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PSGC Pension Benefit Guaranty Corporation 

Protecting America's Pensions 1200 K Street, N.W., Washington, D.C. 20005-4026 

August 23,2006 

Re: I Case 198374, Pellet Hourly Wage Employees Pension 

Plan (the "Pellet Plan") 

Dear \ 

"--------~ 

We are responding to your appeal of PBGC's April 21,2005 determination of your 

benefit under the Pellet Plan. For the reasons stated below, we are denying your appeal. 

PBGC's Benefit Determination and your Appeal 

In its determination letter, PBGC informed you that you were not entitled to a PBGC 

benefit because the Pellet Plan required five years of service to qualify for a vested 

pension benefit and you had only 2.42 years of service. Additionally, on May 13, 2005, 

PBGC provided the following additional explanation in response to a telephone inquiry from 

you: 

You were denied benefits because you were credited with only having 

2.4167 years of service. You were hired on August [] 1979 and your last 

day worked was January = 1980. This decision was made based on 

section 5.1 (a)(1) of plan 002, which provides that absence which continues 

beyond two years from commencement of absence due to layoff or physical 

disability shall not be creditable as continuous service. 

Your June 3,2005 appeal stated that you were "never terminated" from employment 

and you were "eligible to return to work at anytime from 1/12/80 to date of closure/sale of 

National Steel to USX on 5/20/03." You further ex lained that our circumstances were 

unique because you were 

You asserted that you were on layoff status from January 12, 1980, to August 1990, 

when you were called back to work. Your appeal states that, upon such recall notification, 

"the Union, United Steelworkers, on my behalf, met with the Company to out in orace an 

agreement per contract language that allowed for a leave of absence for,--I~ ____ -------" 

and the maintaining of accrued seniority and years of service for pension purposes." You 

further contended that this agreement remained in place until the buyout of National Steel 

by USX, and that therefore you accumulated 23 years and 9 months of service from 

August D1979 until May D 2003. You also said that during this entire time you received 
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"all communications sent to hourly employees relative to insurance, audits, right to know 

rules, bankruptcy notifications, etc." 

You provided documentation in support of your claims, which included: (1) copies 

of the pension agreement's continuous service provision; (2) seniority lists from the 

Company for 1998 and 2002; (3) copies of language in the 1989 and 1990 basic 

leave of absence; and (5) a September 9, 19991etterfrom the Company Benefits Manager 

stating that your credited service for pension purposes was 20 years and 1 month. 

Additionally, you asserted that neither the Union nor you "have ever at any time 

been notified by the company that the leave agreement was invalid or in need of revisions." 

You stated that you r wife and you had made retirement decisions with the expectation that 

you would have "some retirement benefit from my years of service at National Steel." 

Finally, you contended that, because of your many years as al 1 your 

"circumstance and relationship as an hourly employee of National Steel was the exception 

and not the rule" and that "in the eleventh hour, I am being singled out when all the 

evidence supports inclusion because of the unique circumstances of my case." 

Background 

The records PBGC obtained from National Steel show that you were hired by the 

Company on AugustC] 1979, and were put on layoff status on January D 1980. Your 

appeal stated that you remained on layoff status, without the Company offering you a recall 

to work, until August 1990. You also submitted letters from Hanna Mining Co. dated 

February 5, 1981, March 27, 1984, and April 3, 1987, and from National Steel dated 

October 20, 1989, that had notified you that you had been laid off for 12 or more 

consecutive months. The letters also stated that you needed to respond within 15 days 

if you desired to be continued on the records of the Company as available for immediate 

recall to work. It appears that you provided such notification, since Company records in 

1998 and 2002 continued to list your seniority date as Auguste 1979. 

An Agreement between the Company, the Union and you, which you si ned on 

October 4, 1990, stated: is hereby granted a leave of absence 

e greement a so sal t at e ompany will extend the leave 

of absence and continue it as long as I"----------c:--:-----:-:----:----------:--------:-------=---=------" 

I I There is no record, however, that you ever returned to work for 

the Company, and your appeal suggested that you continued to I I 

I I up to and after the Pellet Plan's December 6, 2002 termination date. 
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Plan Provisions 

The 1980 Pension Agreement became effective on July 31, 1980, and therefore was 

in effect shortly after the date of your layoff. Under this Agreement, 10 years of 

"continuous service" was required for vesting in a pension benefit. See section 2.8 of the 

1980 Pension Agreement, which is provided in Enclosure 1. Under the 1989 Pension 

Agreement, the vesting requirement was reduced from 10 years to 5 years of continuous 

service. 

Section 5.1 of the 1980 Pension Agreement (also provided in Enclosure 1) states 

that "continuous service" means "service prior to retirement calculated from the Employee's 

last hiring date (this means in the case of a break in continuous service, continuous service 

shall be calculated from the date of reemployment following the last unremoved break in 

continuous service) .... " Section 5.1 (a) further states: "There shall be no deduction for 

any time lost which does not constitute a break in continuous service, except that in 

determining the length of service for pension purposes: (1) that portion of any absence 

which continues beyond two years from commencement of absence due to a layoff or 

physical disability shall not be creditable as continuous service; .... " Finally, section 

5.1 (b )(4 )(ii) provides: "if a person absent on account of layoff or disability in excess of two 

years returns to work with the Company within an additional period equal to (aa) three 

years, or (bb) the excess, if any of his length of continuous service at commencement of 

such absence over two years, whichever is less, such break shall be removed and his 

continuous service at the time of such break shall be restored . ,,1 

Discussion 

When the Plan terminated on December 6,2002, it did not have sufficient assets 

to provide all benefits PBGC guarantees under Title IVofthe Employee Retirement Income 

Security Act ("ERISA"), and PBGC became the Plan's trustee. Because of legal limits 

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

than the benefits a pension plan would otherwise pay. 

As discussed above, the 1980 Agreement provided that continuous service is 

broken by an "absence due to a layoff or a physical disability which continues for more than 

two years. . . ." The only exceptions to this rule are for a "compensable disability 

incurred during course of employment, " and for returning to work following a layoff or 

disability within a period equal to the lesser of three years or the excess, if any of the 

1 The Pellet Plan's definition of "continuous service" - as well as the provision that a break in 

service occurs if a person is absent due to layoff which continues for more than two years - remained 

unchanged in the later Agreements. See, for example, Enclosure 2, which is a copy of the "continuous 

service" provisions under the Pension Agreement effective as of December 31,2000. We note that the 

later Agreements amended the rules concerning the removal of break of service upon re-employment, but 

that the removal of the break was contingent upon the employee completing one year of continuous 

service following such re-employment. 
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employee's "length of continuous service at commencement of such absence over two 

years." Because neither of these exceptions applies to your case, you incurred a break in 

service two years after your layoff date. 

The Leave of Absence Agreement 

There is no evidence that you were ever were re-employed by any ofthe Companies 

covered under the Pension Agreements. However, as you stated in your appeal, your 

employment status changed in 1990 from laid-off to leave of absence as a result 

Agreement between the Company, the Union and you. 2 This leave of absence agreement 

references Exhibit F, Paragraph 2, Subparagraph (a) of the Basic Labor Agreement 

between National Steel Pellet Company and U.S.W.A. Local Union No. 2660 dated August 

1, 1989 ("Basic Agreement"). 3 

You claimed you are entitled to additional pension service based on this leave of 

absence agreement. The leave of absence agreement, however, is silent about pension 

rights. Also, since the leave of absence agreement was executed shortly after the 

Company notified you in August 1990 of a recall to work, it appears that the primary (if not 

only) purpose of the leave of absence agreement was to preserve your seniority position 

in the event that I land you then desired to return 

to work. Under the Basic Agreement, a break of service for seniority purposes occurs if 

an employee receives a recall notice and then fails to report to work after 15 days, unless 

he obtains a leave of absence.4 Thus, by obtaining a leave of absence, your seniority 

position was preserved. 

However, while seniority under the Basic Agreement takes into account the 

employee's "continuous service," that term is defined differently than in the Pension 

Agreement. For seniority purposes, a layoff does not result in a break in continuous 

service, so long as the employee timely responds that he is available for work after he 

receives a notice from the Company inquiring about his availability or obtains a leave of 

absence. See Enclosure 5. But for pension purposes, continuous service ends after two 

years, even if the employee, timely notifies the Company that he is available for work. 

Therefore, the fact that you obtained a leave of absence for seniority purposes does not 

mean that you were granted additional continuous service for pension purposes. 

2 See Enclosure 3, which is a copy of this agreement which you signed on October 4, 1990. 

3 Enclosure 4 is a copy of this provision, which you provided in your appeal. You asserted that the 

language in this Exhibit to the Basic Agreement was drafted specifically to address your situation as = 

I I ' 

4 See Article IX, section 9.5(D) of the Basic Agreement effective July 1, 1994 , which is provided 

as Enclosure 5. 
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Moreover, there is nothing to indicate that your leave of absence was intended to 

apply retroactively to remove a break in service for pension purposes. Indeed, the leave 

a reement s ecificall a lies onl to the time eriod durin which you I 

You a~ls-=-o---=s-'-ta::<t-::--ed~in=-::-::-yo:::-Cu-:-::r~ 

"---a-p-p-ea~l:-:-t:-ha----:tC=1 ====================':I(~which was more than eight 

years after you were laid off). Therefore, the leave of absence agreement did not change 

the fact that, for pension purposes, your continuous service was broken in January 1982, 

because you had been laid off for more than two years. 

We further concluded that the leave of absence agreement itself cannot be 

considered to constitute re-employment within the meaning of the Pension Agreements, 

especially when it is considered that you never actually returned to work for the Company. 

Thus, we decided that the provisions in the Pension Agreements concerning the removal 

of breaks in continuous service following re-employment are not applicable to your 

situation, since you never were re-employed. 

Letters from Pellet's Benefits Manager 

Your appeal included a copy of a September 9, 1999 letter to you from Jim 

Karstens, Benefits Manager of National Steel Pellet Company (Enclosure 6), that stated: 

"As of today's date you are credited with 20 years 1 month of service for pension purposes. 

Using the current multiplier of $40.00 per year, your present accrued pension benefit is 

$803.00 monthly." It also stated that you were "considered to be on leave of absence at 

the present time." However, a second letter dated January 14, 2002 from Jim Karstens 

(Enclosure 7) stated: "We have been informed by National Steel Corporation that you are 

not entitled to pension service following your last day worked for National Steel Pellet 

Company. Your last day of work at National Steel Pellet Company was January [J 1980. 

The pension agreement does not have a provision that allows service to continue during 

your leave of absence." 

While neither letter provided a full explanation of the Company's reasoning, it 

appears that the second letter corrected the first based upon the Company's re-evaluation 

ofthe relevant language in the Pension Agreements. Thus, the second letter, rather than 

the first, appears to reflect the Company's position at the time the Plan terminated with 

respect to your pension eligibility. In any event, we concluded that the second letter 

(rather than the first) correctly reflects the language in the relevant Plan documents, for the 

reasons that are discussed above. We further noted that, under section 404(a)(1 )(0) of 

the Employment Retirement Income Security Act (ERISA), neither plan fiduciaries nor their 

administrative employees are allowed to disregard the requirements of a written plan 

document. Accordingly we concluded that we cannot determine your pension rights based 

on the September 9, 1999 letter. 

You stated that your wife and you had made retirement decisions with the 

expectation that you would have "some retirement benefit from m ears of service at 

National Steel." 
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\ \the fact remains that you worked less than a year 

with the Company before you were laid off, and you never subsequently returned to work. 

Furthermore, the leave of absence agreement did not contain any provisions concerning 

pension rights. Under these circumstances, we are unable to conclude that you 

reasonably should have expected to receive a pension benefit from the Pellet Plan. In any 

event, PBGC must pay benefits in accordance with the governing Plan documents, and 

accordingly we are unable to provide you with a benefit for the reasons given in your 

appeal. 

Therefore, the Appeals Board decided that you cannot be credited with additional 

continuous service based on your particular situation. We therefore found that PBGC 

correctly determined that you earned only 2.4167 years of continuous service under the 

Pellet Plan and were not vested in a pension benefit. Furthermore, based on ERISA 

section 4001 (a)(8), PBGC is unable to pay you a benefit because PBGC's guarantee is 

limited to vested benefits. 

Request for a Hearing 

You stated that Union and past management employees are willing to testify on your 

behalf, and you also are available to provide testimony either in person or through video 

teleconferencing. PBGC's Rules for Administrative Review of Agency Decisions provide 

that an opportunity to appear before the Appeals Board and an opportunity to present 

witnesses will be permitted at the Appeals Board's discretion. See 29 Code of Federal 

Regulations § 4003.55. The Appeals Board has concluded, however, that there is no 

dispute of material fact in your appeal that requires a hearing to resolve. Accordingly, the 

Board denies your request for a hearing. 

Decision 

For the reasons discussed above, we must deny your appeal. This is the PBGC's 

final action in your case and you may, if you wish, seek court review of this decision. If you 

need other information from PBGC, please call the Customer Contact Center at 

1-800-400-7242. 

Sincerely, 

~w.~ 

Charles W. Vernon 

Chair, Appeals Board 

Enclosures (7)