Kaiser pension bailout to hurt early retirees
Hundreds of retired Steelworkers in Spokane are poised to lose thousands of dollars each as a federal agency takes control of the underfunded pension plans of bankrupt Kaiser Aluminum Corp.
Steelworkers who retired early from the old Mead smelter to draw an enhanced pension stand to lose their monthly supplemental pension payment. The federal agency, the Pension Benefit Guaranty Corp., also wants that group to pay back the monthly supplements they’ve collected since April.
Kaiser recently handed over its retirement obligations to the PBGC, which insures corporate pension plans.
For Steelworkers such as Terry Luding, the move erased hundreds of dollars from his monthly check.
Luding worked for 26 years at Mead, moving from the pot rooms where workers made molten metal to the other units of the vast smelter. After nearly two years of being locked out of the plant during a labor dispute, he was ready to return to work.
Kaiser, however, had other plans. The company sold its federal allotment of electricity during the power crisis of 2000-2001 and laid off most of its workers.
The company kept the smelter idled and by February 2002 filed for bankruptcy protection.
Luding worked odd jobs during the down time until he qualified for early retirement last spring. He was expecting to net about $800 a month from his basic pension plan, plus a $400 supplemental payment designed to help early retirees bridge the gap between their retirement dates and when they can begin collecting Social Security.
For months it seemed to be working well for Luding and perhaps as many as 500 other Steelworkers in the Spokane area in similar circumstances, said Steelworker Gary McKinney.
But their long-awaited good fortune ran out this week.
When the PBGC takes over a pension program, it disallows everything but the most basic payment. That means Luding and others like him will lose the $400-per-month early retirement bonus.
“It just really seems unfair,” he said. “Why is it that the working guys are getting their pensions cut while executives … aren’t?” Luding referred to generous retirement deals cut by Houston-based Kaiser’s top executives when the company was faltering.
Even worse for the Steelworkers, the PBGC has declared that the $400 supplemental payments shouldn’t have been made to Steelworkers since April.
This means the federal government wants its money – the equivalent of $2,000 per Steelworker who retired early – back.
PBGC spokesman Jeffrey Speicher said while unpopular, the agency is designed to insure only the most basic pension payments. It does not cover enhanced severance deals such as the $400 supplemental payment Steelworkers successfully bargained for with Kaiser.
For its part, the PBGC’s bailout of Kaiser has been a $555 million disaster. The agency collected a mere $19 million in premiums from Kaiser since 1994 — thanks to a 13-year-old Congressional cap that now has the PBGC on the brink of failure unless it, too, is bailed out.
Speicher said the PBGC will be sending out notices, perhaps in early 2005, that will inform Steelworkers of their pension benefits and if they owe any money. If they do owe, Speicher said, the amount would be withheld from future pension checks and stretched over the life expectancy of each retired Steelworker to lessen the financial hit.
The entire episode frustrates Steelworkers, whose ranks have been decimated by Kaiser’s bankruptcy. The Mead smelter has closed and been sold and the company has dropped its once-generous medical coverage for retirees, forcing them to find expensive individual insurance policies.
It has prompted Steelworkers to seek reforms, such as the protection of early retiree payments and medical insurance.
He said the PBGC has been seeking its own reforms, such as the ability to place liens on the assets of bankrupt companies that fail to meet pension plan promises.