The Pension Benefit Guaranty Corp. (PBGC) said the National Steel pension plans are 47% funded, with roughly $1.3 billion in assets to cover more than $2.8 billion in benefit liabilities. Of the $1.5 billion in underfunding, the PBGC estimated that it would be liable for more than $1.1 billion.
The company told the PBGC that it will not make any additional contributions to the plans, and the company has already missed more than $150 million in required minimum funding contributions, the PBGC officials said.
PBGC officials said the agency “has concluded there is no reasonable scenario under which National Steel can afford to maintain the pension plans.”
Seizing the seven plans covering 35,000 workers and retirees of the Mishawaka, Ind. steelmaker follows the agency’s largest claim in March 2002 when it assumed $1.6 billion in pension liabilities from LTV Steel Corp.
A March of Steel Plans
Both LTV and National Steel are part of a steady march of tottering US steel companies, which have needed the PBGC to make certain workers and retirees will get paid their pensions according to federal pension guidelines.
With the termination of the National plans, the steel industry accounts for more than 40% of all claims against the pension insurance program but only 2% of covered workers, the PBGC said in announcing the pending National Steel takeover.
Since October 1, 2001, the PBGC said it has absorbed nearly $3 billion in claims from a number of steel companies, including Acme Metals, CSC Steel, GS Industries, and Empire Specialty Steel. (See PBGC Exec: Pension Insurer Hit by ‘Perfect Storm’ ).
The National Steel plans the PBGC wants to take over as trustee include:
- National Steel Corporation Retirement Program
- National Steel Corporation Pension Plan-Hourly Employees
- Granite City United Steelworkers of America Pension Plan
- Granite City Pension Plan for Chemical Workers, Bricklayers, Hodcarriers, Blacksmiths, and Watchman’s Union
- Weirton Retirement Program
- National Steel Pellet Company Pension Plan for Hourly Wage Employees
- Pension Plan for Salaried Employees of National Steel Pellet Company.
Federal guidelines call for workers in plans that terminate in 2002 is $3,579 a month (or $42,954 a year) for workers retiring at age 65. Maximum guarantees are adjusted for retirees older or younger than age 65 and for those who choose survivor benefits.
PBGC, created by ERISA to guarantee private-sector pension benefits, currently backs pension benefits for about 44 million American workers and retirees participating in over 35,000 private sector defined benefit pension plans. The agency is financed by insurance premiums from covered companies and investment income.