"Vf\ 

PBGC 

Pension Benefit Guaranty Corporation 

1200 K Street, N.W., Washington, D.C. 20005-4026 

www.pbgc.gov 

March 30, 2007 

Re: ~ ____________ ~I, ~I __________ ~--~I, Case 198881 

Reliant Industries, Inc Rock Falls Pension Plan (the "Plan") 

Dear ~----------~I : 

The Appeals Board has reviewed your appeal of PBGC's 

August 29, 2005 limited-scope determination of I I benefit 

eligibility. As explained below, we must deny your appeal for a 

70/80 Retirement benefit under the Plan's Special Early Retirement 

Option ("SERO"). However, we are increas ing I I service 

slightly, from 19 years 4 months to 19 years 5 months. 

Background 

• Effective September 27, 2002, I I was laid off because 

"Reliant Fastener will be shutting down operations." 

• 

• 

• 

A month later, 

October [J, 2002. 

applied to retire effective 

The Plan termination date was October 31, 2002. 

discussion on page 3 of this letter. 

See the 

PBGC started I I estimated PBGC benefit payments 

effective December I, 2002 (age 55), using amounts calculated 

by the Plan's former actuary: 

(i) $201.29 per month for 5 years, and 

(ii) $103.27 per month beginning at age 60 and for his 

lifetime thereafter. 

The $201.29 amount was not calculated under the SERO. See 

page 6 of this letter. 
• 

-2-

On March 28, 2005, PBGC wrote to ,LI~~====~I~t~h~a~t~ he had been 

put into pay prematurely. Until 1 final PBGC 

benefit is determined, PBGC offered two Choices for receiving 

his estimated benefit, either: 

(1 ) Stop payments entirely until age 60. Beginning 

December 1, 2007, ,---I _____ 1 could receive a $287.61 per 

month benefit until age 65. Beginning December 1, 2012, 

I I would receive $115.62 per month for his 

lifetime thereafter. 

- or -

(2) Receive an estimated benefit of $173.35 per month until 

age 65, and $1.66 per month for his lifetime thereafter. 

We found the $173.35 amount was a recalculated estimated 

Deferred Vested Termination Benefit. See the calculations on 

page 6 of this letter. The $173.35 amount does not include 

the reduction "to offset the prior payments" which you 

suggested in your appeal. 

• In response to your and 1 inquiries, PBGC sent a 

letter on July 13, 2005, explaining: 

(A) 1 1 was not eligible for the SERO because he was not 

age 55 when the Plan terminated October 31, 2002, and 

(B) PBGC cannot guarantee a benefit by allowing a participant 

to "grow-into" eligibility after a Plan's termination date. 

• Absent a response to PBGC's March 28, 2005 offer, PBGC decided 

to apply Choice (2) for paying I I estimated PBGC 

benefit. Thus, effective September 1, 2005, PBGC changed c=J 

1 1 estimated benefit to $173.35 per month. 

Benefit Determination 

• On August 29, 2005, PBGC formally determined PBGC cannot pay 

lithe SERO. PBGC found that on the Plan's termination 

date, I I met neither the Plan's two alternative "70/80" 

SERO eligibility requirements: 

1) Age 55 and 15 years service ("Rule-of-70"). I 

failed to meet this condition because on the October 31, 2002 

plan termination date, he had not yet reached age 55. His 55th 

birthday was on November 5, 2002. 

2) Age and service Total 80 or more ("Rule-of-80"). He failed 

to meet this condition because on October 31, 2002, his age 

plus service totaled less than 80 years. I I age was 

less than 55, and his service from his May 23, 1983 hire date 

totaled less than 20 years. 
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PBGC also found I was not entitled to the SERO's 

Special Retirement Payment, equal to 13 weeks vacation pay in 

lieu of 3 months pension. 

PBGC's August 2005 determination was limited to the issue of 

I I entitlement to a SERO. In the near future PBGC 

will separately determine ~I ~~~~~_I PBGC benefit amount, 

form, and retirement date. 

Your Appeal 

In your October 11, 2005 appeal: 

1. You argued the Plan does not require working to age 55 to 

receive a SERO. Instead, you proposed a participant may wait 

until age 55 to start the SERO, if his employment is 

terminated earlier by a shutdown and he has at least 15 years 

of service. You cited Plan section 4.02(d). 1 You: 

(i) noted the Plan termination date was October 31, 2002, 

(ii) claimed ~~~~_ 

2002," and 

was laid off "on or about October 31, 

(iii) noted ,---I _____ ---"1 55th birthday was D days later, on 

'-1 -------,1, 2002. 

2. You concluded I I Rule-of-70 benefit is guaranteed. 

You stated, "An individual who simply needs to meet an age 

requirement remains eligible upon attaining that age." You 

cited PBGC Opinion Letter 76-69. 

3. You questioned whether the October 31, 2002 Plan termination 

date was properly set. You stated: "To define the benefits 

I I is entitled to receive by the use of a unilaterally 

decided termination date is simply unjust." 

4. Based on your conclusion that the SERO is guaranteed, you 

asked PBGC to pay I I a $7,046.00 Special Early Payment, 

under section 4.06. You submitted a worksheet showing Plan 

administrators had calculated a $7,046 Special Retirement 

Payment for I I, under the Rule-of-70 SERO. 

Discussion 

Plan Termination Date 

The Appeals Board does not have the authority to review a 

plan's termination date. See 29 CFR 4003.61 (b) (1) For your 

information, PBGC and Reliant Industries agreed on the October 31, 

A copy of the final Plan document is Exhibit B to your 

appeal. 
-4-

2002 Plan termination date. See Enclosure 1. Thus, 

termination date was set following ERISA section 4048(a) (3): 

When PBGC terminates a pension plan, the plan's 

termination date is "the date established by the [PBGC] 

and agreed to by the plan administrator." 

the 

2 

Also, Reliant Industries permanently shut down on October 31, 2002. 

Thus, even if a few employees stayed on, participants' reasonable 

expectations of the Plan's continuance were extinguished on 

October 31, 2002. 

Service Ending October 31, 2002 

The termination date you proposed, "on or about October 31, 

2002," is after the employment termination date PBGC used, 

September D, 2002. We found I I was only laid off on 

September' Df 2002, as you stated in your appeal. Further, the 

Plan allowed him to earn some service while on layoff, both for 

eligibility and his benefit amount. 3 Service used for determining 

guaranteed benefits must end on the Plan's October 31, 2002 

termination date. See the Appendix to this letter. Thus, we are 

redetermining I I service, using the elapsed time from his 

May 23, 1983 hire date through October 31, 2002. Therefore, we are 

increasing I I service from 19 years 4 months to 19 years 

5 months (rounded) . 

Rule-of-70 Requires Service to Age 55 

To qualify for the Rule-of-70 SERO, the Plan document 

requires: 

"Each Participant who (i) has completed 15 Years of 

Credited Service and who has attained the age of 55 ... 

may elect to retire, by application to the Plan 

Administrator, on an Early Retirement Date .... " See 

section 4.02(c). (underlining added) 

Also, "Retirement means termination of employment after a 

Participant has fulfilled all requirements for a Normal or Early 

Retirement Benefit." 4 Thus, the Plan provides the Rule-of-70 SERO 

only to a Participant who is age 55 when his employment is 

terminated. 

2 If 

termination 

4048(a)(4). 

an agreement on the 

date is established 

date cannot be 

by the court. 

reached, the 

See section 

3 See sections 2.49(b) and 2.50 of your Exhibit B. 

4 section 2.43 of your Exhibit B. 
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Service-to-55 Requirement Unchanged by Se ction 4.02(d) 

You questioned whether Plan 4.02 (d) , added in 1997, 

eliminated 5 section 4.02(c)'s requirement to earn service to age 

55 for a Rule-of-70 SERO. Section 4.02(d) states: 

I f a Parti c ipant separates from Service before satisfying 

t he age requirement for his or her Early Retirement Age, 

but satisfies the Service requirement, the Participant 

will be entitled to elect an Early Retirement Benefit 

upon satisfaction of such age requirement. 

Section 4.02(d) allows a Participant whose service ends before his . 

Early Retirement Age (ERA) to wait t o an ERA and "elect" an Early 

Retirement Benefit. 

The Board 

requirement to 

because: 

f ound 

earn 

Plan section 4.02 (d) d oe s not change the 

service to age 55 for a Rule-of -7 0 SERO, 

Section 4.02(d) mentions neither t he SERO nor any specifi c 

Early Retirement Benefit, 

• Section 4.02 (d) reflects a legal requirement that a plan 

provide separated and active participants alike the same 

opportunity to start an actuarially reduced benefit. Thus, 

under Plan sections 4.02 (d) and 4.02 (a) together, a 

participant with 1 5 years service may elect an actuariallyreduced benefit a t age 60, at no cost to the plan. 6 

Section 4.02(d) does not state, nor is it a legal requirement, 

that a separated participant may become eligible for every 

subsidized Plan benefit by waiting instead of earning service 

to a required age. 

Any such change in eligibility for the subsidized SERO would 

more reasonably be effected by modifying section 4.02(c). In 

particular, if 4.02 (d) eliminated the requirement to earn 

service to age 55 for the Rule-of-70 SERO, then 4.02(d) would 

conflict with 4.02(c), as explained above, and 

Any such change in Rule-of-70 eligibility would permit any 

terminated participant, after a wait of years or decades, to 

start an subsidized benefits at age 55, if he loses his job 

because of a shutdown and has 15 years of Credited Service. 

5 The prior Plan document plainly required earning service to 

age 55 for a Rule-of-70 SERG. See Enclosure 2 page 17, section 

5.05(c). We found no evidence that provision was ever changed. For 

example, see Enclosure 3. 

6 See ERISA section 206(d). 
-6-

For these reasons, the Appeals Board denied your claim that 

Plan section 4.02(d) eliminated the Rule-of-70 SERO's requirement 

to earn service to age 55. 

Former Actuary's Interpretation of Plan Document 

You stated, "the Company and actuarial experts" found c::::::::J 

,-------1 "was eligible for early retirement benefits." You showed 

Plan administrators had calculated a $7,046 Special Retirement 

Payment (" SRP") for I I, under the Rule-of-70 SERO, in 

October 2002. 

The October 2002 calculation sheet uses a September 30, 2002 

retirement date, before I I was age 55. (The monthly benefit 

is shown to start 3 months later, after the SRP's 13-week period.) 

See Exhibit E to your appeal. By making the retirement effective 

before age 55, the worksheet is erroneous, even under the Plan 

interpretation you propose. 

Regardless of what calculations were performed, on January 8, 

2003, the Plan actuary authorized paying I I only a $201.29 

non-SERO benefit, even while authorizing payment of the SRP to 

different participant. See your Exhibit H. (I 1 SERO 

benefi t would have been approximately $503.78, 7 unreduced for 

starting early. The $503.78 amount is consistent with the $173.358 

estimated ~on-SERO benefit in PBGC's March 2005 letter.) Thus, the 

actions you cite calculating SERO benefits are contradicted by 

later actions not paying such a benefit to I I. 

Even if Plan officials believed the SERO would have been 

payable based on service ending October 31, 2002, such a practice 

cannot contradict the Plan's written terms. Further, we found no 

instances until the Fall 2002 termination where Plan officials 

applied SERO provisions. Thus, any practices paying the SERO were 

new when the Plan terminated. PBGC generally gives little weight 

to any such new practices occurring when a plan terminates. We 

concluded Plan officials' practices cannot be used to change the 

Rule-of-70 SERO requirements PBGC used. 

Nonforfeitability & Opinion Letter 76-69 

PBGC may guarantee a benefit, as otherwise limited by law, if 

all conditions other than a waiting period have been satisfied when 

a plan terminates. See the Appendix to this letter. Thus, PBGC is 

guaranteeing unreduced 30-Year Early Retirement Benefits under the 

Plan, even though participants must wait until age 60 to start 

7 $2,745.06 pension earnings x 19.3333 years service PBGC 

determined x 1.1% - $80.00}. 

8 $503.78 x .3441 early commencement adjustment 
-7-

those pensions. Such 30-Year benefits do not require working to 

any particular age, in contrast to the Rule-of-70 SERO I I 

requests. 

~----~ 

I did not meet the Plan's requirements for the Ruleof -7 0 SERO when the Plan terminated He had not earned the 

required service to age 55. Therefore, his Rule-of-70 SERO is not 

guaranteed. 

Special Retirement Payment 

~ ___ ~I did not qualify for a SERO when the Plan terminated, 

as explained above. He also did not qualify for an immediate 

Normal, or Late, any other Early Retirement Benefit ("SRB") because 

he was under age 60. Instead, his guaranteed benefit is a Deferred 

Vested Termination Benefit, under Plan section 4.05. Thus, he met 

none of the Plan's eligibility conditions for the SRB when the Plan 

terminated. See section 4.06. Therefore, PBGC cannot guarantee an 

SRB for 1 I. 

Decision 

Having applied Plan provisions and the law to the facts in 

your case, we must deny your appeal. However, we are increasing 

I I service to 19 years 5 months. This letter concludes 

~ _____ ~I administrative remedies with respect to PBGC's 

August 29, 2005 determination that he is not entitled to a 

guaranteed SERO. 

PBGC will issue I a new determination of his benefit 

amount with a new 45-day right to appeal issues not decided in this 

letter. When that decision becomes final, I I may seek court 

review of PBGC's determinations with respect to the issues he has 

raised. Thank you for your patience while we carefully reviewed 

your appeal. 

Sincerely, 

Wd~. ~C 

William D. Ellis 

Member of Appeals Board 

Appendix: Non-forfeitability and Opinion Letter 76-69 

Enclosures: 

(1) Agreement for Appointment of Trustee and Termination of 

plan (3 pages) 

(2) Excerpt from Plan document, effective December 30, 1993. 

(22 pages) 
cc: 

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(3) Excerpt from Reliant Fastener-USW Collective Bargaining 

Agreement signed July 29, 1996 (6 pages)