PBGC Picks Up Another Steel Casualty
On Friday, the PBGC said it had taken over the pension plan of bankrupt steel bar manufacturer Republic Technologies International.
The Ohio-based firm’s four pension plans, which cover some 6,200 workers (including 2,000 retirees) are underfunded by a total of $310 million, according to the PBGC.
Steel Straits
Much of the US steel industry has been in financial straits lately, sending a number of steelmakers into bankruptcy – and their pension plan obligations to the PBGC, insurer of the nation’s private pension system, including LTV , Empire Steel and Northwestern Steel . Even prior to that, the steel industry had presented the PBGC with some of its largest liabilities on a historical basis (see Top 10 Pension Fund Failures ), and the large retiree pension and health liabilities continue to represent a financial challenge for the beleaguered industry.
The average steel company has approximately three retirees for every active employee – nearly three times the ratio for most other major basic manufacturing companies.
According to the United Steelworkers of America, at the end of 1999, the steel industry’s retiree health care benefit obligations totaled an estimated $13 billion. Annually, health care benefits for 600,000 retired steelworkers, surviving spouses, and dependents can cost domestic steel producers an estimated $965 million or $9 per ton of steel shipped (see New Bills Seek to Solve Steel Benefits Issue ).
Republic Response
The most recent casualty, Republic filed for bankruptcy protection in April 2001, citing steel industry market conditions, indebtedness, and an overall weak U.S. economy.
PBGC is guaranteeing the basic pension benefits of Republic employees. Retirees will continue to receive monthly checks, and the benefits of other employees will be kept safe until they reach retirement age, according to PBGC Executive Director Steven A. Kandarian. Under federal pension law, the 2002 maximum guaranteed benefit for workers retiring at age 65 is $3,579.55 a month or $42,954.60 a year. Maximum guarantees are adjusted for retirees older or younger than age 65 and for those who choose survivor benefits.
RTI pension plan participants with questions may contact PBGC’s Customer Service Center toll-free at 1-800-400-7242. For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to 800-400-7242. Information about pension insurance also may be found on PBGC’s Web site, www.pbgc.gov .
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits (see What Is the PBGC ).