, 

I% pension Benefit Guaranty Corporation p-- 1200 K Street N.W., Washington, D.C. 20005-4026 

JUN 0'4 2004 

Re: 1 Case 187163, Nu-Kote International, Inc. 

(the "Company") Retirement Income Plan (the "Plan") 

The Appeals Board reviewed your appeal of PBGC's May 27, 2003 determination and 

September 26,2003 corrected determination of your benefit under the Plan. As explained below, 

the Board found that: (I) your annualized earnings are $54,212.79 for both 1997 and 1998; (2) your 

highest five consecutive years of earnings in your last 10 years of employment under the Plan are 

1992 through 1996; (3) and your Highest Annual Average Earnings (referred to in PBGC's benefit 

statements and in this letter as Average Annual Compensation or "ACOMP") is $64712.10. .These 

are the same values PBGC used in making its May 27, 2003 detennination. The Board therefore 

concluded that the benefit to which you are entitled is the same as staked in that determination, i.e., 

$1,396.24 per month as Straight Life Annuity ("SLA") beginning June 1, 2009, your Earliest 

Unreduced Retirement Date. 

Please note that PBGCs September 26, 2003 corrected determination was not made in 

accordance with the provisions of the Plan and, therefore, is incorrect. 

PBGC's Determination and Your Aflneal 

PBGC's determination letter of May 27,2003 enclosed a benefit statement that showed the 

data used in determining your benefit and how your benefit was calculated. Among the data listed 

was your ACOMP of $60,712.10. 

You filed an appeal by letter dated July 7,2003, stating that you believe the ACOMP that 

PBGC used in its determination is too low. You listed your 1992 - 2000 annual salaries ffom 

PBGC's records, which you obtained by telephone: 
In support of yourb&ief.that your ACOMP is too low, you listed hm your Social Security 

Statement of February 14,2003, your Tared Social Security Earnings and Medicare Earnings from 

the Company for the years 1992 through 1999. You show that your highest continuous five yean 

of earnings, in both cases, are 1995 through 1999 and that your average annual earnings are 

$65,301.80 and $67,741, respectively. You also stated that the Company is willing to work with 

PBGC to resolve the issue based'on the e-mail communications (copies of which you enclosed) 

exchanged on July 3, 2003 between yourself and the Company's Human Resources Manager, 

Mr. Kevin Pataluna. 

PB t& ' 'on an r 

In accordance with established PBGC procedures, the Appeals Board fonvarded your July 7, 

1 2003 correspondence to the Insurance Operations Department ("IOD"), the office responsible for 

determining and paying PBGC benefits, for them to respond to the issues you raised. As a result, 

on September 26, 2003, IOD issued you a corrected benefit determination stating that you are 

entitled to amonthly payment of $1,452.06 in the form of a SLA commencing June 1,2009. PBGC 

also told you that your 1997 and 1998 pension earnings used to determine your ACOMP were 

annualized (and determined to be $61,240.33 both years) because you continued to work for an 

extended period following your recall from a layoff that spanned parts of those two years. Therefore, 

your highest five consecutive salary years are 1995 through 1999 and your ACOMP is $62,976.10: 

By letter dated November 6,2003, you filed an appeal ofthe corrected benefit determination 

in which you stated that you believe the ACOMP of $62,976.10 is low because the annualized 

earnings for 1997 and 1998 are too low. You said that your 1997 annualized pension earnings are 

$71,443.32 (actually $71,413.32), which is the sum of: (1) your year-to-date regular earnings as 

of October 17, 1997, of $53,574.99 shown on the last Company Earnings Statement you received 

for that year, a copy of which you enclosed; (2) a vested four weeks vacation due payment of 

$5,102.38 shown on the Earnings Statement, which you explained was earned from prior 

employment years through 1996; and (3) $12,755.95 for five additional biweekly payments at 

$2,551.19, your biweekly rate, to complete the year. 

You stated that your annualized pension earnings for 1998 are $66,330.94. You explained 

that you were reinstated in 1998 at the same salary you had the previous year; therefore, your 

annualized pension earnings are the product of 26 times your bi-weekly rate of $2,551.19. You 

listed your pension earnings for the five years that you used in calculating an ACOMP of 

$66,032.82: 
1995 $61,798.47 

1996 64,270.42 

1997 71,443.32 (actually $71,423.32) 

1998 66,330.94 

1999 66,330.94 

In addition, you noted that the figures do not include severance pay, which you received, or bonus 

pay which, if applicable, would be in addition to the above figures., 

You stated, as you did in your July 7,2003 letter, that you would like to reserve the right to 

review any actions in this case with the right to provide additional information if needed and the 

right to appear in person before the Appeals Board if you decide to do so at a later date. 

By a communication faxed to us April 2,2004, you supplemented your November 6,2003 

filing. You set forth, among other things, arguments explaining why you believe vacation pay 

should be included in determining ACOMP. You also presented information explaining your status 

as an employee arid participant in-the Plan at the time of your iay off in 1997 and;our ri&n to work 

with the Company in 1998. You attached a number of documents in support of your claims. 

When the Plan terminated on September 30,2000, it did not have suftjcient assets to satisfy 

all benefits whose payment is guaranteed by the PBGC pursuant to Title IV of the Employee 

Retirement Income Security Act ("ERISA"). Section 4022(a) of ERISA provides that, subject to 

certain limitations set forth in section 4022(b), the PBGC shall guarantee the payment of all 

nonforfeitable benefits under a plan which terminates. Under WSA and PBGC regulations a 

"nonforfeitable benefit" is a ". . . benefit for which a participant has satisfied the conditions for 

entitlement under the plan or the requirements of this Act . . ." ERISA Section 4001(a)(8), and 29 

Code of Federal Regulations ("CFR") Part 4001.2. 

The PBGC benefit to which you are entitled is determined by the terms of the Plan, the 

provisions of ERISA, and PBGC regulations and policies. The governing Plan document is the 

'restated Plan that became effffitive April 1,1989, as further amended through August 10,2000, the 

effective date of the last amendment to the Plan. 

Plan Pravisiom 

Section 14 a. of the Plan states, in relevant part: I 

The annual benefit for a Member retiring. . . on or after January 16,1987 will 

be determined by the Member's Highest Annual Average Earnings [ACOMP], as 

defined in Section 41.p. . .. 

- : . ' - ' . . ' ,' - . .'. ..., , , - . . _:: . . . - . : . . . . ..- .- - , - ;. -. . .~ . . . -' 
8 

Section 41.1. deiines "Earnings" as: 

.. . % [Tlhe Employee's salaj or wage fi-om the Company, j&&g any tax 

9 deferred contributions under the provisions of the Nu-Kote International, Inc. 

Savings- Plan, shift premiums, area rate differentials, group leader premiums, 

commissions, incentive payments, and Company payments for non-work periods 

while in active employment status, but all other forms of compensation 

including without limitation, overtime, payments under any bonus plan (including 

any successor annual bonus plan), payments under any long-term incentive plan, 

payments under a termination plan or any similar arrangement, overseas 

supplements, unused vacb (including banked vacation days or banked paid 

absence allowances) and any payments or allowances for specific or contingent 

expenses. The earnin~s of Em d-0 

Com~ensa ]Q u inan I 

Qof re ec 

en~~~lovmerrt. When necessary to produce five consecutive calendar years of 

"Earnings" for purposes of calculating "High Annual Average Earnings." Earnings 

shall include Earnings, as defined herein, hm an Affiliate or an Associated 

Company prior to becoming a Member of this Nan. (Emphasis added.) 

Section 41.p. provides, in relevant part: 

"Highest Annual Average Earnings" shall mean the annual average of an 

Employee's highest "Earnings", as defined, during any 5 conskcutive calendar years 

'of the last 10 of active employment which may include the year in which 

employment terminates. . .. Notwithstanding the foregoing, Earnings for periods 

after August 10, 2000, shall not be counted for purposes of determining Highest 

Annual Average earnings. 

Section 41.h. states: 

"Compensated Hour" shall mean (1) [elach hour for which an Employee 

receives compensation paid directly by the Company. . . and also shall include houm 

credited in accordance with. . . [Company approved leave of absence, compensable 

injury leave, and disability'leave] Each hour of pay at a premium rate shall be 

included as a straight-time hour. 

Each hour for which back pay . . . is either awarded or agreed to by the 

Company and such Compensated Hours shall be creditedfo the year during which 

the services were performed or to which the back pay is applicable. 

Notwithstanding the above, or any provision of this Plan to the contrary, an 

Employee will not be credited with Compensated Hours more than once with respect 

to the same period of time. 
Discussion 

After the Plan terminated, PBGC obtained 6om the Company the Plan and participant 

records it needed to calculate benefits. Following are your estimated or actual annual Earnings and 

hours worked during the 10 years ending the year the Plan terminated in PBGC files: 

2.h l&?m!s Hours Worked 

The types of employee compensation included in pension eamings are determined by the 

provisions of the Plan's governing document; it is amatter in which PBGC does not have discretion. 

The Plan's definition of Earnings include. certain specifically cited types of payments and excludes 

other foms of compensation. Separation pay is not listed in the included items; among the excluded 

items are "payments under a termination plan or any similar arrangement. . .." Bonusa and unused 

vacation pay are specifically excluded from Earnings in Section 41.1. of the Plan. Mr. Kevin 

Pataluna, who started with the Company in March 1998 and served as Chairman of the Retirement 

Committee that administ& the Plan prior to its termination, said in telephone conversations on 

April 1,2004, with the analyst assigned your appeal that pension earnings do not include severance 

pay and pay for unused vacation time. 

On April 1,2004, Mr. Pataluna faxed to us an &page listing, entitled an Earnings Analysis, 

showing the biweekly payments the Company made to you beginning April 22, 1993 (the earliest . 

paydate in the Company's computerized record) and ending December 22,2000. A copy of the 

listing is enclosed for your reference. In the April 1,2004 telephone conversations, Mr. Pataluna 

said that the annual pension earnings and hours worked for all participants were determined on a 

26 pay-period basis; no attempt was made to determine annual earnings and hours starting and 

ending with the first and last days of a calendar year. Mr. Pataluna further stated that, as provided 

in the Plan, pension earnings were annualized to 1,700 hours per year when Compensated Hours 

were less than that. He said that you were regularly scheduled to work 40 hours per week, from 

Monday through Friday, and that you were laid off on October 17, 1997, and returned to work on 

September 8,1998. 
Our review of the Earnings Analysis that Mr. Pataluna sent us contiims your annual pension 

earnings and the hours worked derived from the earnings listed in the preceding table for the years - - 1994, i995,1996 and 1999. 

For 1997, the Earnings Analysis lists you as having had 21 paydates with regular payments 

of $2,551.19 each. For three of the pay periods you also received $100.00, which Mr. Pataluna said 

was not a part ofpension earnings, but instead for the medical insurance option you had elected. On 

the last paydate that you received a regular payment, you also were paid $5,102.38 (equal to two 

biweekly regular payments) for vacation pay. On the next and subsequent paydates you are listed 

as receiving only severance pay. Your pension earnings of $58,677.37 for 1997 shown in the 

preceding table apparently was obtained by includimg the vacation pay with the 21 biweekly regular 

payments; &, 23 x $2,55 1.19 = $58,677.37. Based on the statement you made in your appeal and 

ow review of the Earnings Analysis, the vacation payment was made in lieu of you having taken a 

vacation. Under the terms of the Plan, vacation pay is excluded from pension earnings. Therefore, 

your pension earnings in 1997 were $53,574.99 (21 x $2,551.19), which equates to 1,680 hours 

worked (21 x 80 hours). Pursuant to the provisions of the Plan, your 1997 annualized pension 

.earnings are therefore $54,212.78 ($53,574.99 divided by 1,680 hours times 1,700 hours). 

Your pension earnings of $20,154.40 for 1998 are consistent with the infhnnation in the 

Earnings Analysis, which shows you as having an initial paydate of September 18,1998 that covers 

nine days of work beginning September 8, 1998, the date you returned from layoff. (Reference to 

a universal calendar shows that was a Tuesday with a total of nine working days to the 

September 18, 1998 paydate; also your regular pay for that period of $2,296.07 is nine-tenths of 

$2,551.19.) Tnat first paydate is followed by seven more of $2,551.19 each, resulting in 1998 

pension earnings of $20,154.40 (7.9 x $2,5S 1.19). Based on this amount, your hours worked are 

632 (7.9 x 80 hours) rather than 560 (7 x 80 hours). Therefore, your annualized pension earnings 

for 1998 are $54,212.78 ($20,154.40 divided by 632 horn times 1,700 hours). 

No attempt was made to confum your pension earnings reported for the year 2000 because 

that year is clearly outside of your high-five years because the Plan terminated at the end of 

September and before that the Plan was amended to provide that earnings for periods after August 

10,2000, shall not be counted for determining ACOMP. 

Having applied the Plan's provisions and the law to the facts in this case, the Appeais Board 

found that : (1) for purpose of the Plan, your Earnings in both calendar years 1997 and 1998 are 

$54,212.78; (2) your highest five years of earnings in the last 10 years of your employment under 

the Plan are 1992 through 1996; and (3) your ACOMP is $60,712.10, the same values PBGC used 

in making its May 27,2003 determination of your benefit. Therefore, the Board concluded that the 

benefit to which you are entitled is $1,396.24 per month, the same as stated in the May 2003 

determination. This is final Agency action regarding the matters your appeal raised. You may, if 

you wish, seek court review of the decisions herein. 
di 

,. 

m Regarding your right to appear before the Appeals Board, the Ruks for Administrative 

Review of Agency Decisions, which governs the Appeals Board, provide that: 

"An opportunity to appear before the Appeals Board (or a hearing officer) and an 

opportunity to present wimesses will be permitted at the discretion of the Appeals 

Board. In general, an opportunity to appear will be permitted if the Appeals Board 

determines that there is a dispute as lo a material fact . . .." [29 CFR Part 4003.551 

The Appeals Board determined that there is no dispute as to the material facts in this case and, 

therefore, decided that an oral hearing is not required. 

If you need other information from PBGC, please call our Customer Contact Center at 1-800- 

400-7242. 

Sincerely, 

Sherline M. Brickus 

Member, Appeals Board 

Enclosure