PBGC Initiates Termination of Rouge Steel Pension Plans as "Protective Measure"
FOR IMMEDIATE RELEASE
December 18, 2003
The Pension Benefit Guaranty Corporation today announced that it is filing suit in U.S. district court to terminate and become trustee of four pension plans covering 5,400 workers and retirees of bankrupt Rouge Steel Co., a producer of carbon steel products located in Dearborn, Mich.
"The PBGC is initiating this action as a protective measure," said PBGC Executive Director Steven A. Kandarian. "We believe these pension plans are affordable, and if an asset purchaser stepped forward to assume the plans, the PBGC would withdraw its notice of intent to terminate."
Rouge Steel filed for Chapter 11 bankruptcy protection on Oct. 23, 2003. The bankruptcy court will hear a motion to approve the sale of Rouge Steel's assets on Dec. 22. The only known bidder is Russian steelmaker OAO SeverStal, which stated in its asset purchase agreement that it will not assume the pension plans.
The Rouge Steel pension plans are 53 percent funded, with $140 million in assets to cover $264 million in benefit liabilities. Of the $124 million in total underfunding, the PBGC estimates that it will be liable for about $84 million. The federal pension insurance program is also at risk of incurring an additional $11 million loss for unfunded severance-type benefits if the pension plans are not terminated before the asset sale. The date of plan termination that PBGC will propose to the court is Dec. 18, 2003.
When PBGC becomes trustee of a pension plan, retirees continue to receive their monthly benefit checks without interruption. Other employees receive benefits when they are eligible to retire. Under federal pension law the maximum guaranteed pension at age 65 for participants in plans that terminate in 2003 is $43,977.24 a year. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits for about 44 million American workers and retirees participating in over 32,500 private-sector defined benefit pension plans. Information about PBGC's pension insurance program is available at the agency Web site, www.pbgc.gov.
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PBGC No. 04-16