Plan Proposed To Halt Steel Bankruptcies, Save Pension Agency
WASHINGTON (AP) _ Six senators introduced legislation to allow the federal government to assume some of the pension liabilities of financially-troubled steel companies and to prevent the nation’s pension insurance agency from sinking deeper into red ink.
The Steel Retirement Benefits Funding Act of 1987 has the backing of the United Steelworkers of America and at least three steel companies who sent representatives to a news conference Thursday for the bill’s unveiling.
The measure is intended to rescue the Pension Benefit Guaranty Corp., the federal agency that guarantees pension benefits for retirees. The PBGC has a deficit of about $2 billion, much of it the result of having to prop up underfunded steel pension funds.
″Under current law, companies can enter bankruptcy, terminate their pension plans and transfer their unfunded promises to the federal government insurance program,″ said Sen. Howard Metzenbaum, D-Ohio, a sponsor of the measure. ″This situation leaves the government exposed to billions of dollars in liabilities.″
The bill would create a Steel Retirement Benefits Authority composed of three Cabinet members, the executive director of the PBGC and one member appointed by the White House.
The board would take responsibility for supplemental Social Security and other workers’ benefits that typically kick in when facilities are shut down by steel firms. In exchange, the authority would take a roughly equivalent share of the company’s stock warrants, equity or other assets.
The legislation assumes that it eventually will be profitable for the federal government to cash in those assets. But even if the companies continued to decline, ″Then that would cost no more than we would pay if we do nothing and steel companies continue to file for bankruptcy,″ said Sen. John Heinz, R-Pa., another sponsor.
Representatives of the United Steelworkers and of the Bethlehem, Armco and National steel companies attended the news conference to show support for the bill. Other sponsors are Sens. Dave Durenberger, R-Minn., Arlen Specter, R- Pa., Paul Simon, D-Ill., and Donald Riegle, D-Mich.
″Bethlehem and other steel companies have incurred enormous retiree pension and other health insurance liabilities as a result of massive restructuring during a period of staggering financial losses,″ said Curtis H. Barnette, a Bethlehem senior vice president. He termed it ″appropriate″ for the government to try to aid companies in shedding unwanted facilities in order to become more competitive.
But PBGC Executive Director Kathleen Utgoff said in a statement after the bill was unveiled that the measure attacks only a symptom, and not the problem itself.
The bill ″deals with an important problem, which is underfunded pensions in the steel industry, but it does it in the wrong way,″ she said. ″It does not address the underlying weakness of the pension system that led to underfunding of steel pension plans.″
Many companies have sought to modernize and trim antiquated plants and equipment in recent years in order to adjust to declining demand and compete with foreign imports. Such moves have forced the companies to lay off thousands of workers or move them into early retirements.
American steel-making capacity has been cut by 27 percent in the last six years. LTV Steel, Sharon Steel, and Wheeling-Pittsburgh have all filed for reorganization under federal bankruptcy laws in the last several years.