JUL 2 9 2005 

Re: case 194600, Northwestern Steel & Wire 

Company (the "Company") - Pension Plan A (the "Plan") 

The Appeals Board revieGed your appeal of PBGC's July 28, 2004 

determination of your benefit from the Plan. For the reasons 

stated below, the Board found no basis presented in your appeal for 

changing PBGC's determination. However, because your appeal 

suggested that you thought you had waived all survivor benefits, 

the Board decided that PBGC will give you the opportunity, with 

your spouse's written consent, to waive the Plan's "Free" Surviving 

Spouse Benefit ( "SSB" ) . 

Benefit Determination and Appeal 

In its letter, PBGC informed you that you are entitled to a 

PBGC monthly benefit of $984.41, which is smaller than the $993;02 

estimated monthly benefit you have been receiving. PBGC also 

informed you that because you have been overpaid, PBGC would reduce 

your future monthly payments by $9.94 per month to $974.47 until 

the rota1 overpayment has been repaid, without interest. Please 

note that because the total overpayment has increased during the 

pendency of your appeal, the monthly recoupment amount will be 

increased but will not be more than 10% of your PBGC benefit. 

PBGC's letter also said that your benefit is paid is the form 

of a Straight Life Annuity with an SSB. It explained that under 

this form of benefit, you receive a monthly benefit of $984.41 for 

the rest of your life. It also said that if you die first, your 

eligible surviving spouse would receive $492.21 per month until she 

attains age 60, and thereafter, she would receive $492.21 minus 50% 

of her Social Security Widow's Benefit or, if larger, $150 per 

month. 

In your August 22, 2004 appeal, you suggested that your 

correct monthly benefit should be $1,051.54 (the product of PBGC's 

unadjusted 2001 Maximum Guaranteeable Benefit of $3,392.05 and an 

early retirement adjustment factor of 0.3100). 

Your appeal also stated: (1) you and your wife revoked the 
spouse benefit, (2) Company pensions were 'never based on age, qnly 

years of service", and (3) PBGC is giving some of the pensioners 

the temporary supplement, but excluding others. 

Discussion 

1. Background 

PBGC provides pension insurance in accordance with the 

Employee Retirement Income Security Act of 1974, as amended 

("ERISA"). If a plan sponsor is unable to support i& pension , plan, PBGC becomes trustee of the plan and pays pension benefits as 

defined in the plan subject to limitations and requirements set by .. Congress under ERISA. 

PBGC records show that the Plan terminated on ~ugust 28, 2001 

and that PBGC became the Plan's trustee on August 31, 2001. The 

records also show that you quit working for the Company on May 31, 

2001, retired on June 1, 2001, and received a Special Pension in 

lieu of the first three months of retirement benefits. 

When the Plan terminated, it did not have sufficient assets to 

provide all Plan benefits. Therefore, the provisions of the Plan, 

the provisions of ERISA, and PBGC'S regulations determine your 

benefit entitlement. 

Subject to certain limitations, ERISA requires PBGC to 

guarantee the payment of all b&ic nonforfeitable benefits under a 

covered plan that PBGC trustees. PBGC regulations make it clear 

that most supplemental benefits are not guaranteeable by PBGC 

because they are in addition to the basic regular monthly annuity 

payments that retirees receive under pension plans. 

2. Your Maximum ~uaranteed'Benefit 

Your PBGC benefit is less than your regular monthly Plan 

benefit because of the legal limits on guaranteed benefits set by 

I Congress when it enacted ERISA. Orre of these limits, the Maximum 

Guaranteeable Benefit ("MGB"), affects your PBGC benefit amount. 

j 

I 

For plans .that terminated in 2001, the MGB payable in the form 

of a Straight Life Annuity ("SLA") starting at age 65 cannot be 

more than $3,392.05 per month. Because you began receiving your 

monthly benefit before the Plan's termination date, PBGC must 

adjust that $3,392.05 amount to account for your age as of the 

Plan's termination date (August 28, 2001) , and the form of your 

benefit . 
Age Adjustment 

PBGC regulations require a reduction of your MGB by 7/12 of 1% 

for each of the first 60 months, 4/12 of 1% for each of the next 60 

months, and 2/12 of 1% for each of the next 120 months by which you 

were under age 65 as of August 28, 2001. There are 202 complete 

months between August 28, 2001 and your 65th birthday (July 21. 

2018). So, PBGC used an age adjustment factor of 0.3133 [I - 60 (7/lZf (.01) - 60 (4/l2) (. 01) - 82(2/12) (.01) 1 . 

Form Adjustment 

Section 4.1 of the Plan's governing document provides a 

Surviving Spouse's Benefit '('SSB") to participants like you who 

completed at least 15 years of continuous service and quit working 

when they were eligible for an immediate pension. 

PBGC's determination letter and some of the Plan documents in 

effect before your retirement referred to the SSB as a "Free 

Surviving Spouse BenefitH because unlike the Automatic 50% Spouse 

Option (UA50%SO''), which you chose to revoke with your wife's 

written consent, your Plan benefit is not reduced to pay for the 

SSB. Because the Plan did not provide for a reduction in your 

regular Plan benefit to pay for the SSB, the Plan did not provide 

any mechanism through which you could have revoked the SSB with or 

without your spouse's consent. 

In your appeal, you said that you and your spouse "signed away 

the spouse benefit." The Enclosure is a copy of the revocation 

form that you and your spouse signed. It specifies your estimated 

benefits under the Plan as of the date you signed the revocation. 

It clearly shows the estimated guaranteed benefits and the 

estimated Plan benefits (crossed-out) that would be payable 

depending upon whether you decided to revoke or not to revoke the 

A50%SO. 

In particular, the Enclosure shows that your estimated 

guaranteed benefit during your lifetime if you chose to revoke the 

A50%SO would be $1,051 per month. It also shows that the estimated 

SSB would be $525 per month, resulting in a full.survivor benefit 

of $525 month if you chose to revoke the A50%SO. Just below the 

estimated dollar amounts, there is a note that states 

'The Surviving Spouse's Benefit assumes the spouse is eligible for such benefit and does 

not reflect the deduction applicable when the surviving spouse attains eligibility for Social 

Security widow's or widower's benefit. 

This note was the way the Company let you know that the full SSB 
amount would be payable only until your spouse's age 60 and that 

her amount would be reduced by one-half of her Social Security 

Widow's Benefit after she attains age 60. 

It is clear from the above that when you revoked the A50%SO 

with your wife's written consent, you did not revoke the SSB. 

PBGC regulations require a reduction of your MGB for the 

possibility PBGC would pay additional benefits after you die. 

Based on actuarial calculations, PBGC determined that your SLA/SSB 

is equivalent in value to a Joint and 23.94% Survivor Annuity. 

Based on the ages of you and your spouse as of the Plan's 

termination date, the PBGC benefit form adjustment factor to 

convert your benefit from the SLA to the SLA/SSB is 0.9263. 

Therefore, your PBGC-guaranteed benefit payable as a SLA/SSB 

is $984.41 ($3,392.05 x 0.3133 x 0.9263). 

2. Your Rule-of-65 Supplement 

Before the Plan terminated, the Company found that you were 

entitled to a Rule-of-65 Retirement. Under Section 3.5 of the 1996 

Plan, participants who retire under Rule-of-65 Retirement are 

entitled to an Increased Pension of $400.00 per month, payable 

until the participant dies or becomes eligible for a Public 

Pension, whichever is earlier. The Plan's Increased Pension is 

also known as a temporary supplemental benefit. 

Under PBGC's regulation on Benefits Payable in Terminated 

Single-Employer Plans (29 CFR §4022.21(a)), PBGC may not guarantee 

any portion of your supplemental benefit, because to do so would 

cause your combined benefit (your regular pension plus your 

supplement) to exceed the monthly benefit you would receive under 

the Plan at your Normal Retirement Age in the form of a Straight 

Life Annuity. 

In your appeal, you noted that PBGC is paying the temporary 

supplement to some retirees, while denying it-to others. One 

reason why some participants receive temporary supplements is 

because section 4022.21 (a) (2) (ii) of PBGC' s regulation provides .an 

exception. This exception covers participants,who became entitled, 

on or before the Plan's termination date, to an annuity payable 

under the Plan on account of permanent and total disability. PBGC 

applied this exception to participants who retired under the Plan's 

Permanent Incapacity Retirement and to participants who could have 

retired under the Plan's Permanent Incapacity Retirement but who 
chose to retire under Rule-of-65 disability or 70/80 disability. 

As a result, the Plan supplements payable to these participants 

with disabilities are guaranteed by PBGC. 

b. Nonguaranteed Supplements Payable by PBGC 

ERISA section 4044 provides that upon termination of a covered 

Plan, the assets remaining in the Plan shall be allocated to the 

value of Plan benefits in six different priority categories. Under 

an allocation of a plan's assets, it is possible for a participant 

to receive a benefit (like a temporary supplement) that would not 

otherwise be payable (i .e., that PBGC would not guarantee out of 

its own funds). 

The first two priority categories pertain to participants in 

plans with voluntary or mandatory employee contributions and, as a 

result, are not applicable in this case. Priority Category 3 

("PC3") pertains to participants who retired (or who were eligible 

to retire and receive an immediate pension) three or more years 

prior to Plan termination. In this case, many participants became 

entitled to receive temporary supplements (which would not 

otherwise have been payable by PBGCI as a result of the allocation 

of the Plan's assets to PC3 benefits. 

Since you did not retire on account of a total and permanent 

disability and since you were not entitled to a benefit under PC3, 

neither of the two exceptions discussed above applies to you. 

'Decision 

Having applied Plan provisions, the law, and PBGC rules to the 

facts of this case, the Appeals Board found no basis presented in 

1 your appeal for changing PBGC's determination. However, because 

your appeal suggested that you thought you had waived all survivor 

benefits, the Board decided that PBGC will give you the 

opportunity, with your spouse's written consent, to waive the 

Plan's SSB. 

We will' send a copy of this decision to PBGC's ~enefits 

Administration & Payment Department (BAPD), the group responsible 

for issuing benefit determinations and paying benefits. BAPD will 

contact you directly regardjng what your monthly benefit would be 

if you choose to waive the Plan's SSB, with your spouse's written 

consent, and-give you the opportunity to waive the SSB if you so 

desire. 

This decision is the agency's final action regarding the 

issues you raised in your appeal. You may, if you wish, seek court 

review of this decision. If you need other information from PBGC, 
please call PBGcls Customer Contact Center at 1-800-400-7242. 

Sincerely. 

Michel Louis 

Appeals Board Member