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Latest News - August 2010

August 25, 2010
Federal agency takes over Rouge Steel pensions
Source: The Detroit News
By: David Shepardson

Washington -- After a seven-year legal battle, the Pension Benefit Guaranty Corp. has won permission to take over the pension plans of Rouge Steel, a move that could force some Michigan retirees to give back money they've already received and that will cut benefits for many others.

Some pensions could even be garnisheed.

In a 14-page ruling late Monday, U.S. District Judge George Caram Steeh granted the government's pension insurer the right to assume control of Rouge Steel plans covering roughly 5,600 people, including 3,500 hourly retirees. Many live in Michigan.

The United Auto Workers has long fought the takeover, saying it would result in "many retirees, and perhaps almost all early retirees, suffering substantial reductions or even elimination of future early retirement benefits."

The Dearborn steel plant was part of the Ford Motor Co., for many years. Rouge Steel Co. filed for bankruptcy in October 2003, and the bulk of its assets were sold to Russia-based OAO Severstal in 2004 for $280 million.

The remainder of Rouge Steel's assets, including its pension plans, are being liquidated because Severstal declined to assume them.

The company was willing to turn over pension plans to the PBGC, but was blocked by the UAW.

The pension takeover will mean benefit reductions to some, especially the youngest, since PBGC insures pensions on a sliding scale, based on age.

The key legal issue is the effective date of the termination of the pension plans.

Since the court gave PBGC approval to take over pensions retroactively to October 2005, it means those who kept collecting pension money after bankruptcy may have to give some back.

Employees and retirees kept accruing eligibility for Rouge pensions after 2005. Some didn't qualify for retirement until after 2005.

The UAW says some getting disability pensions may lose those benefits, since they didn't become eligible before October 2005. PBGC spokesman Jeffrey Speicher noted that after October 2005 retirees couldn't accrue additional service toward traditional pension plans. The PBGC chose the termination date with retirees in mind.

Retirees who were overpaid wouldn't see benefit reductions for at least six months, until PBGC calculated the overpayment.

 

 


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