A Fknsion Benefit Guaranty Corporation P- 1200 K Street. N.W.. Washington. D.C. 20005-4026 uDEC 1 6 2003 

Re: Appeal 11 The Retirement Plan for Salaried ~milo~ees of Sharon steel 

Corporation ("Salaried Plan," Case #: 161810) 

Dear I . . 

The Appeals Board has,reviewed your appeal of PBGC's January 3, 2000 corrected 

determination of your Salaried Plan benefit. As explained below, we are denying your appeal. 

PBGC determined that you are entitled to a benefit of $440.62 per month, payable in the 

form of a 50% Joint and Survivor Annuity. (PBGC's fust determination, dated December 21, 

1999, incorrectly said that your benefit was payable as a Straight Life Annuity with no survivor 

benefit.) PBGC noted that this amount is larger than the estimated benefit of $425.88 per month 

you have been receiving. PBGC will send you a one-time payment for the difference, whch will 

include interest from your retirement date (August 1, 1998) to the fust of the month in which 

PBGC pays you. According to your January 24,2000 appeal, your only disagreement is with the 

"phase-in" reduction to your benefit. 

The Salaried Plan adopted an amendment on March 1 1, 1988, that froze benefit accruals 

(but not vesting or eligibility service) retroactively to June 30, 1987. Because this freeze was 

retroactive and reduced participants' accrued benefits, it required IRS approval under section 

412(c)(8) of the Internal Revenue Code and section 302(c)(8) of the Employee Retirement Income 

Security Act (EFUSA). On Septemkr 8, 1988, the IRS approved the amendment. The terms of 

the amendment did not place any conditions on its effectiveness, nor, did the amendment contain 

. an expiration date. On January 1, 1989, the Plan was amended to "unfreeze" benefit accruals, 

effective June 1, 1991. This amendment did not restore benefit accruals for the peridd the freeze 

was in effect, i.e., between June 30, 1987 and June 1, 1991. 

when the Salaried Plan terminated, effective October 17, 1993, its assets were not 

sufficient to provide all benefits PBGC guarantees under Title IV of ERISA. Because of legal 

limitations under ERISA and PBGC's regulations, the benefits that PBGC guarantees may be less 

than the benefits a pension plan would otherwise pay. 
I 

PBGC's Guarantee of BeI 

;fi ERISA.sections 4022@)(1) and @)(7) phase-in PBGC's guarantee of "any increase in the 

i; 

Y, 

amount of benefits under a plan resulting from a plan amendment" made or effective within the 

five years before Plan termination. This phase-in is equal to the greater of 20 percent of the 

benefit increase per month, or $20.00 per month (but not more than !he amount of the increase), 

for each full year the Plan amendment was in effect before Plan termination. Under ERISA, the 

time a benefit increase is in effect begins with the later of the date the increase was adopted or the 

date it became effective. 

Section 4022.2 of PBGC's regulation on Ben& Payable in Terminated Single-Employer 

Planr defines a benefit increase as "any benefit arising from the adoption of a new plan or an 

increase in the value of benefits payable arising from an amendment to an existing.plain This 

section further states that "benefit increase" includes "any change in plan provisions which 

advances a participant's or beneficiary's entitlement to a benefit, such as liberalized participation 

requirements or vesting schedules, reductions in the normal or early retirement age under a plan, 

and changes in the form of benefit payments." 

PBGC treated @e Plan amendment unfreezing benefit accruals as a.benefit increase subject 

to phase-in. PBGC determined that this amendment was "in effect" under ERISA for .Go full 

years between its effective date (June 1, 1991) and the Plan's termination date (October 17, 1993). 

Thus, PBGC phased-in its guarantee of benefits attributable to post-June 1, 1991 accruals at the 

rate of 4O%/$4O per month. 

Your appeal said that the accrual freeze was intended to be temporary and the unfreezing 

merely a resumption of old benefits, not a benefit increase. To support your position, you 

included a copy of an October, 1994 affidavit from a former Sharon Senior Vice President. While 

the affidavit does assert that company oEcials intended the freeze to be temporary, it also notes 

that the intent was to unfreeze the plan "at such time as the business prospects of Sharon Steel 

Corpbration improved. " However, ERISA's phase-in rule esrablishes a "bright-line" test governed 

only by the occurrence of a benefit increase. WSA does not permit PBGC to ignore a required 

phase-in based on the intent or particular economic circumstances of a plan sponsor. Moreover, 

the tenns of the'freeze amendment did not place any conditions on its effectiveneness, nor did it 

contain an expiration date. Thus, even if the freeze was intended to be temporarjr, a plan 

amendment clearly was required to "unfreeze" the Plan. 

As a result of the March 11, 1988 freeze amendment, participants could accrue no 

additional benefits under the Salaried Plan, but instead were limited to the benefits they had earned 

as of the effective date of the freeze (June 30, 1987). Then, solely by operation of the June 1, 

1991 unfreeze amendment, participants resumed accruing benefits based on their service and 
earnings after that date. The economic impact of this amendment was to increase immediately 

after June 1. 1991 'the accbal rate of zero that was in effect immediately before June 1. 1991. 

For the.reasons described above, the Appeals Board concluded that the amendment 

unfreezing benefit accruals resulted in an increase in the value of benefits payable to Salaried Plan 

participants arising from ad amendment to an existing plan. 

Having applied the law, Plan provisions and PBGC regulations and policies to the facts id 

this case, the Appeals Board found that (I) the 1991 Plan amendment lifting the freeze on benefit 

accruals is a benefit incrk under ERISA section 4022@)(1)@); (2) the amendment wai in effect 

under ERISA'~~~ two full years before the Plan termination date; and (3) PBGC'S guarantee of 

the amount of any benefit increase resulting from the Plan amendment is phased-in at the 40%1$40 

, rate. Therefore, we found no basis for changing PBGC's determination of your benefit and must 

deny your appeal. 

This is the Agency's fml decision with respect to this matter and you may, if you wish, 

seek court review. If you have any questions, please call PBGC's Customer Contact Center at 

1-800-400-7242. 

Sincerely, 

Linda M. Mizzi 

Member, Appeals Board . .