High Court Lets Stand Shutdown Benefit Decision

March 8, 2005 (PLANSPONSOR.com) - The nation's high court has refused to overturn a lower court ruling that the Pension Benefit Guaranty Corporation (PBGC) is not required to pay workers of a bankrupt steel company $96 million in unvested shutdown benefits.

The US Supreme Court’s decision came in a case involving a dispute between the United Steelworkers of America and the PBGC, which insures private sector pensions.

The US 6 th Circuit Court of Appeals ruled last year that the PBGC’s notice it was taking over the pension plans of Republic Technologies International (RTI) (See  PBGC Picks Up Another Steel Casualty ) knocked out participants’ expectations of getting accrued vested pension rights after the PBGC’s June 2002 plan takeover (See  Appellate Court Shuts Down Shutdown Benefits Claim ).

In addition, the appeals court found that the participants did not have a “strong reliance” on getting the added benefits because the payments had not been approved by a bankruptcy court when PBGC took over the plans. Appeals judges threw out a ruling by a district court judge that despite PBGC’s issuance of notices of its intent to terminate the plan on June 14, 2002, participants continued to rely on getting the extra benefits. The district court also found that PBGC never demonstrated that the June 14 date protected its insurance fund from an unreasonable increase in liability.

To help facilitate several mergers that occurred during the late 1990s, RTI and the United Steelworkers of America, which represented the employees, negotiated a labor pact providing that workers who met certain age and years of service requirements would be entitled to shutdown benefits in the event of a plant closure.

The same day that a PBGC working group recommended the termination of the plans, a bankruptcy court approved the sale of RTI’s assets to Newco. The asset sale closed on August 16, 2002, and on that date RTI declared a shutdown of its facilities.