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WASHINGTON-The Pension Benefit Guaranty Corp. soon could be saddled with its biggest loss ever, only months after it was hit with a record loss from the takeover of another troubled pension plan.
Bethlehem Steel Corp. says it expects the PBGC to take over and terminate its drastically underfunded pension plan within the next few months.
The PBGC estimates that the Bethlehem plan, which has more than 90,000 participants, has unfunded vested liabilities of $3.9 billion.
While the PBGC's actual liability would be somewhat less-the PBGC does not guarantee all vested benefits, such as those above a certain dollar limit-its loss from the Bethlehem plan still is likely to exceed $3 billion.
That loss would dwarf what has been up until now the most costly pension takeover in the PBGC's 28-year history: the March 31 termination of several pension plans sponsored by LTV Corp., another big steel producer, which sold off assets and went out of business amid massive financial losses. The PBGC puts its loss from the LTV termination at $1.6 billion (BI, Sept. 30).
Termination of the Bethlehem Steel plan would by itself deplete the PBGC's already rapidly declining surplus by more than half. As of June 30, the PBGC's surplus was $4.8 billion, a steep decline from its high point of just two years ago, when the surplus stood at nearly $10 billion.
And, unless economic...