WASHINGTON — The government today took over the pension plans of the bankrupt LTV Steel Co., the nation's No. 2 steel maker, but warned the action could trigger the collapse of the federal system insuring corporate pensions.
Dr. Kathleen Utgoff, the executive director of the government's Pension Benefit Guaranty Corp., said the agency secured the takeover order from a U.S. District Court in New York because LTV failed to make minimum payments to the funds.
She said 85% of LTV's nearly 60,000 retirees will continue to receive full benefits from the corporation, the federal agency that insures corporate pensions.
But Utgoff warned that the pension plans involved contain annual payments of more than $380 million, while the agency's annual premium income is only $280 million.
Labor Secretary William E. Brock III called the government's move with LTV "dangerous."
"We're $4 billion in deficit in the PBGC," Brock said. "That debt is not sustainable. We can't do that."
Even assuming the agency does not have to take over any more major pension funds, the combination of old obligations and today's additions would mean the agency would run out of money in 10 years.
"We simply have to raise more money to keep this system going," Utgoff said, noting the latest U.S. budget proposal contains a plan to institute a sliding fee that could raise premiums for some pension plans as much as 1,200%.
Future Not Secure
"The pensioners who depend on us are not in any immediate danger because the PBGC does have assets," she said. "But we must act now to make sure that the future is secure."
The parent firm of LTV Steel, the LTV Corp. of Dallas, filed for Chapter 11 bankruptcy protection July 16, citing losses in its steel and energy divisions.
The company had lost $1.5 billion since 1982, including $724 million in 1985.
A major problem for LTV Steel has been the cost of benefits to retirees, who outnumber active employees nearly 3 to 1. There are about 23,000 active workers and about 4,000 on layoff.