PBGC Pension Benefit Guaranty Corporation Prot ecting Amer ica's Pensions 1 ZOO K Street. N.W., Washington, D.C. 20005-4026 

September 22, 2008 

Re: and Appeal 2007-1082, Case 198370, 

National Steel Corp. Hourly Pen. Plan (the "Plan") 

Dear 

We are responding to your jointly-filed appeals of PBGC's 

December 14, 2006 determination of benefit and PBGC's 

August 29, 2005 determination of benefit.l For the 

reasons stated below, we decided that the monthly benefit amounts 

_ currently are receiving from PBGC ($1,263.33 

and $706.89, respectively} will not be reduced. 

Determination and Appeal 

PBGC's December 14, 2006 determination stated that 

as the alternate payee of under a Qualified 

Domestic Relations Order (QDRO), is entitled to a monthly benefit 

of $585.64 in the form of a Straight Life Annuity (SLA). The 

Benefit Statement PBGC enclosed with her determination shows that: 

(1) PBGC accepted the $706.89 monthly amount the former Plan 

Administrator ("National Steel") had calculated for her; and (2) 

PBGC determined that it should reduce the $706.89 amount to $585.64 

based on PBGC's Maximum Guaranteed Benefit ("MGB") limit (see 

further discussion below) . 

PBGC's August 29, 2005 determination stated that 

is entitled to a $1,262.33 monthly benefit in the form of a SLA. 

The monthly amount of $1,262.33 equals the Plan benefit amount 

National Steel had calculated for him after the QDRO reduction. 

Thus, PBGC did not reduce benefits based on the MGB. 

In your jointly-filed letter dated March 2, 2007, you state: 

1 The Appeals Board exercised its discretion under PBGC's regulations and 

decided that jointly-filed appeals of their benefit 

determinations should be consolidated. See 29 Code of Federal Regulations 

section 4003.56 (consolidation of appeals). 
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When PBGC pays benefits [under a QDRO] and the 

amount of total benefit . . . to both the participant and 

Alternate Payee is ·reduced t then the Participant and 

Alternate Payee should be reduced by the same percentage. 

I participant was not reduced. 

Al ternate Payee is being reduced. I 

think if we were both reduced equally percentage wise t 

would still be over her MGB. 

The appeal requests that benefit be increased by the 

benefit is decreased. The appeal 

combined 

$121.25 amount that 

requests this result 

benefits would not be 

~ 

so that 

limited by the MGB. 

Background 

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

sufficient assets to provide all benefits PBGC guarantees under 

Title IV of the Employee Retirement Income Security Act ("ERISN') t 

and PBGC became the Plants 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. 

The QDRO's Provisions 

National Steel calculated your monthly Plan benefits based on 

your Qualified Domestic Relations Order ("QDRO") dated September 2, 

1997. Your QDRO is a "separate interest" type of QDRO. This means 

that the alternate payee may elect a date of retirement and form of 

annuity without regard to when the participant starts payments and 

without regard to the form of the participant's payments. Under a 

separate interest QDRO, the participantts benefit thus is divided 

into two parts - one for the participant and one for the alternate 

payee. 

Your QDRO provided that "is awarded 50% of the 

participant's benefit as determined as of November 1995 (date 

of divorce." It also stated that she may elect to receive her 

benefits "in a form which provides her a life annuity based on her 

life." We note that, although the QDRO provided with 

the option of starting her benefits on a different date than 

Hornyak, both decided to start benefits on the same date (October 

I, 1997). 

The QDRO also addressed how benefit payments would be 

allocated if the Plan should terminate with an unfunded liability. 
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For this situation (under which PBGC would be making payments), the 

QDRO provides: "[I]f the amount of the total benefit payment to be 

paid to both the participant and the alternate payee is thus 

reduced, then the participant's benefit payments, and the alternate 

payee's benefit payments shall each be reduced by the same 

percentage." 

Plan Benefits 

When _ retired in 1997, National Steel determined 

that his monthly accrued benefit is $2,078.33. 2 For purposes of 

the QDRO, National Steel also determined that his accrued benefit 

as of his November 1995 divorce date is $1,632.00. Your appeal 

does not challenge either of those amounts. 

Thus, benefit under the QDRO, prior to the 

actuarial adjustment for her age, is $816.00. 3 Plan 

benefits under the QDRO accordingly is the remainder of his 

$2,078.33 accrued benefit, which is $1,262.33. 4 

National Steel also actuarially reduced $816.00 

monthly benefit amount to reflect that, because she was younger 

than she likely would be receiving benefit payments 

over a longer time period. Thus, National Steel multiplied the 

$816.00 amount by an age adjustment factor of 0.866287, which 

resulted in a monthly benefit of $706.89. That amount is payable 

to Ms. Hornyak for her lifetime. 

Impact of Maximum Guaranteed Benefit Limit 

PBGC determined that it was required to reduce 

PBGC benefit because of the MGB, which establishes the maximum 

monthly amount that PBGC may guarantee for a participant under a 

terminated pension plan. Specifically, section 4022(b) of ERISA 

provides that PBGC's guarantee of a participant's plan benefit 

cannot exceed a specified dollar amount payable in the form of a 

Straight Life Annuity at age 65. For plans like yours with 

We note that Plan benefit benefits 

under the QDRO) initially included 5-year certain benefits. The 5-year certain 

period benefits, however, had ended before the Plan's termination date. 

Therefore, under PBGC regulations, there is no adjustment to 

MGB for the 5-year certain period benefit. 

50% x $1,632.00 (accrued benefit at date of divorce) $816.00. 

2,078.33 (accrued benefit at retirement) less $816.00 

benefit under QDRO) = $1,262.33. 
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termination dates in 2002, the MGB is $3,579.55 per month in the 

form of a SLA for a participant who is age 65 on the Plan 

termination date. In both of your cases, PBGC must reduce the 

$3,579.55 MGB amount because, when PBGC started paying your 

guaranteed benefits following the Plan's termination date (December 

6, 2002), you were both younger than age 65. 

A PBGC technical procedure (Actuarial Technical Manual- Interim 

§ 03-1, which we will refer to as "Procedure 03-1'1) addresses how 

the MGB should be applied when a separate-interest QDRO assigns a 

percentage (i.e . , not a fixed dollar amount) of the participant's 

benefit to the alternate payee. Under Procedure 03-1, the 

participant and alternate payee eaCh are assigned a percentage of 

the MGB based on their respective shares of the participant' s 

benefit. In determining the respective shares for purposes of the 

MGB, PBGC follows the terms of the QDRO (i.e., if the alternate 

payee is assigned 40% of the benefit under the QDRO, she will 

receive 40% of the MGB). Also, after the MGB is spl it, PBGC 

calculates the MGB separately for each party based upon his and her 

"age, form of benefit, age of current spouse, etc." 

The above-discussed PBGC procedure is illustrated by PBGC's 

MGB calculations for PBGC determined that 

_ : (1) is entitled to 39.2623% of the MGB because the benefit 

assigned to her under the QDRO is 39.2326% of _ accrued 

benefit;5 and (2) her MGB age adjustment factor, which is based on 

the date of Plan termination and her August 10, 1949 birth date, is 

0.4167. Thus, PBGC determined that the MGB for her benefits is 

$585.64. The $585.64 amount equals $3,579.55 (age 65 MGB for a 

SLA) multiplied by 0.4167 (MGB age adjustment factor) and by 

0.392623 (her % of the MGB based on the QDRO) [$3,579.55 x 0.4167 

x 0.392623 = $585.64]. Although Plan benefit amount 

is $706.89, PBGC concluded that it cannot pay her any more than 

$585.64 (the lesser of her MGB and her Plan benefit). 

PBGC concluded that share of the MGB is 

60.7377% of the MGB [100% - 39.2623% (percentage assigned to 

_ = 60.7377%]. age adjustment factor, which 

is based on the date of Plan termination and his March 4, 1942 

birth date, is 0.7083. Thus, MGB is computed as 

$1,539.94 ($3,579.55 x 0.7083 x 0.607377). Since his Plan benefit 

of $1,262.33 is less than his MGB, PBGC determined that it will 

pay him his full Plan benefit. 

The 39.2326% PBGC computed equals the $816.00 payable to 

under the QDRO (before the reduction the former Plan Administrator made for her 

age at benefit commencement) divided by accrued benefit of 

$2,078.33 (which is the amount of his Plan benefit before the QDRO reduction) . 
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Discussion 

PBGC's MGB benefit calculations for 

conformed with the method in PBGC Procedure 03-1 for separateinterest QDROs. Under the unique circumstances of your cases I 

however, we decided to change PBGC's determination so that the MGB 

causes no reduction to either of your Plan benefit amounts. 

In reaching this conclusion, we first took into account the 

specific terms of the QDRO. We note that, in the usual case, the 

QDRO is either: (1) silent concerning how to allocate PBGC benefit 

reductions between the participant and the alternate payee; or (2) 

provides that the reduction should be "pro rata" based the value of 

the participant's and alternate payee's benefits. See model 

Separate Interest QDRO in Qualified Domestic Relations Orders & 

PBGC (available on PBGC's website), which suggests language for a 

"pro rata" reduction. In your case, however, the QDRO uses 

language that differs somewhat from PBGC' s model. Your QDRO states 

that, if benefits are reduced by PBGC, "then the participant's 

benefit payments, and the alternate payee's benefit payments shall 

each be reduced by the same percentage." 

Thus, your QDRO focuses upon the percentage reductions to 

benefit "payments," rather than to reductions based on the "value" 

of the benefits. Moreover, as a result of the QDRO's specific 

language, an apparent inconsistency arises between PBGC's benefit 

calculations (which are based on Procedure 03-1) and what the QDRO 

provides. Under the QDRO's terms, benefit payments for 

_ are "reduced by the same percentage," but, under Procedure 

03-1, her benefits are reduced by $121.25 and his benefits are not 

reduced at all. 

The second unique circumstance is that, when the method in 

Procedure 03-1 is applied to your cases, the MGB reduces the Plan 

benefits for only one of the two parties to the QDRO. As discussed 

above, PBGC's determination proposed a $121.25 per month MGB 

reduction to _ benefits, while _ Plan 

benefit amount (after the reduction under the QDRO) is $271.61 less 

than his share of the MGB. We further note that, since 

are different ages, the actuarial values at DOPT of their 

monthly benefit payments are different. But even if their monthly 

benefits are adjusted to equivalent age-65 amounts based on the 

actuarial assumptions for the MGB (which are established in PBGC's 

regulations), their combined benefits are less than the MGB. 6 

6 This is illustrated by converting the $706.89 benefit was 

receiving at DOPT (when she was age 53 and 4 months, rounded up to the next 

higher month) to a benefit of equivalent value starting at age 65 in theSLA 

form. Using the MGB actuarial assumptions, her age-65 equivalent benefit is 

$1,696.40 per month. Similarly, the $1,262.33 benefit that was 
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Finally (and most significantly), In this case it is possible 

to reallocate shares of the MGB in a way that 

is both: (1) consistent with terms of your QDRO, and (2) results in 

no benefit reductions based on the MGB. This would occur, for 

example, if 48% of the MGB is assigned to (as Alternate 

payee) and the remaining 52% to Using a 48% 

allocation, the MGB for _ is $727.40 [$3,579.55 x 0.4167 

(age adjustment) x 0.48 (her MGB %) = $715.97]. Since her $715.97 

MGB is greater than her $706.89 Plan benefit amount, her Plan 

benefit amount is not reduced by the MGB. 

For his MGB using a 52% allocation is $1,318.41 

[$3,579.55 x 0.7083 (age adjustment) x 0.52 (his MGB %) 

$1,318.41]. Since his $1,318.41 MGB is greater than his $1,262.33 

Plan benefit amount, his PBGC benefit also is not reduced by the 

MGB. 

As indicated above, this decision is limited to the unique 

circumstances of your cases. Therefore, this decision does not 

apply to other participants in PBGC-trusteed pension plans who have 

different factual circumstances. 

Decision 

For the reasons stated below, we decided that the monthly 

benefit amounts currently are receiving from 

PBGC should not be reduced based on the Maximum Guaranteed Benefit 

limit. Accordingly, the $1,263.33 monthly PBGC benefit that 

currently is receiving and the $706.89 monthly PBGC benefit 

that currently is receiving will not be changed. 

This decision is the agency's final action regarding the 

issues raised in your appeals. 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 

receiving at DOPT is equivalent to a benefit of $1,782.20 starting at age 65 in 

the SLA form. Accordingly, the $1,696.40 age-65 amount for _ plus the 

$1,782.20 age-65 amount for totals $3,478.60, which is less than the 

age-65 MGB amount of $3,579.55 for pension plans terminating in 2002.