Pension Benefit Guaranty Corporation ,:. . 

1200 K Street, N.W., Washington, D.C. 20005-4026 "IM-IU-. 

APR 28 m 

Re: 1 1 

Mcbuth Steel Pension Plan With USWA LU 2659 (;Old Plan," Case # 038976) 

McLouth Steel Products Corporation Pension Plan ("New Plan," Case # 1735W) 

The Appeals Board has reviewed your appeal of PBGC's March 17,2000 determination 

of your New Plan benefit and its December 18,2002 determination of your Old Plan benefit. For 

the reasons described below, we are denying this appeal. 

In 1982,;he McLouth Steel Corporation ("Old McLouth") filed for bankruptcy and sold 

off its operating assets to a new company, eventually McLouth Steel Roducts Corporation ("New 

McLouth"). The Old Plan terminated, effective November 30, 1982, without sufficient assets to 

provide all benefits PBGC guarantees under the Employee Retirement Income Security Act 

(ERISA). New McLouth established the New Plan, which used credited service with both New 

and Old McLouth to compute a New Plan accrued benefit, which it then reduced by the benefit 

payable from the old Plan based only on Old Mcbuth service. The New Plan terminated, 

effective August 13, 1996, also without sufficient assets. PBGC is trustee of both Plans. 

PBGC's September 2, 1988 determination of your Old Plan benefit, which you did not 

appeal, said that you are entitled to a deferred vested benefit of $703.29 per month, if paid as a 

lifetime annuity with no survivor benefit beginning on your Normal Retirement Date under that 

Plan (i.e., December 1, 2000, the first of the month following your 62nd birthday), or to a lower 

amount if paid earlier andlor in a different form. PBGC included a benefit statement with the 

information used to calculate your benefit. 

PBGC's March 17, 2000 New Plan benefit determination said that "no monthly pension 

payment is payable to you at this time. Your correct benefit is currently being offset by fie 

Workers' compensation payments that you are receiving. This monthly offset will continue till 
at least you reach age 65." The letter also said that, if you thought the determination was 

incorrect, you had 45 days from the date of the letter to file an appeal. PBGC did not include a 

benefit statement with this determination. 18. ..

In 

! PBGC's July 13,2000 letter explained that your New Plan benefit is a "normal" benefit 

$ instead of a disability benefit because you received a lumpsum payment of $9.228.16 when you 

!I retired, effective October 1, 1993. PBGC noted that the only way for a participant to receive a 

special payment was to retire with a normal benefit. PBGC further explained that the Plan 

requires the normal benefit of a participant who is receiving Workers' Compensation to be offset 

(reduced) by the amount of the Workers' Compensation payments. 

In response to your request for a disability pension from the Old plan, PBGC issued a 

benefit determination on December 18, 2002 denying your request. PBGC explained that, in 

order for PBGC to guarantee a disability benefit, a participant must meet the Plan's requirements 

for the benefit before the Plan's termination date (November 30, 1982). Your Social Security 

Disability Award said that your disability began October 23, 1987. 

In your February 16, 2004 letter addressed to the Appeals Board (among others) and in 

a series of earlier letters to PBGC, you raised a number of issues concerning both your Old Plan 

and New Plan benefit determinations: 

1. You said you were misled by New Plan officials when you retired, effective September 1, 

1993 at age 54 years and 9 months. You said you only learned recently that you would 

have qualified for a disability benefit under the New Plan. Otherwise, you would never 

have elected to retire under the New Plan's "30-year retirement" provisions, which gave 

you 3 months' pension payments and nothing else. You would instead have elected a 

disability pension because disability pensions are not offset by Workers' Compensation 

until after age 65. 

2. You said you had 69+ points when the Old Plan terminated on November 30, 1982 and 

are, therefore, entitled to a Rule-of45 benefit (instead of a deferred vested benefit). You 

.also believe you qualify for a disability benefit under the Old Plan. 

3. The Old Plan never coordinated pension benefits with Workers' Compensation. To 

support your position, you cited the Sterner case. 

Your February 16,2004 letter also asked that PBGC provide you the employment records used 

to compute your benefit and the rules that govern the Old and New Plans. The Appeals Board 

forwarded your request to PBGC's Disclosure Officer, who will respond to you directly. His 

phone number is 1-800-400-7242 (extension 4040). 
The files available to the Appeals Board show that the former Plan Administrators and 

PBGC used the following information to calculate your Old Plan and New Plan benefits: 

2. 1 Date of hire 

1. I Date of birth 

1 Aueust 31. 1957 1 

I 

3. 

5. 1 Plan termination date 1 November 30.1982 1) 

4. 

6. 1 Type of retirement I Deferred vested (1 

Il - 

Date disabled per Social Security Administration 

Monthly Workers' Compensation (WC) payment $1.694.33/mo. 

Old Plan Benefil 

7. 1 Credited service 1 25.25 years 11 

October 23,1987 

8. 1 Normal retirement date (age 62) I December 1, 2000 

9. 1 Age 62 benefit before WC offset 1 $703.29/mo. 11 

10. 1 Aae 62 benefit after WC offset 11 

I I. I Plan termination date I Aueust 13. 1996 11 

12. 1 Tvw of retirement 1 30-year 11 

13. 1 Last dav worked 1 October 23. 1987 11 

14. 1 Actual retirement date (ace 54.75) I Seotember 1. 1993 11 

15. 1 Credited service [line 114) - line (2)l 1 36.0 vears II' - 

16. 1 Benefit before offsets 1 $1.066.72/mo. 11 

17. 

19. 1 Benefit after WC offset I $0 I 

18. 

The files also show that the former New Plan Administrator applied the Workers' Compensation 

offset to your New Plan benefit, effective January 1, 1994 (when your first monthly benefit 

became payable). PBGC applied the Workers' Compensation offset to your Old Plan benefit, 

effective December 1, 2000, your normal retirement date. Thus, as you said in your letters, you 

never received monthly pension benefits from either the Old or the New Plan. 

- - -- - - 

Special payment in lieu of fust 3 months' pension 

- 

$9,228.16 

II Benefit after Old Plan offset begins at age 62 [line (16) - line (9)] $363.43/mo. 
I0 . When PBGC becomes the trustee of a terminated pension plan, PBGC pays benefits to the .. 

UI plan's participants according to the terms of the plan, subject to the requirements and guarantee I! 

0 

limits of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Old 

11 Plan terminated on November 30, 1982, and the New Plan terminated on August 13, 19%. Your 

it entitlement to a benefit is based on the tenns of these Plans and on ERISA. 

The United States Supreme Court has held that pension plan provisions that allow for the 

offset of workers'compensation payments against pension benefits do not violate ERISA. Atessi 

v. Raybestos-Manhattan, 451 U.S. 504 (1981). Furthermore, the Supreme Court has concluded 

that states may not enact laws that would disallow such offsets from pension payments. Id. at 522- 

526 (New Jersey law purporting to prohibit Workers' Compensation benefits from being used to 

offset pension benefits is a law which "relates to pension plans" governed by ERISA and thus is 

preempted). See also ERISA 8 514(a), 29 U.S.C. 8 1144(a) (ERISA pre-emption of state laws). 

Thus, your reliance upon Michigan laws and state court decisions that address the 

coordination of Workers' Compensation benefits is misplaced. PBGC is not permitted to rely 

upon such state laws and court decisions, but rather must make benefit decisions based upon 

pension plan terms and ERISA. Nevenheless, we have included the following discussion of 

Michigan Workers'Compensation law because it might help in understanding your benefit. 

Since the enactment of a 1981 statute, Michigan has allowed employers to decrease 

Workers' Compensation paymentsfo those disabled employees who were eligible to receive wageloss compensatioh from other employer-funded sources, including pensions. Mich.Comp.Laws. 

("MCL") 8 418.354. Under Workers' Compensation law, such a statutory offset is commonly 

referred to as "benefit coordination." 

The 1981 Michigan law provided that disability benefits from pension plans may be treated 

differently from other pension benefits with respect to the offsets. If the individual was receiving 

a nondisability pension benefit, the Workers' Compensation benefit generally mus! be reduced 

by the amount of the pension. MCL. 8 418.354(1)(d). On the other hand, disability pension 

benefits do not have to be offset against Workers' Compensation payments. MCL 8 418.354(14). 

However, this exemption from coordination of benefits is not automatic; rather, if the pension 

plan is silent on the subject, the disability compensation benefits are subject to coordination. 

Srerner v. Mchuth Steel Products, 211 Mich.App. 354, 536 N.W.2d 225 (Mich.App. 1995), 

motion to appeal denied, 451 Mich. 893, 549 N.W.2d 577 (1996), citing Scott v. Jones & 

Laughlin Steel Corp., 202 Mich.App 408, 509 N.W.2d 841 (Mich.App. 1993). See also 

Hempstead v. Detroit Lions, Inc., 2003 WL 133065 (Mich.App., Jan 03, 2003) (unpublished) 

("statute requires some affirmative statement in a [pension] plan to be exempt from 

coordination"). 
New McLouth, in several litigated Workers' Compensation cases, took the position that 1 disability pension benefits from the New Mchuth Plan were subject to coordination. The C 

! company argued that section 3.10 of the Plan -- which provided that Workers' Compensation 

IA benefits "shall not be deducted from any such amount for permanent incapacity retirement payable . 

!? prior to age 65" -- did not prohibit a reduction to Workers' Compensation payments. Thus, the 

company asserted that coordination of Workers' Compensation benefits is not barred by 

3 application of MCL 8 418.314(14). The Michigan.Court of Appeals in Sterner rejected New 

Mchth's position. However, New McLouth appears to have prevailed in laterdecided cases 

that involve this issue. See, e.g., Kleczewski v..M&uth Steel Products Cop, 635 N.W.2d 306, 

465 Mich. 904 (Mich. Nov 16,2001) (Michigan Supreme Court denial of appeal).' 

The last Pension Agreement for the Old Plan went into effect on July 31, 1980. New 

McLouth and the United Steelworkers of America established the New Plan through a Pension 

Agreement that was dated and become effective on November 15, 1982. They also adopted a 

second Pension Agreement dated September 15, 1995, with a November 1, 1989 effective date. 

In all essential respects affecting your benefit entitlements, the provisions of these plan documents 

are the same. 

Section 2.3 of the New Plan provides that a "30-Year Retirement" benefit is available to 

any participant who retires on or after November 1, 1989 and who "has not attained the age of 

62 years and who shall have had at least 30 years of continuous service:" The 30-Year benefit 

consists of a "special payment" that is paid immediately after retirement and a "regular pension 

amount" that begins the first full calendar month following the three calendar months for which 

the special payment covers. 

The Old Plan and the New Plan provide for a "Permanent Incapacity Retirement" for any 

"participantwho shall have had at least 15 years of continuous service and who shall have become 

permanently incapacitated shall be eligible to retire . . . and shall upon his retirement (hereinafter 

"permanent incapacity retirement") be eligible for a pension. A participant shall be considered 

to be permanently incapacitated . . . only (a) if he has been totally disabled by bodily injury or 

disease so as to be prevented thereby from engaging in any employment of the type covered by 

the Basic Agreement, and (b) after such total disability shall have continued for a period of six 

consecutive months and, in the opinion of a qualified physician, it will be permanent and 

continuous during the remainder of his life" (section 2.5 in both Plans). 

Section 2.7 of both Plans provides that a "Rule-of-65 Retirement" benefit is available to 

any participant who - 

1 The Michigan Supreme Cow iwcd three other rulings on the he day ht were identical lo Klcnewski. Thc 

other ekes were Simpson v. Mdawh Steel Producls. McCany v. MrLouth Swcl Producls. and Herr v. McLowh Sled 

ProducIs. 

-5- 
A. Has at least 20 years of continuous service, has not reached age 55 and whose 

combined age and service equal 65 or more but less than 80, and 

tn B. Whose continuous service is broken by reason of a layoff or disability and who has 

I? 

ID 

not been offered suitable long-term employment as defined in the Plan. 

la 

:b 

x Both Plans also provide for a "Deferred Vested Pension" (Plan section 2.8). The Old Plan 

required 10 or more years of continuous service for this benefit; when the New Plan terminated, 

it required only 5 years of continuous service. 

As described on the first page of this letter, the New Plan benefit is first computed using 

total credited service with both Old and New Mchuth. This benefit is then offset (reduced) by 

the benefit payable from the Old Plan, which is based only on Old Mchuth service, so that the 

remaining New Plan benefit reflects only New Mchuth service. 

In addition, for all types of retirement except Permanent Incapacity, both the Old Plan and 

the New Plan offset a participant's monthly benefit for each month Workers' Compensation 

applies. For Permanent Incapacity Retirement, this offset does not begin until a participant 

reaches age 65 (section 3.10 of both Plan documents). 

According to your letters, you believe you met the conditions for Permanent Incapacity 

Retirement and Rule-of45 Retirement under the Old Plan. Under ERISA and PBGC regulations, 

PBGC cannot a benefit unless a participant meets the plan's requirements for the benefit 

on or before the Plan's termination date (see 29 Code of Federal Regulations (CFR) $5 4022.3, 

.4(a)(3)). While section 2.5 of the Old Plan does provide for Permanent Incapacity Retirement, 

PBGC cannot guarantee that type of benefit because your permanent incapacity occurred on 

October 23, 1987, which is after the Plan's November 30, 1982 termination date. 

SimiIarly, although you met the Old Plan's age and service requirement for a Rule-of45 

Retirement (described as 2.7(A) above) before the Old Plan terminated, you did not meet the 

second requirement (described as 2.7(8) above). That is, the files available to the Appeals Board 

show that (I) you were actively employed on November 30, 1982, (2) your continuous service 

had not been broken before that date, and (3) the former Plan Administrator calculated your Old 

Plan continuous service from your date of hire through November 30, 1982. 

Because you had more than 10 years of continuous service under the Old Plan, you are 

entitled to a benefit under that Plan's Deferred Vested Retirement provisions. 

Although you met the New Plan's requirements for Permanent Incapacity Retirement 

before the Plan's August 13, 1996 termination date, Plan files PBGC's auditors obtained when 

the Plan terminated show you elected to retire under the Plan's 30-Year Retirement provisions, 
'i 

IS effective September 1, 1993. On or near October 1, 1993, New Mchuth issue you a check for r $9,228.16 under the "Special Payment" provision for a 30-Year Retirement. Therefore, your 

IB New Plan benefit is determined under the 30-Year Retirement provisions, rather than Permanent .i 

u Incapacity Retirement provisions. Please note that, had you instead elected Permanent Incapacity 

II 

.. 

I# Retirement, your pension benefits could have been deducted from your Workers' Compensation 

111 Payments as discussed on page 5 of this letter. 

3 

For participants like you who are entitled to benefits under both Mchuth Plans as well 

as to Workers' Compensation, PBGC's practice is to calculate initially the benefits under both 

plans in the absence of any Workers' Compensation offsets. PBGC next applies the Workers' 

Compensation offset amount first to the Old Plan benefit (under the rules for a Deferred Vested 

Retirement in your case) to the extent permitted by plan provisions. PBGC then applies any 

remaining Workers' Compensation offset amount to the New Plan benefit, again to the extent 

permitted by plan provisions. 

Under the relevant pension plan provisions', both your Deferred Vested Retirement benefit 

under the Old Plan and your 30-Year Retirement benefit under the New Plan were required to be 

reduced by your Workers' Compensation payments, starting with the commencement dates of your 

monthly benefits. In your case, monthly Workers' Compensation payments exceeded the 

combined amount of your monthly pension benefits from both the Old and New Plans. Thus, 

PBGC correctly determined that you were owed no pension payments other than the Special 

Payment you had received from New McLouth. 

Having applied the law, the provisions of the Plan, and PBGC regulations and policies to 

the facts in this case, the Appeals Board found there was no basis for changing PBGC's revised 

benefit determinations for both the Old and New Plans. This is the Agency's final decision on 

the issues you raised and you may, if you wish, seek court review of this decision. 

If you have questions, please call PBGC's Customer Contact. Center at 1-800-400-7242. 

Sincerely, 

Linda M. Mizzi ' 

Member, Appeals Board