Canton Repository

October 2, 2004

No shutdown benefits for Republic

By Paul M. Krawzak
Copley News Service

WASHINGTON — In a sweeping reversal that would deny up to 2,500 former Steelworkers millions of dollars in early retirement benefits, a federal appeals court has ruled that laid-off employees of the former Republic Technologies International are not entitled to the monthly payments that a lower court said they should have.

The decision from the Cincinnati-based 6th U.S. Circuit Court of Appeals immediately affects about 100 workers who already have begun to collect what are known as shutdown benefits.

Unless it is successfully appealed and overturned, the ruling also will impact hundreds of others who would have been eligible for the payments, which the Pension Benefit Guaranty Corp. has contested.

In its opinion, a three-judge appeals panel said U.S. District Court Judge Peter C. Economus in Youngstown failed to follow “governing statutory purpose and persuasive case authority” when he ruled in September 2003 that the agency had to pay the early retirement.

The dispute goes back to the agency’s decision to take over then-bankrupt RTI’s pension plans in 2002. The agency, which insures company pensions, terminated the RTI plans after determining that the company would be unable to pay its retirement obligations after its acquisition by Republic Engineered Products. The agency is paying regular retirement benefits to eligible former employees of RTI.

Republic Engineered Products, a specialty steel maker based in Fairlawn, owns and operates several of the former RTI plants.

As a way to avoid paying the shutdown benefits, the agency terminated the RTI pensions on June 14, 2002, ahead of the Aug. 16, 2002, sale of the company to Republic Engineered Products. Under federal law, the agency need not pay shutdown benefits if it terminates a plan before a company actually closes. The agency said it would cost an additional $95 million to pay the early retirement. RTI had not set aside enough money to pay the benefits.

RTI and the United Steelworkers of America argued successfully before Economus that the agency should pay the shutdown benefits. But the appeals court ruling reverses the earlier decision.

The agency applauded the ruling, which spokesman Jeffrey Speicher said “will help protect the financial integrity of the pension insurance fund that safeguards benefits for 44 million workers and retirees.”

Calling the opinion a “disappointment,” United Steelworkers spokesman Gary Hubbard said union attorneys were reviewing the decision and had not decided whether to appeal it.

“We are most angry that the PBGC pursued this destructive and unfair legal strategy in the first place aimed at denying Steelworkers and their families a lifeline promise on the shutdown benefit,” he said.

About 100 former RTI workers already have begun to receive shutdown benefits, which the agency decided to pay pending the outcome of its appeal.

Speicher said the agency will send information to recipients of shutdown benefits giving them a choice of either not receiving any further benefits and repaying what they have received over time, or continuing to receive the monthly checks.

Those who opt to continue to receive the payments will have their overall retirement benefits reduced to reflect their decision to start receiving benefits at a younger age, the agency said.