"v~ PBGC 

Protecting America's Pensions 

Pension Benefit Guaranty Corporation 

t 200 K Street, N.W., Washington, D.C. 20005-4026 

April 24, 2007 

Re: I I, Case 196053, 1"-----_______ _ 

Mosler Pension Guarantee Plan (the "PGP") 

Dear I: 

The Appeals Board has reviewed your May 9, 2005 appeal of 

PBGC's March 25, 2005 determination of LI _____ -----"1 benefit from the 

Mosler Pension Guarantee Plan (the 11 PGpl1) . For the reasons 

explained below, we are granting your appeal. 

Benefit Determination and Appeal 

PBGC determined that 1 1 was entitled to a $86.64 per 

month benefit if it were paid starting March 1, 2009, as a Straight 

Life Annuity. PBGC's Benefit Statement, which was enclosed with 

its determination, showed that the $86.64 monthly amount equaled 

his $298.67 accrued PGP benefit less a $212.03 offset for his ESOP 

benefit. The Benefit Statement further explained: 

"Because you participated in your plan's Employee Stock 

Ownership Program, your monthly benefit is offset by an 

amount that is actuarially equivalent to your shares in 

the Stock Ownership Program." 

Your appeal stated that 1 1 "never received any benefit 

from the ESOP." You further asserted that "the use of the value of 

the ESOP as an offset against his pension benefit would not be 

consistent with applicable law." 

You did not cite any particular law, regulation, or legal 

ruling. As explained below, we decided to grant your appeal based 

on our analysis of the facts and plan provisions. 
Pension Plan Terms 

The PGP, which is a defined-benefit pension plan, is part of 

a floor-offset arrangement with the ESOP. The ESOP is a separate, 

lIindividual account II pension plan that is not covered by PBGC's 

insurance program. Under the floor-offset arrangement, the benefit 

payable by the PGP is the amount that remains, if any, after the 

offset for the participant's ESOP benefit. 

The PGP plan document in effect when I terminated 

employment is the IIMosler Pension Guarantee plan as Amended and 

Restated as of July 1, 1994 11 (the 111994 Planll ). A participant's 

vested accrued benefit under the PGP (if any) is defined under 

section 6 of the 1994 Plan, which sets forth a multi-step benefit 

formula. 

The first step of the formula is to calculate a maximum 

benefit using one of two formulas, whichever produces the higher 

benefit. See 1994 Plan § 6 (a) (1). Next, the offset element is 

calculated. The offset element is the sum of: (i) the 

participant's "ESOP Benefit,,,l if any, and (ii) the participant's 

American Standard Plan (a predecessor plan) benefit, if any. See 

1994 Plan § 6(a) (2). Once the offset element has been determined, 

the third and final step is to subtract the offset element from the 

maximum benefit. See 1994 Plan § 6(a). 

Section 6(b) (4) of the 1994 Plan describes the "ESOP Benefit" 

as follows: 

For purposes of this Section 6, the term ESOP 

Benefit shall mean the vested benefit under the ESOP. 

Such benefit shall be expressed as the life annuity 

Actuarial Equivalent payable at the Participant's Normal 

Retirement Date determined using 100% of the value of 

such Participant's nonforfeitable shares allocated to his 

account under the ESOP as of the valuation date preceding 

the earliest date as of which a distribution is available 

from the ESOP and including in such value any prior 

distributions made to the Participant. (Underlining 

added) 

The participant's ESOP benefit rights are defined under the 

terms of the "Mosler Stock Ownership Plan as Amended and Restated 

as of July 1, 1994 11 ("1994 ESOP"). That document provides that a 

The 1994 PGP Plan document defines the ESOP on page 5, as "the 

Mosler employee Stock Ownership Plan, which is a stock bonus plan under 

Section 401(a) of the Code." 

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participant's "Capital Accumulation,,2 will be distributed following 

his "termination of Service," unless the participant elects to keep 

his funds in the ESOP. 1994 ESOP § 13(a). The ESOP's terms also 

provided that distribution of funds from a participant's ESOP 

account could be made through cash payments over a five-year 

period. 3 

The Summary Plan Description ("SPD") for the Mosler Retirement 

Program (which covers both the PGP and ESOP) provides as follows: 

After the June 30lli allocation to participants' accounts, 

all accounts will be "valued." The value of each share 

is determined by an independent appraiser. Following the 

appraisal, the value and the current worth of the 

accounts will be determined. Any gains will be added and 

losses will be subtracted from each person's account. 

PGP's Determinations of ESOP Benefit Offset Amounts 

Consistent with the ESOP's terms, the ESOP's Administrative 

Committee annually valued the ESOP's stock prices based on the work 

of an independent appraiser. This independent appraisal occurred 

as of each June 30th, which was the last date of the ESOP's plan 

year. The Administrative Committee, upon approving the independent 

appraiser's work, then used the appraiser's stock values (i.e., 

their price per share as of June 30th) for the entire 12-month 

period of the following plan year. 

The ESOP's administrators also performed a quarterly 

accounting of the number of stock shares allocated to each 

participant's account. Thus, for example, the stock dividends that 

accrued on Mosler's preferred stock were credited to ESOP accounts 

on a quarterly basis. 

The PGP's administrators, in calculating the amount of the 

ESOP Benefit offset to the PGP benefit, used the account balances 

provided by the ESOP. For participants such as I I who 

terminated employment before their normal retirement age (age 65) , 

the PGP's administrators determined the ESOP Benefit offset amount 

based on the participant's ESOP account balance as of the quarter 

before the participant terminated employment. 

The term "Capital Accumulation" refers to a participant's vested, 

nonforfeitable interest in his or her ESOP account. ESOP § 2. 

We note that section 409(0) (1) (C) of the Internal Revenue Code 

permits ESOP distributions to occur, after termination of employment, through 

installments payments over a five-year period. 

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ESOP distributions generally occurred semi-annually, at the 

end of December and June. Further, information available to the 

Appeals Board indicates that the ESOP's practice was to make the 

first ESOP installment payment in the same plan year that the 

participant terminated employment, if the participant timely 

elected to receive the ESOP distribution. Thus, for a participant 

such as I I who terminated employment in November 2000, the 

ESOP's administrators recognized an obligation to make the first 

ESOP payment by the end of the plan year (i.e., by June 2001), if 

he elected to receive an ESOP distribution. 

Information available to the Appeals Board also indicates that 

the ESOP was already postponing scheduled payments when I I 

employment terminated in November 2000. For example, an October 

26, 2000 Mosler letter addressed to "ESOP Participant" stated that 

the ESOP payment scheduled for December 2000 was being postponed to 

no later than June 30, 2001. 4 The Appeals Board further found, 

based on PBGC records and information provided by appellants, that 

only a few ESOP distributions were made in December 2000, and no 

ESOP distributions were made after that date. 

For participants who terminated employment after June 30, 

2001, the PGP determined that the amount of the ESOP offset was $0, 

presumably because Mosler then was on the verge of filing for 

bankruptcy.s We further note that Mosler filed for Chapter 11 

bankruptcy on August 6, 2001. The PGP, however, did not change its 

calculation of the ESOP offset for participants who terminated 

employment prior to June 30, 2001, but had never received an ESOP 

distribution. 

4 This letter, which was provided by another PGP participant who 

appealed, stated as follows: 

"Mosler Inc.'s Management has determined that Mosler needs to 

maintain a limited amount of working capital in order to continue 

its normal operations. As a result, Mosler needs to postpone the 

ESOP payment scheduled for December 2000. 

Mosler's Employer Stock Ownership Plan requires that the scheduled 

payment be made during the fiscal year that expires on June 30, 

2001. Mosler intends to make the payment originally scheduled for 

December 2000 on or before June 2001. 

Mosler management appreciates your cooperation during this 

temporary postponement of payment." 

This is reflected in the benefit statements the PGP prepared for 

participants who terminated employment after June 30, 2001, which show that 

Mosler stock was valued as $0 after that date. 

4 
Discussion 

As discussed above, the plan document governing the PGP states 

that the ESOP Benefit offset amount is to be determined "as of the 

valuation date preceding the earliest date as of which a 

distribution is available from the ESOP." Furthermore, for 

participants in 1 1 situation, the PGP's consistent 

interpretation was that the ESOP Benefit offset was based on the 

participant's ESOP account balance as of the quarter before 

termination of employment. For this reason, the PGP had concluded 

that the ESOP Benefit offset to 1 1 PGP benefit should be 

based on his ESOP account balance when he terminated employment, 

which was $15,942.45. 6 

In a previous appeals decision, the Appeals Board upheld the 

PGP's practice for PGP participants who received at least one cash 

distribution from the ESOP. For such participants, the Appeals 

Board concluded that the PGP's consistent practice of not revaluing 

the ESOP Benefit offset after the first ESOP payment was made 

clearly was in accordance with the PGP's terms. 

'-----_____ -----"1 situation, however, is different because the 

available information supports the finding that he never received 

a single ESOP distribution. We further note in this regard that we 

have not identified a single PGP participant who terminated 

employment after June 30, 2000, and who received an ESOP 

distribution. Thus, inl 1 case, the relevant question is 

whether an ESOP distribution ever was "available" to him, within 

the meaning of the PGP's terms, in light of the fact that he never 

received an ESOP payment. 

Our examination of the PGP's and the ESOP's practices 

indicates that the ESOP's administrators generally recognized an 

obligation to make the first ESOP payment in the same plan year as 

when the ESOP Benefit offset was determined, if the participant 

timely had elected to receive an ESOP distribution. Here, there is 

no evidence that 1 1 sought to postpone an ESOP distribution. 

The available records also establish that the ESOP's administrators 

had recognized an obligation to make an ESOP distribution to ~ 

1 1 by the end of the plan year in which he terminated employment 

(i.e., by June 30, 2001). We therefore found that 1 1 did 

not receive a scheduled ESOP distribution because of Mosler's 

PBGC, which accepted the PGP's practice, then converted his 

$15,942.45 ESOP account balance into an ESOP Benefit offset of $212.03, based 

on the PGP's terms. PBGC therefore determined 1"-----___ 1 was entitled to a net 

benefit of $86.64 per month ($298.67 - $212.03). 

5 
failure to provide the ESOP with the necessary funds to make the 

payment, rather than for any other reason. 

The Appeals Board concluded, based on the facts and 

circumstances of this case, that the earliest date as of which an 

ESOP distribution was available to I I did not occur on or 

before June 30, 2001, because the ESOP was unable to make an ESOP 

distribution to him on or before that date due to Mosler's 

financial condition. Accordingly, we decided that a $0 ESOP 

Benefit offset should be used for I I which is consistent 

with PBGC' s treatment of PGP participants who terminated employment 

after June 30, 2001, and who also had not received any payments 

from the ESOP. 

Decision 

Having applied the terms of the Plan and the provisions of 

ERISA to the facts in this case, we are granting your appeal. 

I I Normal Retirement Benefit under the PGP $298.67 per 

month if paid as a Straight Life Annuity starting March I, 2009. 

If you orl I need other information from PBGC, please call 

the Customer Contact Center at 1-800-400-7242. I I also 

should call the Customer Contact Center about four months before he 

is ready to start receiving benefits. 

This is PBGC's final action on PBGC's March 25/ 2005 

determination. Thank you and I"-----___ ~I for your patience while we 

carefully reviewed your appeal. 

Sincerely, 

Charles W. Vernon 

Chair, Appeals Board 

cc: 

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