According to the PBGC, the action to seize the GST Steel Company Pension Plan and GS Technologies Pension Plan was necessary because GS Industries Inc. of Kansas City, Missouri, a bankrupt steel rod producer, was liquidating its business.
GS Industries didn’t have the funds to cover the plans’ liabilities, the agency said. The two GS Industries pension plans were terminated as of June 30, 2002.
As is typically the case in a PBGC pension takeover, the nation’s private system pension insurer will use the plan’s remaining assets and money from its insurance program to pay the covered GS Industries workers up to guaranteed federal limits. Other employees will receive benefits when they are eligible to retire.
Five other pension plans formerly maintained by GS Industries were transferred to new corporate sponsors. These plans remain ongoing, unaffected by PBGC’s action, the agency said.
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, and the large retiree pension and health liabilities continue to represent a financial challenge for the beleaguered industry.
In fact, PBGC officials blamed the steel industry’s rampant pension woes as one reason for the big chunk out of its cash surplus ( PBGC Surplus Dwindles as Pension Plans Fail )
Under federal pension law, the maximum pension guaranteed for workers in plans that terminated in 2002 is $3,579 a month (or $42,954 a year) for persons retiring at age 65. Maximum guarantees are adjusted for retirees older or younger than age 65 and for those who choose survivor benefits.
Created by ERISA, the PBGC guarantees basic pension payments for 44 million working Americans and retirees in 35,000 private defined benefit pensions. The agency gets funds from premiums paid by covered companies into its insurance program as well as investment returns.
What does the PBGC Do? For background, see The PBGC – Friend or Foe