>The ruling, made by the US 6th Circuit Court of Appeals on Friday, makes it clear that the federal government does not have to pay employees of failed manufacturers ‘shutdown pensions’ that union officials claim were promised in labor contracts (See Appellate Court Shuts Down Shutdown Benefits Claim ). In this case, the court ruled that the government, through the auspices of the Pension Benefit Guaranty Corporation (PBGC), will not have to pay $1,000 to $2,000 per month to about 2,500 employees of RTI, the steel manufacturer that closed in 2002.
>The Steelworkers claim that the PBGC, the agency that insures defined benefit plans, preemptively terminated four RTI pension plans. The PBGC claims that it was not responsible for the payment of ‘shutdown pensions’ because RTI never paid premiums to ensure that these benefits would be paid. The PBGC estimates that the ‘shutdown payments’ would cost the pension insurer $96 billion, and would ultimately fall on the backs of taxpayers (See Steelworkers Plan “Shutdown Benefits” Showdown ).
“The PBGC was created by Congress for this exact circumstance and has collected insurance premiums in anticipation of catastrophic events like the RTI bankruptcy,” said USWA District 1 Director David R. McCall in a press release. “It’s outrageous for this government agency to abdicate its fiduciary responsibility to the workers who had long looked to it for protection.” McCall asserted that at the time of the shutdown, the PBGC was paying other companies ‘shutdown pensions’, and that the sole reason for not doing so here was partisan politics, due to a new Bush appointee to the head of the pension insurer.
>Originally, a lower court ruled in favor of the Steelworkers (See Republic Lines Up with Steelworkers, Opposes PBGC Action ). However, the three-judge appeals panel overruled the lower court, saying that is should have deferred to the PBGC argument that the ‘shutdown benefits’ would impose an unreasonable burden.