National Steel Corp - Potential Plan Termination

[Guest pjb]

I'm writing this on behalf of my father-in-law. I'm not familiar with defined benefit plan terminations and PBGC guarantees.

He retired under National Steel Corporation's DB plan at age 45 under "rule of 65", a benefit available due to the circumstances surrounding a plant shutdown and him being forced to terminate employment. The "rule of 65" allowed full normal retirement annuity benefits (reduced for age) at age 45 w/ 20 years of service. He's now age 56.

The plan also provides for medical coverage w/ small employee co-pay. He claims that the company explained to him that the DB plan guaranteed medical coverage for both him and spouse for their lives.

National Steel corp is currently in Chapter 11 bankruptcy, the DB plan is underfunded, and required deposits to the plan aren't being made. As a result, he received the notice to participants regarding underfunding. The notice mentions benefits under rule of 65 may be affected although we don't fully understand how.

Current news indicates two companies have bid on the National Steel: US Steel and AK Steel Corp, although local newspaper articles said they are trying to avoid pension liabilities in the acquisition. However, US Steel has agreed to accept a portion of current liabilities of the company. Rumor has it National Steel decided to go through the bankruptcy process to get the PBGC to take over and terminate the plan with the intention to help sell the company.

Obviously, he's concerned about possibly losing his medical coverage and perhaps a portion of his annuity. I explained to him that it's my understanding retiree medical benefits are generally not a vested protected benefit and the PBGC normally does not continue this type of benefit.

The present value of benefits that may be taken away is quite significant. If anyone has any comments, explanation of rights, or whether an attorney can help in any way, he'd appreciate the help.

Thanks