WASHINGTON — In its biggest rescue of an imperiled pension plan, the federal government Tuesday took control of the pension programs at bankrupt LTV Corp., the nation's second-largest steel producer, to protect the benefits of 60,000 retired workers.
Full pensions are guaranteed for 85% of the workers, said Kathleen Utgoff, executive director of the federal Pension Benefit Guaranty Corp. Reduced payments will go to the other workers: those who took early retirement or whose monthly benefits exceed $1,857.95 a month, the maximum protected by the federal agency.
The takeover threatens the financial solvency of the pension benefit corporation, which insures the private pensions of 38 million workers.
'We Must Act Now'
"The pensioners who depend on us are not in any immediate danger," Utgoff said, "but we must act now to make sure that the future is secure for them as well as for others who may one day need our protection."
The PBGC will immediately add 60,000 retirees to the 94,000 who currently receive benefits from it. "We need to raise more money to keep the promises that we have already made," Utgoff told a news conference at the PBGC headquarters here.
In New York on Tuesday, U.S. District Judge Richard Owen issued an order giving the PBGC control of the three plans, which cover salaried and hourly workers at the Jones & Laughlin division of LTV and hourly employees at the Republic Steel division. There are 108,000 people enrolled in the plans, including 60,000 retirees.
LTV made insufficient contributions to the pension program in 1984 and 1985, and announced last December that it could not provide any more money. The underfunding--the shortage of contributions compared to pension promises--was an "unprecedented $2.1 billion," Utgoff said.
The United Steelworkers of America said it will fight the takeover with a lawsuit.
"Pensions are among the most important subjects of collective bargaining between the union and LTV Steel," union President Lynn Williams said. "Our current labor agreements require LTV Steel to maintain its hourly pension plans. This action can only serve to complicate an already difficult negotiation," he said.
"It appears that the PBGC decided to terminate sooner than we could actually put a replacement program in place," said Frank Valenta, director of Steelworkers District 28 in Cleveland.
The LTV takeover will give the PBGC a deficit of $4 billion because of similar pension problems with other companies, and more problems may be on the way. "We are certainly troubled by the prospect of (other) terminations by steel companies," Utgoff said. "The most immediate problem is the steel industry."
The agency will ask Congress to increase its assets by raising the annual premium that employers pay for the insurance fund, now $8.50 a year for each worker.
The premium should be changed to a sliding scale, Utgoff said. Companies with well-funded plans, with enough money set aside to meet future pension obligations, would pay slightly more than $8.50, she said. The average payment would be approximately $20 per worker per year, with the maximum payment about $100 for the firms with plans having the most problems. She said that even those firms with the most severe financial problems could afford to make the maximum payments.
Warns of Delay
"Now is the time to take the necessary steps to prevent the financial collapse of the pension insurance system," Utgoff said. "Any delay in addressing PBGC's financial crisis will only make the solutions even more difficult. Now is the time to save the pension insurance system."
LTV Corp. of Dallas, which filed in July for protection under Chapter 11 of the bankruptcy laws, is the parent of LTV Steel, the country's second-ranking steel producer.
A pension plan for 3,300 retired salaried employees of Republic, which merged into LTV in 1984, was taken over by the federal government last September.
The health insurance benefits for LTV retirees have been guaranteed until May 15 by a 1986 law. But they are not protected by the PBGC, which covers only pension payments. Unless Congress extends its 1986 action, the health benefits would be eliminated.