I)' PBGe Pension Benefit Guaranty Corporation 

1200 K Street. N.W •• Washington. D.C ZOOOS-4026 

MAR.2 2 2006 

Re: Appeal I I, Case 198374, Pellet Hourly Wage 

Employee Pension Plan (the "Plan") 

Dear Ms. "---I __ ------"I: 

We are responding to your appeal of 

2005 determination regarding your monthly 

the Plan. For the reasons stated below, 

appeal. 

PBGC's September 26, 

pension benefit from 

we are denying your 

PBGC's Determination and Your Appeal 

~ PBGC determined that you are entitled to a monthly PBGC 

benefit of $1,153.63 based on your benefit starting on July 1, 

2021, in the form of a Straight Life Annuity. PBGC also 

provided you with a Benefit Statement. The Benefit Statement 

showed that your "40/15 Deferred Vested Retirement Date," which 

was the earliest date you could received unreduced benefits, was 

July 1, 2018. It also showed that the earliest retirement date 

was July 1, 2016, and that you would receive an actuariallyreduced benefit of $974.36 if you started benefits on that date. 

Your October 17, 2005 appeal asserted that you were 

"unjustly" denied pension benefits within the definition of the 

Plan's "Rule of 65" Retirement provisions. You further claimed 

that "I am being unjustly denied my pension benefit due to age 

discrimination. Many people with more age and less years of 

service are actively collecting their PBGC bene fi ts. Also, my 

understanding is that the salaried employees that worked for 

National Steel get an early option to collect ~heir PBGC pension 

at the age· of 55, but my earliest option is the age of 60. 

Also, people around the same age as myself with 30 years of 

service to NSPC are actively collecting their PBGC pension and 

are working for US Steel (who bought NSPC)." 

You noted that PBGC 

2002, and your employment 

2003. You asserted that 

terminated the Plan on December 

"officially terminated" on May 

benefits "should have been due 

6, 

19, 

and 
2 

payable on June I, 2003 for the time accrued up to the December 

date. II You also questioned PBGC's decision to terminate the 

Plan to avoid pension liability, expressing your opinion that 

"PBGC has willfully and illegally used their fiduciary 

principles to withhold my pension benefits.1I 

Your letter also stated that PBGC had miscalculated your 

years of continuous service. You claimed that "May 3, 1976 to 

Dec. 6, 2002 adds up to 26.7 years, not the 25.2 that is on my 

benefit statement." 

Background 

When National Steel Corporation (\\National") filed for 

bankruptcy on March 6, 2002, it was one of the largest 

integrated steel companies ln the united S,tates. National Steel 

Pellet Company ("Pellet") , a subsidiary of National that 

operated a mining operation in Keewatin, Minnesota, filed for 

bankruptcy along with National. 

On December 5, 2002, PBGC issued a notice of determination 

that the plan and six other pension plans sponsored by National 

should be terminated and trusteed by PBGC. At that time, PBGC 

had found that the National plans were only 47 percent funded, 

wi th roughly $1.3 billion in assets to cover more than $2.8 

billion in benefit liabilities. National further had told PBGC 

that it would make no further contributions to the plans, and 

the company had missed more than $150 million in required 

funding contributions. When it issued its notice of 

determination, PBGC had concluded that: (1) each of the seven 

plans met the plan termination criterion in Employment 

Retirement Income Security Act (ERISA) section 4042 (a) (2) that 

the plan "will be unable to pay benefits when due;" and (2) the 

Plan, as well as five of the other National plansl posed a risk 

that PBGC's long-run loss will increase unreasonably if the plan 

did not terminate, thus meeting the plan termination criterion 

in ERISA section 4042 (a) (4). 

On April 21, 2003 1 the Bankruptcy Court approved the sale 

of most of National's assets, including the Pellet operation, to 

u.S. Steel. U.S. Steel, however 1 did not assume sponsorship of 

the seven National pension plans. In May 2003 1 U. S. Steel 

completed its purchase of Pellet's assets, and this mining 

operation has remained open under U.S. Steel's ownership. Also, 

effective May 31, 2003, PBGC and National entered into an 
3 

agreement providing for the termination of the Plan (along with 

six other National Plans), establishment of December 6, 2002, as 

the Date of Plan Termination ( "DOPT"), and appointment of PBGC 

as the Plan's trustee. 

Relevant Plan Provisions 

The July 31, 1999 Amended and Restated Plan document sets 

forth your benefit rights under the Plan. Enclosure 1 is a copy 

of certain provisions in this document which address your 

entitlement to benefits. The Plan provides unreduced early 

retirement benefits under various conditions, each having its 

own set of requirements, including: 

Age 62/15 Retirement: Attainment of age 62 at the date 

of termination of employment and completion of at 

least 15 years of continuous service. See Enclosure 

1, section 2.2 of the Plan; 

30 Year Retirement: Completion of at least 30 years of 

continuous service. See section 2.3 of the Plan; 

70/80 Retirement: Completion of at 15 years of 

continuous service and (1) combined age and service 

equals 70 or more if participant has attained age 

55, or (2) combined age and service of 80 or more if 

the participant has not attained age 55. 

Additionally, the participant must meet one of the 

following conditions: (1) his or her continuous 

service is broken by layoff, disability, or a 

permanent shutdown of a facility; (2) he or she 

retires after electing to be placed on layoff status 

under the provisions of the Basic Agreement 

applicable to a permanent Shutdown; or (3) after 

being placed on layoff following a permanent 

shutdown, he or she accepts a job with an Employing 

Company but then elects to retire within 90 days. 

See section 2.6 of the Plan; and 

"Rule of 65 11 Retirement: Completion of 20 years of 

continuous service and combined age and service is 

greater than 65 but less than 80 at retirement. 

Addi tionally, the participant must meet one of the 

following conditions: (1) his or her continuous 

service is broken by layoff or disability; (2) he or 
4 

she retires after electing to be placed on layoff 

status under the provisions of the Basic Agreement 

applicable to a permanent shutdown; or (3) after 

being placed on layoff following a permanent 

shutdown, he or she accepts a job with an Employing 

Company but then elects to retire within 90 days. 

See section 2.7 of the Plan. 

Section 2.8 of the Plan sets forth the requirements for the 

"Deferred Vested Pension." If the participant terminated 

employment after· attaining age 40 and completing at least 15 

years of service, this pension is unreduced for payments 

beginning at age 62. However, the benefit is actuarially 

reduced from age 62 in accordance with the table in section 

3.3 (c) (2) if payments begin at an earlier age. If the 

participant terminated employment before attaining age 40, or 

after attaining age 40 but before completing 15 years of 

service, the pension is payable in full at age 65. However, for 

this group of participants, the benefit is actuarially reduced 

in accordance with the table in section 3.3 (c) (3) for start 

dates between ages 60 and 65. 

Law and Regulations 

When the Plan terminated on December 6, 2002, it did not 

have sufficient assets to provide all benefits PBGC guarantees 

under Title IV of the Employee Retirement Income Security Act 

("ERISA") . The terms of the Plan, the provisions of ERISA, and 

PBGC regulations and policies determine your entitlement to a 

guaranteed benefit. 

Section 4022 (a) of ERISA provides that subj ect to certain 

limitations, the PBGC shall guarantee the payment of all 

nonforfeitable benefits under a covered plan that terminates. 

ERISA defines a "nonforfeitable benefit" as: 

II • a benefit for which a participant has satisfied 

the conditions for entitlement under the plan or the 

requirements of [ERISA] (other than submission 

of a formal application, retirement, completion of a 

required waiting period, or death in the case of a 

benefit which returns all or a portion of a 

participant's accumulated mandatory employee 

contributions upon the participant's death).l1 
5 

ERISA § 4001 (a) (8). See also 29 Code of Federal Regulations 

("CFR") § 4001. 2 (definition of IInonforfeitable benefit T1). PBGC 

regulations provide that a guaranteed benefit, among other 

conditions, must be nonforfeitable as of the plan's termination 

date. See 29 CFR § 4022.3. 

As discussed under "plan Provisions, /I one requirement for 

"Rule of 65" Retirement is that the participant's termination of 

employment is due to disability, a break in continuous service 

due to layoff, or retirement after a permanent shutdown. 

Conditions such· as this, which involve how the employment 

relationship is terminated, are substantive requirements 

established under pension plan terms that must be satisfied by 

the plan's termination date. See Fetty v. PBGe r 915 F. Supp. 

230 (D. Colo. 1996), aff'd, 104 F.3d 367 (10th Cir. Dec. 23, 

1996), cert. denied 522 U. S. 812 (1997) (subsidized early 

retirement benefits based upon plan shutdown are not guaranteed 

if the shutdown occurs after the date of plan termination); see 

also PBGC v. Republic Technologies Int'l, 386 F.3d 659 (6th Cir. 

2004) (court affirms PBGC's selection of a pre-shutdown 

termination date that avoided vesting of shutdown benefits) . 

Section 4044 of ERISA requires PBGC, as the Plan's trustee, 

to allocate plan assets to plan benefits as of the plan's 

termination date. plan assets are allocated to nonforfeitable 

benefi ts before they may be allocated to forfeitable benefits. 

Also, PBGC may allocate an additional amount to unfunded, 

nonguaranteed benefits that is based on PBGC's recoveries on its 

claims against plan sponsors (see ERISA § 4022 (c) ) . For your 

Plant however I PBGC has determined that the Plan's assets and 

the 4022(c) amount were insufficient to pay any forfeitable 

benefits. 

Discussion 

According to PBGC's Benefit Statement, you were born on 

~----~I, 1956, and you were hired by Pellet on MayO, 1976. On 

the DOPT t which was December D 2002 t you were 46 years old and 

had 25 years and 3 months of continuous service. PBGC records 

and your appeal indicate that your employment with Pellet after 

DOPT. 
6 

1. Your Claim for "Rule of 65 11 Retirement 

It is undisputed that you met the combination of age and 

service for this type of benefit. However t as stated above 

under "Plan Provisions ,II an additional requirement for "Rule of 

65 11 Retirement is that your continuous service be broken due to 

layoff or disability, or that you retired following a permanent 

shutdown. You asserted that you met this requirement because, 

when your employment with Pellet terminated in May 2003, Pellet 

had ceased to exist as a result of the sale of its assets to 

u.s. Steel. 

As discussed above in "Law and Regulations, II ERISA and PBGC 

regulations require (among other things) that a guaranteed 

benefit be nonforfeitable as of the pension plan's termination 

date. This means that you must satisfy the substantive 

conditions for entitlement to the benefit, including any 

requirements that are based on how the employment relationship 

is terminated, as of the Plan's DOPT. In your case, you did not 

satisfy all of the conditions for "Rule of 65 11 Retirement as of 

DOPT. Rather, the termination of your employment with Pellet 

and the sale of Pellet's assets to U. S. Steel both occurred 

after DOPT. 

2. Your Continuous Service 

According to data PBGC obtained from the Plan 

administrator, you were on layoff from April 24, 1982, to August 

13 I 1989, for a total of seven years and approximately four 

months. The Plan provides generally that continuous service is 

broken after an employee<has been absent for two years due to a 

layoff. See Enclosure 2, section 5.1 of the Plan. However, if 

a participant lS absent due to a layoff and returns to work 

after July I, 1994, the break in service is removed and the 

participant is credited with up to five years of continuous 

service during the layoff period (measured from the date the 

participant last worked, but not to exceed the length of the 

absence from work). AdditionallYI a 1993 Letter of Agreement 

between National and the United Steelworkers of America 

increased the five-year period to six years. See Enclosure 3. 

Therefore, you were granted only six years of continuous 

service for the time you were on layoff, instead of the entire 

elapsed time between your date of layoff and your date of rehire. Also, as you recognized in your appeal, PBGC cannot count 
7 

a participant! s service beyond DOPT in determining the 

participant I s guaranteed benefit. The table below summarizes 

how your continuous service up to DOPT is calculated. 

Dates Elapsed Time Continuous Service 

MayO, 1976 to April [J, 6 years 6 years 

1982 

April D, 1982 to August 7.33 years 6 years 

0, 1989 (Layoff) 

August 0, 1989 to 13.25 years 13.25 years 

DecemberO, .'2002 

Totals 26.58 years 25.25 years 

Please note that he 25.25 years of continuous service used 

to calculate your benefit is the same that the former Plan 

administrator used and is the amount shown in PBGC's benefit 

statement. Thus, the Appeals Board found no basis to change 

your continuous service. 

3. Other Claims in Your Appeal 

You asserted that PBGC's denial of your claim for benefits 

under the Plan! s "Rule of 65 11 Retirement provisions is unjust 

and due to age discrimination. You stated that other Pellet 

employees who are older than you but have less years of service 

are collecting benefits from PBGC. You also considered it 

unfair that salaried employees who worked for National Steel 

could elect to start receiving their benefits at age 55, but 

your earliest benefit start date is at age 60. 

The differences you observed are explained by Plan terms. 

For example, as you noted, the Plan provides that employees with 

more than 15 but less than 30 years of service generally cannot 

start receiving benefits until they reach age 60. The Pellet 

Salaried Employees Pension Plan, on the other hand, allows 

salaried employees to start receiving benefits·at age 55 if they 

have 15 years service. PBGC guarantees the benefits of both 

groups of retirees and must pay benefits due to them based on 

the terms of their respective plans, subject to the requirements 

and guarantee limits of ERISA. ERISA § 4022(a). Neither ERISA 

nor any other law applicable to PBGC provides a basis for PBGC 

to pay additional benefits to you for the reasons you asserted. 
8 

You also stated that PBGC had started paying benefits to 

3D-year employees upon the sale of Pellet's assets to u.s. 

Steel. Please note that such payments have occurred because 

PBGC concluded that Plan participants could qualify for a 

guaranteed 3D-Year Retirement, if they had completed at least 30 

years of continuous service as of DOPT. Since a layoff or a 

permanent shutdown was not a requirement for 3D-Year Retirement, 

ERISA permitted PBGC to guarantee this type of benefit for these 

participants even though Pellet was still operating at DOPT. 

PBGC concluded, however, that it could not start payments to 30-

year employees while they were working for Pellet, since neither 

Plan provisions nor PBGC policy permit participants to receive 

benefits while they were working for Pellet or a member of its 

controlled group. PBGC also concluded that eligible employees 

could start receiving benefits after the sale, even if they 

worked for U.S. Steel, based on PBGC's finding that U.S. Steel 

was an unrelated party who did not assume any of the pension 

liabilities. Thus, since the requirements for 30-Year 

Retirement were different than for "Rule of 65 U Retirement f the 

Appeals Board found no inconsistency in PBGC's treatment of the 

two types of benefits. 

You also asserted that PBGC "has willfully and illegally 

used their fiduciary principles to withhold my pension 

benefits. II You felt that PBGC terminated the Plan prematurely 

to avoid some pension liability. 

PBGC determined that seven of National's pension plans had 

to be terminated, primarily because National stopped funding 

them and no one else wanted to sponsor them. PBGC had found 

that the pension obligations for the seven plans exceeded the 

plans' assets by approximately $1.5 billion at the time of their 

termination. PBGC also decided that one of the reasons for the 

Plant s termination (as well as for five other National plans) 

was to prevent PBGCt s long-run loss from increasing 

unreasonablYt which PBGC concluded likely would occur if a later 

DOPT was established. 

ERISA specifically permits PBGC to seek termination of a 

pension plan to prevent unreasonable long-run loss to PBGC. 

ERISA § 4042(a) (4). As a Federal court of appeals has stated, 

"ERISA provides for involuntary termination proceedings 

precisely so that PBGC can protect its own financial interests 

and 'avoid any unreasonable deterioration of the financial 

condition of the plan or any unreasonable increase in the 
9 

liability of the fund.'" PBGC v. Republic Technologies IntI}, 

386 F.3d 659, 668 (6th Cir. 2004). 

Furthermore, section 4048(a) (3) of ERISA provides that, 

when PBGC terminates a pension plan, the date of plan 

termination is Uthe date established by the [PBGC] and agreed to 

by the plan administrator." If an agreement on the date cannot 

be reached, section 4048{a) (4) provides that the termination 

date is established by the court. As discussed above, PBGC and 

National entered into an agreement establishing December 6, 

2002, as DOPT. ' Please note that the Appeals Board has no 

authority to chan~e an established plan termination date. 

Decision 

Having applied Plan provisions, the law, and PBGC 

regulations to the facts in your case, we found no basis for 

changing PBGC's September 26, 2005 determination. This is the 

PBGC's final action in your case and you may, if you wish, seek 

court review of this decision. I f you need other information 

from PBGC, please contact the Customer Contact Center at 1-800-

400-7242. 

Sincerely, 

Charles W. Vernon 

Chair, Appeals Board 

Enclosures