).
   6
      At that time the PBGC rate was approximately 4.5 percent. See Lyons, 66 F.Supp.2d at 1336.

                                                 8
F.Supp.2d at 1332. The validity of the Treasury regulations is thus a question

worth $13,232.68 to Lyons.7

                                  C. Procedural History

       In a letter dated March 18, 1996, the NCRB, acting on behalf of Lyons,

advised Georgia-Pacific that Treasury Regulation 1.417(e)-1 requires a minimum

lump sum payable from a defined benefit plan to be no less than the present value

of the participant’s normal retirement benefit; and that the present value of Lyons’

normal retirement benefit exceeded the amount in his Personal Account, which was

the amount he was paid. The NCRB’s letter requested that Georgia-Pacific

recalculate Lyons’ benefit in accordance with Treasury Regulation 1.417(e), and

pay Lyons the shortfall.

       Georgia-Pacific responded to the NCRB on April 17, 1996, taking the

position that: the Plan is a “special” form of defined benefit plan known as a “cash

balance plan;” IRS Notice 96-8 notes that cash balance plans define benefits for

each employee by reference to a hypothetical account balance; most cash balance

plans permit the distribution of an employee’s accrued benefit in the form of a

single sum equal to the employee’s hypothetical account balance; Lyons’ “lump



   7
    At oral argument counsel for Lyons and the class stated that the difference for the class as a
whole could be around $20 million.

                                                9
sum distribution was not calculated with reference to the present value of a normal

retirement benefit;” and instead, the amount distributed to Lyons was the amount

credited to his Personal Account.

       On April 14, 1997, Lyons, on behalf of himself and other similarly situated

persons, filed a class action complaint against Georgia-Pacific and the Plan

(collectively “Georgia-Pacific”) alleging that the method used to pay lump sum

cash distributions under the Plan violated ERISA § 203(e)(2), 29 U.S.C. §

1053(e)(2).8 After Georgia-Pacific answered the complaint, the district court in

September of 1997 certified a class under Rule 23(b)(3), and it defined the class

follows:

       All participants (or beneficiaries of participants) in the [Plan] (i) who
       received a lump sum distribution of benefits calculated at a time when
       such participants had a vested interest in the Plan and who (ii)
       received a distribution of benefits in a lump sum where (iii) at the date
       as of which the amount of the lump sum was calculated, the lump sum
       was lower than the present value, if determined using the “applicable
       interest rate” as defined in Internal Revenue Code Section 417(e)(3)
       and set forth in Treasury Regulations issued pursuant to Internal
       Revenue Code Section 417(e), of such participants’ accrued benefit,
       as defined under ERISA.




   8
     Lyons has standing to sue for benefits because he was a participant in the Plan as defined by
ERISA § 3(7). See 29 U.S.C. § 1002(7); see generally Firestone Tire & Rubber Co. v. Bruch, 489
U.S. 101, 115-18, 109 S. Ct. 948, 957-58 (1989) (interpreting the term “participant” in § 1002(7)).

                                                10
Dist. Ct. Consent Order (September 29, 1997). Thereafter, the parties informed

the district court that they “would prefer to seek a ruling from the Court as to the

threshold issue of potential liability as to any class member before engaging in

costly and time consuming discovery on issues pertaining to individual class

members (or groups thereof), damages, or class membership.” Dist. Ct. Consent

Order (March 11, 1998). On March 11, 1998, the court accommodated the parties

by entering a consent order permitting them to file summary judgment motions on

that threshold liability issue. See id. at 1-2. The order provided that if the court’s

ruling on that issue did not dismiss or otherwise resolve the case, there would be a

period during which the parties could “conduct discovery on issues pertaining to

defenses as to claims of individual class members or groups thereof, class

membership, damages, and similar issues.” Id. at 2.

      In its ensuing motion for summary judgment, Georgia-Pacific argued that

the interest rate restrictions set forth in ERISA § 203(e)(2) apply exclusively to

involuntary lump sum distributions of $3,500 or less, and because Lyons and the

other class members received a voluntary lump sum distribution, the statute was

inapplicable. Georgia-Pacific further argued that: ERISA § 204(c)(3) and Internal

Revenue Code (“IRC”) § 411(c)(2) permitted distribution of the Personal Account

as the entire accrued benefit; Georgia-Pacific was entitled to rely upon a good faith


                                          11
exception in IRS Notice 96-8 (a notice Lyons argued supports his claim); and two

IRS determination letters exonerated it from liability.

      On March 22, 1999, the district court granted summary judgment for

Georgia-Pacific. Relying upon the statutory language cited by Georgia-Pacific, the

court held that the interest rate provisions contained in ERISA § 203(e)(2) apply

only for the purpose of determining if a participant must consent to the

distribution of a lump sum, and there exists no legislative authority in either the

language of the statute or elsewhere requiring lump sum distributions to be

computed in accordance with those interest rate provisions. Therefore, the court

concluded, Treasury Regulation 1.411(a)-11 was “an unreasonable construction of

. . . ERISA § 203(e).” Lyons, 66 F.Supp.2d at 1336.

      On April 2, 1999, the district court entered an amended order and final

judgment, certifying the class under Federal Rule of Civil Procedure 23(b)(1)(A)

and Federal Rule of Civil Procedure 23(b)(2). The court made no change in the

definition of the class. Lyons timely appealed the amended order and final

judgment.

                                 II. DISCUSSION

      The principal dispute in this case is about whether ERISA § 203(e), 29

U.S.C. § 1053(e), and the Treasury regulations interpreting that provision required


                                          12
Georgia-Pacific to calculate Lyons’ lump sum benefit by determining the amount

he would have received at the normal retirement age of 65 and then discounting

that amount back to the present value using the PBGC discount rate. It may help to

explain why that matters.

       As we have said, because the Plan is “front-loaded,” interest credits to a

participant’s Personal Account continue after separation from employment until

the normal retirement date, which is specified by the Plan to be age 65. Another

important feature of the Plan is that the interest credit rate it provides is higher than

the maximum discount rate prescribed in ERISA § 203(e). As a result, if the

Plan’s interest credit rate is applied to the Personal Account balance at separation

and projected forward to determine what the normal retirement benefit would be at

age 65, and that benefit is then reduced to a present value using the maximum

discount rate, the resulting amount will be more than what is in the Personal

Account before the calculations are done.9 The amount of the difference will be

the result of two factors – the time until age 65 (the longer the time, the greater

the difference) and the amount the interest credit rate exceeds the prescribed

maximum discount rate (the more it does, the greater the difference). Pinning our


   9
     Stated another way, but equally true, when a cash balance plan’s interest credit rate is greater
than the discount rate applied, the participant’s account balance will be less than the present value
of the normal retirement benefit.

                                                 13
explanation to the facts of this case, the difference of $13,232.68 between the

balance in Lyon’s Personal Account, which is what he was paid under the Plan,

and the amount he claims he is entitled to results from the .75 percent difference

between the higher interest credit rate established in the Plan and the discount rate

prescribed by PBGC, carried over the time between the payout of his lump sum

distribution and his normal retirement date. If the plan had pegged the interest

credit rate to the prescribed maximum discount rate, there would have been no

difference (regardless of the time factor), and no dispute. But it did not, so there is

a dispute.

      The district court held that the Treasury regulation requiring that any lump

sum cash payout be calculated by applying the PBGC discount rate to the normal

retirement benefit under the plan was invalid. We review that holding de novo.

See Lee v. Flightsafety Services Corp., 20 F.3d 428, 431 (11th Cir. 1994).

                 A. The Statute, Code Sections, and Regulations

      In 1974, Congress enacted ERISA, 29 U.S.C. § 1001, et. seq., to protect the

interests of employees by ensuring that they received the pension benefits to which

they were entitled. See ERISA § 2, 29 U.S.C. § 1001. Ten years later, Congress

enacted the Retirement Equity Act, which amended ERISA and the Internal

Revenue Code to “improve the delivery of retirement benefits and provide for


                                          14
greater equity under private pension plans for workers and their spouses and

dependents. . . .” S. Rep. No. 98-575 (1984), reprinted in 1984 U.S.C.C.A.N.

2547. As part of that 1984 legislation, Congress added § 203(e) to ERISA and a

materially identical § 417(e) to the Internal Revenue Code. Those added

provisions made the PBGC rate the maximum interest rate a plan could use to

discount to present value a normal retirement benefit for purposes of determining

whether the amount to be distributed exceeded the cap on involuntary lump sum

distributions. After the 1984 enactment, ERISA § 203(e) read in its entirety as

follows:

       (e) Restrictions on mandatory distributions

       (1) If the present value of any accrued benefit exceeds $3,500, such
       benefit shall not be treated as nonforfeitable if the plan provides that
       the present value of such benefit could be immediately distributed
       without the consent of the participant.

       (2) For purposes of paragraph (1), the present value shall be calculated
       by using an interest rate not greater than the interest rate which would
       be used (as of the date of the distribution) by the Pension Benefit
       Guaranty Corporation for purposes of determining the present value
       of a lump sum distribution on plan termination.

ERISA § 203(e), 29 U.S.C. § 1053(e) (1985).10

  10
     Although the text and the heading of the provision enacted in 1984 dealt only with calculating
amounts for purposes of the restriction on mandatory distributions, the Senate Report spoke in
broader terms. The pertinent part of it said:

       For purposes of determining the present value of the participant’s benefit, the bill

                                                15
       Two years later, Congress enacted the Tax Reform Act of 1986. Among

other things, that legislation amended ERISA § 203(e)(2) and the parallel IRC §

417(e)(3) by adding new provisions relating to the calculation of the present value

of an accrued benefit. One of those provisions permitted the use of a discount rate

up to 120% of the applicable PBGC interest rate if the vested accrued benefit

exceeded $25,000 using the PBGC rate. The other provision clarified that the

present value determined under the 120% rate could not be less than $25,000. See

Tax Reform Act of 1986, Pub. L. No. 99-514, §§ 1139(b), (c), 100 Stat. 2085.

       After those amendments were made in the Tax Reform Act of 1986, this is

how ERISA § 203(e) read:

       (1) If the present value of any nonforfeitable benefit with respect to a
       participant in a plan exceeds $3,500, the plan shall provide that such
       benefit may not be immediately distributed without the consent of the
       participant.




       provides that a plan may not use an interest rate that is greater than the rate used by
       the Pension Benefit Guaranty Corporation (PBGC) for valuing a lump sum
       distribution upon plan termination.

       For purposes of calculating the present value of a benefit as of the date of the
       distribution, the plan is required to use an interest rate no greater than the rate used
       by the Pension Benefit Guaranty Corporation (PBGC) in valuing a lump sum
       distribution upon plan termination . . .

S. Rep. No. 98-575 (1984), reprinted in 1984 U.S.C.C.A.N. at 2549, 2562 (emphasis added). This
legislation was not specifically tailored to cash balance plans – which did not even begin to appear
until 1985, see supra n.2 – but was instead aimed at defined benefit plans in general.

                                                 16
        (2)(A) For purposes of paragraph (1), the present value shall be
        calculated –

        (i) by using an interest rate no greater than the applicable interest rate
        if the vested accrued benefit (using such rate) is not in excess of
        $25,000,

        and

        (ii) by using an interest rate no greater than 120 percent of the
        applicable interest rate if the vested accrued benefit exceeds $25,000
        (as determined under clause (i)).

        In no event shall the present value determined under subclause (II)
        [sic] be less than $25,000.

        (B) For purposes of subparagraph (A), the term “applicable interest
        rate” means the interest rate which would be used (as of the date of
        the distribution) by the Pension Benefit Guaranty Corporation for
        purposes of determining the present value of a lump sum distribution
        on plan termination.

        (3) This subsection shall not apply to any distribution of dividends to
        which section 404(k) of Title 26 applies.

29 U.S.C. § 1053(e) (1990).11 This subsection of ERISA, and the parallel Internal

Revenue Code subsection, have been amended several times since the Tax Reform

Act of 1986. However, none of those amendments occurred until after Lyons had

elected in November of 1992 to receive his lump sum benefit and had been paid it


   11
     In 1989, Congress enacted the Omnibus Budget Reconciliation Act of 1989. That Act made
minor changes to paragraph (1) of ERISA § 203(e), but did not alter paragraph (2), which is the
relevant paragraph in this case. See Omnibus Budget Reconciliation Act of 1989, P.L. 101-239, §§
7682, 7891, 103 Stat. 2106, 2434, 2445.

                                              17
in January of 1993. We will confine our analysis to the law applicable to Lyons

and those similarly situated.12

         Many ERISA sections have parallel provisions in the Internal Revenue

Code, tax provisions that are worded in ways materially identical to the ERISA

sections. 13 ERISA § 203(e) is such a provision. Its tax counterparts are IRC §§

411(a)(11) and 417(e). ERISA itself provides that Treasury regulations

promulgated under IRC §§ 410(a), 411 and 412 are equally applicable to the

parallel provisions of ERISA. See ERISA § 3002(c), 29 U.S.C. § 1202(c)14; 29

    12
       One amendment in particular, made by the Retirement Protection Act of 1994, may have
altered the legal landscape insofar as Treasury Regulation 1.411(a)-11 is concerned. See Retirement
Protection Act of 1994, P.L. 103-465, § 767(c), 108 Stat. 4809, 5039 (codified as amended at 29
U.S.C. § 1053(e)); see also infra 26-27. That amendment may or may not portend a different result
for plan participants who received lump sum distributions after its effective date. But Lyons
received his distribution before the effective date of the 1994 legislation, and is therefore not
affected by it. See infra n.31. When we refer throughout this opinion to those “similarly situated”
to Lyons, we mean in terms of that amendment, i.e., those who received their distributions before
the effective date of the Retirement Protection Act of 1994 amendment to ERISA § 203(e).

       As we will discuss later, there are class representation problems relating to those who elected
lump sum payouts and received them after the effective date of the Retirement Protection Act of
1994. See infra Part II. E.
  13
      “The reason that many ERISA sections have such counterparts in the IRC is that, to encourage
employers to establish pension plans, Congress provides favorable tax treatment for plans which
comply with ERISA’s requirements.” Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1144 n.6 (3rd
Cir. 1993) (citation omitted).
   14
       ERISA § 3002(c) provides:

         Regulations prescribed by the Secretary of the Treasury under [Internal Revenue
         Code] sections 410(a), 411 and 412 of Title 26 (relating to minimum participation
         standards, minimum vesting standards, and minimum funding standards,
         respectively) shall also apply to the minimum participation, vesting and funding

                                                 18
C.F.R. § 2530.200a-2 (“Regulations prescribed by the Secretary of the Treasury or

his delegate under sections 410 and 411 of the [Internal Revenue] Code (relating to

minimum standards for participation and vesting) shall apply for purposes of

sections 202 through 204 [of ERISA]”); Williams v. Cordis Corp., 30 F.3d 1429,

1431 n.2 (11th Cir. 1994); see also 26 U.S.C. § 7805 (“[T]he Secretary [of the

Treasury] shall prescribe all needful rules and regulations for the enforcement” of

the Internal Revenue Code.).

      Because of the law discussed in the preceding paragraph, Treasury

Regulation 1.411(a)-11 which interprets IRC § 411(a)(11) is equally applicable to

ERISA § 203(e). That Treasury regulation, which was issued in 1988, sets forth the

same discount rate restrictions as ERISA § 203(e), but goes further to clearly

specify that the present value of any optional form of benefit (a lump sum payout is

an optional form of benefit), cannot be less than the present value of the

participant’s normal retirement benefit. Treasury Regulation 1.411(a)-11 states in

pertinent part:

      (a) Scope -- (a)(1) In general. Section 411(a)(11) restricts the ability
      of a plan to distribute any portion of a participant’s accrued benefit
      without the participant’s consent. Section 411(a)(11) also restricts the
      ability of defined benefit plans to distribute any portion of a
      participant’s accrued benefit in optional forms of benefit without


      standards set forth in parts 2 and 3 of subtitle B of subchapter I of this chapter.

                                                19
        complying with specific valuation rules for determining the amount of
        the distribution. . . .
                                 ***

        (d) Distribution valuation requirements. In determining the present
        value of any distribution of any accrued benefit from a defined benefit
        plan, the plan must take into account specified valuation rules. For
        this purpose, the valuation rules are the same valuation rules for
        valuing distributions as set forth in section 417(e); see § 1.417(e)-1(d)
        . . . This paragraph also applies whether or not the participant’s
        consent is required under paragraphs (b) and (c) of this section.

26 C.F.R. § 1.411(a)-11 (emphasis added). The “rules for valuing distributions as

set forth in section 417(e),” which are incorporated into Treasury Regulation

1.411(a)-11(d), are the same ones set forth in ERISA § 203(e) as interpreted in

Treasury Regulation 1.417(e)-1(d).15 Those valuation rules include this one: “The

present value of any optional form of benefit cannot be less than the present value

of the normal retirement benefit. . . .” Treas. Reg. § 1.417(e)-1(d). Thus, Treasury

Regulation 1.411(a)-11(d) clearly provides that ERISA § 203(e), and the discount

interest rates it prescribes, applies to consensual as well as non-consensual lump




   15
     To avoid further complicating an already complex discussion, hereinafter when we refer to
Treasury Regulation 1.411(a)-11, we mean to include, where relevant, the valuation rules that are
contained in Treasury Regulation 1.417(e)-1, which are explicitly incorporated by Treasury
Regulation 1.411(a)-11.

                                               20
sum distributions. That means Georgia-Pacific loses most of the battle involving

the threshold liability issue, if this Treasury regulation is valid.16

         The district court held that the interest rate restrictions set forth in ERISA §

203(e)(2), 29 U.S.C. § 1053(e)(2), apply solely for the purpose of determining

whether the participant’s consent is required before the accrued benefit may be

distributed in the form of a lump sum. That conclusion is due to be affirmed only

if we agree with the district court’s holding that Treasury Regulation 1.411(a)-11 is

invalid to the extent it provides to the contrary. We turn now to the critical issue of

whether that Treasury regulation is due deference, and thus is to be upheld, under

the Chevron doctrine.

                                    B. Chevron Analysis

        "The power of an administrative agency to administer a congressionally

created . . . program necessarily requires the formulation of policy and the making

of rules to fill any gap left, implicitly or explicitly, by Congress." Chevron,

U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104

S.Ct. 2778, 2782 (1984) (quoting Morton v. Ruiz, 415 U.S. 199, 231, 94 S.Ct.

1055, 1072, 39 L.Ed.2d 270 (1974)). For that and other reasons, agency



   16
       Georgia-Pacific has other arguments and defenses, see infra Part II. C. & D., but the validity
of this regulation is the big issue.

                                                 21
regulations, like the one at issue here, are to be given deference "unless they are

arbitrary, capricious, or manifestly contrary to the statute." Id. at 844, 104 S.Ct. at

2782. Bringing the general deference rule home to the ERISA area in particular,

this Court has previously recognized that we “owe great deference to the

interpretations and regulations of the Pension Benefit Guaranty Corporation

(‘PBGC’), the Internal Revenue Service (‘IRS’) and the Department of Labor,

which are the administrative agencies responsible for enforcing and interpreting

ERISA.” Blessitt v. Retirement Plan for Employees of Dixie Engine Co., 848

F.2d 1164, 1167 (11th Cir. 1988) (en banc).

       In Chevron, the Supreme Court explained: "First, always, is the question

whether Congress has directly spoken to the precise question at issue. If the intent

of Congress is clear, that is the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously expressed intent of Congress."

Chevron, 467 U.S. at 842-43, 104 S. Ct. at 2781. Thus, our first step is to

determine whether Congress’ intent, as embodied in ERISA § 203(e) at the time of

the payout to Lyons in 1993, is clear that the present value interest rate

restrictions contained in that legislation are applicable only to involuntary lump

sum distributions. If so, then that is “the end of the matter” and the provisions of

Treasury Regulation 1.411(a)-11 to the contrary are invalid.


                                           22
          The intent of Congress behind this part of ERISA § 203(e), at least as it

existed at the time Lyons received his distribution in 1993, is anything but clear on

this issue. Paragraph (1) of ERISA § 203(e) provides that an involuntary lump

sum distribution may not be made when the present value of the vested accrued

benefit exceeds $3,500. Paragraph (2)(A) begins with the limiting phrase, “For

purposes of paragraph (1),” which seems to indicate that the restrictions on

calculating present value which follow that introductory language apply only to the

calculation of whether the present value exceeds the $3,500 cap on involuntary

distributions contained in paragraph (1).17 But there is a strong contrary indication

in paragraph (2) as well.

          Clause (i) of paragraph (2)(A) specifies the applicable discount rate to be

used “if the vested accrued benefit (using such rate) is not in excess of $25,000,”

and clause (ii) specifies a different, higher, discount rate to be used “if the vested

accrued benefit exceeds $25,000 (as determined under clause (i)).” An additional,

final sentence of paragraph (2) reiterates that “[i]n no event shall the present value

determined under subclause (II) be less than $25,000,”18 which is an amount

higher than the $3,500 cap for non-consensual distributions set forth in paragraph

   17
         ERISA §203(e), as it existed at that time, is set out in its entirety supra Part II. A.
    18
      Everyone agrees that the reference to “subclause (II)” is a typographical error, and that the
reference intended is to subclause or clause (ii).

                                                     23
(1). What all of these references to amounts above and below $25,000 mean is that

Congress must have had something other than involuntary distributions in mind,

because the cap on them was clearly specified in paragraph (1) to be $3,500. If

Congress had intended to address only involuntary distributions, it would have

used the $3,500 figure in place of the $25,000 figure in all three places in

paragraph (2) of ERISA § 203(e). The $25,000 references make sense only in the

context of determining lump sum distributions not governed by the $3,500 cap,

which is to say consensual ones.

       Georgia-Pacific has never explained why, if ERISA § 203(e) applies only to

non-consensual distributions, subparagraph (2) is replete with references to

distribution amounts that can only be made with consent. Instead, Georgia-Pacific

places great emphasis on the introductory clause (“For purposes of paragraph

(1)...”), and it also points out that Congress did not change the heading of § 203(e)

– “Restrictions on mandatory distributions” – when it made the 1986 amendments

to that subsection of ERISA. We have previously observed that “reliance upon

headings to determine the meaning of a statute is not a favored method of statutory

construction.” Scarborough v. Office of Personnel Management, 723 F.2d 801,

811 (11th Cir. 1984). While section titles or headings may sometimes be useful to




                                          24
resolve ambiguity in a statute, the ambiguity here is extreme – the language of §

203(e) actually conflicts with itself.

       Moreover, the heading upon which Georgia-Pacific relies originated in the

1984 legislation, before Congress added to ERISA § 203(e) the provisions in 1986

that caused the conflict. It is true that when Congress amended the subsection in

1986, it did not alter the heading of § 203(e).19 Congressional inaction regarding

an existing title is far too thin a reed to support a construction of a statutory

provision that would effectively write out of it the very changes that Congress

amended the provision to include. Cf. Connecticut Nat’l Bank v. Germain, 503

U.S. 249, 253, 112 S. Ct. 1146, 1149 (1992) (“[C]ourts should disfavor

interpretations of statutes that render language superfluous. . . .”); Bouchard

Transp. Co. v. Updegraff, 147 F.3d 1344, 1351 (11th Cir. 1998) (“A basic

principle of statutory construction is that a statute should not be construed in such a

way as to render certain provisions superfluous or insignificant.” (quoting




  19
     However, later that year, the heading of ERISA § 203(e) was changed by the Office of the Law
Revision Counsel. See generally 2 U.S.C. § 285b(4) (authorizing the Office of the Law Revision
Counsel “[t]o classify newly enacted provisions of law to their proper positions in the [United
States] Code where the titles involved have not yet been enacted into positive law”). The new
heading for ERISA § 203(e), as it appeared in the Code from 1986 to 1994, was: “Consent for
distribution; present value; covered distributions.” That heading, of course, is less favorable to
Georgia-Pacific’s position than the one contained in the 1984 version of the legislation.

                                               25
Woodfork v. Marine Cooks & Stewards Union, 642 F.2d 966, 970-71 (5th Cir.

Apr. 1981) (internal quotations and citations omitted))).

      The fairest statement that can be made about ERISA § 203(e) on its face is

that it is ambiguous about the issue before us. There are indications pointing both

ways, although it seems to us that the strongest ones point in the direction of

ERISA § 203(e)’s present value restrictions applying to consensual as well as

non-consensual lump sum distributions. Even if we view the ambiguity needle as

pointing straight up, the Supreme Court has instructed us:

      [I]f a statute is silent or ambiguous with respect to the question at
      issue, our longstanding practice is to defer to the executive
      department’s construction of a statutory scheme it is entrusted to
      administer, unless the legislative history of the enactment shows with
      sufficient clarity that the agency construction is contrary to the will of
      Congress.

Japan Whaling Ass’n v. Am. Cetacean Soc’y, 478 U.S. 221, 233, 106 S. Ct. 2860,

2868 (1986) (internal quotations and citations omitted).

      In the Retirement Protection Act of 1994, Congress removed the language

relating to the calculation of present value amounts in excess of $25,000, thereby

lessening (or perhaps removing) the ambiguity or self-contradictory nature of the §

203(e) provisions. That amendment may or may not compel a different conclusion

as to lump sum distributions made after the effective date of the 1994 legislation.

However, Lyons received his distribution in 1993 and the legal issues relating to

                                          26
that distribution, including the validity of Treasury Regulation 1.411(a)-11, are to

be decided in view of the statute as it existed at that time.

      Georgia-Pacific argues that in the 1994 legislation Congress simply

“clarified” its earlier intent. Of course, the Retirement Protection Act of 1994 was

enacted by a different Congress than the one that enacted the Tax Reform Act of

1986, which put in place the version of ERISA § 203(e) that we are interpreting.

See Russello v. United States, 464 U.S. 16, 26, 104 S.Ct. 296, 302 (1983)(“[I]t is

well settled that the views of a subsequent Congress form a hazardous basis for

inferring the intent of an earlier one.”) (internal quotations and citations omitted).

Whatever effect the 1994 legislation may have on the issues as they relate to

distributions after it was enacted, it does not affect our conclusion relating to the

issues pertaining to distributions that occurred before then.

      Because the language of ERISA § 203(e) itself is ambiguous, at least as it

existed at the time Lyons received his distribution, we turn now to the legislative

history to see if it “shows with sufficient clarity that the agency construction is

contrary to the will of Congress.” Japan Whaling, 478 U.S. at 233, 106 S. Ct. at

2868. Both parties cite to numerous statements found in the congressional record

to support their respective positions. Lyons argues that statements found in the

House Conference Report to the Tax Reform Act of 1986 confirm that Congress


                                           27
intended ERISA § 203(e)(2) to apply to all lump sum distributions.20 That is the

legislation that created the textual conflict to begin with.

        Labeling the 1986 legislative history itself “ambiguous,” Georgia-Pacific

prefers to direct our attention to statements found in the Senate Report to the 1984

legislation which first put ERISA § 203(e) on the books. Georgia-Pacific argues

that earlier legislative history shows the discounting-to-present value methodology

is limited to involuntary cash-outs of employee benefits.21 The problem with that


   20
        The House Conference Report to the Tax Reform Act of 1986 stated:

        If the present value of the vested accrued benefit is no more than $25,000, then the
        amount to be distributed to the participant or beneficiary is calculated using the
        PBGC rate.

        If the present value of the accrued benefit exceeds $25,000 (using the PBGC interest
        rate), then the conference agreement provides that the amount to be distributed is
        determined using an interest rate no greater than 120 percent of the interest rate . .
        . In no event, however, is the amount to be distributed reduced below $25,000 when
        the interest rate used is 120 percent of the applicable PBGC rate.

        For example, assume that, upon separation from service, the present value of an
        employee’s total accrued benefit . . . is $50,000 using the applicable PBGC rate.
        Under the conference agreement, the plan may distribute to this employee (if the
        employee and, if applicable, the employee’s spouse consents) the total accrued
        benefit, calculated using 120 percent of the applicable PBGC rate (e.g., $47,000).

H.R. Conf. Rep. No. 98-841 (1986), reprinted in 1986 U.S.C.C.A.N. 4075, 4576. Lyons argues that
if the interest rate restrictions applied solely to the consent determination, the Conference Committee
would not have stated that (1) the minimum distribution under the 120% rate is $25,000; and (2) if
the amount computed utilizing the 120% rate is, for example, $47,000, the plan must distribute at
least $47,000.


   21
        The Senate Report to Retirement Equity Act of 1984 states:


                                                  28
argument is that we are concerned with ERISA § 203(e), as amended by the 1986

legislation, not as it existed before. Georgia-Pacific also argues that Congress

would have clarified § 203(e) in the Tax Reform Act of 1986 if it had wanted the

provision to apply to consensual distributions as well as non-consensual ones. But

the same can be said in the other direction: If Congress had wanted § 203(e) to

apply only to non-consensual distributions, it could have clarified the provision in

the Tax Reform Act of 1986 to so provide.

       As the previous discussion indicates, the legislative history of § 203(e)

provides no answer, much less a clear answer, to the issue at hand. Like the



       Present Law

       Under present law, in the case of an employee whose plan participation terminates,
       a pension, profit-sharing, or stock bonus plan (pension plan) may involuntarily “cash
       out” the benefit (i.e., pay out the balance to the credit of a plan participant without
       the participant’s consent) if the present value of the benefit does not exceed $1,750.
       ...

       Reasons for Change

       The Committee believes that the limit on involuntary cash-outs should be raised to
       $3,500 in recognition of the effects of inflation on the value of small benefits payable
       under a pension plan.

       Explanation of Provisions

       The bill provides that, if the present value of an accrued benefit exceeds $3,500, then
       the benefit is not to be considered non-forfeitable if the plan provides that the present
       value of the benefit can be immediately distributed without the consent of the
       participant . . . .

S. Rep. No. 98-575 (1984), reprinted in 1984 U.S.C.C.A.N. 2547, 2569.

                                                  29
language of the provision, the legislative history is ambiguous. As a result, this is

a prototypical situation where regulations are permissible, provided they are

otherwise reasonable. We turn now to Georgia-Pacific’s arguments that Treasury

Regulation 1.411(a)-11 is unreasonable.

      Georgia-Pacific contends that the Treasury regulation is unreasonable

because, all other factors being equal, it produces benefits that are inversely

proportional to the age of the participant at the time the lump sum distribution is

taken. To the extent that the argument means the earlier a participant leaves

employment the better the payout, that is not entirely true. While interest credits

continue after separation from employment, service credits do not. The longer a

participant stays employed under the Plan, the more service credits will be added to

the accrued annuity, and the larger the effect the interest credit will have (because

the interest credit is applied to the Personal Account balance which will grow with

the addition of service credits). Moreover, those who design plans can reduce any

perceived disparity by reducing or eliminating the difference between the statutory

discount rate (which was derived from the PBGC rate at the time of Lyons’

distribution) and the interest credit rate. To the extent that Treasury Regulation

1.411(a)-11 does make it easier for younger employees to leave an employer who

has a front-loaded, cash balance defined benefit plan, we cannot say that


                                          30
consequence makes the regulation unreasonable in light of the fact that one

arguable benefit of such plans is that they allow younger workers to take a larger

benefit with them when changing jobs. See Give Employees Meaningful

Information When Pensions are Changed to Cash Balance Plans, Says Actuary, PR

Newswire, May 7, 1999.22

        Georgia-Pacific also argues that Treasury Regulation 1.411(a)-11 is

unreasonable, because it will not work at all where the credit rate varies in

response to some measure of market fluctuations, such as a stock or bond index. As

an example, Georgia-Pacific posits a farfetched hypothetical.23 We note that

Georgia-Pacific has not cited any evidence or source indicating that such plans

exist, or if they do exist, that they are anything but rare.24 We will not strike down a

   22
     Georgia-Pacific also contends that the practical effect of Treasury Regulation 1.411(a)-11 will
be to cause employers to change plans so that the interest credit rate is no more than the statutorily
prescribed maximum discount rate. There is nothing in the record or elsewhere that has been brought
to our attention indicating that all or most employers will do so, nor are we prepared to say that if
that were the effect it would make the regulation unreasonable in the Chevron sense.
   23
       Georgia-Pacific points out that the S & P 500 gained approximately 28% in 1998, and posits
that “[i]f future interest credits were based on the index, Lyons would be entitled to a 28% annual
interest credit on his account balance until age 65 which then would be discounted by the PBGC rate
(around 5%).” That would produce, Georgia-Pacific says, “a difference of hundreds of thousands
(if not millions) of dollars between the actual account balance” and the one due under Lyons’ theory.
The hypothetical is farfetched, because it would be foolhardy for a plan to base future annual interest
credits on any single year’s performance of a market index or indicator. If the plan did, the normal
retirement benefit under it could be thrown way out of whack, too, even if there were no early lump
sum distributions.
   24
      Lyons responds to this argument of Georgia-Pacific by suggesting that such a plan would not
satisfy the IRC § 401(a)(25) requirement that pension benefits are to be “definitely determinable”

                                                  31
regulation on the basis of a speculative hypothetical. Even if such plans do exist,

the Plan before us is not one. We address the reasonableness of the Treasury

regulation as it applies to the case before us, involving what we understand to be a

not untypical type of front-loaded defined benefit plan with a fixed interest credit

rate that permits consensual lump sum distributions before normal retirement age.

We have no occasion to decide whether Treasury Regulation 1.411(a)-11 might be

unreasonable as applied to a materially different plan, such as one in which the

interest credit rate varies with market performance.

        Because Congress has not spoken directly to the precise issue, because the

legislative history is ambiguous, and because Treasury Regulation 1.411(a)-11 is

not unreasonable, at least insofar as it applies to the specific type of plan in this

case, Treasury Regulation 1.411(a)-11 is due to be upheld under the Chevron

decision. See Atlantic Mut. Ins. Co. v. Comm’r, 523 U.S. 382, 389, 118 S.Ct.

1413, 1418 (1998) (“The task that confronts us is to decide, not whether the

Treasury regulation represents the best interpretation of the statute, but whether it

represents a reasonable one.” (citation omitted)); Chevron, 467 U.S. at 843 n.11,

104 S. Ct. at 2782 n.11 (“The court need not conclude that the agency construction


in order for the plan to obtain and maintain qualified status under the Code. We have not had
sufficient briefing on whether such a plan would tax qualify for us to be able to decide that issue,
nor do we need to do so in order to dispose of the present case. But the existence of the tax
qualification issue shows the speculative nature of Georgia-Pacific’s hypothetical.

                                                32
was the only one it permissibly could have adopted to uphold the construction, or

even the reading the court would have reached if the question initially had arisen in

a judicial proceeding.”) We turn now to Georgia-Pacific’s contention that even if

the Treasury regulation is valid, it does not apply to this specific Plan.

                             C. Application to the Plan

      Lyons argues that Georgia-Pacific violated Treasury Regulation 1.411(a)-11

by failing to project the amount in his hypothetical account to normal retirement

age and then discount that figure back to present value using the maximum

discount rate prescribed in ERISA § 203(e)(2). Three years after Lyons received

his lump sum distribution, the IRS issued Notice 96-8, which required ERISA

plans to do exactly what Lyons argues Georgia-Pacific was required to do at the

time it distributed his lump sum benefit to him. See I.R.S. Notice 96-8, 1996-1

C.B. 359. IRS Notice 96-8 definitively states that the discounting-to-present value

methodology found in IRC §§ 411 and 417 applies to cash balance plans. The

notice explains that when calculating the lump sum distribution under a cash

balance plan, “the balance of the employee’s hypothetical account must be

projected to normal retirement age and then the employee must be paid at least the

present value, determined in accordance with [IRC] section 417(e) [one of the tax




                                           33
counterparts to ERISA § 203(e)], of that projected hypothetical account balance.”

I.R.S. Notice 96-8 (material in brackets added). 25

        Georgia-Pacific cannot be held accountable to Lyons for failing to comply

with IRS Notice 96-8 per se, because it was released on January 18, 1996, which

was after Lyons and those similarly situated to him had received their lump sum

benefits. A distribution ought to be judged in light of the law and any official

guidance that existed at the time of the distribution. Moreover, according to IRS

Notice 96-8 itself, its purpose was not to promulgate binding rules, but to elicit

opinions on “anticipated regulations.”



   25
       IRS Notice 96-8 states that it was issued to provide “guidance concerning the requirements
of section 411(a) and 417(e) with respect to the determination of the amount of a single sum
distribution from a cash balance plan.” Id.. It advises that “in order to comply with 411(a) and
417(e) in calculating the amount of a single sum distribution under a cash balance plan, the balance
of the employee’s hypothetical account must be projected to normal retirement age and then the
employee must be paid at least the present value, determined in accordance with section 417(e), of
that projected hypothetical account balance.” Id..

         Notice 96-8 explains that if a plan’s interest credit rate exceeds the statutory discount rates
set forth in IRC § 417(e), then payment of the participant’s hypothetical account balance as the lump
sum will result in a smaller benefit than the employee is entitled and thereby violate the anti-
forfeiture rules in IRC § 411(a) and the present value requirements of IRC § 417(e). The Notice also
predicts that anticipated Treasury regulations will contain a list of interest credit rates described as
“standard indices and associated margins.” Those rates are “assumed” not to exceed the Internal
Revenue Code § 417(e) rate, and plans that utilize the proposed interest credit rates may distribute
the hypothetical account balance without violating IRC § 417(e). The Notice concludes with a
subsection entitled “Guidance will be prospective,” which provides a safe harbor for plans that rely
on a “reasonable, good-faith interpretation of the applicable provisions of the [Internal Revenue]
Code, taking into account pre-existing guidance.” Id..



                                                  34
          Georgia-Pacific contends that until IRS Notice 96-8 was issued, there was

no guidance suggesting that Treasury Regulation 1.417 would apply to cash

balance plans in the manner advocated by Lyons. It argues that even if this Court

gives deference to the Treasury regulation, there was no indication at the time of

Lyon’s lump sum distribution that Georgia-Pacific should have projected the

amount in Lyon’s hypothetical account to normal retirement age and then

discounted that amount back to present value using ERISA § 203(e)(2) and IRC §

417(e) rates.26 Georgia-Pacific says that until IRS Notice 96-8 all it was required

     26
         Georgia-Pacific’s contention disregards a Treasury decision issued well before Lyons
received his distribution. On September 19, 1991, the Secretary of the Treasury issued Treasury
Decision 8360 which, among other things, stated that cash balance plans must comply with IRC §
417(e) valuation rules even if the resulting lump sum amount would be greater than the amount in
the participant’s hypothetical account. That Treasury Decision 8360 stated:

          Several commentators requested clarification of the treatment of cash balance plans,
          another hybrid plan design. . . . Comments indicated that cash balance plans are
          becoming increasingly popular.
                                                  ***
          Some of the comments involving cash balance plans . . . requested that the final
          regulations provide special relief for cash balance plans from the requirements of
          section 417(e). . . . These rates, when combined into a single blended rate, are
          sometimes lower than the rates used by existing cash balance plans in determining
          employees’ cash balances, and can therefore require a plan that does not use the
          section 417(e) rates to determine interest adjustments to pay an employee more than
          the amount of the employee’s hypothetical cash balance when benefits are paid in a
          single sum. The Treasury and the Service have determined that such relief cannot
          be granted consistent with the requirements of section 417(e). However, in order to
          minimize the occasions when this problem will arise, the final regulations include
          a blended section 417(e) interest rate among the alternative safe harbor interest rates
          a cash balance plan may use in determining interest adjustments.

T.D. 8360, 56 Fed Reg. 47524, 47528 (1991). Thus, the Treasury Department had put employers
on notice of its position that the law required cash balance plans to use the statutory rates in IRC §

                                                    35
to distribute as a lump sum was the amount in an individual employee’s

hypothetical account.27 We are skeptical about whether lack of guidance and

direction can be a defense to this type of action by a plan participant, and in any

event Treasury Regulation 1.411(a)-11 when read against the Plan’s own terms

provides enough guidance that Georgia-Pacific is liable to plan participants even

for distributions made before the issuance of IRS Notice 96-8.28

        Reiterating some of the features of a cash balance plan is helpful in

explaining Georgia-Pacific’s obligations under the law as it existed at the time of

Lyon’s lump sum distribution. As we have explained before, a defined benefit,

cash balance plan, such as this one, credits a hypothetical account with service



417(e), at the time Lyons received his payout, to discount to present value the normal retirement
benefit that would have been received if an early lump sum distribution had not been elected.


   27
      Along these lines, Georgia-Pacific argues that ERISA § 204(c)(2)(C) permitted it to limit the
lump sum distribution to Lyons’ Personal Account Balance. But ERISA § 204(c)(2)(C) addresses
situations involving “accumulated contributions,” which are defined as those that include
“mandatory contributions made by the employee.” 29 U.S.C. § 1054(c)(2)(C)(i). The Plan in this
case did not require or permit employee contributions, so the provision Georgia-Pacific relies upon
does not apply.
   28
      IRS Notice 96-8 contains a “safe harbor” clause that protects from tax disqualification a plan
in which pre-Notice distributions were made inconsistently with the provisions of the notice “if the
amount of the distribution satisfied those [applicable Internal Revenue Code] sections based on a
reasonable, good-faith interpretation of the applicable provisions of the Code, taking into account
pre-existing guidance.” I.R.S. Notice 96-8. It is by no means clear that Georgia-Pacific could meet
the requirements of that “safe harbor.” See discussion of Treasury Decision 8360 supra n.26. Even
if Georgia-Pacific could meet those requirements, it would be safely harbored only from tax
disqualification, not from liability to plan participants.

                                                36
credits and interest credits. Nevertheless, as a defined benefit plan, the plan

“consists of a general pool of assets rather than individual dedicated accounts.”

Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439, 119 S. Ct. 755, 761 (1999).

In a cash balance type of defined benefit plan, “[t]he total assets on deposit do not

generally equal the total of all balances maintained for participants.” Brown, supra

note 1, at 83. “[T]he employer typically bears the entire investment risk and –

short of the consequences of plan termination – must cover any underfunding as

the result of a shortfall that may occur from the plan’s investments.” Hughes

Aircraft Co., 525 U.S. at 439, 119 S. Ct. at 761(citing Connolly v. Pension Benefit

Guaranty Corp., 475 U.S. 211, 232, 106 S. Ct. 1018 (1986) (O’Connor, J.

concurring)).

       Because the plan here is a defined benefit plan, the individual employees

“have a right to a certain defined level of benefits, known as ‘accrued benefits.’”

Id. at 440, 119 S.Ct. at 761. “That term, for purposes of a defined benefit plan, is

defined as ‘the individual’s accrued benefit determined under the plan [and

ordinarily is] expressed in the form of an annual benefit commencing at normal




                                          37
retirement age.’” Id. (quoting ERISA § 3(23)(A), 29 U.S.C. § 1002(23)(A)).29

The Plan involved in this case defines “Accrued Benefit” as follows:

         Accrued Benefit means, as of the time of reference, a monthly amount
         of benefit, payable in the form of an increasing life annuity,
         commencing on a Participant’s Normal Retirement Date, where the
         amount of such monthly benefit is the result of dividing the then
         credits to such Participant’s Personal Account by the applicable factor
         from Section A of Appendix A.

Unlike a defined contribution plan, the “accrued benefit” under this Plan is not the

amount in the Participant’s Personal Account, but rather an amount derived from

that hypothetical account. Thus, Lyons did not have a statutory right to the amount

found in his hypothetical account prior to the normal retirement date, and Georgia-

Pacific did not have a right to limit any distribution to him to that amount. Instead,

after five years of work, Lyons earned a vested interest in an amount at normal

retirement age, to be calculated under the Plan by projecting forward the amount in

his hypothetical account using the interest credit rates specified in the Plan.

         Treasury Regulation § 1.417(e)-1, which was in effect at the time of the

distribution, unequivocally states that “[t]he present value of any optional form of

benefit cannot be less than the present value of the normal retirement benefit

determined in accordance with this paragraph.” Treas. Reg. § 1.417(e)-1(d)

    29
       “By contrast, an ‘accrued benefit’ for purposes of defined contribution plans means ‘the
balance of the individual’s account.’” Hughes Aircraft Co., 525 U.S. at 440 n.3, 119 S. Ct. at 761
n.3 (quoting ERISA § 3(23)(B); 29 U.S.C. § 1002(23)(B)).

                                               38
(emphasis added). “Any” means exactly what it says. See Lyes v. City of Riviera

Beach, Florida, 166 F.3d 1332, 1337 (11th Cir. 1999) (en banc) (when no limiting

language is used “‘any’ means all.”) (internal quotations and citations omitted).

“[A]ny optional form of benefit” includes a pre-retirement lump sum benefit,

which means that such a lump sum distribution cannot be less than “the present

value of the normal retirement benefit determined in accordance with” the Treasury

regulation.

       The “normal retirement benefit” itself, before it is discounted to present

value, is determined in accordance with the Plan. It is the amount a participant

would have received at age 65 under the Plan but for the election to take an early

lump sum distribution. See Treas. Reg. § 1.417(e)-1. To determine the normal

retirement amount Lyons would have received at age 65, the Plan specifies that his

hypothetical account balance must be projected forward using the interest credit

rates set forth in the Plan. It is the Plan itself, rather than the Treasury regulations,

that requires the hypothetical account balance to be projected forward using the

credit interest rate, and it is the Plan itself that specifies the interest credit rate to be

applied for that purpose. What the Treasury regulation adds is that once the

normal retirement benefit is ascertained in accordance with the Plan, that amount is




                                             39
then to be discounted to present value using the PBGC rate in order to calculate the

lump sum distribution to which the participant is entitled.

      For these reasons, we conclude that Treasury Regulation 1.411(a)-11, which

was issued in 1988, requires that lump sum distributions under the Plan be

calculated by determining what would have been the normal retirement benefit had

the participant not elected to take an early lump sum distribution, and then

discounting that amount to present value using the PBGC rate prescribed in ERISA

§ 203(e). Distribution of the hypothetical account balance alone is not enough

where, as here, the interest credit rate exceeds the PBGC rate.

                        D. The IRS Determination Letter

      In 1989 the IRS issued Georgia-Pacific a determination letter stating that the

Plan was tax qualified. Georgia-Pacific argues that based upon that letter it cannot

be held liable for any underpayment of benefits to Lyons and those similarly

situated. The reasoning is that in determining the plan was tax qualified the IRS

must have concluded that distributing the participant’s Personal Account complied

with IRC § 417(e), the Internal Revenue Code subsection that parallels ERISA §

203(e).

      The one-page determination letter makes no mention at all of the lump sum

payment provision, nor is there any indication in the letter that the IRS considered


                                         40
that provision of the Plan, much less the issue now before us. In its amicus brief

the IRS urges us not to consider the letter, because it “may have erroneously

overlooked the plan provision” for lump sum payments. Because it does not

specifically address the issue at hand, the IRS letter is not owed any deference. See

Hickey v. Chicago Truck Drivers, Helpers & Warehouse Workers Union, 980 F.2d

465, 469 (7th Cir. 1992) (“Given the informal nature of these letters, the express

limitations included in the IRS letter, and the absence of any reasoning to explain

the basis for the statements, we do not think that any implication in either of these

letters . . . is entitled to deference.”); In re Gulf Pension Litigation, 764 F. Supp.

1149, 1172 (S.D. Tex. 1991) (“[T]he Court also finds that the IRS determination is

due no deference because it evidences no investigation or legal analysis of the facts

by the IRS.”). The letter may protect the Plan from adverse tax treatment, but it

does not protect the Plan from liability to participants.30

                            E. Class Representative Problems

        The Plan in this case was changed to a cash balance defined benefit plan by

an amendment that became effective January 1, 1989. Thereafter, and until the Plan

was amended in 1997, it utilized an interest credit rate that was higher than the

   30
     The same is true of an IRS determination letter Georgia-Pacific received in 1997, after it made
amendments to the Plan that are not relevant to the issue in this case. We mention that second letter
only in a footnote, because it was issued long after Lyons and those similarly situated with him had
received their distributions.

                                                 41
statutorily prescribed maximum discount rate. The class the district court defined

covered all of those who had received lump sum distributions under the Plan that

were lower than the present value of their accrued retirement benefit would have

been if calculated using the statutorily prescribed discount rate.

         Lyons, who is currently the only class representative, received his lump sum

distribution in January of 1993. The version of ERISA § 203(e) on the books at

that time had remained unchanged in any material way since amendments were

made to it by the Tax Reform Act of 1986, and that version continued in effect

without material change until amended by the Retirement Protection Act of 1994.

Thus, from all that appears Lyons is an adequate representative for all class

members who received their lump sum distributions before the 1994 amendment

took effect.31 He suffered the same type of injury as they did, and the law

applicable to his claim is the same as that applicable to theirs.

         However, Lyons is not an adequate representative for those class members

who received their lump sum distributions after the effective date of the 1994

amendment, because their claims are governed by ERISA § 203(e) as amended by



    31
      The 1994 legislation specifies that the relevant amendment “shall apply to plan years and
limitation years beginning after December 31, 1994; except that an employer may elect to treat the
amendments made by this section as being effective on or after the date of enactment of this Act
[December 8, 1994].” Retirement Protection Act of 1994, P.L. 103-465, § 767(d), 108 Stat. 4809,
5039. See also ERISA § 205(g)(3)(B), 29 U.S.C. § 1055(g)(3)(B).

                                               42
that legislation. Lyons has no interest in whether the 1994 amendment altered the

legal landscape for those who received distributions thereafter. It does not matter

to him, for example, whether the amended language is sufficiently free of

ambiguity that the Chevron analysis may come out differently. See supra Part II.

B. Even if it does, that will not affect his claim which is governed by pre-1994

law.

            As we have explained before:

               Among the prerequisites to the maintenance of a class action is
        the requirement of Rule 23(a)(4) that the class representatives “will
        fairly and adequately protect the interests of the class.” The purpose of
        this requirement, as of many other of Rule 23's procedural mandates,
        is to protect the legal rights of absent class members. Because all
        members of the class are bound by the res judicata effect of the
        judgment, a principal factor in determining the appropriateness of
        class certification is “the forthrightness and vigor with which the
        representative party can be expected to assert and defend the interests
        of the members of the class.”

Kirkpatrick v. J. C. Bradford & Co., 827 F.2d 718, 726 (11th Cir. 1987)(citations

omitted). We cannot expect Lyons to assert with “forthrightness and vigor” those

interests of other class members that he does not share and in which he has no

stake. Indifference as well as antagonism can undermine the adequacy of

representation.32

       32
         We realize, of course, that class issues, including those relating to the adequacy of
representation requirement, are ordinarily raised in the district court whose rulings on such issues
are reviewed only for an abuse of discretion. However, the circumstances here are a bit unusual. The

                                                43
       Because there is no adequate class representative before us to advocate the

interests of those who received their lump sum distributions after the effective date

of the amendment that the Retirement Protection Act of 1994 made to ERISA §

203(e), we have declined to decide whether Treasury Regulation 1.411(a)-11 is a

valid regulation insofar as it concerns those distributions. See supra 26-27. On

remand, if an adequate class representative appears to advocate the interests of

those who have a stake in that issue, the district court should proceed to decide that

issue, and any other issues concerning the threshold liability question that relate

particularly to those class members, in the first instance.

                                     III. CONCLUSION

       Treasury Regulation 1.411(a)-11 is a reasonable and valid interpretation of

ERISA § 203(e), as it existed prior to its amendment by the Retirement Protection

Act of 1994, at least as that provision applies to defined benefit cash balance plans


district court held that no class member, including Lyons, was entitled to any relief because Treasury
Regulation 1.411(a)-11 was unreasonable and invalid even as it applied to those who received their
distributions before the effective date of the 1994 amendment to ERISA § 203(e). Lyons appears
to have been an adequate representative of all those in the class as to that issue. But now that we
have reversed the district court’s holding, the issue concerning the adequacy of representation
involving distributions made after the 1994 amendment arises. Adequacy of representation issues
implicate due process, see In re Am. Med. Sys., Inc., 75 F.3d 1069, 1083 (6th Cir. 1996), and may
be addressed throughout the litigation, see Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1213-14
(6th Cir. 1997)(court of appeals sua sponte narrowing class definition and limiting judgment
accordingly); cf. 7A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §
1765, at 293 (2d ed. 1986) (“[A] favorable decision under Rule 23(a)(4) is not immutable. If later
events demonstrate that the representatives are not adequately protecting the absentees, the court
may take whatever steps it thinks necessary under Rule 23(c) or Rule 23(d) at that time.”)

                                                 44
with fixed interest credit rates. The district court’s judgment, which is based on a

holding to the contrary, is due to be reversed. 33

        REVERSED and REMANDED for further proceedings consistent with this

opinion.




   33
     As we mentioned earlier in this opinion, the district court at the urging of the parties addressed
only the threshold liability issue of potential liability to any class member, and left for the future
discovery and decision of other issues that might arise if potential liability were found. See supra
Part I. C. We leave those issues and any additional defenses Georgia-Pacific may have that are not
inconsistent with our holdings in this opinion to be decided on remand.

                                                  45
