PBiC Pension Benefit Guaranty Corporation

Protecting Americas Pensions 1200 K Street, N.W., Washington, D.C. 20005-4.026

SEP 2 5 2006

 

 

 

Re: Appeal , Can Lowrey Glass Company Retirement Plan for

Hourly Employees (the "Plan"), PBGC Case #198 136

Dear 

The Appeals Board reviewed your appeal ofPBGC's May 16,2006 determination of your

benefit under the Plan. As explained below, we found no basis for changing PBGC's

determination. However, in accordance with PBGC policy, you will be given the opportunity

to: (1) remain in pay status at the amount stated in PBGC's determination letter or (2) come out

of pay status and reapply for your benefit with a later starting date, which will result in a higher

monthly benefit amount for you.

PBGC 's Determination and Your Appeal

PBGC's determination letter told you that you are entitled to a benefit of $136.63 as a

Joint and 100% Survivor Annuity instead of the $541.44 you have been receiving on an

estimated basis. The letter explained that, because the PBGC benefit you are entitled to is less

than the amount you have been receiving, you have been overpaid ($14,168.35 as of the date of

the determination letter) and that PBGC will reduce the $136.63 by $13.68 until the overpayment

amount, without interest, has been repaid.

 e determination letter also enclosed a benefit statement that shows: (1) you were born

on July , 1950; (2) you were hired by the Can Lowrey Glass Company ("Can Lowrey" or

"the Company") on April 1970; (3) you experienced a break in service from June 1970 to

July 1973; (4) you were actively employed on June 6, 2003, which i he date of Plan

termination and also the date you last earned Plan benefits; (5) you had 33. years of credited

(benefit) service under the Plan; and (6) you retired and began receiving a Plan benefit in the

amount of $541.44 per month effective July , 2003.
-2-

Your June , 2006 letter appealed the reduction in your benefit. You said "It is my

understanding that PBGC has unilaterally removed the 'Plan Early Retirement Benefit Provision'

retroactively, which has led to a re-calculation of my pension benefits. I object to this action.

I have relied on the effect of this provision for the past three (3) years in planning my retirement

and making business decisions."

You asserted that PBGC's determination is in violation of Section 16.14 of your original

collectively bargained employment contract. Section 16.14 provides:

Retirement Due to Plant Closing - Should the company elect to

permanently close the plant during the term of this contract, an

employee under the age of fifty-five (55) whose last day worked

is within ninety (90) days of such closing and whose employment

is terminated as a result of such closing, may retire and receive a

pension benefit figured as if he were age fifty-five (55) based on

his years and months of credited service at the date of such closing,

provided he has thirty (30) or more full years of credited service at

the date of such closing.

You also asserted that the "shutdown" provision was "valid and accepted by the

Bankruptcy Court and subsequently accepted and applied by the PBGC in 2003." You stated

that you believe"it is a violation of due process, my contract rights and the Bankruptcy Court's

Chapter Eleven proceedings for the PBGC, three years after-the-fact, to reduce my benefits for

'early commencement' and causing me substantial financial harm." You asked that the Appeals

Board honor the original agreement and not reduce your benefits.

Background

Carr Lowrey Glass Company was founded in 1889. By the 1990ts, Can Lowrey was

experiencing financial difficulties. In 1998, the Company was acquired by three unrelated

companies. The new owners tried repeatedly and unsuccessfully to find a buyer for Can Lowrey

and were faced with continuing operating losses. A final search for a buyer of Can Lowrey

assets failed in May of 2003, after which the shareholders ceased their support of the Company.

On May 29, 2003, Can Lowrey publicly announced that it was ceasing all operations and

terminating virtually all of its workers on June 6, 2003. On July 10, 2003, Can Lowrey filed a

liquidating Chapter 7 bankruptcy petition.

The Plan was established effective October 1, 1989. As of June 6, 2003, the Plan had

estimated assets of $5,326,400 and estimated total benefit liabilities of $14,944,500. It was

underfunded by $9,618,100 for all benefits and by $9,310,800 for those benefits that PBGC

guarantees under Title IV of the Employee Retirement Income Security Act ("ERISA"), the law

that governs PBGC. Included in these amounts were unpaid minimum funding contributions

totaling $2,909,544.
-3..

The PBGC initiated termination of the Plan to protect the interests of the Plan participants

because the Plan had not met the minimum funding standards, because the Plan would be unable

to pay benefits when due, and because of the Plan's imminent abandonment following the

Company's liquidation. ERISA Section 4042(a) specifically permits PBGC to seek termination

of a pension plan under the conditions described above.

Furthermore, Section 4048(a)(3) of ERISA provides that, when PBGC terminates a

pension plan, the date of plan termination is "the date established by the [PBGC] and agreed to

by the plan administrator." Having decided to terminate the Plan, PBGC and the Plan

administrator agreed on September 24, 2003 that June 6, 2003 would be the date of Plan

termination. The agreement between PBGC and Can Lowrey stated that the Company ceased

operations and began to liquidate its assets on June 6, 2003, and, accordingly, "Plan participants'

expectations that the Plan would continue ceased as of that date." The Appeals Board has no

authority to change an established plan termination date.

Discussion

As noted above, when the Plan terminated, its assets were not sufficient to provide all

benefits PBGC guarantees under Title IV of ERISA. Because of legal limitations under ERISA

and PBGC regulations, the benefits PBGC guarantees may be less than the benefits a pension

plan would otherwise pay.

The Plan provides that Normal Retirement occurs at age 65. It also provides that a

participant may receive an Early Retirement benefit if he terminates employment after attaining

age 55 and earning at least 10 years of service. Such an Early Retirement benefit is unreduced

if, at the time of retirement, the participant is age 60 or has earned at least 30 full years of Benefit

Service.

Additionally, as you note in your appeal, the Plan has a special provision concerning

entitlement to Early Retirement benefits upon plant shutdown. Section 1.13 of the Plan

document provides:

in the event that the permanent closing of a plant by the Employer

results in the termination of Employment of a Participant who is

employed at such plant, then such Participant shall be entitled to

an Early Retirement Benefit, provided that at the time of such plant

closing the Participant has thirty (30) or more years of Benefit

Service. In order to receive the benefit of the preceding sentence,

a Participant must have actually worked atthe plant within ninety

(90) days of its permanent closing. Further, the employee

termination must be due to the upcoming plant closing.
Section 16.14 of the collective bargaining agreement, which is quoted on page 2, contains

similar language. The effect of these provisions is that a participant with 30 years of service may

retire and receive an unreduced benefit before age 55, provided that his employment is

terminated as a result of a plant shutdown.

You retired and were placed in pay status by the former Plan administrator, Carr Lowrey,

effective July , 2003, shortly after the Company announced its plans to shut down operations

on June 6, 2003. The records maintained by Carr Lowrey show that June 6, 2003 was the last

day you worked for the Company. When you retired, you were age 52 years and months and

had earned 33. years of credited service. Therefore, in accordance with the terms of the Plan

and the collect e bargaining agreement, the prior Plan administrator treated you as if you were

age 55 and, thus, entitled to a shutdown benefit (unreduced early retirement benefit), which the

prior Plan administrator determined to be $541.44 per month in the form of a Joint and 100%

Survivor Annuity. This benefit amount includes the offset for the benefit you earned, and which

is payable, under the Anchor Hocking Service Retirement Plan.

When PBGC became trustee of the Plan, as with all other trusteed plans, PBGC had to

collect and audit the data and records it needed to determine the Plan benefits it can legally pay.

Since this process can be complex and time-consuming, PBGC continued to pay you and the

other retirees of the Plan the benefit amounts the prior Plan administrator had calculated as

estimated benefits until PBGC could complete its review of the Plan and determine the benefits

payable under ERISA and PBGC regulations (see PBGC's letter dated December 16, 2003).

For a benefit to be guaranteed, PBGC regulations generally require that a participant

satisf' the conditions of the pension plan necessary to establish the right to receive the benefit

before the plan's termination date. 29 Code of Federal Regulations ("CFR") Part 4022.4(a).

Furthermore, PBGC has consistently held, based on this regulation, that when entitlement to a

benefit is based on a plant shutdown, the shutdown must have occurred before the date of plan

termination if PBGC is to guarantee the benefit.

In this case, the shutdown date and the plan termination date are precisely the same.

Because Carr Lowrey's shutdown did not occur before the Plan's termination date, shutdown

benefits under the Plan are not guaranteed by PBGC and, thus, PBGC is unable to pay you a

shutdown benefit. We recognize that this may cause a hardship to you, but the rules regarding

entitlement to guaranteed benefits are established by a PBGC regulation and the Appeals Board

does not have the authority to change them.

We note that, under Plan Section 3.4, participants who are at least age 55 when they

terminate employment and who have at least 30 years of credited service may receive an

unreduced early retirement benefit, even if there is no plant shutdown. Although you had more

than 30 years of credited service, both the termination of your employment and the termination
-5-.

of the Plan occurred before you attained age 55. Because you did not meet the conditions for

an unreduced early retirement benefit provided under Section 3.4 of the Plan before the Plan's

termination date, PBGC is unable to pay you that type of benefit.

The benefit to which you are entitled is determined under Article 5, "Termination of

Employment," Section 5.2, "Early Deferred Pension Benefits." This Section provides that if the

participant's benefit commences prior to the participant's normal retirement date (age 65), the

accrued benefit is reduced by one-half of one percent (V2 %) for each full month by which the

commencement date precedes the normal retirement date. Since your pension benefit began

before age 65, PBGC correctly determined that your accrued Plan benefit must be reduced in

accordance with the Early Deferred Pension provision. We also note that, for the age reduction

before age 55, PBGC used its own actuarial factors, because the Plan's factors stopped at age 55.

For this reason, the reduction based on the benefits you received before age 55 is less than the

one-half of one percent (V2 %) reduction starting at age 55.

The former Plan administrator started your pension payments at age 52 and months.

In situations such as this, where a participant is put into pay status before he is entitled to a

benefit, PBGC's policies allow the participant to choose between two options: (1) to remain in

pay status, but to receive an actuarially reduced benefit; or (2) to come out of pay status until he

or she is eligible to reenter pay status (55 is the earliest age you would be eligible). PBGC's

benefit determination is based on the first option; through an oversight, PBGC did not offer you

the second. Therefore, we are changing PBGC's determination to allow you an opportunity to

select the second option.

Decision

Having applied the terms of the Plan, the provisions of ERISA and PBGC regulations to

the facts in this case, we found no basis for changing PBGC's May 16, 2006 determination that

you are not entitled to an unreduced early retirement benefit under the Plan. This is the Agency's

final decision regarding this matter and you may, if you wish, seek court review of this decision.

However, because, you are currently receiving an early retirement benefit to which you

are not entitled, i.e., a shutdown or unreduced early retirement benefit, in accordance with PBGC

policy, you may choose one of the following options:

(1) Continue receiving monthly payments at the reduced amount stated

in PBGC's May 16, 2006 determination.

or

(2) Stop receiving payments and reapply for benefits with a starting

date later than July , 2003.
We will forward a copy of this letter to PBGC's Benefits Administration and Payment

Department ("BAPD"), the office responsible for determining and paying PBGC benefits.

BAPD will contact you directly regarding the details of this election process, the amount of your

benefit and the recoupment of any benefit overpayments you received.

If you need additional information, please call PBGC's Customer Contact Center at 1-

800-400-7242 and ask to speak to a BAPD representative assigned to the Plan.

Sincerely,

Sherline M. Brickus

Member, Appeals Board