By Jerry Geisel
YOUNGSTOWN, Ohio — The Pension Benefit Guaranty Corp. will appeal a federal court ruling that could, if affirmed, exacerbate the PBGC's already precarious financial condition by increasing its exposure to billions of dollars in unfunded pension shutdown benefits.
The Sept. 30 ruling by U.S. District Court Judge Peter Economus means the PBGC will be liable for about $96 million in shutdown benefits to about 2,500 former employees — mostly members of the United Steelworkers of America — who once worked for now-defunct steel bar manufacturer Republic Technologies International of Akron, Ohio. The PBGC liability for shutdown benefits comes on top of $108 million in regular pension benefits the agency will pay to the participants of the two Republic plans, which the PBGC terminated last year.
The USWA said the ruling ensures that members will receive benefits they believe they were entitled to receive.
"USWA members at RTI gave their entire working lives to this company with the expectation that they would receive shutdown pension benefits if the company went out of business," said USWA President Leo Gerard in a statement.
"It is a tremendous victory," added Gary Ford, a partner at The Groom Group, Washington, and outside counsel to the USWA.
But PBGC officials say the ruling is another blow to the financial solvency of an agency already facing a more than $5 billion deficit.
"By forcing the PBGC to pay nearly $100 million in unfunded severance benefits, this ruling will further weaken a pension insurance system that already is billions of dollars in the red," said Executive Director Steve Kandarian.
But the ramifications of the ruling go far beyond the hefty additional benefits the PBGC could be liable to pay to the former Republic steelworkers.