UNITED STEELWORKERS OF AMERICA
Five Gateway Center
Pittsburgh, PA  15222

December 18, 2001

TO:  All Pension and Benefits Technicians

FROM:  Patti  Schehafer, Assistant to the President and Director and Karin S. Feldman, Counsel

SUBJECT:  2002 PBGC Maximum & Guaranteed Benefits Overview

     This memo included, in addition to the annual table for the PBGC Maximum, a brief overview of the benefits guaranteed by the PBGC in the event of a plan termination.  The overview is based on the typical benefits provided under steel pension agreements.

2001 Maximum Monthly Guarantee

     The maximum monthly guarantee set by the PBGC for plans terminating in 2002 is $3,579.55 at age 65.  For 2001, the Age 65 Maximum for Ages 45 to 65 for benefits paid as a single life annuity:

     The applicable age maximum is determined as of the later of::

     1) the plan termination date or
     2) the participant's retirement date.

Thus, for pensioners receiving benefits, the PBGC Maximum is based on their age on the plan termination date.  For employees and former employees who are not retired as of the termination date, the Maximum is based on their age when benefit payments commence.  Please remember that the plan termination date fixes the applicable Age 65 Maximum even though benefit payments may not begin until well after the year of plan termination.

     To understand how the PBGC maximum works for participants retiring after the plan termination date, assume a plan termination date of June1, 2002 and an employee who is Age 59 on that date and retires three years later at Age 62.  The applicable PBGC Maximum is $2,827.84, the amount for his age at retirement, not $2,183.53, the Maximum for Age 59.  If his pension benefit, calculated as of the termination date, is less that $2,827.84, it is fully guaranteed (subject, of course, to the Phase-In Rule, further down).

Basic Rule for Benefits to Be Guaranteed

     PBGC guarantees the benefit payable at normal retirement earned as of the plan termination date, subject to the PBGC Maximum and the Phase-In Rule if:

     1) The benefit is being paid, or

     2) The participant has satisfied all the conditions for receiving the benefit under the plan, other than submitting an application, satisfying a waiting period or actual retirement.

     For pensioners, surviving spouses and beneficiaries receiving benefits as of the termination date, PBGC guarantees the lifetime benefit paid to the pensioner and any of the pensioner.  PBGC does not guarantee:

     1) Temporary benefits ending before normal retirement age, such as supplements for 70/80 and Rule-of-65 Retirements or other transition or minimum benefits usually paid until Age 62; or

     2) Amounts in excess of the PBGC Maximum for the recipient's age (See Table Above).

     For employees and former employees, PBGC guarantees the lifetime benefit due if all age, service or other eligibility requirements are met as of the termination data.  PBGC does not guarantee:

     1) Disability, 70/80 or Rule-of-65 Retirement benefits if the triggering event occurs after the termination date.

     2) Surviving Spouse's Benefits in the event of a death before retirement even if the employee earned 15 years of service as of the termination date.  For deaths after retirement, the Surviving Spouse's Benefit is guaranteed on a limited basis as discussed at the end of this letter.

     3) The Special Payment because it is considered a lump sum payment, rather than a monthly benefit.  Instead, the PBGC guarantees the monthly retirement benefit due for the months usually covered by the Special Payment.

     4) Amounts in excess of the PBGC Maximum for the year of plan termination based on the participant's age when benefit payments begin (See Table Above).

It is also important to remember that any service earned after the plan termination date is not taken into account by the PBGC in determining guaranteed benefits.  For this purpose, all service stops as of the termination date.  This means, for example, that an employee who has not satisfied the service requirement for a deferred vested pension will not have a benefit guaranteed by the PBGC.

     The specific benefit provisions of the pension agreement will determine the benefits provisions of the pension agreement will determine the benefits guaranteed by the PBGC.  The benefit types mentioned in this section are typical, but the terms of the particular pension agreement must, of course, be consulted.

Phase-In Rule

     Benefit increases in effect for less than five years as of the termination date are not fully guaranteed by the PBGC.

     Under the Phase-In Rule, the PBGC guarantees a portion of the benefit improvement if it has been in effect for at least one year as of the termination date.  For benefit increases, the PBGC guarantee equals the larger of:

     1) $20 per month; or
     2) 20 per cent of the amount of the benefit increase multiplied by the number of years the benefit increase has been in effect.

     To illustrate the Phase-In Rule, assume a $5 increase in the pension multiplier became effective May 1, 2000 and a plan termination date of June 1, 2002.  Because the improvement was in effect for 2 years before the plan termination date, the guaranteed amount for any individual will be the larger of $40 ($20 x 2) or 40 percent of the increase (20 percent x 2).  For the PBGC will guarantee $60 (40 percent of $150) because that amount is larger than the minimum guarantee of $40.

Special Rules for Certain Benefits

Disability Retirements

     For pensioners receiving a disability (permanent incapacity) retirement benefit as of the plan termination date, the PBGC will not reduce the monthly lifetime benefit when it exceeds the PBGC Maximum for the pensioner's age if the pensioner is receiving Social Security disability benefits.

     For employees disabled before the plan termination date, the PBGC will guarantee the disability retirement even if the usual five month period is not completed by the plan termination date.  The guaranteed benefit will be calculated in the same way as it is for pensioners receiving disability retirement benefits as of the plan termination date.

Surviving Spouse's Benefit

     For pensioners receiving benefits as of the plan termination date, the Surviving Spouse's Benefit due upon the death of the pensioner is guaranteed by the PBGC.

     For employees eligible for immediate retirement on the plan termination date, the PBGC will guarantee the Surviving Spouse's Benefit in the event of a death after retirement.

     In no other circumstances is the Surviving Spouse's Benefit guaranteed by the PBGC.

Survivor Benefits

     For employees and former employees eligible for deferred vested benefits, the PBGC provides pre-retirement survivor annuity coverage if the participant dies before retiring.  The PBGC charges for this coverage by reducing the benefit paid upon retirement, but it may be rejected by the individual and the spouse when the PBGC provides the necessary notice and revocation election.

     At the time of retirement, the PBGC will provide married employees and their spouses with the Automatic 50% Spouse Option unless the employee and spouse reject it.  The PBGC will not provide Co-Pensioner Options.