Detroit News reported that Pension Benefit Guaranty Corporation has asked a federal court in Detroit to allow it to finally take over the pension plans of Rouge Steel. It has been seeking for 6 years to take over the plans, which cover 5,600 people.

It may be noted that Rouge Steel's assets were sold to Russia based OAO Severstal in 2004 for USD 280 million after the company's October 2003 bankruptcy filing. The remainder of Rouge Steel's assets is in the process of final liquidation, including its pension plans, which the Russian company declined to assume.

The takeover could mean a significant benefit reduction to some of the pension recipients, especially for the youngest retirees, since PBGC insures pensions on a sliding scale based on age.

Rouge Steel is willing to turn them over, but has been blocked by a deal with the United Auto Workers that required the union's consent. In a court filing, PBGC said that the plans should be terminated to protect the interests of the participants and to avoid unreasonable deterioration of the financial condition of the pension plans.

The PBGC noted that Rouge's hourly plan had USD 100 million in 2001, 70% of its liabilities. The plan's balance fell to USD 80 million by 2006 or 50% funded.

The pension plans are under funded by about USD 100 million to USD 120 million. The PGBG would be liable for about USD 100 million of the costs. Retirees who were overpaid wouldn't see benefit reductions for at least six months, until PBGC calculated the overpayment. In any instance, PBGC doesn't garnish pensions by more than 10% to cover past repayments.

(Sourced from www.detnews.com)