US - The Pension Benefit Guaranty Corporation's (PBGC) has prevented Ohio company WCI Steel from abandoning its underfunded pension plan, avoiding a loss of $94m to the insurance program.
WCI’s corporate parent, The Renco Group, has agreed to assume sponsorship of the plan, sparing WCI workers from benefit reductions.
The preventive action was based on provisions of federal pension law which state members of a corporate “controlled group” are responsible for the pension liabilities of other group members.
Under the proposed plan of reorganization filed in federal bankruptcy court, the pension plan would have been left behind by the reorganizing steelmaker.
Renco remained responsible for WCI’s pension obligations because the PBGC acted before the group was broken up by confirmation of the reorganization plan.
The PBGC will now withdraw the enforcement action it filed on 3 February in the US District Court in Youngstown, Ohio.
PBGC executive director Bradley Belt (pictured), who recently announced his intention to leave the agency in May, said Renco’s decision had been in the best interest of all stakeholders.
“Whenever possible the PBGC will use the tools at its disposal to prevent unnecessary plan terminations,” he added.
As part of a negotiated settlement, the reorganized WCI has agreed to contribute $15.3m to the plan upon the steelmaker's emergence from Chapter 11 and, subject to certain conditions, another $5m in each of the next two years.
As plan sponsor, Renco will be responsible for paying all future contributions to the plan. The WCI pension plan covers about 2,000 workers and retirees.
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