ension Benefit Guarant 

!OO K Street. N.W., Washington. D.C. 2 

y Corporation 

100054026 

MAR 2 2 2004 

Re: 

Case 176357, GSGSB, Inc. Pension Plan (the Plan) 

The Appeals Board reviewed the appeal you filed on behalf of 

your client, of PBGC's September 26, 2002 

determination of his benefit under the Plan. For the reasons 

stated below, the Board denied the appeal in art' and granted the 

appeal in part, by deciding thatActua1 Retirement 

Date is November 1, 1997. As a result, your client's final PBGC 

monthly benefit (before recoupment) is $166.72 payable as a. 

Straight Life Annuity (SLA) . 

Determination and Appeal 

PBGC determined that your client was entitled to a PBGC 

monthly benefit starting on September 1, 1993 of $97.91 payable as 

an SLA, which provides a benefit for his lifetime and no survivor 

benefit. PBGC also determined that becausehas been 

receiving estimated payments of $675.69 per month, he received 

$29,116.19 too much, and that PBGC would reduce his final $97.91 

benefit amount by $9.79 until the overpayment has been repaid, 

without interest. As you know, the estimated $675.69 payments have 

continued while the appeal has been pending and the total 

overpayment has grown. 

1 ~ctober 1, 2002 letter to PBGC stated that he 

was receiving his correct benefit of $675.59 per month as agreed to 

in 1997, between' his lawyers and pension advisors. With his 

letter, he included correspondence from October 1997. 

On March 12, 2003, PBGC1s Insurance operations Department 

(IOD) responded to letter, explaining that PBGC 

calculated a smaller late factor based on a retirement date of 

September 1, 1993 and that Sedgwick Noble ~owndes (SNL) did not 

correctly apply the Plan's' vesting provisions in effect when his 

employment ended. IOD also advised your client that if he still 

disagreed with the September 26, 2002 determination, he should send 

a letter to the Appeals ~oard within 30 days stating the specific 
reason why the determination was wrong. 

After several. extensions' of the appeal period, your July 9, 

2003 appeal letter suggested that the Appeals Board should change 

PBGC's determination based on six "issues"' listed on pages 4 

through 6 of your appeal letter, which you described as: 

1. Effects of PBGC Delay. 

2. Initial Claim for ERISA-Protected Normal Retirement 

Benefits Was Ignored. 

3. Effect of Plan Termination. 

4. Vested Interest. 

5. Inconsistent, Inaccurate and Confusing Documents. 

6. Gravity of Financial Harm. 

The Board addresses these "issues' below in'the same order in 

which you raised them. 

1. Effects of PBGC Delay 

Your letter states that "(r)ecords and sources of information 

that may have been available in 1997, 1998 or even 1999 are no 

longer available" and that "after such a long period of time 

memories fade, details blur and fact's become fuzzy." 

While the Appeals Board does not disagree with the above 

statements, the Board notes that PBGC's determination accepted all 

of the personal data upon which SNL based.their calculation of your 

client's monthly benefit. Thus, it appears that there is no 

disagreement as to the facts. 

2. Initial Claim for ERISA-Protected Normal Retirement Benefits 

Was Ignored 

PBGC records show that the -Plan's former administrator did not 

considerto be vested either in 1991 when he f'irst 

inquired or in 1993 when he became 65 years old. 

that it was only after negotiations in 1997 that 

date of termination of employment was changed from March 27, 1987 

(the date on which he was terminated by GSGSB) to April !0, 1988. 

Before this change in his date of termination of employment, your 

client did not have the five years of service required to entitle . 

him to a vested benefit. 

In any case, however, the Appeal Board found that even if 

initial claim was "ignored," it has no effect on 
I 

m 

UI the amount of his benefit payable under the Plan and guaranteed by X I PBGC . UI 

P 4 I 3. Effect of Plan Termination. 

m 

Your appeal letter stated that "(clontrary to the PBGC defined 

benefit plan single-employer plan termination rules as I understand 

them, and acknowledging that the procedures have changed from what 

was required in 1993, it was still a requirement that affected 

participants and beneficiaries receive various notices regarding 

the Plan termination. According to a he received 

nothing." You also said that you now if the Plan 

terminated in a PBGC-defined Standard or Distress Termination. 

. . .If the Plan terminated in a Distress Termination then the PBGC 

would have had early involvement in the Plan and the lack of notice 

to and enormous discrepancy between estimated 

benefits and final benefits and the length of time in determining 

benefits is inexcusable." 

As you suggested in your appeal, PBGC provides pension 

insurance in accordance with the Employee Retirement Income 

Security Act of 1974, as amended (ERISA). If a plan sponsor is 

unable to support its Ension plan, PBGC becomes trustee of the 

plan and pays pension benefits as defined in the plan subject to 

limitations set by Congress under ERISA. 

Please note that there are two ways by which PBGC can become 

trustee of a single-employer plan. One way is under the distress 

termination procedures in ERISA § 4041. PBGC may also initiate 

termination proceedings under ERISA § 4042, if as in this case, 

PBGC determines that a plan will be unable to pay benefits when 

due. 

When PBGC institutes proceedings under ERISA § 4042, it sends 

a Notice of Determination to the plan .sponsor, stating that it 

intends to become trustee of the plan. Enclosure 1 is a copy of 

the Plan's November 24, 1997 Notice of Determination. Enclosure 2 

is a copy of the Trusteeship Agreement under which PBGC became 

trustee of the Plan on April 22, 1998. The Trusteeship Agreement 

reveals that the date of the Plan's termination, August 31, 1993, 

was the date on which the Plan's sponsor permanently ceased all 

business operations, and therefore, the date on which participants' . reasonable expectations- of the Plan's continuance were 

extinguished. 

When PBGC becomes trustee of a terminated plan pursuant to 

ERISA § 4042, it notifies interested parties 0.f PBGCrs,trusteeship 

in accordance with ERISA § 4042 (d) . ~nclosure. 3is a copy of the 
notice that was sent to on July 16, 1998. 

When PBGC becomes 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. Records available to the Appeals Board 

show that your client started receiving the benefit calculated by 

SNL in early 1998, the year in which PBGC became trustee. So, PBGC 

continued to pay that benefit amount on an estimated basis when 

PBGC took over benefit payment activities. 

During the period of time during which PBGC pays estimated 

benefits, PBGC completes several tasks, including: (1) the auait 

of plan records; (2) the calculation of PBGC benefits; and (3) the 

preparation and mailing of benefit determination letters and 

statements. 

Please note that the length of time during which a participant 

receives an estimated benefit from PBGC has no effect on the final 

PBGC benefit amount. 

4. Vested Interest. 

Your appeal letter indicatedthat you are not disputing 

employment termination date of April 30, 1988 or I that he had five years of vesting service or that he was 25% vested 

under the Plan's regular vesting schedule. 

Although your appeal letter suggested that the Plan.might have 

been top-heavy, the Form 5500 that the Plan filed with the Internal 

Revenue Service for 1991 stated that the Plan was never top-heavy. 

Your appeal letter stated that "from the 1992 Plan year Form . 

5500 filing, it appears thata partial termination, for which 100% 

vesting of participants is re ired, may have occurred in that year 

or earlier. If so, would have been, on the date of 

the Plan termination, already fully vested and his full benefit 

would be guaranteed.'' 

Please note that PBGC does not guarantee benefits that become 

vested as the result of a partial termination of a plan. 

Please also note that the Plan's Fifth Amendment, which became 

effective on October 31, 1992 and was adopted on October.6, 1992, 

changed the vesting schedule from five-year cliff vesting to 100 

percent immediate vesting. However, since1 date of 

termination of employment was April 30, 1988, his vesting . 

percentage is based on the 5-15 graded vesting schedule, the 

vesting schedule in effect on his date of termination of 
employment. The Plan changed it6 vesting schedule from the 5-15 

graded vesting schedule to the five-year-cliff vestinq schedule 

effective April 1, 1989, almost a year after1 date 

of termination of employment. 

5. Inconsistent, Inaccurate and Confusing Documents. 

Your appeal letter stated that the Form 5500 filings for the 

1993 and 1994 Plan years were "clearly inaccurate" because the 

forms indicated that the plan had not terminated during 1993 or 

1994 or in any prior year. 

As noted in item 3 above, the Plan's date of termination was 

set by the Trusteeship Agreement (see Enclosure 2), and thus, would 

not have been known by the Plan administrator when they filed the 

1993 and 1994 Forms 5500. 

Your letter also stated that "there is a crazy quilt of Plan 

restatements and amendments that appear to overlap." The Appeals 

Board regrets any confusion that the prior Plan administrator may 

have caused'by the use of retroactive amendments that may have been 

required by ERISA. The Board found, however, that it is clear that 

the 5-15 graded vesting schedule applies to the calculation of your 

client's benefit. 

6. Gravity of Financial Harm. 

Your appeal letter stated that "expended 

significant sums in pursuing legal remedies against the Plan and 

its fiduciary and retaining experts to assist him and his attorneys 

in preparing for his ERISA litigation. He also reported on his 

annual income tax return the annual pension income he received 

based on $675.59 per month. By reporting this larger.amount, which 

the PBGC now proposes to reduce by almost 909, was 

pushed into a higher tax category which, it appears, impacted his 

Social Security benefits by subjectin them to income taxation ' 

(both Federal and State). Therefore, rqp1 may be losing 

as much if not more than the PBGC, yet he had and has no recourse 

to recoup these sums.'' 

Your letter 'asked ,that "the ~&eals Board review the 

particulars ofcase and follow its own stated goal 

of carrying out its duty to recoup overpayments in a. method 

'designed to effectively accomplish its goal with minimum hardship 

to participants." 

As noted in Item 3 above, 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 (see 29 Code of Federal Regulations 5 4022.81) 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 that ERISA does not authorize PBGC to pay benefits 

larger than those provided under the terms of a terminated plan. 

7. Your Client's Annuity Starting Date. 

On page 3 of your appeal letter, you said that you understood 

that "the Plan factor used by the Planls actuary was.be1ng changed 

[by PBGCI to a reduced factor but for a longer period of timen but 

that it was "not clear how these adjustments impact his benefits or 

how the factors were determined." 

PBGC1s March 12, 2003 letter statedthat "When PBGC determined 

[your client 'sl final benefit amount, we took into consideration 

our policy that the benefit must start on the first of the month 

after the GSGSB Date of Plan termination (DOPT) which is August 31, 

1993. We determined [your client's] Actual Retirement Date as 

September 1, 1993, the first of the month following DOPT. Covering 

a shorter period of five months,.the Late Retirement Factor we used 

was 1.0518. The change in the Late Retirement Factor resulted in 

a smaller amount but also provided [your client] with an underpaid 

period which extends from September 1, 1993 until November 1, 1997. 

This underpaid period will reduce the total amount of [your 

client's1 overpayment." 

Enclosure 4 is a copy of the late retirement factors produced 

by PBGC based on the Plan's definition of actuarial equivalence. 

It shows that the late retirement adjustment factor for a . 

September 1, 1993 ARD'is 1.0518 while the late retirement factor 

for a November 1, 1997 ARD is 1.7569. Enclosure 5 shows the 

calculation of your client's PBGC benefit based on the two 

commencement dates. 

The Appeals Board reviewed applicable PBGC policy and decided 

that PBGC policy did not require a change in your client's ARD. 

Therefore, the Board decided that your client's actual^ Retirement 

Date is November 1, 1997. . . 

As a result, your client is entitled to a final PBGC monthly 

benefit of $166.72 (before reduction.for recoupment) payable as an 

SLA starting on November 1, 1997. Enclosure 5 shows the details of 

the calculation of your client's PBGC monthly benefit. 
Decision 

I Having applied Plan provisions, the law and PBGC ru1es"to the 

tu facts in this case, the Appeals Board denied the appeal in part and 

granted the appeal in part, by deciding that1 

Actual Retirement Date is November 1, 1997. As a result, his final 

PBGC monthly benefit [before recoupment) is $166.72 payable as an 

SLA . 

 his is the agency's final decision on the issues you raised. 

has exhausted his administrative remedies, .and may, 

if he wishes, ask a court to review this decision. 

When IOD receives a copy of this decision, they will 

recalculate the total overpayment and monthly recoupment amount 

before adjusting your client's monthly benefit in accordance with 

this decision. 

In the meantime,if your client needs more information about 

his benefit, he may call PBGC's Customer Contact Center' at 

1-800-400-7242. 

Sincerely, 

Michel Louis 

Acting Chair, Appeals Board 

Enclosures (5) 

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