%I695332 

Pension ~enefl+ Guaranty Corporation p-wmi 1200 K Street. N.W., Washington. D.C. 200054026 

FEB 2 5 2004 

Re : Case 168863, Baldinger Baking Company 

(Baldinger) Union Pension Plan (the Baldinger Plan) 

The Appeals Board has reviewed your appeal of PBGCUs June 20, 

2002 determination of your benefit under the Baldinger Plan. For 

the reasons stated below, the Board changed PBGC1s determination by 

increasing your monthly PBGC benefit payable as a Straight Life 

Annuity (SLA) starting on your Actual Retirement Date (ARD) from 

$217.61 to $406.95 per month. 

Determination and Appeal 

PBGC determined that starting on your ARD (October 1, 1995) 

you were entitled to a monthly benefit of $217.61 payable as an 

SLA, which provides a benefit for your lifetime and no survivor 

benefit. PBGC's letter noted that you have been receiving a 

monthly benefit of $426.88 and,that PBGC would reduce your $217.61 

. final monthly benefit by $21.76 per month until you have repaid the 

overpayments, without interest. PBGC included a Benefit Statement 

showing some of your personal data and how they calculated your 

benefit. 

Your July 11, 2002 appeal stated that the date of termination 

of employment shown on your Benefit Statement is incorrect because 

you continued to work for Baldinger until February 14, 1992 when 

you "had to retire on disability" due to work-related injuries. 

Your appeal mentioned that after "Baldinger Baking. Co. merged with 

Eastbald," and after.you quit working due to work-related injuries, 

"a new contract was reached where the then working employees were 

able to make up the lost time of interrupted coverage" but that 

your disability kept you from being a "part of it." Your appeal 

also said that the reduction in your benefit would create an 

economic hardship for you. Your appeal concluded by-saying that 

the calculations shown on PBGC1s Benefit Statement are "a 

mathematical mystery" and asked whether there might be "a simpler 

wayN to show the calculations. 
4 

U 

Discussion 

m 

A 1. Your Date of Termination of Employment 'D 

a 

I 

e Documents in PBGC1s files show that the ~aldin'ger Plan 

terminated on January 26, 1991. As a result, PBGC cannot include 

your service with Baldinger after that date when calculating your 

vested benefit~under the Baldinger Plan. 

PBGC's Benefit Statement erroneously labeled January 26, 1991 

as your date of termination of employment because you were still 

actively employed on the Baldinger Plan's termination date and 

service after that date could not be used to calculate your PBGC 

benefit. We regret the inconvenience caused by the mislabeling. 

2. Offset of Your Baldinger Plan Benefit by 'the Benefit You 

Accrued under the MBU Plan 

In a telephone conversation with an appeals analyst, you 

indicated that because you did not "make up the lost time of 

interrupted coverage," you are not entitled to a benefit under the . 

MBU Plan. That appeals analyst .talked 'to the current administrator 

of the MBU Plan, and the administrator confirmed that you are not 

entitled to a benefit under the MBU Plan because you had only 8.25 

years of service under the MBU Plan, and the MBU Plan's vesting 

schedule provides zero percent vesting if a participant has fewer 

than ten years of service. 

The Appeals Board found that because the Baldinger Plan 

provisions require your Baldinger Plan benefit to be offset by the 

benefit to which you are entitled under the MBU Plan, your offset 

amount should be $0. 

3. Economic Hardshije 

PBGC provides pension insurance according to the Employee 

Retirement Incame Security Act of 1974, as amended (ERISA). If a 

plan sponsor is unable to support its pension plan, PBGC becomes . i trustee of the plan and pays pension benefits as defined in the 

plan subject to limitations set by Congress under ERISA. 

Records available to the Appeals Board reveal that . the 

Baldinger Plan terminated on January 26, 1991 and that PBGC became 

trustee of the Baldinger 'Plan on July 5, 1999. 

When PBGC is appointed trustee of a terminated plan, it pays 

pensions on an estimated basis. Estimated payments are intended to 

minimize financial hardship for retirees while PBGC prepares formal 
benefit determinations. When PBGC issues, formal benefit 

determinations, however, ERISA and PBGC regulations allow PBGC to 

recover any previous overpayments,. and it is PBGC's policy to do 

so. The Appeals Board has no authority to change PBGC policy in 

this matter. 

Please note, however, that because PBGC issued its Notice of 

Determination on May 18, 1999, PBGC regulations require repayment 

only of the overpayments you received on and after June 1, 1999. 

4. Recalculation of Your Benefit 

a. Five-Year Phase-In 

Although you requested a "simpler way" to show the calculation 

of your benefit, 'the limits on guaranteed beriefits set by Congress 

under ERISA do not allow a simple calculation. One of those 

limits, the Five-Year Phase-In, affects the amount of your PBGC 

benefit. 

Under this limit, PBGC may guarantee increases in benefits 

resulting from plan amendments only to the extent of $20 per month 

or 20% of the increase, whichever is larger, for each full year 

that the benefit increase was in effect before the plants 

termination date. For this purpose, an increase starts to be "in 

eEEectU as of its effective date or its adoption date, whichever is 

later. Since the sponsor did not adopt the original Baldinger Plan 

until May 2, 1986, the first benefit rate ($22.95 per year of 

service) was "in effect" less than five full years before the 

Baldinger Plan's termination date (January 26, 1991), and, 

therefore, the guaranteed portion of the original benefit using the 

$22.95 benefit rate is limited to $80 per month or 80% of the 

benefit, whichever is larger. 

'Similarly, since the original Baldinger Plan called for an 

increase in the benefit rate to $24.62 per year of service 

effective February 4, 1988 (less than three years before the 

Baldinger Plan's termination date), the guaranteed portion of the 

benefit increase resulting from this change is limited to $40 per 

month or 40% of the increase, whichever is larger, but not more 

than the benefit increase itself. 

Finally, since the benefit rate was again increased to $29.44 

per year of service effective as of the Baldinger Plan's May 4, 

1989 valuation date (less than two years before the Baldinger 

Plan's termination date), the'guaranteed portion of the benefit 

increase resulting Erom this change is limited to $20 per month or 

20% of the increase, whichever is larger, but not more than the 
P Q In particular, your full Baldinger-Plan benefit calculated 

*1 using the $24.62 benefit rate based on your 14 years of service as 

rO ' 1 of the Baldinger Plan's termination date is $344.68 per month, 

while your benefit calculated using the $29.44 benefit rate is 

$412 .l6. The increase in your benefit resulting from the last 

benefit increase is $67.48. Since $20.00 is larger than 20% times 

$67.88, only $20.00 of the $67.48 increase is guaranteed by PBGC. 

b. Allocation of Aseets under ERISA 5 4044 

PBGC pays benefits in excess of guaranteed benefits if a 

plan's assets as of the plan's termination date are sufficient to 

cover the benefits payable. 

In the Baldinger Plan, the assets were sufficient to provide 

the benefits calculated using the $24.62 benefit rate but 

insufficient to provide all benefits using the $29.44 benefit rate. 

Furthermore, based on PBGC's actuarial valuation of benefits 

payable under the Baldinger Plan as of the Baldinger Plan's 

termination date, PBGC determined that 82.32% of the non-guaranteed 

portion of the increase in benefits resulting from the change from 

the $24.62 benefit rate to the $29.44 benefit rate was covered by 

the Baldinger Plan's assets. 

Your full Baldinger Plan benefit calculated using the $24.62 

benefit rate ($344.68) is fully payable by PBGC because the 

Baldinger Plan's assets as of the Baldinger Plan's termination date 

were sufficient to provide it. And as noted above, PBGC guarantees 

$20.00 per month of the last benefit increase. 

The non-guaranteed portion of the last benefit increase is 

equal to $47.48 ($67.48 minus $20.00). The Baldinger Plan's assets 

as of the Baldinger Plan's termination date were sufficient to 

provide only 82.32% of this amount. Thus, $39.09 (82.32% times 

$47.48) of the $47.48 is payable out of the Baldinger Plan's 

assets. 

As a result of the above calculations, your total PBGC benefit 

payable as a result of the allocation of the Baldinger Plan's 

assets is $403.77 ($344.68 plus $20.00 plus $39.09). 

c. Allocation of the ERISA 5 4022(c) Amount 

Section 4022 (c) of ERISA allows PBGC to allocate additional 

money (the 5 4022(c) amount) to pay unfunded benefits in excess of 

guaranteed benefits. Based on PBGC's actuarial valuation of 
benefits payable under the Baldinger Plan as of the Baldinger 

Plants termination date, PBGC determined that the Baldinger Plan's 

§ 4022 (c) amount was sufficient to cover 37.88% of the unfunded, 

non-guaranteed portion of the increase in benefits resulting from 

the change-from,the $24.62 benefit rate to the $29.44 benefit rate. 

The portion of the last benefit increase that is not covered 

by the Baldinger Plan's assets is $8.39 ($412.16 minus $403.77). 

Thus, your benefit payable under ERISA § 4022(c) is equal to $3.18 

(37.88% times $8.39) . 

As a result, your total PBGC benefit is equal to $406.95 

($403.77 plus $3.18) per month payable as an SLA. 

Decision 

Having applied provisions of the Baldinger Plan to the facts 

in your case, the Appeals Board changed PBGCTs determination by 

increasing your monthly PBGC benefit payable as an SLA starting 0x1 

your ARD from $217.61 to $406.95 per month. This is the final 

agency action on the issues you raised in your appeal. You may, if 

you wish, seek court review of this decision. 

When PBGC's Insurance Operations Department (IOD), the PBGC 

office responsible for issuing benefit determination, receives a 

copy of this decision, they will change your PBGC benefit amount in 

accordance with this decision. IOD will recalculate the total 

amount of your overpayments as well as the temporaq monthly 

reduction that will be required for repayment of that recalculated 

overpayment amount. 

If you need more information about your benefit, please call 

the Customer Contact Center at 1-800-400-7242. 

Michel Louis 

Appeals Board Member