US - The Pension Benefit Guaranty Corporation (PBGC) has taken over the running of Northwestern Steel and Wire's pension fund.
Northwestern Steel, who filed for bankruptcy in December last year, is currently being liquidated and last month terminated its pension fund. According to the PBGC, the pension plan has liabilities of approximately $470m, compared to just $311m worth of assets.
For workers retiring at the age of 65, the PBGC will guarantee a maximum pension of $40,704 a year. The amounts will be adjusted for retirees at other ages or those who elect to take survivor benefits. However, the PBGC will not cover any health and welfare benefits, severance and vacation pay, life insurance or any other benefit provided by the Northwestern Steel plan.
The PBGC is a product of the 1974 ERISA legislation, and is designed to encourage the continuation and maintenance of defined benefit pension plans, provide regular payments, and keep pension insurance premiums at a minimum. Currently, the PBGC insures 38,000 defined benefit (DB) schemes in the US.
In the event that a company fails, and its retirement plan is underfunded, the PBGC takes over the running of the fund. The organisation is not funded by tax revenues - instead it collects insurance premiums from employers that sponsor insured pension plans. It earns money from investments and receives funds from pension plans it takes over.
By Geoffrey Ho
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