PBGC Pension Benefit Guaranty Corporation 

Protecting Americo's Pensions 1200 K Street, N.W., Washington, D.C. 20005-4026 

March 19, 2010 

Re: I· 1 Case 197454; Special Metals Corporation Salaried 

Employees Pension Plan (the "SMC Plan" or the "Plan") 

Dear"---I __ _ 

This Appeals Board decision responds to your appeal regarding PBGC's 

October 15, 2008 determination of your benefit under the Plan. As we explain below, 

we found that your appeal did not provide a sufficient basis for changing PBGC's 

determination. We must, therefore, deny your appeal. 

PBGe's Benefit Determination and Your Appeal 

PBGC's October 15, 2008 determination letter stated that, as of the date of that 

letter, you were entitled to a monthly PBGC benefit of $6,525.55, payable in multiple 

forms. The letter stated further that: 

• Your Plan Benefit is paid in the form of Option A (Joint and Survivor Annuity). 

The Option A form of benefit provides you with a monthly benefit for the rest of 

your life. Thereafter, your surviving. beneficiary will receive a portion of your 

benefit for'the rest of your beneficiary's life. 

A portion of your benefit is paid from funds rolled over from the Security Reserve 

Plan to this Plan. The Rollover Benefit is paid in the form of a 19 and 18 Year 

Certain and Continuous Annuity. The 19 and 18 Year Certain and Continuous 

Annuity provide you with a monthly benefit for the rest of your life. If you die 

within 19 years of your actual retirement date (01/01/1995), and 18 years of your 

actual retirement date (01/01/1996),any remaining payments not issued wiU be 

paid to your designated beneficiary. 

Additionally, you are also receiving a benefit paid in the form of a 16 Year 

Escalator Annuity with a 34% Joint Survivor Annuity. Upon your death, your 

beneficiary will receive the survivor portion of your benefit for the rest of your 

beneficiary's lifetime. 

The Escalator Annuity is scheduled to increase by $188.03 each July 1 through 

July 1, 2014. 

The enclosed Benefit Statement explains how we calculated your benefit. 

Please be advised that your benefit is offset by the Cigna (now Prudential) 

[benefit.] 
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Although your determination letter was r~latively long and detailed, your 

November 10, 2008 appeal letter did not directly address the letter. Instead, your 

appeal referred directly to line numbers on the Benefit Statement. For reference, we 

have included a copy of your October 15, 2008 Benefit Statement at Enclosure 1. 

Your appeal letter stated as follows: 

First your item 1 of Benefit Calculation indicates that the portion of my total 

monthly pension due to my annuity purchases was $4,028.99. Assuming this 

was as of May 1, 2004 that is correct. 

Your item two refers to Benefit Due to Rollovers, not including plan subsidies, 

implying that the pension plan subsidized my annuities. This is NOT correct. 

The COMPANY matched each of my three annuity purchases with a subsidy of 

25%. These subsidies were contributed to me as an incentive to purchase 

annuities. The company did NOT contribute these subsidies to the pension plan 

and should be considered as part of my Benefit Rollover as opposed to a 

Pension Plan payment and therefore not subject· to the pension maximum. 

Enclosed is a copy of all three annuity contracts indicating that the company 

match was for increasing my annuity purchases ·and NOT a contribution to the 

pension plan. Correcting this difference would add $378.58 to my monthly 

pension. 

If my appeal re company subsidies is denied I appeal your item 2, which 

indicates that $2,817.26 of the $4,028.99 annuity payment, or 69.92%, was due 

to my, non subsidized, funds. My contribution, in each case was 75%, see 

enclosed, so the non subsidized amounLshould be $3,021.74. Correcting this 

difference would add $204.48 to my monthly pension. 

Your item 8, there is no indication as to how the amount of $188.03 was 

calculated.· My original contract was for $194.74. I assume amount would 

change depending on outcome of appeal re Rollovers. ( 

In addition to the above I request a written explanation of the length of time I will 

receive benefits (IE lifetime) as well as to what benefits my survivor will receive 

and for how long. Pending your response I reserve the right to appeal your 

position on these issues. 

In summary, my position is that none of my annuity income is subject to the 

PBGC maximum. None of this income comes out of pension plan funds as it is 

all paid by annuities purchased from third parties. Pension plan funds were not 

used to purchase the annuities and the Pension Plan was only the administrator. 

Lastly I appeal the amount of lump sum payment previously received and reserve 

the right to appeal the lump sum payment mentioned in your October 15, 2008 

letter but cannot provide details pending resolution of above. 

With your appeal, you included copies of the documents by which you transferred 

partial account balances from your account under the Inco Security Reserve Plan (the 

"ISRP"), an individual-account plan, to the Retirement Plan of· Inco Limited and 

Subsidiaries (the "Inco DB Plan). You claim that these documents show that Inco 
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Limited agreed to pay an additional 25% to provide you with larger benefit for each of 

the transfers. 

Legal and Factual Background 

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 qualified defined-benefit pension plan, PBGC becomes trustee of the plan 

and pays benefits as defined in the plan, subject to the limitations and requirements set 

by Congress under ERISA. . 

Records available to the Appeals Board show that the Inco DB Plan, to which 

you transferred your account balances, changed its name to the Retirement Plan of Inco 

Alloys International, Inc. in 1997 [for simplicity, we will continue to refer to that plan as 

the "Inco DB Plan"], and later merged into the SMC Plan. Thus, benefits that were 

previously payable under the Inco DB' Plan became payable under the SMC Plan after 

the merger. 

As you rolled over your own money from the ISRP, PBGC applied ERISA's 

Maximum Guaranteed Benefit ("MGB") limit only to the portion of your SMC Plan benefit 

that was above the annuity value of your rolled-over account balances. In other words, 

PBGC is (1) fully paying you any monthly benefits directly attributable to the account 

balances that you transferred from the ISRP to the Inco DB Plan; (2) determining the 

monthly benefits directly attributable to those account balances based on the standard 

PBGC definition of actuarial equivalence in effect on the date of each transfer; and 

(3) subjecting to ERISA's MGB limit only the amounts of your monthly benefits over and 

above the amounts that are directly attributable to your account balances. 

Discussion 

1. Whether the Transfers of Your ISRP Account Balances Were Subsidized by Inco 

Limited or by the Inco DB Plan 

Section 9.8 of the 1997 Restatement of the Inco DB Plan describes the funding 

of pensions payable from the Inco DB Plan. See Enclosure 2 for selected pages of the 

1997 Restatement. Section 9.8A states in pertinent part as follows: 

A supplemental benefit shall be payable under this Section 9.8A at the 

time benefits commence (and shall be contingent until such time as a final 

irrevocable payment election is in effect for benefits accrued under the Security 

Reserve Plan) equal to 25% of the actuarially equivalent annual benefit, ... -

Based on the above section of the Inco DB Plan, we have concluded that the 

25% additional annuity payment is a subsidy provided by the Inco DB Plan .. Whether 

Inco Limited paid an additional amount into the Inco DB Plan's trust at the time of the 
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transfer or later does not affect its character. The 25% additional annuity is an 

employer-provided benefit payable l.mder the Inco DB Plan. 

Similarly, when you rolled over a part of your ISRP balance to select an Escalator 

Annuity, your balance was not even enough to fund the first 16 years of the Escalator 

Annuity. The portion of the Escalator Annuity after the 16th year was payable in 

accordance with section 9.8B of the Inco DB Plan. Section 9.8B is set' out starting at 

the bottom of the third page of Enclosure 2. 

PBGC also determined that your balances were not sufficient to provide 75% of 

the annuity amounts specified in the transfer documents you signed. Thus, the portion 

the annuity amounts stated in your transfer documents that are higher than the amounts 

, that ,your balances would have purchased on the annuity market at the time of your 

transfers are annuity amounts that are subsidized by the Inco DB Plan's trust fund. 

Please note that while the documents that you signed when you rolled over your 

balances from the ISRP state that you elected to transfer your funds "to obtain an 

annuity," they do not state that an annuity would be purchased for you from a third 

party, and, in fact, no third-party annuities were ever purchased for you. The entirety of 

your monthly' benefit has always been paid directly from the Inco DB Pian's funds. 

2. The'Annuity Value of Your Three Roll-Over Balances 

You had three separate Rollovers, which we have labeled A, B, and C in the 

table below. For each Rollover, PBGC calculated the amount of the monthly annuity 

that could have been purchased on the private annuity market. As in other cases where 

balances from individual-account plans have been transferred to the trust fund of a 

PBGC-trusteed defined-benefit plan, PBGC. used its standard valuation assumptions 

that were in effect at the time of each transfer as a proxy for the private annuity market 

rates. These amounts so calculated are considered the participant-funded portion of 

the Rollover benefits. The results of these calculations are shown in the following table. 

Total Plan Participant- Plan- Plan 

Date of Amount of Annuity Benefit Rollover Funded Funded Funded 

Rollover Transfer Transfer Start Date Form Benefit Portion Portion Percent 

19-Year 

Certain 

and 

A 111993 $312,000 01/01/1995 Continuous $3,053.99 $2,188.42 $865.57 28,34% 

18-Year 

Certain 

and 

B c::=:::J1993 $40,000 01/01/1996 Continuous $390.78 $273.16 $117.62 30.10% 

C c=:::Jt993 $80,000 07/01/2001 Escalator $194.74' $118.56' $76.18' 39.12% 

Initial benefit amount increases by the same amount each year for 13 years. 
-5-

Using PBGC's standard annuity valuation .assumptions for March 31, 19932 and 

September 30, 19933

, the Appeals Board's actuarial consultants (Bolton Partners of 

Washington, DC) matched the above Participant-Funded Portion amounts exactly for 

Rollovers A & B and matched the Rollover C amount within $4" which we have 

concluded was due to rounding or a slightly different calculation algorithm. Therefore, 

we have accepted PBGC's calculations of the participant-funded portions of your 

rollover benefits. . 

3. Total PBGC Benefits Payable to You and Your Spouse 

Enclosure 3 is the more detailed Benefit Statement that you 'requested in your 

appeal letter. Based on the detailed calculations at Enclosure 3, the following tables 

show the PBGC benefits payable to you and your spouse. 

Plan Rollover Rollover Rollover Participant's Total 

Dates Payable Benefit A B C PBGC Benefit 

11/01/2003 -

06/30/2004 $1,663.15 $2,977.21 $380.90 $564.09 $5,585.40 

07/01/2004 -

06/30/2005 $1,663.15 $2,977.21 $380.90 $752.12 $5,773.43 

07/0112005 -

06/30/2006 $1,663.15 $2,977.21 $380.90 $940.15 $5,961.46 

07/01/2006 -

06/30/2007 $1,663.15 $2,977.21 $380.90 $1,128.18 $6,149.49 

07/01/2007 -

06/30/2008 $1,663.15 $2,977.21 $380.90 $1,316.21 $6,337.52 

07/01/2008 -

06/30/2009 $1,663.15 $2,977.21 $380.90 $1,504.24 $6,525.55 

07/01/2009 -

06/30/2010 $1,663.15 $2,977.21 $380.90 $1,692.27 $6,713.58 

07/01/2010 -

06/30/2011 $1,663.15 $2,977.21 $380.90 $1,880.30 $6,901.61 

07/01/2011 -

06/30/2012 $1,663.15 $2,977.21 $380.90 $2,068.33 $7,089.64 

07/01/2012 - / 

06/30/2013 $1,663.15 $2,977.21 $380.90 $2,256.36 $7,277.67 

07/01/2013 -

06/30/2014 $1,663.15 $2,977.21 $380.90 $2,444.39 $7,465.70 

07/01/2014 and after $1,663.15 $2,977.21 $380.90 $2,632.42 $7,653.73 

If you were to die first, your wife would have received or will receive the following 

benefit amounts. 

2 

3 

PBGC's valuation assumptions on March 31, 1993 were a 5.25% immediate interest rate and a 

4.5% interest rate for the first 7 years of any deferral period and 4% for any remaining deferral 

periods, with UP84P1 mortality for males and UP84M4 for females. 

PBGC's valuation assumptions on September 30, 1993 were a 4.75% immediate interest rate 

and a 4.0% interest rate for any pre-retirement deferral period, with UP84P1 mortality for males 

and U P84M4 for females. 
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Plan. Rollover Rollover Rollover Beneficiary's Total 

Dates Payable Benefit A B C PBGC Benefit 

11/01/2003 -

06/30/2004 $831.58 $2,977.21 $380.90 $564.09 $4,753.78 

07/01/2004 -

06/30/2005 $831.58 $2,977.21 $380.90 $752.12 $4,941.81 

07/01/2005 -

06/30/2006 $831.58 $2,977.21 $380.90 $940.15 $5,129.84 

07/01/2006 -

06/30/2007 $831.58 $2,977.21 . $380.90 $1,128.18 $5,317.87 

07/01/2007 -

06/30/2008 $831.58 $2,977.21 $380.90 $1,316.21 $5,505.90 

07/01/2008 -

06/30/2009 $831.58 $2,977.21 $380.90 $1,504.24 $5,693.93 

07/01/2009....: 

06/30/2010 $831.58 $2,977.21 $380.90 $1,692.27 $5,881.96 

07/01/2010 -

06/30/2011 $831.58 $2,977.21 $380.90 $1,880.30 $6,069.99 

07/01/2011 -

06/30/2012 $831.58 $2,977.21 $380.90 $2,068.33 $6,258.02 

07/01/2012 -

06/30/2013 $831.58 $2,977.21 $380.90 $2,256.36 $6,446.05 

07/01/2013 -

12/31/2013 $831.58 $2,977.21 $380.90 $2,444.39 $6,634.08 

01/01/2014 - . 

06/30/2014 $831.58 $0.00 $0.00 $2,444.39 $3,275.97 

07/01/2014 -

06/30/2017 $831.58 $0.00 $0.00 $2,632.42 $3,464.00 

07/01/2017 and After $831.58 $0.00 $0.00 $895.02 $1,726.60 

4. Your Lump-Sum Backpayments . 

PBGC paid you a lump sum of $83,318.71 on October 1, 2007. This payment 

consisted of $77,063.64 in underpayments plus $6,255.07 in interest. PBGC calculated 

the underpayments based on your PBGC Estimated Monthly Benefit. At the time of 

your benefit determination letter, PBGC determined that your PBGC Final Monthly 

Benefit was larger than your Estimated Monthly Benefit and, therefore, you were due an 

additional payment of $10,531.28, consisting of $9,536.78 in underpayments and 

$994.50 in interest. Please see the tables below for details on your backpayments: 

First Lump-Sum Payment 

Actual 

Date Payment PBGC Estimated Payment Underpayment 

11/01/2003 $5,963.98 $5,445.71 ($518.27) 

12/01/2003 $5,963.98 $5,445.71 ($518.27) 

01/01/2004 $5,963.98 $5,445.71 ($518.27) 

02/01/2004 $5,963.98 $5,445.71 ($518.27) 

03/01/2004 $5,963.98 $5,445.71 ($518.27) 

04/01/2004 $5,963.98 $5,445.71 ($518.27) 
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First Lump-Sum Payment 

Actual 

Date Payment PBGC Estimated Payment Underpayment 

05/01/2004 $3,118.37 $5,445.71 $2,327.34 

06/01/2004 $3,118.37 $5,445.71 . $2,327.34 

07/01/2004 $3,118.37 $5,627.90 $2,509.53 

08/01/2004 $3,118.37 $5,627.90 $2,509.53 

09/01/2004 $4,421.33 $5,627.90 $1,206.57 

10101/2004 $4,421.33 $5,627.90 $1 ;206.57 

11/01/2004 $4,421.33 $5,627.90 $1,206.57 

12/01/2004 $4,421.33 $5,627.90 $1,206.57 

01/01/2005 $4,421.33 $5,627.90 $1,206.57 

02/01/2005 .$4,421.33 $5,627.90 $1,206.57 

03/01/2005 $4,421.33 $5,627.90 $1,206.57 

04/01/2005 $4,421.33 $5,627.90 $1,206,57 

05/01/2005 $4,421.33 $5,627.90 $1,206.57 

06/01/2005 $4,421.33 $5,627.90 $1 ;206.57 

07/01/2005 $4,421.33 $5,810.09 $1,388.76 

08/01/2005 $4,421.33 $5,810.09 $1,388.76 

09/01/2005 $3,118.37 $5,810.09 $2,691.72 

10101/2005 ·$3,118.37 $5,810.09 $2,691.72 

11/01/2005 $3,118.37 $5,810.09 $2,691.72 

12/01/2005 $3,118.37 $5,810.09 $2,691.72 

01/01/2006 $3,118.37 $5,810.09 $2,691.72 

02/01/2006 $3,118.37 $5,810.09 $2,691.72 

03/01/2006 $3,118.37 $5,810.09 $2,691.72 

04/01/2006 $3,118.37 $5,810.09 $2,691.72 

05/01/2006 $3,118.37 $5,810.09 $2,691.72 

06/01/2006 $3,118.37 $5,810.09 $2,691.72 

07/01/2006 $3,118.37 $5,992.28 $2,873.91 

08/01/2006 $3,118.37 $5,992.28 $2,873.91 

09/01/2006 $3,118.37 $5,992.28 $2,873.91 

10/01/2006 $3,118.37 $5,992.28 $2,873.91 

11/01/2006 $3,118.37 $5,992.28 $2,873.91 

12/01/2006 $3,118.37 $5,992.28 $2,873.91 

01/01/2007 $3,118.37 $5,992.28 $2,873.91 

02/01/2007 $3,118.37 $5,992.28 $2,873.91 

03/01/2007 $3,118.37 $5,992.28 $2,873.91 

04/01/2007 $3,118.37 $5,992.28 $2,873.91 

05/01/2007 $5,992.28 $5,992.28 $0.00 

06/01/2007 $5,992.28 $5,992.28 $0.00 

07/01/2007 $6,174.47 $6,174.47 $0.00 . 

08/01/2007 $6,174.47 $6,174.47 $0.00 

09/01/2007 $6,174.47 $6,174.47 $0.00 

Total: $77,063.64 
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Second Lump-Sum Payment 

PBGC Estimated PBGC Final 

Date Payment Payment Underpayment 

11/01/2003 $5,445.71 $5,585.40 $139.69 

12/01/2003 $5,445.71 $5,585.40 $139.69 

01/01/2004 $5,445.71 $5,585.40 $139.69 

02/01/2004 $5,445.71 $5,585.40 $139.69 

03/01/2004 $5,445.71 $5,585.40 $139.69 

04/01/2004 $5,445.71 $5,585.40 $139.69 

05/01/2004 $5,445.71 $5,585.40 $139.69 

06/01/2004 $5,445.71 $5,585.40 $139.69 

07/01/2004 $5,627.90 $5,773.43 $145.53 

08/01/2004 $5,627.90 $5,773.43 $145.53 

09/01/2004 $5,627.90 $5,773.43 $145.53 

10/01/2004 $5,627.90 $5,773.43 $145.53 

11/01/2004 $5,627.90 $5,773.43 $145.53 

12/01/2004 $5,627.90 $5,773.43 $145.53 

01/01/2005 $5,627.90 $5,773.43 $145.53 

02/01/2005 $5,627.90 $5,773.43 $145.53 

03/01/2005 $5,627.90 $5,773.43 $145.53 

04/01/2005 $5,627.90 $5,773.43 $145.53 

05/01/2005 $5,627.90 $5,773.43 $145.53 

06/01/2005 $5,627.90 $5,773.43 $145.53 

07/01/2005 $5,810.09 $5,961.46 $151.37 

08/01/2005 $5,810.09 $5,961.46 $151.37 

09/01/2005 $5,810.09 $5,961.46 $151.37 

10/01/2005 $5,810.09 $5,961.46 $151.37 

11/01/2005 $5,810.09 $5,961.46 $151.37 

12/01/2005 $5,810.09 $5,961.46 $151.37 

01/01/2006 $5,810.09 $5,961.46 $151.37 

02/01/2006 $5,810.09 $5,961.46 $151.37 

03/01/2006 $5,810.09 $5,961.46 $151.37 

04/01/2006 $5,810.09 $5,961.46 $151.37 

05/01/2006 $5,810.09 $5,961.46 $151.37 

06/01/2006 $5,810.09 $5,961.46 $151.37 

07/01/2006 $5,992.28 $6,149.49 $157.21 

08/01/2006 $5,992.28 $6,149.49 $157.21 

09/01/2006 $5,992.28 $6,149.49 $157.21 

10/01/2006 $5,992.28 $6,149.49 $157.21 

11/01/2006 $5,992.28 $6,149.49 $157.21 

12/01/2006 $5,992.28 $6,149.49 $157.21 

01/01/2007 $5,992.28 $6,149.49 $157.21 

02/01/2007 $5,992.28 $6,149.49 $157.21 

03/01/2007 $5,992.28 $6,149.49 $157.21 

04/01/2007 $5,992.28 $6,149.49 $157.21 

05/01/2007 $5,992.28 $6,149.49 $157.21 

06/01/2007 $5,992.28 $6,149.49 $157.21 
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Second Lump-Sum Payment 

PBGC Estimated PBGC Final 

Date Payment Payment Underpayment 

07/01/2007 $6,174.47 $6,337.52 $163.05 

08/01/2007 $6,174.47 $6,337.52 $163.05 

09/01/2007 $6,174.47 $6,337.52 $163.05 

10101/2007 $6,174.47 $6,337.52 $163.05 

11/01/2007 $6,174.47 $6,337.52 $163.05 

12/01/2007 $6,174.47 $6,337.52 $163.05 

01/01/2008 $6,174.47 $6,337.52 $163.05 

02/01/2008 $6,174.47 $6,337.52 $163.05 

03/01/2008 $6,174.47 $6,337.52 $163.05 

04/01/2008 $6,174.47 $6,337.52 $163.05 

05/01/2008 $6,174.47 $6,337.52 $163.05 

06/01/2008 $6,174.47 $6,337.52 $163.05 

07/01/2008 $6,356.66 $6,525.55 $168.89 

08/01/2008 $6,356.66 $6,525.55 $168.89 

09/01/2008 $6,356.66 $6,525.55 $168.89 

10101/2008 $6,356.66 $6,525.55 $168.89 

11/01/2008 $6,356.66 $6,525.55 $168.89 

12/01/2008 . $6,356.66 $6,525.55 $168.89 

Total: $9,536.78 

DeciSIon 

Having applied Plan provisions and the law to the facts of your case, we found 

that your appeal did not provide a sufficient basis for changing PBGC's determination. 

We must, therefore, deny your appeal. This decision is PBGC's final action regarding 

PBGC's October 15, 2008 determination. If you wish, you may seek review of this 

decision in an appropriate federal district court. 

We regret the delay in responding to your appeal and appreciate your patience 

while we completed our review. If you have other questions about your PBGC benefits, 

you may call PBGC's Customer Contact Center at 1-800-400-7242 and ask to speak to . 

the authorized representative assigned to the SMC Plan (Case 197454). 

Sincerely, 

Michel Louis 

Appeals Board Member 

Enclosures (3)