PBGC Moves to Protect WCI Steel Pension Plan
FOR IMMEDIATE RELEASE
February 03, 2006
WASHINGTON-The Pension Benefit Guaranty Corporation filed suit today to prevent the underfunded pension plan of WCI Steel Inc. of Warren, Ohio, from being shifted to the federal pension insurance program. The PBGC believes WCI's corporate parent should assume responsibility for the pension plan.
With $138 million in assets to cover $255 million in obligations, the WCI pension plan is $117 million short of what it needs to pay benefits to roughly 2,000 workers and retirees. Bankrupt WCI Steel, based in Warren, Ohio, is currently a member of a family of companies under the umbrella of The Renco Group Inc. of New York City. As a result, the PBGC has a claim against the assets of all Renco "controlled group" members for the underfunding in the WCI pension plan.
On Feb. 6, the bankruptcy court will begin a confirmation hearing on a plan of reorganization sponsored by the holders of WCI's secured notes. If confirmed, the plan would transfer ownership of WCI's assets to a new corporation owned by the company's secured noteholders, risking the removal of WCI from the Renco controlled group and putting Renco's assets beyond the reach of the PBGC. According to a statement of facts filed in WCI's bankruptcy proceedings and agreed to by Renco, "the Renco Controlled Group has cash substantially in excess of the ... maximum termination liabilities" of the pension plan.
"WCI's corporate parent has more than enough money to fill the hole in the pension plan," said PBGC Executive Director Bradley D. Belt. "Renco should either assume responsibility for the plan or buy an annuity from a private insurer to cover all promised benefits."
By filing suit now to terminate the WCI pension plan, the PBGC matures its claim against the Renco controlled group for the pension shortfall and expects to achieve a full recovery. If the PBGC had waited until after the plan of reorganization was confirmed, the pension plan would have been abandoned to a liquidating corporate shell with no assets. The pension insurance program then could have been liable for $94 million of the $117 million shortfall, while workers and retirees would have forfeited up to $23 million in benefits not guaranteed by PBGC.
"Companies that make pension promises are obligated to pay for those pension promises," said Belt. "Our action today is designed to protect workers from lost benefits and the pension insurance program from an unnecessary claim."
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 30,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.
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PBGC No. 06-23