,. t,V~ 

PBGC

Protecting America's Pensions 

··.Pension Benefit~Guar~.1ty Coq:ioration · 


1200 K Street, N. W., ~ashington, D.C. ~0005-4026 

. October 30, 20.13 

Re: Appeal 20120Case# 196603, Bethlehem Steel Corporation Pension Plan 

Dear ~--

The Appeals Board has reviewed your appeal ofPBGC's April 6, 2011 determination ofyour 

PBGC-payable benefit under the Bethlehem Plan. For the. reasons discussed below, we changed 

PBGC's determination by finding that you are entitled to $1,720.68 per month, payable from the 

Plan's December 18, 2002 termination date through , 2004, and to $1,718.56 per month 

thereafter. 

PBGC's Benefit Determination and Your Appeal 

PBGC's letter said that you are entitled to a regular PBGC-payable benefit of $1,558.55 per· 

month, as a Straight Life Annuity with a Five-Year Certain feature, based on your "separate-interest" 

Qualified Domestic .Relations Order ("QDRO"). PBGC also said that, because the amount you are 

entitled to is less than the amount you are clirrently receiving ($1 ,885.03 per month) on an estimated 

basis, you have been overpaid (then equal to $48,266.15). PBGC explained that the overpayment 

"represents the amount ofpastpayments that were over and above the limits set by Congress" and 

that your future benefit will be reduced by not more than I 0% ($155.85 per month) until you have 

repaid the tot_al overpayment, without interest. 

PBGC also included with its determination _a benefit statement with the information PBGC 

used to calculate your benefit. The statement showed that you were entitled to a PBGC-payable· 

benefit of $1 ,561.15 per month from December 18, 2002, the ·Plan's terminatio'n date, through 

L____~, 2004. The statement also noted that the former Plan Administrator calculated your 

benefit using an incorrect QDRO offset amount ($1, 147.91 per month instead of$649.60 per month). 

PBGC said that, after recalculating your benefit using the correct amqunt, you were entitled to a pretermination plari liability of $8,4 71.27. 

PBGC Wrote you on June 29, 2011 to explain that, upon further research ofBethlehem Plan 

records, PBGC found that the Plan had included $10,464.51 in yourc::J 2003 pension check to 

., I 
,, ~ • J:,. • \ _; 

account for the Plan's having previously deducted the wrong QDRO offset. PBGCexplained . .tlHit 

you are not entitled to the pre:-termination liability disc.ussed in its April 6, 2011 benefit statement 

because the issue was resolved before PBGC took over your pension payments.· 

After receiving a filing extension and the information you requested under the~Freedom of 

Information Act, you filed a timely appeal ori October 4, 2011. Your appeal raised the following 

concerns: . .,:- -~ ··-·-' -·"':.:-...~:........ __,__ . ­

• 	 You referred to PBGC's letters of (I) October 14, 2003, which reduced your 

estimated benefit from $2,924.46 per morith to $2,330.10 per month, ana (2) 

March 10, 2004, whicl;l further reduced your estimated benefit to $1,885.03 per 

month. These letters said that "the guaranteed benefit amount will be about the same 

or just slightly different than the amount you have been receiving as an estimated 

benefit." You noted that PBGC has reduced your benefit a cumulative 52%, which 

.is more than slightly. You also pointed out that, although PBGC's letters said it 

would take "up to three years" to determine guaranteed benefit amounts, it actually 

took over 8 years to make the final determination. 

i 

• 	 You said you were told by PBGC staff during a conference call on September 1, 2011 

that (1) QDROs were not taken into consideration in calculating the estimated benefit 

amounts shown in the October 14, 2003 letter and that the letter should not have been 

sent, and (2) the reduction from your estimated benefit of $1,885.03 ~o the final 

benefit of $1,558.55 was due to 11 incorrect methodology 11 in calculating t~e 

implications ofthe QDROseven years earlier. You said this shows the overpayment 

is due to PBGC's ,error.s, and not to limits set by Congress as stated in PBGC's 

April 6, 2011 determination. 

• 	 Your letter pointed out that, by its own admission, PBGC's letter of April 6, 20 I 1 

was the· final determination of your benefit amount, including the payment of 

$8,471.27. You further noted thatPBGC's letter of.June 29,2011 rescinded that 

notion -- yet another example of PBGC's miscalculation and miscommunication .. 

You said in conclusion that the reductions to your benefit have been communicated to you over a 

period ofeight years and'based on flawed calculations on the part ofPBGC. PBGC's misstatements, · 

miscalculations and unnecessary delays have made the task ofresponsibly planning for your :fjnancial 

future virtually impossible. You reject the final benefit amount and repayment of overpayments 

described in PBGC's letters ofApril 6,2011 and June 29,2011, and are willing to continue receiving 

the $1,885.03 amount you have based all of your future financial plans. 

Background 

When the Bethlehem Plan terminated, effectiveDecember 18,2002, itdid not have sufficient 

., assets to provide all benefits PBGC guarantees under Title IV ofthe Employee Retirement Income 

Security Act ("ERISA 11 

). Theterms ofthe Plan, the provisions ofERISA:, and PBGC regulations and 

-2­
. :The 

__j 

·. ,·t """ 

..~~policies determine-your entitlement-to a.guaranteedbenefit. Because oflegallimits-under·ERISA' • ---,~·-· ·· 

- and PBGC's regulations, the benefits PBGC guarantees may be less than the benefits a pension plan 

would otherwise pay. Three of these limits, the "Accrued-at-Normal-Retirement-Age" limit, the 

"Maximum Guaranteeable Benefit" limit and the "Phase-in" limit apply to your benefit. 

The records PBGC's auditors obtained from the former Plan administrator show that you 


were born on . .and;your.former spouse, , was born 


records further show that you and were married on 
L_______ 

on . Youretired,effective ,2001, underthe30-YearRetirementprovisions 


ofthe 1999 Steel Division componentofthe Bethlehem Plan (noru:epresented salaried employees). 


You elected to receive your benefit in the Plan's automatic form for a single participant, which for 


you is a Straight Life Annuity with a Five-Year Certain feature. 


Your Plan Benefit (Before the QDRO) 

Under the 1999 Steel Plan (nonrepresented salaried employees); your benefit is the highest 


ofthe amounts calculated under four different formulas: Minimum Pension formula, Percent Pension 


formula, total RetirementBenefit{TRB) formula and Lifetime Minimum Perisionformula. Because 


you elected to receive your Retirement Account Balance in a lump sum payment, your monthly Plan 


benefit is reduced by the annuity value of your Retirement Account Balance ("RAB"). 


The following shows your Plan benefit under each formula, payable in the Plan's Straight Life 


Annuity form with an Automatic Five-Year Certain feature, as ofyour , 2001 termination 


date. As of that date, you had 35.75 years of continuous service, average monthly earnings of 


$7,631.57, and aRAB offset of$270.85 per month. ' 


Minimum Pension Formula: 

($26.50 x 15.00 )'rs.) +($28.00 x 15.00 yrs.) + ($29.50 x 5.75 yrs.) = .$987.13 

$987.13 permo- $270.85 [RAB offset] = $716.28 per mo. 

Percent Pension Formula: 

(1.2% X 20.00 yrs. X $7,631.57) + (1.5% X 10.00 yrs. X $7,631.57) 

+ (1.6% x5.75 yrs. x $7,631.57) = $3,678.42 

$3,678.42 permo - $270.85 [RAB offset] = $3,407.57 per mo. 

TRB before age 62: _ . _ 

:(1.575% x 30.00 yrs. x $7,631.57) + (1.6% x 5.75 yrs. x $7,631.57) = $4,308.02 

$4,308.02 X .8925 [early retirement factor] =$3,844.91 per mo. 

$3,844.91 - $270.85 [RAB offset]= $3,574.06 per mo. 

TRB after age 62: 

$4,308.02 - $715.54 [Social Security offset] = $3,592.48 

$3,592.48 - $270.85 (RAB offset) = $3,"321.63 per mo. 

-3­
···--_-.-_~--·~·Lifetime Minimum-Formula~· .. 


$2,000- $270.85 [RABoffset] = $1,729.15 permo. 


Your Plan benefit is highest under the TRB formula before age 62 and under the Percent formu.la 

after age 62. 

-- ":".:... __ •.-,. ........ _,.o_,.,."':_-,. 
 Thus, ifthe Plan had·noUerminated~and there were no QDRO, you would have received:· •-'-.;-'-- ''""'"''""-"·-- ----..... ...... 

• 	 $3,574.06 per month from your retirement date through 
~--~

2004 (the month in which you turned age 62); and 

• 	 $3,407.57 per monthfroml______j, 2004 forward. 

Your Qualified Domestic Relations Order 

In g~neral, ERISA and the Internal Revenue Code (the. "IRC") permit a pension benefit to be 

assigned away from a participant only in situations involving certain domestic relations orders that 

meet" the specific legal requir~ments to be "qualified." There are two basic types of domestic 

relations orders: shared-payment orders and separate-interest orders. A shared-payment order 

generally. provides the Alternate Payee with a portion (or, in some cases, all) of the Participant's 

monthly pension payments during the Participant's lifetime, or for a specified shorter period. A 

separate-interest order essentially divides one. benefit in:to two separate benefits and generally 

provides the Alternate Payee with a portion (or, in some cases, all) of the value of the Participant's 

benefit. The Alternate Payee's separate-interest benefit is often payable regardless of whether the 

Participant has.entered pay status and payments usually continue beyond ·the Participant's death. ' 	 . 

Plan files include a copy ofa Domestic Relations Order filed with the c·ivil Division, Court 

of Common Pleas ofLehigh County, Pennsylvania, on I996. The Order, which named 

youas the Participant and your former spouse, , as the Alternate Payee, provided in part 

that-­

• 	 The Alternate Payee's Annuity Starting Date is as soon as 


administratively practicable subsequent to the qualification of this 


Domestic Relations Order. 


• 	 The Plan will pay benefits to the Alternate Payee in the form of a 

_single life annuity, based on the Alternate Payee's life, actuarially 


adjusted for said Alternate Payee's age at the date benefit payments 


commence to the Alternate Payee. 


• 	 The benefit of the Alternate Payee shall be paid directly to said 

· Alternate Payee by the Plan on a monthly basis. The form of benefit 


to be used for the calculation of the. benefit to be paid to the Alternate 


Payee is the normal form of benefit payable to an unmarried 


-4­
··-·· •·''""" ·~·~-- · 	 Participant, as such. form of benefit is defined in the Plan. 'The"· .. 


procedure to calculate· the amount due to the Alternate Payee is as 


follows: 


Step I: The Plan Administrator shall determine the total accrued 

· benefit payable to the Participant as of SeptemQer I, I990. 

, - -~----- ----- .;: ...,.... .. ~·--~·'. -· --· "·•-,• ,;-:-...w••·,.,....,.,.......,.,,;·~····~- •• •• 


Step 2: The Alternate Payee must be paid a percentage of the Step I 

benefit. The percentage ofthe Step I benefit to be paid to said 

Altern~te Payee is: 65%. 

By letter dated September 23~ i 996 (see Enclosure 1 ), the Assi~tant Secretary of the 

Employee Benefits Administration Committee for Bethlehem Steel notified you ofhis determination 

that the , 1996 Order is a separate-interest Qualified Domestic Relations Order ("QDRO"). 

This letter described the terms of the QDRO as follows: 

/ 

Amount Payable to Alternate Payee: $409.50 per month 

Month in which first payment is made: September 1996 

Duration: Lifetime of the Alternate Payee 

Plan records further showthat Bethlehem Plan officials had determined that 65% ofyour accrued 

monthly benefit as ofSeptember 1, 1990 was $1,147.91 per month, ifpaid as a Straight Life Annuity 

beginning , 2007, the first of the month following your 65th birthday. 1 By letter dated 

July 17, 2001, a Bethlehem Benefits Representative advised you that your regular monthly pension 

would be reduced by $1,14 7.91 per month to implement the QDRO (see Enclosure 2). On April21, 

2003, the Benefits Representative wrote to explain that the $1,147.91 per month QDRO offset was 

too high and that the com~ct amount was $649.60 per month (see Enclosure 3). The new offset 

amount was reduced from the age-65 offset amount to account for the fact that you retire~ at 

age 58.4167. (This letter also discussed the Plan's reimbursing you for the underpayments.) 

Although the Plan reduced the QDRO offset (subtraction) amount.to take into account your 

age at retirement, your underlying accrued monthly benefit was not reduced to take age into account. 

As a 30-Year retiree, you were entitled to receive your full accrued monthly benefit (i.e., the Plan 

benefit you would receive if payments began· at age 65) without reduction for your age. In general, 

the difference between an unreduced benefit at age 58.4167 and an actuarially-reduced benefit at 

age 58.4167 is referred to as the "early.retirement subsidy" or "subsidy." 

- 5­
·-·· · -' -- PBG<:.:YscPolicy 6.6.-3 (Qualified Domestic Relations Orders)·provides· that, in cases: where ­

a separate-interest QDRO is silent as to whether all or part ofa ·participant's early retirement subsidy · 

must be paid t'o the alternate payee, PBGC will generally not pay any portion of.the subsidy to the 

alternate payee.2 We note that the former Bethlehem Plan Administratorfollowed the same practice 

when a separate-interest QDRO was silent on early retirement subsidies and did not pay any portion 

ofthe subsidy to the alternat~ payee. The 9DRO offset amounts cited earlier reflected this practice. 

To summarize, if the Plan had nofterminated, after taking into account your QDRO, you I 	 . 

would have received: 

• 	 $2,924.46 per month ($3,574.06 - $649.60) from your retirement 

date through , 2004 (the month in which you turned age 62); 

and 

• 	 $2,757.97 per month ($3,407.57- $649.60) fromL______j) 2004 

forward._ 

ERISA Limits Affecting Your Benefit 

A. 	 Accrued-at-Normal-Retirement-Age LimitPBGC cannot guarantee any portion of a participant's pre-age 62 benefit unless the benefit, 

when added to his. or her regular monthly benefit, is less than or equal to the benefit the participant 

would otherwise receive under the Plan at his or hernormal retirement age (age 65) in the form of 

a Straight Life Annuity (see PBGC's regulation on Benefits Payable in Terminated Single-Employer 

r 	Plans (the "benefits regulation"),· 29 Code ofFederal Regulations§ 4022.21(a)(l)). 

Your Accrued-at-Normal limit is $3,407.57 per month, which is the amount the Bethlehem 

Plan would have paid you as a Straight Life Annuity at age 65 (before the RAB and QDRO offsets) 

ifthe Plan had not terminated. Accordingly, PBGC cannot guarantee the $166.49 additional amount 

($3,574.06- $3,407.57) of your Plan benefit payable under the TRB formula prior to age 62. 

B. Maximum Guaranteeable Benefit ("MGB") 

Section 4022(b )(3) ofERlSA provides that PBGC's guarantee of a participant's plan benefit 

cannot exceed a specified dollar amount pay~ble in the form of a Straight Life Annuity at age 65. 

' 	For a plan like yours with a termination date in 2002, the MGB is $3,579.55 per month in the form 

ofa Straight Life Annuity for a participant who is age 65 on the Plan termination date. Because (1) 

you began receiving your benefit before the Plan terminated and before your age 65 and (2) your 

regular Plan benefit is in the form of a Straight Life Annuity with an Automatic Five-Year Certain 

is an exception to this general rule that does not apply here. 

-6­

2 There 
--- -·~:: -::':-:-- -f~ature;·:PBGC musLadjust .the $3,579-,55 'amount to t_ake into account your age and:-your benefitform. Sections 4022.22 and 4022.23 ofP~GC's benefits regulation prescribe the rules for adjusting 

the MGB. 

I. Age Adjustment Factor 

. Tbe -MGBJor a participant who begins receiving a benefit before age 65 must_be'reduced to - -,-- ­

reflect the number of whole months between (I) the l~ter of the participant's age at the Plan's 

termination date and his age at.retirement, and (2) age 65, In your case, the later date in (1) is your 

age at the plan termination date, December 18, 2002. On that date; you were age0years0month 

and0 days, with0whole months remaining until you reached age 65. Under the regulation, this 

reduction is equal to 7/12 of I% for each ofthe first 60 months, 4/12 of I% for each ofthe next 60 

months, and 2/12 of I% for each ofthe next I20 months. Thus, your age adjustment factor equals: 

1.0- [(7/12 x O.OI xDmonths) = 1.0- 0.3383 = 0.6617 

2. FormAdjustment Factor 

The Bethlehem Plan does not reduce your regular monthly benefit to provide for the 

Five-Year Certain feature. However, PBGC's benefits regulation requires PBGC to account for their 

value in the calculation ofthe MGB. To adjust for the Five-Year Certain feature, the MGB must be 

reduced by J/24 of I% for each of the first 60 months and l/I2 of I% for each month beyond 60 

months for each whole month remaining in the certain period after the date of Plan termination. 

Under the Bethlehem Plan, your Five-Year Certain benefit ended , 2006, which is0whole 

months after December I8, 2002. This.period-certain adjustment factor is: I.O- (1/24 x 0.0 I x0) 

= 1.0- O.OI2_5 =-0.98375. 

Using the factors shown above, your MGB (before the QDRO) in the Plan's Straight Life 

Annuity form with an Automatic Five-Year Certain-feature is: · · 

$3,579.55 [age-65 MGB] X 0.66I7 [age adjustment] x 0.98375[fonn adjustment]= $2,330.10 per month 

C. Phase-in Limit 

Sections 4022(b )(1) and 4022(b)(7) ofERISA provide for the phase-in ofPBGC's guarantee 

of "any increase in the amount of benefits under a plan resulting from a plan amendment made or 

effective.within the five years before the Plan termination." This phase-in is equal to the greater of 

20 percent ofthe benefit increase per month, or $20.00 per month (but not more than the increase 

itself), for each full year the Plan amendment was in effect before Plan termination. Under ERISA, · 

the time a·benefit increase is in effect begins with the later ofthe date the increase was adopted or 

the date it became .effective, and ends on tlie plan's termination date. ' 

Under the I999 Steel Plan, your benefit is the highest ofthe amounts calculated llnder three 

different formulas: the Mimmum Pension Formula, the Percent Pension Formula, and the Total 

- 7­
. - ":"· ....

Retirement Benefit Formula (TRB) .., Plan amendments adopted·:within five''~years of the Plan's. 

termination date increased your Plan benefit under the last two formulas. These increases were 

adopted by Bethlehem on September 7, 1999, and took effect January 1, 2000. 

Your Plan benefit, has to be calculated under the Plan provisions in effect five years before 

the Plan's December 18, 2002 termination date in order to apply the phase-in limit and to take into 

.a~eountthe:,QDRO offset-to your benefit. Your benefit- under each formula is shown~b~low.- Please 

note that, because you elected to receive your Retirement Account Balance in a lump sum, your 

monthly Plan benefit must be reduced. by $270.85 per month, which is the annuity value of your 

Retirement Account Balance.(RAB). 

Minimum Pension Formula: 

($26.50 x 15.00 yrs.) + ($28:00 x 15.00 yrs.) + ($29.50 x 5.75 yrs.) = $987.13 

$987.13 - $270.85 [RAB] = $716.28 per mo. 

Percent Pension Formula: 

(1.155% x 30.00 yrs. x $7,631.57) + (1.26% x 5.75 yrs. x $7,631.57) = $3,197.25 

$3,197:25 - $270.85 [RAB] = $2,926.40 per mo. 

TRB before age 62: 

(1.50% x 35.75 yrs. x $7,631.57) = $4,092.43 


($4,092.43 x 0.8925 [early retirement] x 1.05) - $270.85 [RAB] =$3,564.27 per mo. 


TRB after age 62:. 

{($4,092.43- $715.54 [Social Security offset]) x 1.05}- $270.85 [RAB] = $3,274.88 

Lifetime Minimum Formula: 

None in Plan 

Under five-year old Plan provisions, your Plan benefit is highest under the TRB both before and after 

age 62. Because your MGB ($2,330.1 0) is lower than yotir Plan benefit calculated above, there is 

no "benefit increase" to be phased-in. 3 Your guaranteeable Plan benefit (before the QDRO offset) 

under five-year-old Plan provisions is the lesser ofthe benefit calculated above and your MGB. In 

your.case, the lesser amount is your MGB of $2,330.10 per month. 

Your PB.GC-Guaranteed Benefit 

When PBGC becomes trustee of a terminated plan, PBGC must develop a method fqr 

calculating estimated benefits both for participants who start receiving benefits shortly after plan 

termination and already-retired participants whose Plan benefits exceed PBGC's guarantee. This 

3 Howe~er, aphase-in calculation is required in calculating the earlyretirement subsidy discussed on page 9 ofthis 

decision because your. Plan benefit reduced for early retirement and calculated under five-year old Plan provisions is less 

than your MGB. 

- 8­
"~~:· 

- -"- .• ,_ .. ~"~

. \ 

'-,

_

"

__estimated method is.used until PBGC·can collect plan-records, audit ·plan-data and develop planspecific benefit calculation and valuation programs. 

As you noted in your appeal, after PBGC began paying you an estimated benefit amount, 

PBGC changed its methodology for allocating benefit cutbacks resulting from the ERISA guarantee 

limits between the participant and the alternate payee. Please note that PBGC regularly reviews its 

:~;ri'p.rQ~edures and. revises them as necessary to correct errors or confomLt<Y~currentopolicy;--PBGC's· 

review ofits QDRO procedures was underway when the Bethlehem Plan terminated and the revised 

procedures took effect shortly thereafter. Hqwever, the Appeals Board found an error in the way 

PBGC's April 6, 2011 determination applied the revised methodology. 

Your benefit calculated under Plan provisions in effect when you retired (see page 3 ofthis 

decision) and also under Plan provisions in effect five years before the Plan .terminated (see page 8) 

are based on your 30-Year retirement benefit unreduced for age. PBGC's methodology for allocating 

benefit cutbacks between the participant" and the alternate payee is complex and requires, among 

other things, that PBGC calculate the early retirement subsidy which, for this purpose, is based on 

a calculated actuarially-equivalent early retirement factor ("ERF"). In your case, the actuari~llyequivalent ERF for a participant who retires at age 58.4167 is 0.5465. This ERF is applied to your 

benefit under Plan provisions in effect at your retirement date and to your benefit .under Plan 

provisions in effect five years before the Plan terminated \ · 

PBGC's methodology also requires that PBGC calculate an "AP%" to be used in calculating 

the PBGC-payable benefit for the AP. The numeratorofthe AP% is $1,147.91, which is the amount 

of your QDRO offset if paid as a Straight Life Annuity beginning at age 65 (from page 5 of this 

decision). The denominator is your accrued monthly benefit payable at age 65 under the Plan 

provisions in effect five years before the Plan terminated (your post-62 TRB benefit of $3,274.88 

from page 8). Therefore, the AP% is $1,147.91 + $3,274.88, or 35.05%.4 One minus the AP%, or 

64.95%, is used in determining your PBGC-payable benefit. 

Enclosure 3 to this decision is a table-showing a detailed calculation of your final PBGCpayable benefit amounts. To summarize: the Appeals Board concluded that PBGC's April6, 2011 

determination did not correctly take into account the early retirement subsidy. The Board found that 

your PBGC-guaranteed benefit, after taking the QDRO into account, is $1,681.81 per month (from 

line 62 ofthe table), instead of$1,513.40 per month (from line 38). 

Your PBGC-Pavable Benefit 

Under certain circumstances, section 4022(c) ofERISA authorizes PBGC to pay additional 

benefits (i.e., benefits that PBGC could not otherwise legally guarantee) based on amounts th~t 

4 Paragraph 14 ofyour separate-interest QDRO provides guidance on calculating the benefits payable to the Alternate 

Payee in the event of Plan tennination. We noted that PBGC's methodology for calculating an ;'AP%" that is used in 

detennining the AP's PBGC-payable benefit is consistent with the provisions in paragraph 14 of your separate-interest 

QDRO. 

-9­
_PBGC recovers from sponsors ofterminated·-underfunded .pension plans, ,PBGC determined that, 

due to section 4022(c), PBGC can pay asmall portion of your-unfunded nonguaranteed benefit, 

which results iri a final PBGC-payable benefit, in the Plan's Straight Life Annuity with a Five-Year 

Certain feature (since expired) of: 

I 

Before age 62: $I,681.8I [guaranteed]+ $38.87 [~022(c)] = $1,720.68 per month 

After age 62: $I,681.8I [guaranteed]+ $36.75 [4022(c)] = $1,718.56 per month 

While we are sympathetic to your situation, PBGC and the Appeals Board must follow the terms of . I • 

the Plan, the law and PBGC regulations and policies. 

Length ofTime (or PBGC Determination 

As you noted ih your appeal, the benefit statement PBGC ~ncluded with its April 6, 20 II 

determination stated that the former Plan Administrator calculated your benefit using an incorrect 

QDRO offset amount ($I,I47.9I per month instead of$649.60 per inonth) and that, as a result, you 

were entitled to a pre-termination plan liability of $8,47I.27. Plan officials had previously advised 

you ofthis error on April 2I, 2003. Although this letter said that Bethlehem would include the total 

underpayment amount in your April 2003 pension, PBGC, staff initially assumed the payment had 

not been made because lump-sum payments were restricted during the transition from Bethlehem's 

plan administration to PBGC's. PBGC later determined that the Plan had included the underp~yment 

-in yourc::::J2003 pension check. 

You also appealed the length oftime it took for PBGC to make a final determination. You 

said that, instead of "up to three years," it actually took over 8 years to make a final determination. 

You noted that this unnecessary delay made it virtmilly impossible for you to plan responsibly for 

your financial future. 

" When PBGC becomes trustee of a terminated plan, PBGC must collect plan records, audit 

plan data and determine the .benefits PBGC can legally pay. This proc~ss can be complex and timeconsuming, especially in a Plan like the Bethlehem Plan with several component plans, complex 

Plan provisions and more than 90,000 participants. While PBGC's goal is to issue all benefit 

determinations within a few years of a plan's termination, the length of time- PBGC takes to 

determine final benefit amounts payable under ERISA and PBGC's regulations is not subject to 

appeal. 

Recoupment ofOverpayments 

PBGC continues to pay retirees, on an estimated basis, the same benefits they were receiving 

from the former Plan Administrator while PBGC completes its processing of the terminated plan. · 

If the estimated amounts are too high, PBGC must recover the overpa)'I:Jlents and does so by 

reducing the participant's future benefit, generally by not more than I 0%, until the overpayment is 

·repaid. PBGC does not charge interest on the overpayments. 

- 10­
_Although PBGC'is responsible:for:makingpension~payments and-for limiting Plan. benefits' 


to the guaranteed level as ofthe Plan's termination date, the former paying agent usually continues 


making the payments for a short period of time for administrative reasons: In this case, the 


Bethlehem Plan continued to make monthly benefit payments through August 2003. PBGC (through 


its paying agent, State Street Bank) took over benefit payments, effective September I, 2003, fllld 


initially continued to pay you the same $2,924.46 per mopth the Plan was then paying you. To avoid 


- __ the possibility of large overpayments, PBGC estimated the:effect of the ERISA legal limits; and 

· reduced your estimated benefit amount to $2,330.10 per month beginning December I, 2003, and 

then to $1,885.03 per month beginning May 1, 2004. 

Although your :(inal PBGC-payable benefit amounts are higher than the amounts shown on 


PBGC's April 6, 20 I1 determination, the final benefit amounts are still lower than the estimated 


benefits you have been receiving. Accordingly, you have been overpaid since the Plan terminated 


- and PBGC must temporarily reduce your future PBGC payments by not more than 1 0% until the 

overpayment 1 is repaid (without interest). · · 

Decision 

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


policies to the facts iri ·this case, the Appeals Board changed PBGC's April 6, 20 II determination by 


finding that you are entitled (before recoupment)to (I) $I,720.68 per month (instead of$I ,56I.I5) 


from the Plan's December I8, 2002 termination date through , 2004, the first ofthemonth 


in which you tirmed age 62, and (2) $1,718.56 per month (instead of$I,558.55 per month) from 


L_____, 2004 forward. Your benefit is payable as a Straight Life Annuity with a Five-Year 


Certain feature (since expired). This is the Agency's final decision on this matter and you may, if 


you. wish, seek court review ofthis decision. 


We will forward a copy of this decision to PBGC's Benefits Administration and Payment 


Department, the organization responsible for determining and paying benefits. They will implement 


this decision and recalculate your overpayment amount. ' 


Thank you for your patience while we completed our review. If you have questions, :please 


call PBGC's Customer Contact Center at 1-800-400-7242. 


Sincerely, 

'· 

Linda M. Mizzi 

Member, Appeals BoardEnclosures (4) 

- II ­

I