"v~ P BGC Pension Benefit Guaranty Corporation 

Pro.ect;ngAme,;ce'sPens;ons 1200 K Street, N.W., Washington, D.C. 20005-4026 

May 17, 2006 ,-----------------------, 

Re: I ICase 194601, Northwestern Steel & Wire 

Co. Pension Plan B ("Salaried Plan") 

Dear I I: 

The Appeals Board has reviewed your appeal ofthe PBGC's 

August 23, 2004 determination of your benefit under the Salaried Plan. 

In your appeal, you request a recalculation of your Salaried Plan benefit 

without applying a phase-in reduction of your Rule-of-65 shutdown 

benefit. For the reasons stated below, we deny your appeaL 

Backwund 

The Northwestern Steel & Wire Company ("Company") 

maintained two defined benefit pension plans. The Salaried Plan 

covered non-union workers, while PlanA ("Hourly Plan")(collectively, 

the "Plans") covered union workers. 

The Pension Plans Prior to 1988 

The Rule-of-65 ("R65") early retirement benefit was included in 

both the Salaried and Hourly Plans effective in 1980. Both plans 

provided an unreduced early retirement benefit to employees meeting 
certain age and service requirements, if (1) the employee was disabled, 

or (2) the Company and the employee agreed that the employee's 

retirement was mutually beneficial for the employee and the Company. 

See Exhibits lA, IE. Additionally, under the Hourly Plan an employee 

could qualify for the R65 benefit if the employee was laid offfollowing a 

plant shutdown with no prospect of future long-term employment with 

the Company. See Exhibit lB. 

Treasury Regulation 1.4U(d)-4 

In 1988, the Treasury Department issued a regulation, generally 

effective for plan years beginning on or after January 1, 1989, 

prohibiting plans from conditioning the availability of a benefit, such as 

early retirement, on the employer's consent. Treas. Reg. §§ 1.411 (d)-4, 

Q-4 through Q-9. Under this regulation, a plan sponsor was required 

to amend any such plan provisions to reflect one of the following 

options: (1) eliminate the consent requirement, (2) eliminate the benefit 

conditioned on the consent, or (3) condition the availability of the 

benefit on objective criteria set forth in the plan. Id.l 

Subsequent Plan Amendments 

To comply with the 1988 Treasury Regulation, in December 1994, 

the Company restated the Hourly and Salaried Plans, effective August 

16, 1988. The restated plan document removed the provision allowing 

participants to receive the R65 benefit with the Company's consent. 

Following these changes, the Hourly Plan continued to provide a R65 

1 Subsequent Treasury Department notices extended the time limits for adopting 

such amendments until the mid-1990s. 

2 
shutdown benefit. See Exhibits 3A, 3B. However, the Company did not 

amend the Salaried Plan to allow for the R65 benefit in the event of a 

plant shutdown until November 1998. See Exhibit 4, Second 

Amendment of Pension Plan B of Northwestern Steel & Wire Co. 

PBGC's Phase-In ofR65 Benefits in the Salaried Plan 

On August 28, 2001, PBGC terminated and trusteed both the 

Salaried and Hourly Plans. PBGC guarantees the pension benefits 

under each Plan, subject to certain limitations imposed by the 

Employee Retirement Income Security Act of 1974,29 U.S.C. §§ 1001-

1461 (2000 & Sup. III, 2003) ("ERISA"). 

One of those limitations requires PBGC to "phase in," or pay only 

a percentage of, benefit increases added to a plan within five years of its 

termination. 29 U.S.C. § 4022(b). This "phase-in" is equal to the 

greater of twenty percent of the increase in the monthly benefit, or 

$20.00 per month, for each full year the plan amendment was in effect 

before plan termination. 29 U.S.C. § 4022(b)(7). In this case, the 

Salaried Plan was amended in November 1998 to include plant 

shutdown as a qualifying event for the R65 early retirement benefit. 

Because the Salaried Plan terminated in August 2001, the amendment 

was in effect more than two years, but less than three years, before 

termination. As a result, ERISA requires PBGC to phase in such a 

benefit increase by the greater of 40% or $40. 29 U.S.C. § 4022(b)(7). 

Benefit Determination and Appeal 

In its August 23, 2004 determination letter, PBGC informed you 

that you are entitled to a monthly payment of $771. 77. PBGC's Benefit 

3 
Statement indicated that your R65 shutdown benefit was subject to a 

40%1$40 phase-in. See Exhibit 5, Benefit Statement. On October 1, 

2004, you appealed the benefit determination, contending the R65 

shutdown benefit under the Salaried Plan should not be phased-in. In 

addition, you ask why you did not receive an Additional Money Benefit 

when younger participants with less service received this benefit. See 

Exhibit 6. 

Discussion 

Additional Monthly Benefit 

As you note in your appeal, the benefit statements for some Plan 

participants indicate that they receive an "Additional Monthly Benefit 

from 4022(c)." Under ERISA § 4022(c), PBGC allocates certain 

additional funds based on its experience in recovering on claims against 

plan sponsors. 

In the Salaried Plan, the Section 4022(c) amount was fully 

exhausted in the process of partially covering benefits that were 

provided under the terms of the 1988 Plan, but that were not· 

guaranteed by PBGC or funded out of the Plan's assets. Line (6) of your 

PBGC Benefit Statement shows that your monthly benefit under the 

1988 Plan (the pre-1998 Plan) was $606.56 (as adjusted to make it 

directly comparable to the type of benefit provided under the 1998 

Plan). Your guaranteed monthly benefit was $771.77. 

Since your guaranteed monthly benefit ($771.77) exceeded your 

adjusted 1988 Plan benefit ($606.56), you were not eligible for an 

Additional Monthly Benefit under Section 4022(c) of ERISA. As we 

4 
discussed in an April 2006 telephone conversation, it was possible for a 

Plan participant who was younger than you and who had less service 

than you did to become eligible for an Additional Monthly Benefit. In 

particular, a Plan participant with significantly higher average monthly 

earnings than your own could have become entitled to a 1988 Plan 

benefit that exceeded PBGC's guaranteed benefit limitations. If you 

require further explanation regarding this issue, please feel free to call 

me directly at (800) 326-4090 (Ext. 3739). 

Reading the R66 Shutdown Benefit Provision into the Salaried Plan 

Prior to 1998 

In your appeal, you argue that even though the Salaried Plan did 

not provide the R65 benefit in the event of a plant shutdown until 

November 1998, PBGC should nonetheless calculate R65 benefits under 

the Salaried Plan in the same manner as the Hourly Plan, since it was 

the employees' understanding and the Company's long-standing policy, 

that the plans were identical. ERISA, however, requires that all 

pension plan documents be in writing2 in order to ensure that "every 

employee may, upon examining the plan documents; determine exactly 

what his rights and obligations are under the plan." H.R. REP. No. 

1280, reprinted in 1974 u.S.C.C.A.N. 4639, 5038, 5077-78. 

PBGC must discharge its duties "in accordance with the 

documents and instruments governing the plan insofar as such 

documents and instruments are consistent with the provisions of this 

2 29 U.S.C. § 1l02(a)(I) (2005). 

5 
title [Title I] and title IV." 29 U.S.C. § 1l04(a)(1)(D) (2005). Here, the 

R65 provision in the Salaried Plan, both prior to and after the 1998 

amendment, is consistent with Title I and Title IV of ERISA, so the 

Salaried Plan documents are controlling with respect to the R65 

provision. As the trustee of the Salaried Plan, PBGC is authorized "to 

pay benefits under the plan" in accordance with Title IV of ERISA. 

29 U.S.C. § 1342(d)(1)(B)(i). Consequently, PBGC must pay benefits 

according to the Salaried Plan's written terms, subject to limitations in 

ERISA. 

While there are limited circumstances in which PBGC may look 

beyond the written plan documents to determine a participant's benefit, 

such as when a plan provision is ambiguous3, such circumstances do not 

exist in this case. See Epright v. Envtl. Res. Mgmt., Inc. Health & 

Welfare Plan, 81 F.3d. 335, 340 (3d Cir. 1996) (noting that extrinsic 

evidence is only to be used when there is an ambiguity in the plan's 

terms). Here, the terms of the Salaried Plan are clear and the R65 

provision is not ambiguous; therefore, PBGC will not look to extrinsic 

evidence.4 Under the 1988 restatement of the Salaried Plan, plant 

3 "An ambiguity exists when the terms or words of a pension plan are subject to 

more than one reasonable interpretation." McDaniels v. The Chevron Corp., 203 

F.3d 1099, 1110 (9th Cir. 2000). 

4 Your appeal referred to communications from a former Company official as 

evidence of the Company's understanding that the plans were identical and the 

Company's intention to provide the R65 shutdown benefit to all employees whether 

hourly or salaried. As noted above, there are limited circumstances in which PBGC 

may look beyond the written plan documents to determine a participant's benefit, 

such as when a plan provision is ambiguous. The Salaried Plan is not ambiguous 

on the R65 benefits. Therefore, PBGC cannot take this extrinsic evidence into 

account to determine a participant's benefit. 

6 
shutdown is clearly not a qualifying circumstance for the R65 benefit. 

See Exhibit 3A. Moreover, the Salaried Plan's 1988 Summary Plan 

Description, which describes the plan provisions in plain language, also 

does not include plant shutdown as a qualifying event. See Exhibit 2. 

It was not until ten years later, as a result of the 1998 amendment, that 

plant shutdown was added as an eligible event for the R65 benefit 

under the Salaried Plan. Consequently, your benefit was properly 

calculated under the terms of the Salaried Plan. 

Decision 

For the reasons stated above, the Board denies your appeal. You 

may, if you wish, seek court review of this decision. If you need other 

information from PBGC, please call the Customer Contact Center at 

1-800-400-7242. 

Sincerely, 

Roger Cushing 

Appeals Board Member 

Enclosures 

Exhibit 1A - Salaried Plan SPD 1980 Rule-of-65 Provision 

Exhibit 1B - Hourly Plan SPD 1980 Rule-of-65 Provision 

Exhibit 2 - Salaried Plan SPD 1988 Rule-of-65 Provision 

Exhibit 3A - Salaried Plan Rule-of-65 Provision Effective 8/16/88 

Exhibit 3B - Hourly Plan Rule-of-65 Provision Effective 8/16/88 

7 
Exhibit 4 - Second Amendment of Salaried Plan 

Exhibit 5 - Benefit Statement 

Exhibit 6 - Benefit Appeal 

8