The Pension Benefit Guaranty Corp., which returned $2 billion in unfunded pension liabilities last month to the bankrupt LTV Corp., went to court yesterday to try to force the company to pay full pension benefits to its retirees covered by three plans.
The action, which was filed in U.S. District Court in New York, asked that the court enforce compliance with a PBGC order instructing the company to pay retirees 100 percent of their pension benefits -- the amount they received before the PBGC assumed responsibility for the plans. Some LTV retirees have been receiving less under a new pension arrangement agreed to by the company's creditors and its union.
"Retirees deserve and have a legal right to their full benefits," said Kathleen Utgoff, executive director of the PBGC. "We are keeping our pledge to make sure that they get them."
The agency assumed responsibility for the plans after it became clear that LTV could not meet its pension obligations.
It took the unprecedented step of handing the plans back to LTV after it decided that the new pension plan abused the federal insurance system and that the company has recovered sufficiently to meet more costly pension obligations.
LTV has said it is willing to pay benefits at least at the level guaranteed by the PBGC along with certain supplemental payments provided for in the new pension deal.
About 85 percent of the retirees involved are receiving full benefits, but another 15 percent of early retirees receive reduced benefits.
The company, which called the action "unexplainable," has said repeatedly that it faces $6.5 billion of debt and that it is in no position to fund the original three pension plans that cover about 100,000 LTV retirees and workers.
LTV also has pointed out that federal bankruptcy laws prohibit it from paying claims before its filing for Chapter 11 reorganization on July 17, 1986. The three plans have more than $1 billion in assets to cover monthly benefits of $30 million.
"Checks at reduced levels have already been issued to LTV's retirees, even though restoration requires payment of full benefits," said Gary Ford, the agency's general counsel. "PBGC will not allow this violation of the law to continue."
Ford added that the agency hopes that the key issue of whether the restoration of the plans to LTV is a legal one under the Employe Retirement Income Security Act -- a premise being challenged by the company -- will be settled expeditiously.
LTV has 20 days to respond to the agency's complaint.