APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.

[255] John J. Loflin, Jr., argued the cause for appellant. With him on the briefs were J. Lee Rankin and Stanley Buchsbaum.

Lee A. Albert argued the cause for appellees. With him on the brief were Robert Borsody, Martin Garbus, and David Diamond.

Briefs of amici curiae were filed by Solicitor General Griswold, Assistant Attorney General Ruckelshaus, and Robert V. Zener for the United States, and by Victor G. Rosenblum and Daniel Wm. Fessler for the National Institute for Education in Law and Poverty.

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The question for decision is whether a State that terminates public assistance payments to a particular recipient without affording him the opportunity for an evidentiary hearing prior to termination denies the recipient procedural due process in violation of the Due Process Clause of the Fourteenth Amendment.

This action was brought in the District Court for the Southern District of New York by residents of New [256] York City receiving financial aid under the federally assisted program of Aid to Families with Dependent Children (AFDC) or under New York State's general Home Relief program.^[1] Their complaint alleged that the New York State and New York City officials administering these programs terminated, or were about to terminate, such aid without prior notice and hearing, thereby denying them due process of law.^[2] At the time [257] the suits were filed there was no requirement of prior notice or hearing of any kind before termination of financial aid. However, the State and city adopted procedures for notice and hearing after the suits were brought, and the plaintiffs, appellees here, then challenged the constitutional adequacy of those procedures.

The State Commissioner of Social Services amended the State Department of Social Services' Official Regulations to require that local social services officials proposing to discontinue or suspend a recipient's financial aid do so according to a procedure that conforms to either subdivision (a) or subdivision (b) of § 351.26 of the regulations as amended.^[3] The City of New York [258] elected to promulgate a local procedure according to subdivision (b). That subdivision, so far as here pertinent, provides that the local procedure must include the giving of notice to the recipient of the reasons for a proposed discontinuance or suspension at least seven days prior to its effective date, with notice also that upon request the recipient may have the proposal reviewed by a local welfare official holding a position superior to that of the supervisor who approved the proposed discontinuance or suspension, and, further, that the recipient may submit, for purposes of the review, a written statement to demonstrate why his grant should not be discontinued or suspended. The decision by the reviewing official whether to discontinue or suspend aid must be made expeditiously, with written notice of the decision to the recipient. The section further expressly provides that "[a]ssistance shall not be discontinued or suspended prior to the date such notice of decision is sent to the recipient and his representative, if any, or prior to the proposed effective date of discontinuance or suspension, whichever occurs later."

Pursuant to subdivision (b), the New York City Department of Social Services promulgated Procedure No. 68-18. A caseworker who has doubts about the recipient's continued eligibility must first discuss them with the recipient. If the caseworker concludes that the recipient is no longer eligible, he recommends termination [259] of aid to a unit supervisor. If the latter concurs, he sends the recipient a letter stating the reasons for proposing to terminate aid and notifying him that within seven days he may request that a higher official review the record, and may support the request with a written statement prepared personally or with the aid of an attorney or other person. If the reviewing official affirms the determination of ineligibility, aid is stopped immediately and the recipient is informed by letter of the reasons for the action. Appellees' challenge to this procedure emphasizes the absence of any provisions for the personal appearance of the recipient before the reviewing official, for oral presentation of evidence, and for confrontation and cross-examination of adverse witnesses.^[4] However, the letter does inform the recipient that he may request a post-termination "fair hearing."^[5] This is a proceeding before an independent [260] state hearing officer at which the recipient may appear personally, offer oral evidence, confront and cross-examine the witnesses against him, and have a record made of the hearing. If the recipient prevails at the "fair hearing" he is paid all funds erroneously withheld.^[6] HEW Handbook, pt. IV, §§ 6200-6500; 18 NYCRR §§ 84.2-84.23. A recipient whose aid is not restored by a "fair hearing" decision may have judicial review. N. Y. Civil Practice Law and Rules, Art. 78 (1963). The recipient is so notified, 18 NYCRR § 84.16.

I

The constitutional issue to be decided, therefore, is the narrow one whether the Due Process Clause requires that the recipient be afforded an evidentiary hearing before the termination of benefits.^[7] The District Court held [261] that only a pre-termination evidentiary hearing would satisfy the constitutional command, and rejected the argument of the state and city officials that the combination of the post-termination "fair hearing" with the informal pre-termination review disposed of all due process claims. The court said: "While post-termination review is relevant, there is one overpowering fact which controls here. By hypothesis, a welfare recipient is destitute, without funds or assets. . . . Suffice it to say that to cut off a welfare recipient in the face of . . . `brutal need' without a prior hearing of some sort is unconscionable, unless overwhelming considerations justify it." Kelly v. Wyman, 294 F. Supp. 893, 899, 900 (1968). The court rejected the argument that the need to protect the public's tax revenues supplied the requisite "overwhelming consideration." "Against the justified desire to protect public funds must be weighed the individual's over-powering need in this unique situation not to be wrongfully deprived of assistance . . . . While the problem of additional expense must be kept in mind, it does not justify denying a hearing meeting the ordinary standards of due process. Under all the circumstances, we hold that due process requires an adequate hearing before termination of welfare benefits, and the fact that there is a later constitutionally fair proceeding does not alter the result." Id., at 901. Although state officials were party defendants in the action, only the Commissioner of Social Services of the City of New York appealed. We noted probable jurisdiction, 394 U. S. 971 (1969), to decide important issues that have been the subject of disagreement in principle between the three-judge court in the present case and that convened in Wheeler v. Montgomery, No. 14, post, p. 280, also decided today. We affirm.

Appellant does not contend that procedural due process is not applicable to the termination of welfare benefits. [262] Such benefits are a matter of statutory entitlement for persons qualified to receive them.^[8] Their termination involves state action that adjudicates important rights. The constitutional challenge cannot be answered by an argument that public assistance benefits are "a `privilege' and not a `right.' " Shapiro v. Thompson, 394 U. S. 618, 627 n. 6 (1969). Relevant constitutional restraints apply as much to the withdrawal of public assistance benefits as to disqualification for unemployment compensation, Sherbert v. Verner, 374 U. S. 398 (1963); or to denial of a tax exemption, Speiser v. Randall, 357 U. S. 513 (1958); or to discharge from public employment, Slochower v. Board of Higher Education, 350 U. S. 551 (1956).^[9] The extent to which procedural due process [263] must be afforded the recipient is influenced by the extent to which he may be "condemned to suffer grievous loss," Joint Anti-Fascist Refugee Committee v. McGrath, 341 U. S. 123, 168 (1951) (Frankfurter, J., concurring), and depends upon whether the recipient's interest in avoiding that loss outweighs the governmental interest in summary adjudication. Accordingly, as we said in Cafeteria & Restaurant Workers Union v. McElroy, 367 U. S. 886, 895 (1961), "consideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action." See also Hannah v. Larche, 363 U. S. 420, 440, 442 (1960).

It is true, of course, that some governmental benefits may be administratively terminated without affording the recipient a pre-termination evidentiary hearing.^[10] [264] But we agree with the District Court that when welfare is discontinued, only a pre-termination evidentiary hearing provides the recipient with procedural due process. Cf. Sniadach v. Family Finance Corp., 395 U. S. 337 (1969). For qualified recipients, welfare provides the means to obtain essential food, clothing, housing, and medical care.^[11] Cf. Nash v. Florida Industrial Commission, 389 U. S. 235, 239 (1967). Thus the crucial factor in this context—a factor not present in the case of the blacklisted government contractor, the discharged government employee, the taxpayer denied a tax exemption, or virtually anyone else whose governmental entitlements are ended—is that termination of aid pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits. Since he lacks independent resources, his situation becomes immediately desperate. His need to concentrate upon finding the means for daily subsistence, in turn, adversely affects his ability to seek redress from the welfare bureaucracy.^[12]

Moreover, important governmental interests are promoted by affording recipients a pre-termination evidentiary hearing. From its founding the Nation's basic [265] commitment has been to foster the dignity and well-being of all persons within its borders. We have come to recognize that forces not within the control of the poor contribute to their poverty.^[13] This perception, against the background of our traditions, has significantly influenced the development of the contemporary public assistance system. Welfare, by meeting the basic demands of subsistence, can help bring within the reach of the poor the same opportunities that are available to others to participate meaningfully in the life of the community. At the same time, welfare guards against the societal malaise that may flow from a widespread sense of unjustified frustration and insecurity. Public assistance, then, is not mere charity, but a means to "promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity." The same governmental interests that counsel the provision of welfare, counsel as well its uninterrupted provision to those eligible to receive it; pre-termination evidentiary hearings are indispensable to that end.

Appellant does not challenge the force of these considerations but argues that they are outweighed by countervailing governmental interests in conserving fiscal and administrative resources. These interests, the argument goes, justify the delay of any evidentiary hearing until after discontinuance of the grants. Summary adjudication protects the public fisc by stopping payments promptly upon discovery of reason to believe that a recipient is no longer eligible. Since most terminations are accepted without challenge, summary adjudication also conserves both the fisc and administrative time and energy by reducing the number of evidentiary hearings actually held.

[266] We agree with the District Court, however, that these governmental interests are not overriding in the welfare context. The requirement of a prior hearing doubtless involves some greater expense, and the benefits paid to ineligible recipients pending decision at the hearing probably cannot be recouped, since these recipients are likely to be judgment-proof. But the State is not without weapons to minimize these increased costs. Much of the drain on fiscal and administrative resources can be reduced by developing procedures for prompt pre-termination hearings and by skillful use of personnel and facilities. Indeed, the very provision for a post-termination evidentiary hearing in New York's Home Relief program is itself cogent evidence that the State recognizes the primacy of the public interest in correct eligibility determinations and therefore in the provision of procedural safeguards. Thus, the interest of the eligible recipient in uninterrupted receipt of public assistance, coupled with the State's interest that his payments not be erroneously terminated, clearly outweighs the State's competing concern to prevent any increase in its fiscal and administrative burdens. As the District Court correctly concluded, "[t]he stakes are simply too high for the welfare recipient, and the possibility for honest error or irritable misjudgment too great, to allow termination of aid without giving the recipient a chance, if he so desires, to be fully informed of the case against him so that he may contest its basis and produce evidence in rebuttal." 294 F. Supp., at 904-905.

II

We also agree with the District Court, however, that the pre-termination hearing need not take the form of a judicial or quasi-judicial trial. We bear in mind that the statutory "fair hearing" will provide the recipient [267] with a full administrative review.^[14] Accordingly, the pre-termination hearing has one function only: to produce an initial determination of the validity of the welfare department's grounds for discontinuance of payments in order to protect a recipient against an erroneous termination of his benefits. Cf. Sniadach v. Family Finance Corp., 395 U. S. 337, 343 (1969) (HARLAN, J., concurring). Thus, a complete record and a comprehensive opinion, which would serve primarily to facilitate judicial review and to guide future decisions, need not be provided at the pre-termination stage. We recognize, too, that both welfare authorities and recipients have an interest in relatively speedy resolution of questions of eligibility, that they are used to dealing with one another informally, and that some welfare departments have very burdensome caseloads. These considerations justify the limitation of the pre-termination hearing to minimum procedural safeguards, adapted to the particular characteristics of welfare recipients, and to the limited nature of the controversies to be resolved. We wish to add that we, no less than the dissenters, recognize the importance of not imposing upon the States or the Federal Government in this developing field of law any procedural requirements beyond those demanded by rudimentary due process.

"The fundamental requisite of due process of law is the opportunity to be heard." Grannis v. Ordean, 234 U. S. 385, 394 (1914). The hearing must be "at a meaningful time and in a meaningful manner." Armstrong v. Manzo, 380 U. S. 545, 552 (1965). In the present context these principles require that a recipient have timely and adequate notice detailing the reasons for a [268] proposed termination, and an effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence orally. These rights are important in cases such as those before us, where recipients have challenged proposed terminations as resting on incorrect or misleading factual premises or on misapplication of rules or policies to the facts of particular cases.^[15]

We are not prepared to say that the seven-day notice currently provided by New York City is constitutionally insufficient per se, although there may be cases where fairness would require that a longer time be given. Nor do we see any constitutional deficiency in the content or form of the notice. New York employs both a letter and a personal conference with a caseworker to inform a recipient of the precise questions raised about his continued eligibility. Evidently the recipient is told the legal and factual bases for the Department's doubts. This combination is probably the most effective method of communicating with recipients.

The city's procedures presently do not permit recipients to appear personally with or without counsel before the official who finally determines continued eligibility. Thus a recipient is not permitted to present evidence to that official orally, or to confront or cross-examine adverse witnesses. These omissions are fatal to the constitutional adequacy of the procedures.

The opportunity to be heard must be tailored to the [269] capacities and circumstances of those who are to be heard.^[16] It is not enough that a welfare recipient may present his position to the decision maker in writing or secondhand through his caseworker. Written submissions are an unrealistic option for most recipients, who lack the educational attainment necessary to write effectively and who cannot obtain professional assistance. Moreover, written submissions do not afford the flexibility of oral presentations; they do not permit the recipient to mold his argument to the issues the decision maker appears to regard as important. Particularly where credibility and veracity are at issue, as they must be in many termination proceedings, written submissions are a wholly unsatisfactory basis for decision. The secondhand presentation to the decisionmaker by the caseworker has its own deficiencies; since the caseworker usually gathers the facts upon which the charge of ineligibility rests, the presentation of the recipient's side of the controversy cannot safely be left to him. Therefore a recipient must be allowed to state his position orally. Informal procedures will suffice; in this context due process does not require a particular order of proof or mode of offering evidence. Cf. HEW Handbook, pt. IV, § 6400 (a).

In almost every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses. E. g., ICC v. Louisville & N. R. Co., 227 U. S. 88, 93-94 (1913); Willner v. Committee on Character & Fitness, 373 U. S. 96, 103-104 (1963). What we said in [270] Greene v. McElroy, 360 U. S. 474, 496-497 (1959), is particularly pertinent here:

"Certain principles have remained relatively immutable in our jurisprudence. One of these is that where governmental action seriously injures an individual, and the reasonableness of the action depends on fact findings, the evidence used to prove the Government's case must be disclosed to the individual so that he has an opportunity to show that it is untrue. While this is important in the case of documentary evidence, it is even more important where the evidence consists of the testimony of individuals whose memory might be faulty or who, in fact, might be perjurers or persons motivated by malice, vindictiveness, intolerance, prejudice, or jealousy. We have formalized these protections in the requirements of confrontation and cross-examination. They have ancient roots. They find expression in the Sixth Amendment . . . . This Court has been zealous to protect these rights from erosion. It has spoken out not only in criminal cases, . . . but also in all types of cases where administrative. . . actions were under scrutiny."

Welfare recipients must therefore be given an opportunity to confront and cross-examine the witnesses relied on by the department.

"The right to be heard would be, in many cases, of little avail if it did not comprehend the right to be heard by counsel." Powell v. Alabama, 287 U. S. 45, 68-69 (1932). We do not say that counsel must be provided at the pre-termination hearing, but only that the recipient must be allowed to retain an attorney if he so desires. Counsel can help delineate the issues, present the factual contentions in an orderly manner, conduct cross-examination, and generally safeguard the [271] interests of the recipient. We do not anticipate that this assistance will unduly prolong or otherwise encumber the hearing. Evidently HEW has reached the same conclusion. See 45 CFR § 205.10, 34 Fed. Reg. 1144 (1969); 45 CFR § 220.25, 34 Fed. Reg. 13595 (1969).

Finally, the decisionmaker's conclusion as to a recipient's eligibility must rest solely on the legal rules and evidence adduced at the hearing. Ohio Bell Tel. Co. v. PUC, 301 U. S. 292 (1937); United States v. Abilene & S. R. Co., 265 U. S. 274, 288-289 (1924). To demonstrate compliance with this elementary requirement, the decision maker should state the reasons for his determination and indicate the evidence he relied on, cf. Wichita R. & Light Co. v. PUC, 260 U. S. 48, 57-59 (1922), though his statement need not amount to a full opinion or even formal findings of fact and conclusions of law. And, of course, an impartial decision maker is essential. Cf. In re Murchison, 349 U. S. 133 (1955); Wong Yang Sung v. McGrath, 339 U. S. 33, 45-46 (1950). We agree with the District Court that prior involvement in some aspects of a case will not necessarily bar a welfare official from acting as a decision maker. He should not, however, have participated in making the determination under review.

Affirmed.

[For dissenting opinion of MR. CHIEF JUSTICE BURGER, see post, p. 282.]

[For dissenting opinion of MR. JUSTICE STEWART, see post, p. 285.]

MR. JUSTICE BLACK, dissenting.

In the last half century the United States, along with many, perhaps most, other nations of the world, has moved far toward becoming a welfare state, that is, a nation that for one reason or another taxes its most [272] affluent people to help support, feed, clothe, and shelter its less fortunate citizens. The result is that today more than nine million men, women, and children in the United States receive some kind of state or federally financed public assistance in the form of allowances or gratuities, generally paid them periodically, usually by the week, month, or quarter.^[17] Since these gratuities are paid on the basis of need, the list of recipients is not static, and some people go off the lists and others are added from time to time. These ever-changing lists put a constant administrative burden on government and it certainly could not have reasonably anticipated that this burden would include the additional procedural expense imposed by the Court today.

The dilemma of the ever-increasing poor in the midst of constantly growing affluence presses upon us and must inevitably be met within the framework of our democratic constitutional government, if our system is to survive as such. It was largely to escape just such pressing economic problems and attendant government repression that people from Europe, Asia, and other areas settled this country and formed our Nation. Many of those settlers had personally suffered from persecutions of various kinds and wanted to get away from governments that had unrestrained powers to make life miserable for their citizens. It was for this reason, or so I believe, that on reaching these new lands the early settlers undertook to curb their governments by confining their powers [273] within written boundaries, which eventually became written constitutions.^[18] They wrote their basic charters as nearly as men's collective wisdom could do so as to proclaim to their people and their officials an emphatic command that: "Thus far and no farther shall you go; and where we neither delegate powers to you, nor prohibit your exercise of them, we the people are left free."^[19]

Representatives of the people of the Thirteen Original Colonies spent long, hot months in the summer of 1787 in Philadelphia, Pennsylvania, creating a government of limited powers. They divided it into three departments —Legislative, Judicial, and Executive. The Judicial Department was to have no part whatever in making any laws. In fact proposals looking to vesting some power in the Judiciary to take part in the legislative process and veto laws were offered, considered, and rejected by the Constitutional Convention.^[20] In my [274] judgment there is not one word, phrase, or sentence from the beginning to the end of the Constitution from which it can be inferred that judges were granted any such legislative power. True, Marbury v. Madison, 1 Cranch 137 (1803), held, and properly, I think, that courts must be the final interpreters of the Constitution, and I recognize that the holding can provide an opportunity to slide imperceptibly into constitutional amendment and law making. But when federal judges use this judicial power for legislative purposes, I think they wander out of their field of vested powers and transgress into the area constitutionally assigned to the Congress and the people. That is precisely what I believe the Court is doing in this case. Hence my dissent.

The more than a million names on the relief rolls in New York,^[21] and the more than nine million names on the rolls of all the 50 States were not put there at random. The names are there because state welfare officials believed that those people were eligible for assistance. Probably in the officials' haste to make out the lists many names were put there erroneously in order to alleviate immediate suffering, and undoubtedly some people are drawing relief who are not entitled under the law to do so. Doubtless some draw relief checks from time to time who know they are not eligible, either because they are not actually in need or for some other reason. Many of those who thus draw undeserved gratuities are without sufficient property to enable the government to collect back from them any money they wrongfully receive. But the Court today holds that it would violate the Due Process Clause of the Fourteenth Amendment to stop paying those people weekly or monthly allowances unless the government first affords them a full "evidentiary hearing" even [275] though welfare officials are persuaded that the recipients are not rightfully entitled to receive a penny under the law. In other words, although some recipients might be on the lists for payment wholly because of deliberate fraud on their part, the Court holds that the government is helpless and must continue, until after an evidentiary hearing, to pay money that it does not owe, never has owed, and never could owe. I do not believe there is any provision in our Constitution that should thus paralyze the government's efforts to protect itself against making payments to people who are not entitled to them.

Particularly do I not think that the Fourteenth Amendment should be given such an unnecessarily broad construction. That Amendment came into being primarily to protect Negroes from discrimination, and while some of its language can and does protect others, all know that the chief purpose behind it was to protect ex-slaves. Cf. Adamson v. California, 332 U. S. 46, 71-72, and n. 5 (1947) (dissenting opinion). The Court, however, relies upon the Fourteenth Amendment and in effect says that failure of the government to pay a promised charitable installment to an individual deprives that individual of his own property, in violation of the Due Process Clause of the Fourteenth Amendment. It somewhat strains credulity to say that the government's promise of charity to an individual is property belonging to that individual when the government denies that the individual is honestly entitled to receive such a payment.

I would have little, if any, objection to the majority's decision in this case if it were written as the report of the House Committee on Education and Labor, but as an opinion ostensibly resting on the language of the Constitution I find it woefully deficient. Once the verbiage is pared away it is obvious that this Court today adopts the views of the District Court "that to cut off a welfare recipient in the face of . . . `brutal need' without a prior [276] hearing of some sort is unconscionable," and therefore, says the Court, unconstitutional. The majority reaches this result by a process of weighing "the recipient's interest in avoiding" the termination of welfare benefits against "the governmental interest in summary adjudication." Ante, at 263. Today's balancing act requires a "pre-termination evidentiary hearing," yet there is nothing that indicates what tomorrow's balance will be. Although the majority attempts to bolster its decision with limited quotations from prior cases, it is obvious that today's result does not depend on the language of the Constitution itself or the principles of other decisions, but solely on the collective judgment of the majority as to what would be a fair and humane procedure in this case.

This decision is thus only another variant of the view often expressed by some members of this Court that the Due Process Clause forbids any conduct that a majority of the Court believes "unfair," "indecent," or "shocking to their consciences." See, e. g., Rochin v. California, 342 U. S. 165, 172 (1952). Neither these words nor any like them appear anywhere in the Due Process Clause. If they did, they would leave the majority of Justices free to hold any conduct unconstitutional that they should conclude on their own to be unfair or shocking to them.^[22] Had the drafters of the Due Process Clause meant to leave judges such ambulatory power to declare [277] laws unconstitutional, the chief value of a written constitution, as the Founders saw it, would have been lost. In fact, if that view of due process is correct, the Due Process Clause could easily swallow up all other parts of the Constitution. And truly the Constitution would always be "what the judges say it is" at a given moment, not what the Founders wrote into the document.^[23] A written constitution, designed to guarantee protection against governmental abuses, including those of judges, must have written standards that mean something definite and have an explicit content. I regret very much to be compelled to say that the Court today makes a drastic and dangerous departure from a Constitution written to control and limit the government and the judges and moves toward a constitution designed to be no more and no less than what the judges of a particular social and economic philosophy declare on the one hand to be fair or on the other hand to be shocking and unconscionable.

The procedure required today as a matter of constitutional law finds no precedent in our legal system. Reduced to its simplest terms, the problem in this case is similar to that frequently encountered when two parties have an ongoing legal relationship that requires one party to make periodic payments to the other. Often the situation arises where the party "owing" the money stops paying it and justifies his conduct by arguing that the recipient is not legally entitled to payment. The recipient can, of course, disagree and go to court to compel payment. But I know of no situation in our legal system in which the person alleged to owe money to [278] another is required by law to continue making payments to a judgment-proof claimant without the benefit of any security or bond to insure that these payments can be recovered if he wins his legal argument. Yet today's decision in no way obligates the welfare recipient to pay back any benefits wrongfully received during the pre-termination evidentiary hearings or post any bond, and in all "fairness" it could not do so. These recipients are by definition too poor to post a bond or to repay the benefits that, as the majority assumes, must be spent as received to insure survival.

The Court apparently feels that this decision will benefit the poor and needy. In my judgment the eventual result will be just the opposite. While today's decision requires only an administrative, evidentiary hearing, the inevitable logic of the approach taken will lead to constitutionally imposed, time-consuming delays of a full adversary process of administrative and judicial review. In the next case the welfare recipients are bound to argue that cutting off benefits before judicial review of the agency's decision is also a denial of due process. Since, by hypothesis, termination of aid at that point may still "deprive an eligible recipient of the very means by which to live while he waits," ante, at 264, I would be surprised if the weighing process did not compel the conclusion that termination without full judicial review would be unconscionable. After all, at each step, as the majority seems to feel, the issue is only one of weighing the government's pocketbook against the actual survival of the recipient, and surely that balance must always tip in favor of the individual. Similarly today's decision requires only the opportunity to have the benefit of counsel at the administrative hearing, but it is difficult to believe that the same reasoning process would not require the appointment of counsel, for otherwise the right to counsel is a meaningless one since these [279] people are too poor to hire their own advocates. Cf. Gideon v. Wainwright, 372 U. S. 335, 344 (1963). Thus the end result of today's decision may well be that the government, once it decides to give welfare benefits, cannot reverse that decision until the recipient has had the benefits of full administrative and judicial review, including, of course, the opportunity to present his case to this Court. Since this process will usually entail a delay of several years, the inevitable result of such a constitutionally imposed burden will be that the government will not put a claimant on the rolls initially until it has made an exhaustive investigation to determine his eligibility. While this Court will perhaps have insured that no needy person will be taken off the rolls without a full "due process" proceeding, it will also have insured that many will never get on the rolls, or at least that they will remain destitute during the lengthy proceedings followed to determine initial eligibility.

For the foregoing reasons I dissent from the Court's holding. The operation of a welfare state is a new experiment for our Nation. For this reason, among others, I feel that new experiments in carrying out a welfare program should not be frozen into our constitutional structure. They should be left, as are other legislative determinations, to the Congress and the legislatures that the people elect to make our laws.

[1] AFDC was established by the Social Security Act of 1935, 49 Stat. 627, as amended, 42 U. S. C. §§ 601-610 (1964 ed. and Supp. IV). It is a categorical assistance program supported by federal grants-in-aid but administered by the States according to regulations of the Secretary of Health, Education, and Welfare. See N. Y. Social Welfare Law §§ 343-362 (1966). We considered other aspects of AFDC in King v. Smith, 392 U. S. 309 (1968), and in Shapiro v. Thompson,394 U. S. 618 (1969).

Home Relief is a general assistance program financed and administered solely by New York state and local governments. N. Y. Social Welfare Law §§ 157-165 (1966), since July 1, 1967, Social Services Law §§ 157-166. It assists any person unable to support himself or to secure support from other sources. Id., § 158.

[2] Two suits were brought and consolidated in the District Court. The named plaintiffs were 20 in number, including intervenors. Fourteen had been or were about to be cut off from AFDC, and six from Home Relief. During the course of this litigation most, though not all, of the plaintiffs either received a "fair hearing" (see infra, at 259-260) or were restored to the rolls without a hearing. However, even in many of the cases where payments have been resumed, the underlying questions of eligibility that resulted in the bringing of this suit have not been resolved. For example, Mrs. Altagracia Guzman alleged that she was in danger of losing AFDC payments for failure to cooperate with the City Department of Social Services in suing her estranged husband. She contended that the departmental policy requiring such cooperation was inapplicable to the facts of her case. The record shows that payments to Mrs. Guzman have not been terminated, but there is no indication that the basic dispute over her duty to cooperate has been resolved, or that the alleged danger of termination has been removed. Home Relief payments to Juan DeJesus were terminated because he refused to accept counselling and rehabilitation for drug addiction. Mr. DeJesus maintains that he does not use drugs. His payments were restored the day after his complaint was filed. But there is nothing in the record to indicate that the underlying factual dispute in his case has been settled.

[3] The adoption in February 1968 and the amendment in April of Regulation § 351.26 coincided with or followed several revisions by the Department of Health, Education, and Welfare of its regulations implementing 42 U. S. C. § 602 (a) (4), which is the provision of the Social Security Act that requires a State to afford a "fair hearing" to any recipient of aid under a federally assisted program before termination of his aid becomes final. This requirement is satisfied by a post-termination "fair hearing" under regulations presently in effect. See HEW Handbook of Public Assistance Administration (hereafter HEW Handbook), pt. IV, §§ 6200-6400. A new HEW regulation, 34 Fed. Reg. 1144 (1969), now scheduled to take effect in July 1970, 34 Fed. Reg. 13595 (1969), would require continuation of AFDC payments until the final decision after a "fair hearing" and would give recipients a right to appointed counsel at "fair hearings." 45 CFR § 205.10, 34 Fed. Reg. 1144 (1969); 45 CFR § 220.25, 34 Fed. Reg. 1356 (1969). For the safeguards specified at such "fair hearings" see HEW Handbook, pt. IV, §§ 6200-6400. Another recent regulation now in effect requires a local agency administering AFDC to give "advance notice of questions it has about an individual's eligibility so that a recipient has an opportunity to discuss his situation before receiving formal written notice of reduction in payment or termination of assistance." Id., pt. IV, § 2300 (d) (5). This case presents no issue of the validity or construction of the federal regulations. It is only subdivision (b) of § 351.26 of the New York State regulations and implementing procedure 68-18 of New York City that pose the constitutional question before us. Cf. Shapiro v. Thompson, 394 U. S. 618, 641 (1969). Even assuming that the constitutional question might be avoided in the context of AFDC by construction of the Social Security Act or of the present federal regulations thereunder, or by waiting for the new regulations to become effective, the question must be faced and decided in the context of New York's Home Relief program, to which the procedures also apply.

[4] These omissions contrast with the provisions of subdivision (a) of § 351.26, the validity of which is not at issue in this Court. That subdivision also requires written notification to the recipient at least seven days prior to the proposed effective date of the reasons for the proposed discontinuance or suspension. However, the notification must further advise the recipient that if he makes a request therefore he will be afforded an opportunity to appear at a time and place indicated before the official identified in the notice, who will review his case with him and allow him to present such written and oral evidence as the recipient may have to demonstrate why aid should not be discontinued or suspended. The District Court assumed that subdivision (a) would be construed to afford rights of confrontation and cross-examination and a decision based solely on the record. 294 F. Supp. 893, 906-907 (1968).

[5] N. Y. Social Welfare Law § 353 (2) (1966) provides for a post-termination "fair hearing" pursuant to 42 U. S. C. § 602 (a) (4). See n. 3, supra. Although the District Court noted that HEW had raised some objections to the New York "fair hearing" procedures, 294 F. Supp., at 898 n. 9, these objections are not at issue in this Court. Shortly before this suit was filed, New York State adopted a similar provision for a "fair hearing" in terminations of Home Relief. 18 NYCRR §§ 84.2-84.23. In both AFDC and Home Relief the "fair hearing" must be held within 10 working days of the request, § 84.6, with decision within 12 working days thereafter, § 84.15. It was conceded in oral argument that these time limits are not in fact observed.

[6] Current HEW regulations require the States to make full retroactive payments (with federal matching funds) whenever a "fair hearing" results in a reversal of a termination of assistance. HEW Handbook, pt. IV, §§ 6200 (k), 6300 (g), 6500 (a); see 18 NYCRR § 358.8. Under New York State regulations retroactive payments can also be made, with certain limitations, to correct an erroneous termination discovered before a "fair hearing" has been held. 18 NYCRR § 351.27. HEW regulations also authorize, but do not require, the States to continue AFDC payments without loss of federal matching funds pending completion of a "fair hearing." HEW Handbook, pt. IV, § 6500 (b). The new HEW regulations presently scheduled to become effective July 1, 1970, will supersede all of these provisions. See n. 3, supra.

[7] Appellant does not question the recipient's due process right to evidentiary review after termination. For a general discussion of the provision of an evidentiary hearing prior to termination, see Comment, The Constitutional Minimum for the Termination of Welfare Benefits: The Need for and Requirements of a Prior Hearing, 68 Mich. L. Rev. 112 (1969).

[8]It may be realistic today to regard welfare entitlements as more like "property" than a "gratuity." Much of the existing wealth in this country takes the form of rights that do not fall within traditional common-law concepts of property. It has been aptly noted that

"[s]ociety today is built around entitlement. The automobile dealer has his franchise, the doctor and lawyer their professional licenses, the worker his union membership, contract, and pension rights, the executive his contract and stock options; all are devices to aid security and independence. Many of the most important of these entitlements now flow from government: subsidies to farmers and businessmen, routes for airlines and channels for television stations; long term contracts for defense, space, and education; social security pensions for individuals. Such sources of security, whether private or public, are no longer regarded as luxuries or gratuities; to the recipients they are essentials, fully deserved, and in no sense a form of charity. It is only the poor whose entitlements, although recognized by public policy, have not been effectively enforced." Reich, Individual Rights and Social Welfare: The Emerging Legal Issues, 74 Yale L. J. 1245, 1255 (1965). See also Reich, The New Property, 73 Yale L. J. 733 (1964).

[9] See also Goldsmith v. United States Board of Tax Appeals, 270 U. S. 117 (1926) (right of a certified public accountant to practice before the Board of Tax Appeals); Hornsby v. Allen, 326 F. 2d 605 (C. A. 5th Cir. 1964) (right to obtain a retail liquor store license); Dixon v. Alabama State Board of Education, 294 F. 2d 150 (C. A. 5th Cir.), cert. denied, 368 U. S. 930 (1961) (right to attend a public college).

[10] One Court of Appeals has stated: "In a wide variety of situations, it has long been recognized that where harm to the public is threatened, and the private interest infringed is reasonably deemed to be of less importance, an official body can take summary action pending a later hearing." R. A. Holman & Co. v. SEC, 112 U. S. App. D. C. 43, 47, 299 F. 2d 127, 131, cert. denied, 370 U. S. 911 (1962) (suspension of exemption from stock registration requirement). See also, for example, Ewing v. Mytinger & Casselberry, Inc., 339 U. S. 594 (1950) (seizure of mislabeled vitamin product); North American Cold Storage Co. v. Chicago, 211 U. S. 306 (1908) (seizure of food not fit for human use); Yakus v. United States, 321 U. S. 414 (1944) (adoption of wartime price regulations); Gonzalez v. Freeman, 118 U. S. App. D. C. 180, 334 F. 2d 570 (1964) (disqualification of a contractor to do business with the Government). In Cafeteria & Restaurant Workers Union v. McElroy, supra, at 896, summary dismissal of a public employee was upheld because "[i]n [its] proprietary military capacity, the Federal Government. . . has traditionally exercised unfettered control," and because the case involved the Government's "dispatch of its own internal affairs." Cf. Perkins v. Lukens Steel Co., 310 U. S. 113 (1940).

[11] Administrative determination that a person is ineligible for welfare may also render him ineligible for participation in state-financed medical programs. See N. Y. Social Welfare Law § 366 (1966).

[12] His impaired adversary position is particularly telling in light of the welfare bureaucracy's difficulties in reaching correct decisions on eligibility. See Comment, Due Process and the Right to a Prior Hearing in Welfare Cases, 37 Ford. L. Rev. 604, 610-611 (1969).

[13] See, e. g., Reich, supra, n. 8, 74 Yale L. J., at 1255.

[14] Due process does not, of course, require two hearings. If, for example, a State simply wishes to continue benefits until after a "fair" hearing there will be no need for a preliminary hearing.

[15] This case presents no question requiring our determination whether due process requires only an opportunity for written submission, or an opportunity both for written submission and oral argument, where there are no factual issues in dispute or where the application of the rule of law is not intertwined with factual issues. See FCC v. WJR, 337 U. S. 265, 275-277 (1949).

[16] "[T]he prosecution of an appeal demands a degree of security, awareness, tenacity, and ability which few dependent people have." Wedemeyer & Moore, The American Welfare System, 54 Calif. L. Rev. 326, 342 (1966).

[17] This figure includes all recipients of Old-age Assistance, Aid to Families with Dependent Children, Aid to the Blind, Aid to the Permanently and Totally Disabled, and general assistance. In this case appellants are AFDC and general assistance recipients. In New York State alone there are 951,000 AFDC recipients and 108,000 on general assistance. In the Nation as a whole the comparable figures are 6,080,000 and 391,000. U. S. Bureau of the Census, Statistical Abstract of the United States: 1969 (90th ed.), Table 435, p. 297.

[18] The goal of a written constitution with fixed limits on governmental power had long been desired. Prior to our colonial constitutions, the closest man had come to realizing this goal was the political movement of the Levellers in England in the 1640's. J. Frank, The Levellers (1955). In 1647 the Levellers proposed the adoption of An Agreement of the People which set forth written limitations on the English Government. This proposal contained many of the ideas which later were incorporated in the constitutions of this Nation. Id., at 135-147.

[19]This command is expressed in the Tenth Amendment:

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

[20] It was proposed that members of the judicial branch would sit on a Council of Revision which would consider legislation and have the power to veto it. This proposal was rejected. J. Elliot, 1 Elliot's Debates 160, 164, 214 (Journal of the Federal Convention); 395, 398 (Yates' Minutes); vol. 5, pp. 151, 164-166, 344-349 (Madison's Notes) (Lippincott ed. 1876). It was also suggested that The Chief Justice would serve as a member of the President's executive council, but this proposal was similarly rejected. Id., vol. 5, pp. 442, 445, 446, 462.

[21] See n. 1, supra.

[22] I am aware that some feel that the process employed in reaching today's decision is not dependent on the individual views of the Justices involved, but is a mere objective search for the "collective conscience of mankind," but in my view that description is only a euphemism for an individual's judgment. Judges are as human as anyone and as likely as others to see the world through their own eyes and find the "collective conscience" remarkably similar to their own. Cf. Griswold v. Connecticut, 381 U. S. 479, 518-519 (1965) (BLACK, J., dissenting); Sniadach v. Family Finance Corp., 395 U. S. 337, 350-351 (1969) (BLACK, J., dissenting).

[23] To realize how uncertain a standard of "fundamental fairness" would be, one has only to reflect for a moment on the possible disagreement if the "fairness" of the procedure in this case were propounded to the head of the National Welfare Rights Organization, the president of the national Chamber of Commerce, and the chairman of the John Birch Society.

PENSION BENEFIT GUARANTY CORPORATION v. THE LTV CORP. et al.

No. 89-390.

Argued February 27, 1990

Decided June 18, 1990

Blackmun, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Brennan, Marshall, Scalia, and Kennedy, JJ., joined, and in which White and O’Connor, JJ., joined except as to the statement of judgment and n. 11. White, J., filed an opinion concurring in part and dissenting in part, in which O’Connor, J., joined, post, p. 656. Stevens, J., filed a dissenting opinion, post, p. 657.

Carol Connor Flowe argued the cause for petitioner. With her on the briefs were James J. Armbruster, Raymond Morgan Forster, Thomas S. Martin, Richard K. Willard, and Charles G. Cole.

Lewis B. Kaden argued the cause for respondents. With him on the brief for respondents The LTV Corporation et al. were Karen E. Wagner, Michael J. Crames, Marc Abrams, and Frank Cummings. Robin E. Phelan and Kathryn C. Malloy filed a brief for respondent Banctexas Dallas, N. A. Joel B. Ziueibel, Geoffrey M. Kalmus, Michael J. Dell, and Peter V. Pantaleo filed a brief for respondent LTV Bank Group. R. A. King and Kenneth R. Bruce filed a brief for respondents David H. Miller et al. Edgar H. Booth, Richard H. Kuh, and Mary S. Zitwer filed a brief for respondent Official Committee of Equity Security Holders. Leonard M. Rosen, Lawrence P. King, Theodore Gewertz, Harold S. Novikoff, Brian M. Cogan, and Mark A. Speiser filed a brief for respondent Official Committee of Unsecured Creditors of LTV Steel Company, Inc. William H. Roberts, Raymond L. Shapiro, Thomas E. Biron, William E. Taylor III, and Ann B. Laupheimer filed a brief for respondent Official Parent Creditors’ Committee of The LTV Corporation.*

*

Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Starr, Deputy Solicitor General Shapiro, and Christopher J. Wright; for the American Society of Pension Actuaries by Chester J. Salkind; for Armco et al. by Benjamin R. Civiletti and W. Warren Hamel; and for the Retired Employees Benefits Coalition, Inc., by Bruce E. Davis.

Briefs of amici curiae urging affirmance were filed for the State of Ohio by Anthony J. Celebrezze, Jr., Attorney General, and Loren L. Braverman; and for the American Federation of Labor and Congress of Industrial Organizations et al. by Robert M. Weinberg, Jeremiah A. Collins, Peter O. Shinevar, Laurence Gold, Bernard Kleiman, Carl B. Frankel, Paul Whitehead, and Karin S. Feldman.

William J. Kilberg and Baruch A. Fellner filed a brief for Wheeling-Pittsburgh Steel Corp. as amicus curiae.

Justice Blackmun

delivered the opinion of the Court.

In this case we must determine whether the decision of the Pension Benefit Guaranty Corporation (PBGC) to restore certain pension plans under § 4047 of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 1028, as amended, 100 Stat. 237, 29 U. S. C. § 1347, was, as the Court of Appeals concluded, arbitrary and capricious or contrary to law, within the meaning of the Administrative Procedure Act (APA), 5 U. S. C. § 706.

I

Petitioner PBGC is a wholly owned United States Government corporation, see 29 U. S. C. § 1302, modeled after the Federal Deposit Insurance Corporation. See 120 Cong. Rec. 29950 (1974) (statement of Sen. Bentsen). The Board of Directors of the PBGC consists of the Secretaries of the Treasury, Labor, and Commerce. 29 U. S. C. § 1302(d). The PBGC administers and enforces Title IV of ERISA. Title IV includes a mandatory Government insurance program that protects the pension benefits of over 30 million private-sector American workers who participate in plans covered by the Title.1 In enacting Title IV, Congress sought to ensure that employees and their beneficiaries would not be completely “deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans.” Pension Benefit Guaranty Corporation v. R. A. Gray & Co., 467 U. S. 717, 720 (1984). See also Nachman Corp. v. Pension Benefit Guaranty Corporation, 446 U. S. 359, 361-362, 374-375 (1980).

When a plan covered under Title IV terminates with insufficient assets to satisfy its pension obligations to the employees, the PBGC becomes trustee of the plan, taking over the plan’s assets and liabilities. The PBGC then uses the plan’s assets to cover what it can of the benefit obligations. See 29 U. S. C. § 1344 (1982 ed. and Supp. IV). The PBGC then must add its own funds to ensure payment of most of the remaining “nonforfeitable” benefits, i. e., those benefits to which participants have earned entitlement under the plan terms as of the date of termination. §§ 1301(a)(8), 1322(a) and (b). ERISA does place limits on the benefits PBGC may guarantee upon plan termination, however, even if an employee is entitled to greater benefits under the terms of the plan. See 29 CFR § 2621.3(a)(2) and App. A (1989); 29 U. S. C. § 1322(b)(3)(B). In addition, benefit increases resulting from plan amendments adopted within five years of the termination are not paid in full. Finally, active plan participants (current employees) cease to earn additional benefits under the plan upon its termination and lose entitlement to most benefits not yet fully earned as of the date of plan termination. 29 U. S. C. §§ 1322(a) and (b), 1301(a)(8); 29 CFR § 2613.6 (1989).

The cost of the PBGC insurance is borne primarily by employers that maintain ongoing pension plans. Sections 4006 and 4007 of ERISA require these employers to pay annual premiums. See 29 U. S. C. §§ 1306 and 1307 (1982 ed. and Supp. IV). The insurance program is also financed by statutory liability imposed on employers who terminate underfunded pension plans. Upon termination, the employer becomes liable to the PBGC for the benefits that the PBGC will pay out.2 Because the PBGC historically has recovered only a small portion of that liability, Congress repeatedly has been forced to increase the annual premiums. Even with these increases, the PBGC in its most recent annual report noted liabilities of $4 billion and assets of only $2.4 billion, leaving a deficit of over $1.5 billion.

As noted above, plan termination is the insurable event under Title IV. Plans may be terminated “voluntarily” by an employer or “involuntarily” by the PBGC. An employer may terminate a plan voluntarily in one of two ways. It may proceed with a “standard termination” only if it has sufficient assets to pay all benefit commitments. A standard termination thus does not implicate PBGC insurance responsibilities. If an employer wishes to terminate a plan whose assets are insufficient to pay all benefits, the employer must demonstrate that it is in financial “distress” as defined in 29 U. S. C. § 1341(c) (1982 ed., Supp. IV). Neither a standard nor a distress termination by the employer, however, is permitted if termination would violate the terms of an existing collective-bargaining agreement. 29 U. S. C. § 1341(a)(3).

The PBGC, though, may terminate a plan “involuntarily,” notwithstanding the existence of a collective-bargaining agreement. Ibid. Section 4042 of ERISA provides that the PBGC may terminate a plan whenever it determines that:

“(1) the plan has not met the minimum funding standard required under section 412 of title 26, or has been notified by the Secretary of the Treasury that a notice of deficiency under section 6212 of title 26 has been mailed with respect to the tax imposed under section 4791(a) of title 26,

“(2) the plan will be unable to pay benefits when due,

“(3) the reportable event described in section 1343(b)(7) of this title has occurred, or

“(4) the possible long-run loss of the [PBGC] with respect to the plan may reasonably be expected to increase unreasonably if the plan is not terminated.” 29 U. S. C. § 1342(a).

Termination can be undone by PBGC. Section 4047 of ERISA, 29 U. S. C. § 1347, provides:

“In the case of a plan which has been terminated under section 1341 or 1342 of this title the [PBGC] is authorized in any such case in which [it] determines such action to be appropriate and consistent with its duties under this subchapter, to take such action as may be necessary to restore the plan to its pretermination status, including, but not limited to, the transfer to the employer or a plan administrator of control of part or all of the remaining assets and liabilities of the plan.”

When a plan is restored, full benefits are reinstated, and the employer, rather than the PBGC, again is responsible for the plan’s unfunded liabilities.

II

This case arose after respondent The LTV Corporation (LTV Corp.) and many of its subsidiaries, including LTV Steel Company Inc. (LTV Steel), (collectively LTV), in July 1986 filed petitions for reorganization under Chapter 11 of the Bankruptcy Code. At that time, LTV Steel was the sponsor of three defined benefit pension plans (Plans) covered by Title IV of ERISA. Two of the Plans were the products of collective-bargaining negotiations with the United Steelworkers of America (Steelworkers). The third was for nonunion salaried employees. Chronically underfunded, the Plans, by late 1986, had unfunded liabilities for promised benefits of almost $2.3 billion. Approximately $2.1 billion of this amount was covered by PBGC insurance.

It is undisputed that one of LTV Corp.’s principal goals in filing the Chapter 11 petitions was the restructuring of LTV Steel’s pension obligations, a goal which could be accomplished if the Plans were terminated and responsibility for the unfunded liabilities was placed on the PBGC. LTV Steel then could negotiate with its employees for new pension arrangements. LTV, however, could not voluntarily terminate the Plans because two of them had been negotiated in collective bargaining. LTV therefore sought to have the PBGC terminate the Plans.

To that end, LTV advised the PBGC in 1986 that it could not continue to provide complete funding for the Plans. PBGC estimated that, without continued funding, the Plans’ $2.1 billion underfunding could increase by as much as $65 million by December 1987 and by another $63 million by December 1988, unless the Plans were terminated. Moreover, extensive plant shutdowns were anticipated. These shutdowns, if they occurred before the Plans were terminated, would have required the payment of significant “shutdown benefits.” The PBGC estimated that such benefits could increase the Plans’ liabilities by as much as $300 million to $700 million, of which up to $500 million would be covered by PBGC insurance. Confronted with this information, the PBGC, invoking § 4042(a)(4) of ERISA, 29 U. S. C. § 1342(a)(4), determined that the Plans should be terminated in order to protect the insurance program from the unreasonable risk of large losses, and commenced termination proceedings in the District Court. With LTV’s consent, the Plans were terminated effective January 13, 1987.3

Because the Plans’ participants lost some benefits as a result of the termination, the Steelworkers filed an adversary action against LTV in the Bankruptcy Court, challenging the termination and seeking an order directing LTV to make up the lost benefits. This action was settled, with LTV and the Steelworkers negotiating an interim collective-bargaining agreement that included new pension arrangements intended to make up benefits that plan participants lost as a result of the termination. New payments to retirees were based explicitly upon “a percentage of the difference between the benefit that was being paid under the Prior Plans and the amount paid by the PBGC.” App. 181. Retired participants were thereby placed in substantially the same positions they would have occupied had the old Plans never been terminated. The new agreements respecting active participants were also designed to replace benefits under the old Plans that were not insured by the PBGC, such as early retirement benefits and shutdown benefits. With respect to shutdown benefits, LTV stated in Bankruptcy Court that the new benefits totaled “75% of benefits lost as a result of plan termination.” Id., at 159. With respect to some other kinds of benefits for active participants, the new arrangements provided 100% or more of the lost benefits. Id., at 235.

The PBGC objected to these new pension agreements, characterizing them as “follow-on” plans. It defines a follow-on plan as a new benefit arrangement designed to wrap around the insurance benefits provided by the PBGC in such a way as to provide both retirees and active participants substantially the same benefits as they would have received had no termination occurred. The PBGC’s policy against follow-on plans stems from the agency’s belief that such plans are “abusive” of the insurance program and result in the PBGC’s subsidizing an employer’s ongoing pension program in a way not contemplated by Title IV. The PBGC consistently has made clear its policy of using its restoration powers under § 4047 if an employer institutes an abusive follow-on plan. In three opinion letters, two in 1981 and one in 1986, the PBGC stated: “[T]he termination insurance program of Title IV was not intended to subsidize an employer’s ongoing retirement program.” App. to Pet. for Cert. 162a, 167a, 173a. Accordingly, the PBGC has indicated that if an employer adopts a new plan that, “together with the guaranteed benefits paid by the PBGC under the terminated plan, provide[s] for the payment of, accrual of, or eligibility for benefits that are substantially the same as those provided under the terminated plan,” App. 229, the PBGC will view the plan as an attempt to shift liability to the termination insurance program while continuing to operate the plan.

LTV ignored the PBGC’s objections to the new pension arrangements and asked the Bankruptcy Court for permission to fund the follow-on plans. The Bankruptcy Court granted LTV’s request. In doing so, however, it noted that the PBGC “may have legal options or avenues that it can assert administratively . . . to implement its policy goals. Nothing done here tonight precludes the PBGC from pursuing these options. . . .” Id., at 261.

In early August 1987, the PBGC determined that the financial factors on which it had relied in terminating the Plans had changed significantly. Of particular significance to the PBGC was its belief that the steel industry, including LTV Steel, was experiencing a dramatic turnaround. As a result, the PBGC concluded it no longer faced the imminent risk, central to its original termination decision, of large unfunded liabilities stemming from plant shutdowns. Later that month, the PBGC’s internal working group made a recommendation, based upon LTV’s improved financial circumstances and its follow-on plans, to the PBGC’s Executive Director to restore the Plans under the PBGC’s § 4047 powers. After consulting the PBGC’s Board of Directors, which agreed with the working group that restoration was appropriate, the Executive Director decided to restore the Plans.4

The Director issued a notice of restoration on September 22, 1987, indicating the PBGC’s intent to restore the terminated Plans. The PBGC notice explained that the restoration decision was based on (1) LTV’s establishment of “a retirement program that results in an abuse of the pension plan termination insurance system established by Title IV of ERISA,” and (2) LTV’s “improved financial circumstances.” See App. to Pet. for Cert. 182a.5 Restoration meant that the Plans were ongoing, and that LTV again would be responsible for administering and funding them.

LTV refused to comply with the restoration decision. This prompted the PBGC to initiate an enforcement action in the District Court.6 The court vacated the PBGC’s restoration decision, finding, among other things, that the PBGC had exceeded its authority under § 4047. See In re Chateaugay Corp., 87 B. R. 779 (SDNY 1988).

The Court of Appeals for the Second Circuit affirmed, holding that the PBGC’s restoration decision was “arbitrary and capricious” or contrary to law under the APA, 5 U. S. C. § 706(2)(A), in various ways. 875 F. 2d 1008, 1015-1021 (1989). The court first concluded that the PBGC’s action was arbitrary and capricious because the PBGC focused “inordinately on ERISA” to the exclusion of other laws. Id., at 1016. The court then found the agency’s anti-follow-on policy to be contrary to law because the “legislative history of section 4047 reveals no indication that Congress intended the establishment of successive [i. e., follow-on] benefit plans to be a ground for restoration.” Id., at 1017. The court also found the PBGC’s other basis for restoration—improved financial condition—inadequate because the PBGC did not explain many of its economic assumptions. Id., at 1018-1020. Finally, the court concluded that the agency’s restoration decision was arbitrary and capricious because the PBGC’s decisionmaking process of informal adjudication lacked adequate procedural safeguards. Id., at 1021.

Because of the significant administrative law questions raised by this case, and the importance of the PBGC’s insurance program, we granted certiorari. 493 U. S. 932 (1989).

III

A

The Court of Appeals first held that the restoration decision was arbitrary and capricious under § 706(2)(A) because the PBGC did not take account of all the areas of law the court deemed relevant to the restoration decision. The court expressed the view that “[b]ecause ERISA, bankruptcy and labor law are involved in the case at hand, there must be a showing on the administrative record that PBGC, before reaching its decision, considered all of these areas of the law, and to the extent possible, honored the policies underlying them.” 875 F. 2d, at 1015. The court concluded that the administrative record did not reflect thorough and explicit consideration by the PBGC of the “policies and goals” of each of the three bodies of law. Id., at 1016. As the court put it, the PBGC “focused inordinately on ERISA.” Ibid. The Court of Appeals did not hold that the PBGC’s decision actually conflicted with any provision in the bankruptcy or labor laws, or that the PBGC’s action “trench[ed] upon the . . . jurisdiction” of another agency. See Burlington Truck Lines, Inc. v. United States, 371 U. S. 156, 173 (1962). Rather, the court held that because labor law and bankruptcy law are “involved in the case at hand,” the PBGC had an affirmative obligation, which had not been met, to address them. 875 F. 2d, at 1015.

The PBGC contends that the Court of Appeals misapplied the general rule that an agency must take into consideration all relevant factors, see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U. S. 402, 416 (1971), by requiring the agency explicitly to consider and discuss labor and bankruptcy law. We agree.

First, and most important, we do not think that the requirement imposed by the Court of Appeals upon the PBGC can be reconciled with the plain language of § 4047, under which the PBGC is operating in this case. This section gives the PBGC the power to restore terminated plans in any case in which the PBGC determines such action to be “appropriate and consistent with its duties under this title [i. e., Title IV of ERISA]” (emphasis added). The statute does not direct the PBGC to make restoration decisions that further the “public interest” generally, but rather empowers the agency to restore when restoration would further the interests that Title IV of ERISA is designed to protect. Given this specific and unambiguous statutory mandate, we do not think that the PBGC did or could focus “inordinately” on ERISA in making its restoration decision.

Even if Congress’ directive to the PBGC had not been so clear, we are not entirely sure that the Court of Appeals’ holding makes good sense as a general principle of administrative law. The PBGC points out problems that would arise if federal courts routinely were to require each agency to take explicit account of public policies that derive from federal statutes other than the agency’s enabling Act. To begin with, there are numerous federal statutes that could be said to embody countless policies. If agency action may be disturbed whenever a reviewing court is able to point to an arguably relevant statutory policy that was not explicitly considered, then a very large number of agency decisions might be open to judicial invalidation.

The Court of Appeals’ directive that the PBGC give effect to the “policies and goals” of other statutes, apart from what those statutes actually provide,7 is questionable for another reason as well. Because the PBGC can claim no expertise in the labor and bankruptcy areas, it may be ill equipped to undertake the difficult task of discerning and applying the “policies and goals” of those fields. This Court recently observed:

“[N]o legislation pursues its purposes at all costs. Deciding what competing values will or will not be sacrificed to the achievement of a particular objective is the very essence of legislative choice—and it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute’s primary objective must be the law.” Rodriguez v. United States, 480 U. S. 522, 525-526 (1987).

For these reasons, we believe the Court of Appeals erred in holding that the PBGC’s restoration decision was arbitrary and capricious because the agency failed adequately to consider principles and policies of bankruptcy law and labor law.

B

The Court of Appeals also rejected the grounds for restoration that the PBGC did assert and discuss. The court found that the first ground the PBGC proffered to support the restoration—its policy against follow-on plans—was contrary to law because there was no indication in the text of the restoration provision, § 4047, or its legislative history that Congress intended the PBGC to use successive benefit plans as a basis for restoration. The PBGC argues that in reaching this conclusion the Court of Appeals departed from traditional principles of statutory interpretation and judicial review of agency construction of statutes. Again, we must agree.

In Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984), we set forth the general principles to be applied when federal courts review an agency’s interpretation of the statute it implements:

“When a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. 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. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute. ” Id., at 842-843 (footnotes omitted).

Here, the PBGC has interpreted § 4047 as giving it the power to base restoration decisions on the existence of follow-on plans. Our task, then, is to determine whether any clear congressional desire to avoid restoration decisions based on successive pension plans exists, and, if the answer is in the negative, whether the PBGC’s policy is based upon a permissible construction of the statute. See Mead Corp. v. Tilley, 490 U. S. 714 (1989) (applying Chevron principles to the PBGC’s construction of ERISA).

Turning to the first half of the inquiry, we observe that the text of § 4047 does not evince a clear congressional intent to deprive the PBGC of the ability to base restoration decisions on the existence of follow-on plans. To the contrary, the textual grant of authority to the PBGC embodied in this section is broad. As noted above, the section authorizes the PBGC to restore terminated plans “in any such case in which [the PBGC] determines such action to be appropriate and consistent with its duties under [Title IV of ERISA].” 29 U. S. C. § 1347. The PBGC’s duties consist primarily of furthering the statutory purposes of Title IV identified by Congress. These are:

“(1) to encourage the continuation and maintenance of voluntary private pension plans for the benefit of their participants,

“(2) to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries under plans to which this subchapter applies, and

“(3) to maintain premiums established by [the PBGC] under section 1306 of this title at the lowest level consistent with carrying out the obligations under this sub-chapter.” 29 U. S. C. § 1302(a).

On their face, of course, none of these statutorily identified purposes has anything to say about the precise question at issue—the use of follow-on plans as a basis for restoration decisions.

Nor do any of the other traditional tools of statutory construction compel the conclusion that Congress intended that the PBGC not base its restoration decisions on follow-on plans. The Court of Appeals relied extensively on passages in the legislative history of the 1974 enactment of ERISA which suggest that Congress considered financial recovery a valid basis for restoration, but which make no mention of follow-on plans. The court reasoned that because follow-ons were not among the bases for restoration discussed by Members of Congress, that body must have intended that the existence of follow-ons not be a reason for restoring pension plans. See 875 F. 2d, at 1017.

We do not agree with this conclusion. We first note that the discussion in the legislative history concerning grounds for restoration was not limited to the financial-recovery example. The House Conference Report indicated that restoration was appropriate if financial recovery or “some other factor made termination no longer advisable.” H. R. Conf. Rep. No. 93-1280, p. 378 (1974). Moreover, and more generally, the language of a statute—particularly language expressly granting an agency broad authority—is not to be regarded as modified by examples set forth in the legislative history. An example, after all, is just that: an illustration of a statute’s operation in practice. It is not, as the Court of Appeals apparently thought, a definitive interpretation of a statute’s scope. We see no suggestion in the legislative history that Congress intended its list of examples to be exhaustive. Under these circumstances, we conclude that ERISA’s legislative history does not suggest “clear congressional intent” on the question of follow-on plans.

The Court of Appeals also relied on the legislative history of the 1987 amendments to ERISA effected by the Pension Protection Act, Pub. L. 100-203, 101 Stat. 1330-333. See 875 F. 2d, at 1017. This history reveals that Congress in 1987 considered, but did not enact, a provision that expressly would have authorized the PBGC to prohibit follow-on plans. But subsequent legislative history is a “hazardous basis for inferring the intent of an earlier” Congress. United States v. Price, 361 U. S. 304, 313 (1960). It is a particularly dangerous ground on which to rest an interpretation of a prior statute when it concerns, as it does here, a proposal that does not become law. See, e. g., United States v. Wise, 370 U. S. 405, 411 (1962). Congressional inaction lacks “persuasive significance” because “several equally tenable inferences” may be drawn from such inaction, “including the inference that the existing legislation already incorporated the offered change.” Ibid. These admonitions are especially apt in the instant case because Congress was aware of the action taken by the PBGC with respect to LTV at the time it rejected the proposed amendment. See H. R. Rep. No. 100-391, pt. 1, pp. 106-107 (1987). Despite Congress’ awareness of the PBGC’s belief that the adoption of follow-on plans was a ground for restoration, Congress did not amend § 4047 to restrict the PBGC’s discretion. The conclusion that Congress thought the PBGC was properly exercising its authority is at least as plausible as any other. Thus, the legislative history surrounding the 1987 amendments provides no more support than the 1974 legislative history for the Court of Appeals’ holding that the PBGC’s interpretation of § 4047 contravened clear congressional will.

Having determined that the PBGC’s construction is not contrary to clear congressional intent, we still must ascertain whether the agency’s policy is based upon a “permissible” construction of the statute, that is, a construction that is “rational and consistent with the statute.” NLRB v. Food & Commercial Workers, 484 U. S. 112, 123 (1987); see also Sullivan v. Everhart, 494 U. S. 83 (1990). Respondents argue that the PBGC’s anti-follow-on policy is irrational because, as a practical matter, no purpose is served when the PBGC bases a restoration decision on something other than the improved financial health of the employer. According to respondents, “financial improvement [is] both a necessary and a sufficient condition for restoration. The agency’s asserted abuse policy . . . is logically irrelevant to the restoration decision.” Brief for Respondents LTV Corp. and LTV Steel 33 (emphasis added). We think not. The PBGC’s anti-follow-on policy is premised on the belief, which we find eminently reasonable, that employees will object more strenuously to a company’s original decision to terminate a plan (or to take financial steps that make termination likely) if the company cannot use a follow-on plan to put the employees in the same (or a similar) position after termination as they were in before. The availability of a follow-on plan thus would remove a significant check—employee resistance—against termination of a pension plan.

Consequently, follow-on plans may tend to frustrate one of the objectives of ERISA that the PBGC is supposed to accomplish—the “continuation and maintenance of voluntary private pension plans.” 29 U. S. C. § 1302(a)(1). In addition, follow-on plans have a tendency to increase the PBGC’s deficit and increase the insurance premiums all employers must pay, thereby frustrating another related statutory objective—the maintenance of low premiums. See 29 U. S. C. § 1302(a)(3). In short, the PBGC’s construction based upon its conclusion that the existence of follow-on plans will lead to more plan terminations and increased PBGC liabilities is “assuredly a permissible one.” Everhart, 494 U. S., at 93. Indeed, the judgments about the way the real world works that have gone into the PBGC’s anti-follow-on policy are precisely the kind that agencies are better equipped to make than are courts.8 This practical agency expertise is one of the principal justifications behind Chevron deference. See 467 U. S., at 865.

None of this is to say that financial improvement will never be relevant to a restoration decision. Indeed, if an employer’s financial situation remains so dire that restoration would lead inevitably to immediate retermination, the PBGC may decide not to restore a terminated plan even where the employer has instituted a follow-on plan.9 For present purposes, however, it is enough for us to decide that where, as here, there is no suggestion that immediate retermination of the plans will be necessary,10 it is rational for the PBGC to disfavor follow-on plans.11

C

Finally, we consider the Court of Appeals’ ruling that the agency procedures were inadequate in this particular case. Relying upon a passage in Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U. S. 281, 288, n. 4 (1974), the court held that the PBGC’s decision was arbitrary and capricious because the “PBGC neither apprised LTV of the material on which it was to base its decision, gave LTV an adequate opportunity to offer contrary evidence, proceeded in accordance with ascertainable standards . . . , nor provided [LTV] a statement showing its reasoning in applying those standards.” 875 F. 2d, at 1021. The court suggested that on remand the agency was required to do each of these things.

The PBGC argues that this holding conflicts with Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U. S. 519 (1978), where, the PBGC contends, this Court made clear that when the Due Process Clause is not implicated and an agency’s governing statute contains no specific procedural mandates, the APA establishes the maximum procedural requirements a reviewing court may impose on agencies. Although Vermont Yankee concerned additional procedures imposed by the Court of Appeals for the District of Columbia Circuit on the Atomic Energy Commission when the agency was engaging in informal rulemaking, the PBGC argues that the informal adjudication process by which the restoration decision was made should be governed by the same principles.

Respondents counter by arguing that courts, under some circumstances, do require agencies to undertake additional procedures. As support for this proposition, they rely on Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U. S. 402 (1971). In Overton Park, the Court concluded that the Secretary of Transportation’s “post hoc rationalizations” regarding a decision to authorize the construction of a highway did not provide “an [a]dequate basis for [judicial] review” for purposes of the APA, 5 U. S. C. §706. Id., at 419. Accordingly, the Court directed the District Court on remand to consider evidence that shed light on the Secretary’s reasoning at the time he made the decision. Of particular relevance for present purposes, the Court in Overton Park intimated that one recourse for the District Court might be a remand to the agency for a fuller explanation of the agency’s reasoning at the time of the agency action. See id., at 420-421. Subsequent cases have made clear that remanding to the agency in fact is the preferred course. See Florida Power & Light Co. v. Lorion, 470 U. S. 729, 744 (1985) (“[I]f the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation”). Respondents contend that the instant case is controlled by Overton Park rather than Vermont Yankee, and that the Court of Appeals’ ruling was thus correct.

We believe that respondents’ argument is wide of the mark. We begin by noting that although one initially might feel that there is some tension between Vermont Yankee and Overton Park, the two cases are not necessarily inconsistent. Vermont Yankee stands for the general proposition that courts are not free to impose upon agencies specific procedural requirements that have no basis in the APA. See 435 U. S., at 524. At most, Overton Park suggests that § 706 (2)(A), which directs a court to ensure that an agency action is not arbitrary and capricious or otherwise contrary to law, imposes a general “procedural” requirement of sorts by mandating that an agency take whatever steps it needs to provide an explanation that will enable the court to evaluate the agency’s rationale at the time of decision.

Here, unlike in Overton Park, the Court of Appeals did not suggest that the administrative record was inadequate to enable the court to fulfill its duties under § 706. Rather, to support its ruling, the court focused on “fundamental fairness” to LTV. 875 F. 2d, at 1020-1021. With the possible exception of the absence of “ascertainable standards”—by which we are not exactly sure what the Court of Appeals meant—the procedural inadequacies cited by the court all relate to LTV’s role in the PBGC’s decisionmaking process. But the court did not point to any provision in ERISA or the APA which gives LTV the procedural rights the court identified. Thus, the court’s holding runs afoul of Vermont Yankee and finds no support in Overton Park.

Nor is Arkansas-Best, the case on which the Court of Appeals relied, to the contrary. The statement relied upon (which was dictum) said: “A party is entitled, of course, to know the issues on which decision will turn and to be apprised of the factual material on which the agency relies for decision so that he may rebut it.” 419 U. S., at 288, n. 4. That statement was entirely correct in the context of Arkansas-Best, which involved a formal adjudication by the Interstate Commerce Commission pursuant to the trial-type procedures set forth in §§ 5, 7 and 8 of the APA, 5 U. S. C. §§ 554, 556-557, which include requirements that parties be given notice of “the matters of fact and law asserted,” § 554(b)(3), an opportunity for “the submission and consideration of facts [and] arguments,” § 554(c)(1), and an opportunity to submit “proposed findings and conclusions” or “exceptions,” § 557(c)(1), (2). See 5 U. S. C. § 554(a); 49 Stat. 548, 54 Stat. 913, formerly codified at 49 U. S. C. §§ 17, 305(h) (1976 ed.), repealed 92 Stat. 1466; 96 Stat. 2444. The determination in this case, however, was lawfully made by informal adjudication, the minimal requirements for which are set forth in the APA, 5 U. S. C. § 555, and do not include such elements. A failure to provide them where the Due Process Clause itself does not require them (which has not been asserted here) is therefore not unlawful.

IV

We conclude that the PBGC’s failure to consider all potentially relevant areas of law did not render its restoration decision arbitrary and capricious. We also conclude that the PBGC’s anti-follow-on policy, an asserted basis for the restoration decision, is not contrary to clear congressional intent and is based on a permissible construction of § 4047. Finally, we find the procedures employed by the PBGC to be consistent with the APA. Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

1

Title IV covers virtually all “defined benefit” pension plans sponsored by private employers. A defined benefit plan is one that promises to pay employees, upon retirement, a fixed benefit under a formula that takes into account factors such as final salary and years of service with the employer. See 29 U. S. C. § 1321. It is distinguished from a “defined contribution” plan (also known as an “individual account” plan), under which the employer typically contributes a percentage of an employee’s compensation to an account, and the employee is entitled to the account upon retirement. See 29 U. S. C. §§ 1002(34) and (35). ERISA insurance does not cover defined contribution plans because employees are not promised any particular level of benefits; instead, they are promised only that they will receive the balances in their individual accounts.

2

Prior to 1987, employers were liable for only 75% of PBGC’s expenditures. In that year, Congress eliminated the 75% cap. See Pension Protection Act, Pub. L. 100-203, 101 Stat. 1330-333.

3

The Steelworkers appealed the District Court’s judgment (giving effect to the PBGC’s termination) to the United States Court of Appeals for the Second Circuit. That court affirmed. Jones & Laughlin Hourly Pension Plan v. LTV Corp., 824 F. 2d 197 (1987).

4

Thereafter, the Executive Director offered to meet with LTV to “consider any additional information [it] might wish to supply.” App. 348. Representatives of LTV and the PBGC then met on September 19 and 21, 1987. At these meetings, LTV officials expressed concern about the timing of the restoration decision and indicated that restoration would give rise to time-consuming litigation, which would cast doubt on the bankruptcy reorganization, thereby imposing hardship on other creditors.

5

The PBGC also gave a third reason for restoration—LTV’s “demonstrated willingness to fund employee retirement arrangements.” See App. to Pet. for Cert. 182a. Before the Court of Appeals for the Second Circuit, the PBGC conceded that this reason was not an independent basis for the restoration decision but rather was “subsumed [with]in the other two” grounds. See 875 F. 2d 1008, 1020 (1989). Accordingly, the Court of Appeals did not address this explanation for restoration, and neither do we.

6

Meanwhile, LTV filed an action in the Bankruptcy Court alleging that restoration would violate the automatic stay provision of the Bankruptcy Code. See 11 U. S. C. § 362(a). The District Court granted the PBGC’s motion to withdraw LTV’s action from the Bankruptcy Court pursuant to 28 U. S. C. § 157(d), and considered the two actions together. See In re Chateaugay Corp., 86 B. R. 33 (SDNY 1987).

7

It is worth noting that the provisions of ERISA itself do take account of other areas of federal law. For example, as noted above, an employer may not voluntarily terminate a plan if to do so would violate the terms of a collective-bargaining agreement. 29 U. S. C. § 1341(a)(3).

8

Justice Stevens suggests that the possibility of follow-on plans will make employees “no less likely to object to the financial steps that will lead to [an involuntary] plan termination because they would have no basis for belief that a union will insist on [the adoption of follow-on plans] when, perhaps years later, the PBGC involuntarily terminates the plan.” Post, at 659 (dissenting opinion). There is no reason to believe, however, that financial decisions that lead to an involuntary termination always or ordinarily occur far in advance of the termination itself. Thus, as Justice Stevens himself acknowledges with respect to a voluntary termination, “those who could object to [the events resulting in an involuntary termination may also be] reasonably assured of receiving benefits when the insurance is paid.” Ibid. Moreover, even when an involuntary termination does not occur until well after the financial decisions that lead to termination are made, we think the PBGC’s apparent belief that employee resistance to those financial decisions will be lessened to some degree by the prospect of follow-on plans after termination is not an unreasonable one.

9

For example, the PBGC did not restore a fourth LTV plan that had been terminated because, among other things, the plan had insufficient assets to pay benefits when due. App. 318.

10

In this respect we observe that in its notice of restoration, the PBGC relied on the long-term potential for PBGC liability. See 29 U. S. C. § 1342(a)(4). The PBGC did not conclude that the Plans were in any imminent danger or that LTV could not meet the statutory minimum-funding requirements. In fact, the PBGC observed in the notice that LTV did have “sufficient cash” to cover current benefits. See App. to Pet. for Cert. 183a. No party has suggested to this Court that, at the time of restoration, immediate retermination, either voluntary or involuntary, was likely.

11

Because we, like the Court of Appeals, read the PBGC’s notice of restoration as indicating that the PBGC’s anti-follow-on policy constitutes an independent ground for the restoration decision, we need not address that court’s ruling that the PBGC’s methodology with regard to the other asserted basis for restoration—improved financial condition—was flawed.

Justice White,

with whom Justice O’Connor joins, concurring in part and dissenting in part.

I join the Court’s opinion except for the statement of the judgment and footnote 11. In particular, I agree that the anti-follow-on policy at issue here is not contrary to the statute and that the PBGC would not have been prohibited from applying that policy as a basis for restoration in this case. Unlike the Court, however, I cannot read the notice of restoration as relying on the anti-follow-on policy and respondents’ alleged improved financial position as alternative, independent grounds for restoration. The notice, as I read it, clearly rested on both grounds in conjunction. Furthermore, it would make good sense to rely on improved financial position, for without it there would be a risk of an early re-termination of the plan. At the very least, there is serious doubt about the matter, and if the Court of Appeals was correct that the PBGC’s assessment of respondents’ financial position was inadequate—and I think it was—the case should be remanded to the agency to consider whether the anti-follow-on plan by itself provides sufficient grounds for a restoration order.

I realize that the PBGC represented at oral argument that it had relied on its anti-follow-on policy and on respondents’ improved financial condition as separate and independent grounds for the restoration, Tr. of Oral Arg. 25-26, but counsel’s post hoc rationalizations are no substitute for adequate action by the agency itself. See Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U. S. 29, 50 (1983). Nor may the PBGC’s restoration order be upheld even though the agency might reach the same result on remand, relying only on the anti-follow-on policy. “[The agency’s] action must be measured by what [it] did, not by what it might have done. . . . The [agency’s] action cannot be upheld merely because findings might have been made and considerations disclosed which would justify its order as an appropriate safeguard for the interests protected by the Act.” SEC v. Chenery Corp., 318 U. S. 80, 93-94 (1943).

I would therefore reverse the Court of Appeals in part, affirm in part, and remand with directions to return the case to the PBGC.

Justice Stevens,

dissenting.

In my opinion, at least with respect to ERISA plans that the PBGC has terminated involuntarily, the use of its restoration power under § 4047 to prohibit “follow-on” plans is contrary to the agency’s statutory mandate. Unless there was a sufficient improvement in LTV’s financial condition to justify the restoration order, I believe it should be set aside. I, therefore, would remand the case for a determination of whether that ground for the agency decision is adequately supported by the record.

A company that is undergoing reorganization under Chapter 11 of the Bankruptcy Code continues to operate an ongoing business and must have a satisfactory relationship with its work force in order to complete the reorganization process successfully. If its previous pension plans have been involuntarily terminated with the consequence that the PBGC has assumed the responsibility for discharging a significant share of the company’s pension obligations, that responsibility by the PBGC is an important resource on which the company has a right to rely during the reorganization process. It may use the financial cushion to fund capital investments, to pay current salary, or to satisfy contractual obligations, including the obligation to pay pension benefits. As long as the company uses its best efforts to complete the reorganization (and, incidentally, to reimburse the PBGC for payments made to its former employees to the extent required by ERISA),1 the PBGC does not have any reason to interfere with managerial decisions that the company makes and the bankruptcy court approves. Whether the company’s resources are dedicated to current expenditures or capital investments and whether the package of employee benefits that is provided to the work force is composed entirely of wages, vacation pay, and health insurance, on the one hand, or includes additional pension benefits, on the other, should be matters of indifference to the PBGC. Indeed, if it was faithful to the statement of congressional purposes in ERISA, see ante, at 648, it should favor an alternative that increases the company’s use and maintenance of pension plans and that provides for continued payment to existing plan beneficiaries. The follow-on plans, in my opinion, are wholly consistent with the purposes of ERISA.

According to the Court, the PBGC policy is premised on the belief that if the company cannot adopt a follow-on plan, the employees will object more strenuously (1) in the case of a voluntary termination, to the “company’s original decision to terminate a plan”; and (2) in the case of an involuntary termination, to the company’s decision “to take financial steps that make termination likely.” Ante, at 651. That belief might be justified in the case of a voluntary termination of an ERISA plan. Since the follow-on plan would be adopted immediately after plan termination, those who could object to the insurable event are also reasonably assured of receiving benefits when the insurance is paid.2 That view is wholly unwarranted, however, in the case of an involuntary termination. The insurable event, plan termination, is within the control of the PBGC, which presumably has determined that the company does not have the financial resources to meet its current pension obligations. Even if the company could adopt a follow-on plan, the employees will be no less likely to object to the financial steps that will lead to plan termination because they would have no basis for belief that a union will insist on that course when, perhaps years later, the PBGC involuntarily terminates the plan. The safety that comes from a healthy pension plan will not be overcome by the hope that a future union will remember the interests of its retirees and former employees. Plan restoration in these circumstances is not a legitimate curative to the problem of moral hazard, but rather constitutes punishment of both labor and management for the imprudence of their predecessors.

In the case of an involuntary termination, if a mistake in the financial analysis is made, or if there is a sufficient change in the financial condition of the company to justify a reinstatement of the company’s obligation, the PBGC should use its restoration powers. Without such a financial justification, however, there is nothing in the statute to authorize the PBGC’s use of that power to prevent a company from creating or maintaining the kind of employee benefit program that the statute was enacted to encourage.

Accordingly, I respectfully dissent.

1

At the time of the termination of the LTV plans, the PBGC was entitled to recover only 75 percent of the amounts expended to discharge LTV’s pension obligations. The statute has since been amended to authorize a 100 percent recovery. LTV represents that if the restoration order is upheld, and if—as seems highly probable—it is promptly followed by another termination, the PBGC bankruptcy claim will increase from about $2 billion to more than $3 billion. Brief for Respondents LTV Corp. and LTV Steel 33, n. 21. The PBGC, of course, does not assert this change as a justification for the restoration order.

2

The three opinion letters identifying the PBGC policy concerning follow-on plans all involved voluntary terminations. See App. to Pet. for Cert. 159a, 165a, 172a. The restoration order entered in this case was unprecedented.