Pension Benefit Guaranty Corporation PHme 1200 K Street, N.W., Washington, D.C. 200054026 

JUL % r 2004 

Re: kCase No: 161810), The Retirement Plan for Salaried 

Employees of Sharon Steel Corporation 

The Appeals Board reviewed your appeal of PBGC's December 16, 1999 determination 

under the Sharon Plan. As explained below, the Board changed PBGC's determination by finding 

that you are entitled to a monthly benefit of $696.60, payable in the form of a 50% Joint and 

Survivor Annuity. Consequently, you have been underpaid and not overpaid. 

PBGC's Determination and Your A-upeal 

PBGC determined that you are entitled to a monthly benefit of $541.45 payable in the form 

of a 50% Joint and Survivor Annuity. PBGC noted that this amount is less than the estimated 

monthly benefit of $656.60 which you have been receiving and that your overpayment then totaled 

$8,866.55. PBGC records show that you haye continued to receive the larger $656.60 amount 

while your appeal has been pending. 

In your January 10,2000 appeal, you contend that an early retirement factor should not 

be applied to your PBGC benefit because you retired under the Plan's 70180 Immediate Severance 

Retirement. You noted that a 70/80 Immediate Severance Retirement pays an unreduced early 

retirement benefit to a participant who at the time of retirement: (1) has been employed for at 

least 15 years; (2) has attained age 55 and whose combined age and years of service total 70 or 

more; and (3) whose service is broken by reason of a reduction in force. You request that your 

early retirement benefit be recalculated by removing the early retirement factor from the Plan's 

.70/80 "CRP yearly accrual formula." On March 16, 2004, you supplemented your appeal with 

a copy of a Summary Plan Description that you believe supports your contention. 

You also asked that we review the application of PBGC's Benefit Guarantee Ratio (line 11 

of your PBGC benefit statement) in light of the above information. 

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.. 

W 

I. 

.. The Plan adopted an amendment on March 11, 1988, that froze benefit accruals (but not 

N 

.n vesting or eligibility service) retroactively to June 30, 1987. Because this freeze was retroactive 

? and reducedparticipants' accrued benefits, it required IRS approval under section412(c)(8) of the 

Internal Revenue Code and section 302(c)(8) of the Employee Retirement Income Security Act . (ERISA). On September 8, 1988, the IRS approved the amendment. The terms of the 

amendment did not place any conditions on its effectiveness, nor did the amendment contain an 

expiration date. On January 1, 1989, the Plan was amended.to "unfreeze" benefit accruals, 

effective June 1, 1991. This amendment did not restore benefit accruals for the period the freeze 

was in effect, i.e., between June 30, 1987 and June 1, 1991. 

When the Plan terminated, effective October 17, 1993, its assets were not sufficient to 

provide all benefits PBGC guarantees under Title N of ERISA. Because of legal limitations 

under ERISA and PBGC's regulations, the benefits that PBGC guarantees may be less than the 

benefits a pension plan would otherwise pay. 

Phase-in of PBGC's Guarantee of Ben& Increases 

ERISA sections 4022@)(1) and @)(7) phase-in PBGC's guaranteeof "any increase in the 

amount of benefits under a plan resulting from a plan amendment" made or effdve within the 

five years before Plan termination. This phase-in is equal to the greater of 20 percent of the 

benefit increase per month, or $20.00 per month (but not more than the amount of the increase), 

for each fuli year the Plan amendment was in effect before Plan termination. Under ERISA, the 

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

date it became effective. 

Section 4022.2 of PBGC's regulation on Benefits Payobe in Terminated Single-Employer 

Plans defmes a benefit increase as "any benefit arising from the adoption of a new plan or an 

increase in the value of benefits payable arising from an amendment to an existing plan." This 

section further states.that "benefit increase" includes "any change in plan provisions which 

advances a participant's or beneficiary's entitlement to a benefit, such as liberalized participation 

requirements or vesting schedules, reductions in the normal or early retirement age under a plan, 

and changes in the form of benefit payments." 

PBGC treated the Plan amendment unfreezing benefit accruals as a benefit increase subject 

to phase-in. PBGC determined that this amendment was "in effect* under ERISA for two full 

years between its effective date (June 1, 1991) and the Plan's termination date (October 17,1993). 

Thus, PBGC phased-in its guarantee of benefits attributable to post-June 1, 1991 accruals at the 

rate of 40%1$40.00 per month. 

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Benefit under 70/80 Plan Provisions 

Section 5.09 of the Plan document, as amended and restated effective January 1,1989 (see 

Enclosure 1). states that a participant retiring under the "Immediate Severance" retirement 

provisions is entitled to receive the greater of: 

(1) The actuarial equivalent of the benefit calculated using the "CRP 

yearly accrual formula", or 

(2) The benefit calculated using the Percent or Minimum Formula 

without actuarial adjustment. 

However, the Summary Plan Description (SPD) you provided as an addendum to your appeal 

makes no mention of an actuarial reduction to the "CRP yearly accrual formula" in its description 

of benefits payable under the Plan. While the SPD is undated, the Introduction section st& that 

the SPD is based on the plan provisions effective October 1, 1979. 

According to the records PBGC's auditors obtained from the former Plan Administrator, 

when you retired effective June 1, 1992, the Plan officials responsible on'an ongoing basis for 

calculating and paying benefits applied the "CRP yearly accrual formula" to your benefit without 

anactuarial reduction for early retirement. Therecord further reveals that Plan officials calculated 

the benefits of der similar~aituated participants the same way. It appears that jn using tbjs 

method to calculate benefits, the Plan officials had resolved a conflict between the SPD and the 

Plan document. The Appeals Board notes that several wwts have held that when the SPD 

conflicts with plan language, the SPD will control. SeeBursteinv. Retirement Account Plan for 

Employees of Alleehenv Health. Education and Research Fund, 334 F.2nd 365 (3d Civ. 2003). 

Based on.lhe circumstances, rhe Board iouna rhe 'CRF yeariy accruai iormuia'snouia be appiied 

1 to your benefit without an actuarial reduction for earl I " >-...7......----.....-. - - 

On December 16, 2003, the Appeals Board found that: (1) the Freeze Amendment, which 

froze benefit accruals (but not vesting or eligibility service) between June 30, 1987 and June 1, 

1991, was validly adopted; (2) participants received proper notice under ERISA and the Code; 

(3) the 1991 Plan amendment lifting the freeze on benefit accruals is a benefit increase under 

ERISA section 4041(b)(l)(B); (4) the amendment was in effect under ERISA for two full years 

before the Plan termination date; and (5) PBGC's guarantee of the amount of any benefit increase 

resulting from the Plan amendment is phased-in at the 40%/$40.00 rate. 

Your appeal also asked for an explanation of PBGC's Guarantee Ratio. Enclosure 2 

explains how this ratio was calculated and how phase-in applies to your benefit. 

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Decision 

Based on the information described above, the Appeals Board changed PBGC's 

determination by finding that you are entitled to $696.60 per month, payable as a 50% Joint & 

Survivor Annuity. This is the agency's final decision on this matter and you may, if you wish, 

seek judicial review of this decision in the appropriate Unites States District Court. For your 

information, we enclosed a corrected benefit statement detailing your revised benefit amount (see 

Enclosure 3). 

We will forward a copy of this letter to PBGCs Insurance Operations Department, who 

will contact you directly with respect toany backpayments and accrued interest PBGC owes you. 

If you need other information from PBGC, pleasecall the Customer Contact Center at 1-800-400- 

7242. 

Sincerely, 

Linda M. Mizzi 

Member, Appeals Board 

Enclosures (3) . 

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