AK Steel Corp., Middletown, Ohio, proposed freezing its $2.5 billion master pension trust fund and directing new employees to the company's $400 million 401(k) plan. Company officials said in a contract offer to employees that the firm cannot be competitive with its projected benefit obligation, according to a money management executive familiar with the situation. The company paid $345 million in pension benefits in 2004. The proposal was made Thursday in the company's most recent contract offer to its plant workers. The current contract expires May 20, according to published reports.
AK Steel's pension fund is underfunded by about $1.3 billion, and its projected benefit obligation is about $3.8 billion, according to its most recent annual report. The money management executive also pointed to published reports that U.S. Steel Corp. is in talks to acquire AK Steel, and freezing AK Steel's pension plan might make it more attractive for an acquisition, the executive said.
Albert Ferrara, CFO of AK Steel, did not return calls seeking comment. Gary Glynn, president of the $9.6 billion U.S. Steel and Carnegie Pension Fund, Pittsburgh, declined to comment.