PBGC Negotiates Deal to Strengthen Pension Funding at Elkem Metals Inc.
FOR IMMEDIATE RELEASE
July 24, 2008
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced an agreement with Norwegian-owned Elkem Metals Inc. that will shore up funding for the pension plan of 1,600 workers and retirees by $17.3 million and provide another $22 million if the PBGC later takes over the plan.
Unlike instances in which the PBGC assumes responsibility for pension plans that can no longer pay benefits, Elkem's retirement plan remains ongoing and under the company's control. Under the agreement, Elkem will put more money into the plan for the benefit of its participants, and will reduce risk to the agency's insurance program by enhancing the plan's financial health.
"We will use every opportunity under federal pension law to protect the retirement security of American workers," said PBGC Director Charles E.F. Millard. "We will continue to vigilantly monitor corporate actions that may threaten pension plans and act swiftly to negotiate suitable protections like the one announced today with Elkem, and last year with Electrolux. We appreciate Elkem's desire to work with us to achieve an outcome that is favorable to its employees and retirees."
Elkem, which produces metals and other materials, ceased operations at an Oklahoma calcium carbide plant in March, and at a West Virginia silicon metal facility in December 2005. The plants stopped operating following sales to buyers who didn't assume liabilities of the company's retirement plan. As a result, approximately 80% of the plan's active participants were separated from employment with Elkem.
Elkem's plant closures spurred the PBGC to obtain a cash infusion and other guarantees for the Elkem Metals Inc. Retirement Program Plan. Under ERISA, the federal pension law that created the PBGC, the agency seeks protection in the form of a bond or escrow when more than 20 percent of a company's employees covered by a pension plan are separated from their jobs with the employer due to a cessation of operations at a facility. However, the PBGC strives to craft settlements that safeguard pension plans, while recognizing the business needs of the companies that sponsor them.
By ceasing operations at the two plants, Elkem incurred an obligation for the payment of $50.7 million in potential liabilities in the event of plan termination. In order to resolve that obligation, the company agreed to make a $17.3 million payment beyond its required funding contributions. Elkem also agreed to waive the resulting credit balance that would have allowed the company to make smaller contributions to the pension plan in the future. Also, the agreement calls for Elkem and its U.S. owners to pay up to an additional $22 million if the PBGC assumes responsibility for the plan at a later date.
The Elkem agreement follows a similar settlement made last year with Swedish-owned Electrolux Home Products Inc. for $77.5 million. That agreement was reached after the appliance maker closed a plant in Greenville, Mich. The agency acted to shore up pension funding for the benefit of the company's 2,350 former employees.
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. 08-40