The Pension Benefit Guaranty Corp. (PBGC) today announced its intention to assume responsibility for paying pension benefits to 95,000 workers and retirees of Bethlehem Steel Corp., the nation's second-largest integrated steel maker.
The Bethlehem Steel pension plan will rank as the largest assumed by the PBGC in its 28-year history, both in terms of the number of participants and the amount of underfunding. According to PBGC estimates the plan is 45 percent funded, with $3.5 billion in assets to cover $7.8 billion in benefit liabilities. Of the $4.3 billion in total underfunding, the PBGC expects to be liable for about $3.7 billion.
"The PBGC is moving to protect the basic pension benefits of Bethlehem's workers and retirees because the company can no longer afford to maintain its pension plan," said Executive Director Steven A. Kandarian. "To safeguard the pension insurance system that protects millions of Americans, we had to act now to prevent even larger losses down the road."
The PBGC proposes to terminate the Pension Plan of Bethlehem Steel Corp. & Subsidiary Companies effective December 18, 2002 and to assume responsibility for benefits earned to that date, subject to legal limits. The plan includes more than 67,000 retirees currently receiving benefits, more than 15,000 former employees who will be eligible for a benefit at retirement age, and nearly 13,000 active workers.
"The PBGC's insurance guarantees will protect the basic pension benefits of Bethlehem Steel workers," Kandarian said. "Retirees will continue to receive their monthly checks without interruption, and other employees will receive benefits when they are eligible to retire."
With the assumption of the Bethlehem pension plan, the steel industry accounts for more than 50 percent of all claims against the federal pension insurance program but only 2 percent of covered workers. Since October 1, 2001, the PBGC has absorbed more than $6 billion in claims from steel companies. The three largest claims in the PBGC's history are from Bethlehem Steel, LTV Steel, which the agency assumed in March 2002, and National Steel, which the agency earlier this month announced it is seeking to assume.
Under federal pension law, the maximum pension guaranteed for workers in plans that terminate in 2002 is $3,579.55 a month (or $42,954.60 a year) for persons retiring at age 65. Maximum guarantees are adjusted for those who retire at ages younger or older than 65 or those who elect survivor benefits. PBGC expects that most Bethlehem retirees will receive their full basic pension benefit. However, certain supplemental benefits and benefit increases made within the last 5 years will not be fully guaranteed.
Employees and retirees do not need to take any action. Until the PBGC becomes trustee of the Bethlehem Steel pension plan, individuals who have questions or who wish to retire should contact the Bethlehem Steel plan administrator. Those with questions about the federal pension insurance program may call the PBGC's Bethlehem Information Line, 1-800-453-9584, or consult the agency Web site.
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 about 44 million American workers and retirees participating in over 35,000 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 PBGC's investment returns.