Pension Benefit Guaranty Corporation 

75-85 

September 11, 1975 

REFERENCE: 

 [*1] 3(35) Definitions. Defined Benefit Plan

4022(a) Benefits Guaranteed. Type of Benefits Guaranteed

4043(b)(3) Reportable Events. Decrease in Participants 

OPINION: 

 This letter is to confirm the information given you by * * * in her previous phone conversation with you concerning

the points raised in your letter of June 6, 1975. 

As you have been advised, the PBGC does take the position that both of the above-captioned plans are defined

benefit plans. We base this decision on the language of § 3 of both plans, which provides, in pertinent part, that

employees shall be eligible for benefits "allocated as and to the extent mathematically calculated from time to time by

an actuary . . . (A copy of the actuarial allocation is hereto attached marked 'Exhibit A' and by specific reference made

a part hereof . . .) which based upon the payments provided for in Section 9 made by the Company into the Fund can be

provided . . . ." n1 

n1 The quoted language is taken from § 3 of the Voluntary Plan but it is essentially the same as the language of §

3 of the Union Plan. 

Exhibit A to each plan sets forth the formula, including dollar amounts, for computing each type of benefit payable

under the plans. [*2] A typical provision of Exhibit A is that found in the October 2, 1968 Exhibit A to the Voluntary

Plan which provides that: "(t)he amount of Normal Retirement benefits payable to a retired Employee in accordance with

Section 3.1 shall be $3.00 per month multiplled by the number of years of Credited Service as defined in Section 4." 

Thus, under both plans the benefits payable are computed in accordance with specified formulae, which is the

essence of a defined benefit plan. The fact that the dollar amounts to be used in the formulae may vary from time to time

does not change the basic nature of the plan; it is still one which provides for a defined benefit. 

It is also our determination that both the Union Plan and Voluntary Plan provide basic benefits, as that term is

defined under § 4022(a) of the Act (such as a normal retirement benefit and a disability benefit). We are including

herewith for your information a copy of the Corporation's proposed regulations defining basic benefits. (We expect that

the final regulations will be published in the Federal Register within the next week.) We cannot, however, determine as

yet the extent to which each participant's basic benefits will [*3] be guaranteed by this Corporation pursuant to the

limitations set forth in § 4022(b) of the Act. 

As noted above, we understand that under both plans the benefit levels may fluctuate, but this of course is not

uncommon under defined benefit plans. While a reduction in benefits does not necessarily result in a plan termination,

it is a reportable event pursuant to § 4043(b) (2) of the ACT and this Corporation must be notified of any such benefit

reductions. In the event of a termination of either the Union Plan or the Voluntary Plan, the maximum benefit level

which would be guaranteed by this Corporation would be the benefit level in effect at the date of termination. 

Finally, it is our opinion that the Act requires this Corporation to guarantee the payment of all underfunded basic

benefits under a covered pension plan upon the termination of such plan. Further, we believe that waiver of their rights

by participants would generally be inconsistent with the public policy expressed in the Act. 

Henry Rose 

General Counsel