Federal agency to rescue Kaiser pensions

A federal agency that insures corporate pension programs will rescue Kaiser Aluminum Corp.’s underfunded retirement plan covering 9,600 hourly employees.

The decision affects about 4,000 Steelworkers in the Spokane region, including retirees, laid-off employees and those still on the job.

Kaiser’s pension plan was only 48 percent funded, according to Jeffrey Speicher, a spokesman for the federal Pension Benefit Guaranty Corp. (PBGC). Kaiser had about $301 million to cover pension liabilities of $629 million.

The latest bailout means the PBGC has now taken on $555 million of Kaiser’s benefit promises. Earlier, the PBGC took over the pension obligations for Kaiser’s salaried retirees and a group of workers at smaller plants.

Kaiser now ranks seventh-largest among companies that failed to fulfill their pension promises to workers and ended up surrendering them to the PBGC.

Topping the list are three steel companies, including Bethlehem Steel Corp., followed by LTV Corp. and National Steel Corp.

Compared to the $19 million in premiums Kaiser has paid to the PBGC since 1994, the half-billion-dollar obligation is indicative of the problems afflicting the agency as companies declare bankruptcy and shed such costs.

Kaiser filed for bankruptcy 2½ years ago. It is attempting to reorganize and emerge from bankruptcy protection next year.

The pension obligations are one of the financial problems that have stood in the way of Kaiser’s reorganization. The company also has sold big factories, including smelters in Mead and Tacoma; cut medical benefits to retirees; and is still trying to settle weighty asbestos claims inherited from operations dating back decades.

The PBGC’s takeover of the Kaiser Aluminum Pension Plan is largely an administrative matter that is not expected to affect retirees older than 65. Pension payments will now come from the PBGC rather than Kaiser.

The changes, however, may affect early retirees who are under the age of 65 by trimming their benefits, said Dave Carlson, president of Steelworkers Local 338 at the Trentwood rolling mill.

The PBGC takeover has been anticipated for months, but the agency and Kaiser have wrestled with the details.

The delay had put retirees in bind. Many needed to collect their pension checks from the PBGC to qualify for a tax credit designed to help offset the cost of their heath insurance.

Such wrinkles are the unintended consequences of the problems faced by the PBGC.

Pension shortfalls have touched off a crisis within the agency, which posted a loss of $7.6 billion last year.

Created in 1974 to guarantee basic pension benefits, the PBGC now insures pension benefits earned by 44 million Americans participating in 31,000 corporate retirement plans.

The agency’s problems stand to worsen if and when two major airlines, United Airlines and US Airways Group Inc., abandon their pension plans to the PBGC. United’s pension plan, for example, is underfunded by $8.3 billion.

Such numbers have PBGC executive director Brad Belt calling for reforms. Among them: that the PBGC could file a lien against the assets of a company in bankruptcy court.