Pension Benefit Guaranty Corporation 

Protecting America's Pensions 1200 KStreet, N.W., Washington, D.C. 20005-4026 

Office of the General Counsel February 28, 2007 

D 

Re: LI _~ _______ I Case 196053, Mosler Pension Guarantee 

Plan 

Dear ,----I ___ I: 

The Appeals Board has reviewed your appeal of PBGC's March 

28, 2005 determination regarding your monthly pension benefit 

from the Mosler Pension Guarantee Plan (the "PGP") For the 

re~sons stated below, we denied your appeal. 

Your Benefit Determination and Appeal 

By letter dated March 28, 2005, PBGC determined that you are 

entitled to a monthly benefit of $201.54. In that letter, PBGC 

also noted that this is the same amount you received from the PGP 

Plan administratqr before the PGP terminated. 

In your April 6, 2005 appeal, you stated that you should be 

receiving $357.89 per month. You further asserted that your PGP 

benefit should not be reduced based on your account under the 

Mosler Employee Stock Ownership Plan (the "ESOPII), since you 

received only a single payment of $3,874.00 from the ESOP and 

would not receive future payments due to Mosler, Inc. 's 

("Mosler's") bankruptcy. 

On April 25, 2005, an authorized PBGC representative 

responded to your appeal, stating: 

Your plan included a provision offsetting your defined 

benefit by your accumulated ESOP balance. PBGC does 

not have any authority over the Mosler ESOP plan. 

At the' time of your retirement, your Mosler pension 

benefit consisted of the PGP benefit offset by the 

annuitized value of your ESOP balance. In accordance 

with plan practice of the MOSLER PENSION GUARANTEE 'PLAN 

the prior plan administrator determined your ESOP 

monthly offset to be $156.35. Your PGP monthly 
benefit, guaranteed by the PBGC, payable from your 

retirement date of 0/2000 is $201.54. 

In a second appeal letter dated May 9, 2005, you again stated 

that your PGP benefit of $357.89 per month should not be reduced 

by the monthly equivalent of your $19,372.31 ESOP account 

balance, since most of it was never paid to you. 

Overview of the PGP, the ESOP, and PBGC's Guarantee 

The PGP, which is a defined-benefit pension plan, is part of 

a floor-offset arrangement with the ESOP. The ESOP is a 

separate, II individual account II pension plan. 1 Under the 

floor-offset arrangement, the benefit payable by the PGP is the 

amount that remains, if any, after the offset for the 

participant's ESOP benefit. 

PBGC's termination insurance program covers certain 

defined-benefit pension plans. Since the PGP is a terminated, 

defined-benefit plan covered by PBGC, ERISA requires PBGC to 

guarantee the payment of benefits under it, subject to statutory 

limits. ERISA § 4022. Therefore, after the underfunded PGP 

terminated as of October 15, 2001, PBGC became responsible for 

paying guaranteed benefits to every PGP participant and 

beneficiary based upon the terms of the PGP and ERISA's 

requirements. 

ERISA § 4021(b) (1), however, expressly excludes individual 

account plans from coverage by PBGC. Because the ESOP is an" 

individual account plan, PBGC is statutorily prohibited from 

insuring any benefits that should have been, but were not, paid 

from that plan. 

Pension Plan Terms that Define Your PGP Benefit 

The PGP plan document in effect when you terminated 

employment is the "Mosler Pension Guarantee Plan as Amended and 

Restated as of July 1, 1994" (the "1994 Plan"). A participant's 

Section 407(d) (6) of the Employee Retirement Income Security Act of 

1974 ("ERISA") defines an "employee stock ownership plan" (i.e., an "ESOP") as 

an "individual account plan" whose funds must be invested primarily in 

qualified employer securities. 

ERISA § 3(34) defines the term "individual account plan" as "a pension 

plan which provides for an individual account for each participant and for 

benefits based solely upon the amount contributed to the participant's 

account, and any income, expenses, gains, and losses, and any forfeitures .. " 

which may be allocated to such participant's account." 

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accrued benefit under the PGP (if'any) is defined under section 6 

of the 1994 Plan, which sets forth a mUlti-step benefit formula. 

The first step of the formula is to calculate a maximum 

benefit using one of two formulas, whichever produces the higher 

benefit. See 1994 Plan § 6(a) (1). Next, the offset element is 

calculated. The offset element is the sum of: (i) the 

participant's "ESOP Benefit, ,,2 if any, and (ii) the participant's 

American Standard Plan (a predecessor plan) benefit, if any. See 

1994 Plan § 6(a) (2). Once the offset element has been 

determined, the third and final step is to subtract the offset 

element from the maximum benefit. See 1994 Plan § 6(a). 

Your ESOP benefit rights are defined under the terms of the 

"Mosler Stock Ownership Plan as Amended and Restated as of July 

I, 1994" ("1994 ESOPII). That document provides that a 

participant's "Capital Accumulation" 3 will be distributed 

following his "termination of Service," unless the participant 

elects to keep his funds in the ESOP. 1994 ESOP § 13(a). The 

ESOP's terms also provided that distribution of funds from a 

participant's ESOP account could be made through cash payments 

over a five-year period. 4 

The Summary Plan Description ("SPD") for the Mosler 

Retirement Program (which covers both the PGP and ESOP) provides 

as follows: 

After the June 30th allocation to participants' 

accounts, all accounts will be "valued." The value of 

each share is determined by an independent appraiser. 

2 Section 6(b) (4) of the 1994 Plan describes the ESOP Benefit as 

follows: 

For purposes of this Section 6, the term ESOP Benefit shall mean 

the vested benefit under the ESOP. Such benefit shall be 

expressed as the life annuity Actuarial Equivalent payable at the 

Participant's Normal Retirement Date determined using 100% of the 

value of such Participant's nonforfeitable shares allocated to his 

account under the ESOP as of the valuation date preceding the 

earliest date as of which a distribution is available from the 

ESOP and including in such value any prior distributions made to 

the Participant. 

3 The term "Capital Accumulation" refers to a participant's vested, 

nonforfeitable interest in his or her ESOP account. ESOP § 2. 

4 We note that section 409(0) (1) (C) of the Internal Revenue Code 

permits ESOP distributions to occur, after termination of employment, through 

installments payments over a five-year period. 

3 
Following the appraisal, the value and the current 

worth of the accounts will be determined. Any gains 

will be added and losses will be subtracted from each 

person's account. 

PGP's Determinations of ESOP Benefit Offset Amounts 

Consistent with the ESOP's terms, the ESOP's Administrative 

Committee annually valued the ESOP's stock prices based on the 

work of an independent appraiser. This independent appraisal 

occurred as of each June 30th, which was the last date of the 

ESOP's plan year. The Administrative Committee, upon approving 

the independent appraiser's work r then used the appraiser's stock 

values (i.e., their price per share as of June 30th) for the 

entire 12-month period of the following plan year. 

Based upon information available to PBGC r the table below 

shows the stock values that the ESOP used for the four plan years 

prior to PGP's termination: 

PRICE' PER SHARE OF MOSLER, INC. STOCK 

7/1/98 - 7/1/99 - 7/1/00 - after 

Stock Type 6/30/99 6/30/00 6/30/01 6/30/015 

Preferred $100.00 $100.00 $17.38 $0 

(Series C) 

Preferred $284.58 $340.99- $70.83 $0 

(Series D) 

Common $2.40 $3.20 $1.12 $0 

Stock 

The ESOP's administrators also performed a quarterly 

accounting of the number of stock shares allocated to each 

participantrs account. Thus, for example, the stock dividends 

that accrued on Mosler's preferred stock were credited to ESOP 

accounts ana quarterly basis. 

The PGP's administrators, in calculating the amount of the 

5 We found no record that an independent appraisal occurred for June 

30, 2001. However, the benefit statements prepared for participants who 

terminated employment after June 30, 2001, indicate that the PGP's 

administrators valued Mosler stock as $0 after that date. Additionally, 

PBGC's Actuarial Case Memo states that, after June 30, 2001, the ESOP's 

account balances '",ere valued as $0. 

4 
ESOP Benefit offset to the participant's PGP benefit, used the 

account balances provided by the ESOP (which, as discussed above, 

were based on the appraised stock values). The ESOP Benefit 

offset amount was determined as of a valuation date prior to the 

first ESOP installment payment. Under the terms of the PGP, 

there was only one valuation date to determine the amount of the 

ESOP Benefit offset. We examined records PBGC obtained from 

Mosler, but did not find a single instance where the PGP revalued 

the amount of the ESOP Benefit offset after the first installment 

payment from the ESOP was made. 

Information in PBGC Records Concerning Your Benefits 

The records PBGC obtained from Mosler indicate that: 

• you were informed that the earliest date as of which an ESOP 

distribution was available to you was December, 2000; 

• your ESOP account was valued as of September 30, 2000, and 

both the ESOP Benefit offset and the amount of the first 

ESOP installment payment were calculated as of that date; 

• the value of your ESOP account as of September 30, 2000, 

which was based on the stock prices show~ in the table above 

for the 7/1/00 - 6/30/01 plan year, was $19,372.31; 

• based on the PGP's actuarial assumptions, your $19,372.31 

ESOP account balance as of September 30, 2000 was equivalent 

to a monthly payment of $156.35, payable in the form of a 

life annuity as of your normal retirement date; and 

• based on your statements in your appeal, you received an 

ESOP cash distribution on December 27, 2000, in the· amount 

of $3,874.00, which was approximately one-fifth of your ESOP 

account balance as of September 30, 2000. 

Discussion 

Your appeal asserted that your PGP benefit should not be 

reduced by an ESOP Benefit offset amount, since you received only 

a single payment of $3,874.00 from the ESOP. ERISA requires, 

however, that PBGC follow the terms of your defined-benefit plan, 

the PGP, in determining the amount of your guaranteed benefits. 

The plan documents governing the PGP provide that the ESOP 

Benefit offset amount is to be determined "as of the valuation 

date preceding the earliest date as of which a distribution is 

available from the ESOP." This provision clearly establishes 

5 
that the ESOP valuation date occurs before the date of the first 

ESOP distribution. Furthermore, as discussed above, the PGP's 

practice (which was consistent with the PGP's terms) was not to 

revalue the ESOP benefit offset after the first ESOP payment was 

made. Accordingly, based on our review of the PGP's terms and 

our examination of PGP's practice, we concluded that we cannot 

change your ESOP Benefit offset amount even though you received 

only a single ESOP installment payment. 

Thus, in accordance with sections 6(a) and 6(b) (4) of the 

1994 Plan document and based on the pension plan records PBGC 

obtained, your monthly PGP benefit is $201.54. This equals the 

$357.89 monthly benefit calculated under the PGP's benefit 

formula after the offset for the American Standard Plan benefit, 

reduced by your $156.35 monthly ESOP Benefit. 

Decision 

For the reasons stated above, the Board denied. your appeal. 

This is PBGC's final action in your case and 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. 

Charles Vernon 

Chair, Appeals Board 

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