Workers With Best Benefits Stand to Lose Most

Richard E. Cecconi retired on March 31, 1986, after 30 years with Republic Steel in Warren, Ohio. He was 50, his pension was $2,309 a month and his retirement looked secure.

Then Republic’s parent, Dallas-based LTV Corp., declared bankruptcy, and the federal Pension Benefit Guaranty Corp. took over LTV’s underfunded pension plans in the biggest pension bailout ever.

Cecconi and thousands of other LTV workers learned what pension rights advocates have long warned--workers with the best pension benefits stand to lose the most when the PBGC moves in. Cecconi’s pension was cut to $632 a month.

“There is no fairness here,” Cecconi said. “I was not an early retiree. I worked the full 30 years necessary to qualify for a full pension, and now get only 27%.”

But without the PBGC, Cecconi and 108,000 other LTV workers and retirees would have gotten far less.

“The main purpose of the PBGC was to make sure that people didn’t see their pensions totally wiped out, and it has been a very definite success,” said Alan V. Reuther, associate general counsel at the United Auto Workers. “As difficult as LTV was, it would have been a complete disaster without the PBGC.”

The agency was created by Congress in 1974 as part of a package of pension-protection measures known as the Employee Retirement Income Security Act. Its mission was similar to that of the Federal Deposit Insurance Corp., which insures bank deposits up to $100,000 per account.

When the PBGC becomes trustee of a pension plan that does not have enough money to pay its obligations, the agency pays the pensions up to a certain maximum. The ceiling was $750 a month in 1974 and has risen to $2,028 for 1989.

The agency guarantees only basic benefits available at age 65 under the company plan. Those who retire before 65, such as Cecconi, receive less under a formula. For instance, a worker who takes early retirement at 55 will receive about half the PBGC maximum.

The agency does not guarantee health and welfare benefits, and pension increases granted by the company in the five years before the plan ended are reduced according to a formula.

The PBGC insures the pensions of 40 million workers and retirees covered by defined-benefit plans, the type promising a specific amount based on age, service and salary. Another 36 million workers have defined-contribution plans, such as profit-sharing and 401(k) savings plans, which are not insured.