8 Pension Benefit Guaranty Corporation ~mBBQO~ 1200 K Street. N.W., Washington. D.C. 20005-4026 

SEP 2 9 2003 

Re: Peter J. Schmitt (PJS 

Retirement Plan (the Plan) 

;) Employees 

The Appeals Board has reviewed your appeal of PBGC's 

September 18, 2001 determination of your Plan benefit. For the 

reasons explained below, the Board changed PBGC's determination by 

finding that PBGC must use the early commencement reduction factors 

described in Plan § 4.04 (b) instead of the Plan's definition of 

actuarial equivalence to adjust your benefit for early 

commencement. 

8 When PBGC's Insurance Operations Department, the office that 

issues benefit determinations, receives a copy of this decision, 

they will recalculate your monthly benefit in accordance with this 

decision 

PBGC's Determination and Your Appeal 

PBGC's determination letter said you were entitled to a 

monthly benefit of $604.88, payable as a Joint and 50% Survivor 

Annuity. The letter noted that you were then receiving an 

estimated benefit of $938.80, and therefore, had been overpaid. 

PBGC records show that you have continued to receive the $938.80 

amount during the pendency of your appeal. 

Your October 22, 2001 appeal claimed that there was a mistake 

in the calculation of your benefit, and asked the Appeals Board to 

"review the enclosed documents." On one of those documents, a 

document you received from the former Plan administrator (PJS) in 

1995, you highlighted a schedule of early commencement reduction 

factors, thereby indicating your disagreement with the early 

commencement adjustment factor PBGC applied to your benefit. You 

suggested that according to the Plan provisions, your early * retirement factor should be 0.52 and not 0.3856, as shown on your 

PBGC Benefit Statement. 
Discussion 

The Appeals Board reviewed the Plan's documents, and found 

that PBGC used a factor of 0.3856 because PBGC interpreted the Plan 

documents as requiring use of the Plan's definition of "actuarial 

equivalence" to calculate your early commencement adjustment 

factor. 

In making its determination, PBGC relied on the Plan's 

Article Six. Article Six applies to participants like you, whose 

employment with PJS ended before attainment of age 55. 

Section 6.04(b) says that separated vested participants with at 

least 10 years of service may elect to start receiving their 

benefits as early as age 55. It also says that the amount of the 

benefit payable as of the early commencement date is equal to the 

amount that would be payable at age 65, "actuarially reduced to 

account for the early commencement of benefit payments." PBGC read 

the quoted phrase in conjunction with Plan section 5.05, which 

defines "actuarial equivalent" and "actuarial equivalence," and 

concluded that the Plan's reduction under section 6.04(b) must be 

based on the definitions in section 5.05. 

Our review of the Plan's history shows that the phrase 

"actuarially reduced to account for the early commencement of 

benefit payments" has been in Plan section 6.04(b) since 1977, as 

part of the Plan's 1977 Restatement. Plan section 5.05, on the 

other hand, was added by the Plan's Sixth Amendment, in response 

to the enactment of the Retirement Equity Act of 1984, in which 

Congress required that all qualified defined benefit plans specify 

actuarial assumptions in a way which precludes employer discretion. 

Documents in PBGC's files show that in applying Plan § 6.04(b) 

to a deferred vested participant's benefit before the adoption of 

the Plan's Sixth Amendment, PJS used the reduction factors 

specified in Plan section S 4.04 (b) , which are the reduction 

factors the Plan prescribes for "early retirees." "Early retirees" 

are participants who worked with PJS at least until age 55 and 

earned at least ten years of service. The files also show that 

even after the adoption of the Sixth Amendment, PJS always used the 

reduction factors specified in Plan section § 4.04(b) in 

calculating deferred vested benefits under Plan § 6.04(b) up until 

the end of December of 1991. 

On December 20, 1991, PJS adopted the Plan's Twelfth 

8 Amendment. While that amendment contained many provisions, the 

only change pertinent to our discussion was a slight change in the 

reduction factors specified in Plan § 4.04 (b) . The reduction 
factors did not change at all for early retirees who started 

receiving their benefits at or after age 60, but for example, if 

an early retiree started receiving a benefit at age 55, the Twelfth 

Amendment changed the early commencement factor from 0.5333 to 

0.52. While the Twelfth Amendment (or any other amendment) did not 

change the words in Plan § 6.04(b), PBGC files show that PJS used 

the Plan's definition of actuarial equivalence to determine early 

commencement adjustment factors for seven deferred vested 

participants whose monthly benefits commenced between January 1, 

1992 and August 1, 1992. But by the time the next deferred vested 

participant started receiving an early benefit on December 1, 1992, 

PBGC files show that PJS had reverted to its long-standing 

interpretation of the words in Plan § 6.04(b), and used the factors 

in Plan § 4.04(b) from that point forward. 

Based on the Plan's consistent interpretation of the words in 

Plan § 6.04(b) from at least as early as September 1, 1982 through 

the Plan's termination date (December 31, 1994) except for a brief 

period in 1992, the Appeals Board found that PBGC should apply the 

phrase "actuarially reduced to account for the early commencement 

of benefit payments" in Plan 5 6.04(b) as meaning "reduced by the 

factors specified in Plan § 4.04(b) ." 

8 Decision 

Having applied the law and Plan provisions to the facts of 

this case, we changed PBGC1s determination by finding that PBGC 

must use the early commencement reduction factors described in Plan 

section 4.04(b) instead of the Plan's definition of actuarial 

equivalence to adjust your benefit for early commencement. 

We regret the delay in resolving your appeal and appreciate 

your patience while we completed our review. When PBGC's Insurance 

Operations Department receives a copy of this decision, they will 

recalculate your monthly benefit in accordance with this decision, 

and send you a corrected determination letter with a new 45-day 

right to appeal. In the meantime, if you need other information 

about your benefit, please call PBGC's Customer Contact Center at 

1-800-400-7242. 

Sincerely, 

8 Michel Louis 

Appeals Board Member