FAQ #1: What is happening?
Answer: The Plan Administrator for the SBC Holdings, Inc. Salaried Employees’ Pension Plan (the “Plan”) is submitting an application to the Pension Benefit Guaranty Corporation (the “PBGC”), which is an agency of the United States Government, to end the Plan under what is known as a “distress termination.” The Plan is a defined benefit pension plan. The legal term for ending the Plan is to “terminate” the Plan. If the Plan terminates without having enough money to pay all promised benefits, the PBGC’s insurance program will pay you the benefit provided by the Plan up to the guarantee limits set by Federal law.
FAQ #2: What is the Pension Benefit Guaranty Corporation (the “PBGC”)?
Answer: The PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 (“ERISA”) to protect pension benefits in private sector traditional pension plans known as defined benefit pension plans. The PBGC insures pension plans like ours. The PBGC’s financing comes from a number of sources, including insurance premiums paid by companies like ours, whose plans the PBGC protects, from the assets of underfunded pension plans that the PBGC takes over, from financial recoveries from the companies formerly responsible for those plans, and from investment of these funds, but not from taxpayer dollars. Most people receive from the PBGC the full benefit they earned before their pension plan terminates. Although the PBGC ultimately decides whether participants and beneficiaries in underfunded terminated plans will receive their full benefits, the Plan’s actuary has advised The Stroh Companies, Inc., and members of its controlled group (the “Company”) that all of the Plan’s participants and beneficiaries can expect to receive the full benefits, in annuity form, that they have earned and are entitled to as of the Plan’s termination date.
FAQ #3: How can the Company terminate the Plan?
Answer: If the Plan does not have enough money to pay all pension benefits owed to participants, and the Company cannot afford to make further contributions to the Plan, then the Plan Administrator may apply to the PBGC for a distress termination of the Plan. Generally, the PBGC cannot approve the application unless it is proven that because of the ongoing expense of the Plan, the Plan no longer is affordable and the Company at some point in the future will be unable to pay its bills and stay in business unless the Plan is terminated. If the application is approved, the PBGC will take over as trustee of the Plan and then pay benefits to participants and beneficiaries, up to the legal limits, using Plan assets and PBGC insurance funds.
FAQ #4 : Will my benefit decrease as a result of the termination?
Answer: The Plan Administrator has been advised by the Plan’s enrolled actuary that he believes the answer is no, because the level of benefits for each of the participants and beneficiaries most likely does not exceed the guarantee limits under Federal pension insurance law. All participants and beneficiaries can expect to receive from the PBGC, as a guaranteed benefit, the full annuity benefit they are currently receiving or currently entitled to receive (whether now or in the future) under the Plan. Benefit payments will continue uninterrupted while the PBGC is reviewing the distress termination application.
The PBGC ultimately is responsible for determining the appropriate amount of a participant’s or beneficiary’s benefits under terminated pension plans that the PBGC takes over.
FAQ #5: What can the PBGC tell me about my pension?
Answer: If you are a participant in a pension plan that the PBGC insures but that has not yet been taken over (“trusteed”), which at this time is the case here, the PBGC will not yet have any specific information about you or your benefit under your plan. Generally, the PBGC obtains most of this information after the PBGC trustees the plan. This means that if you look on the PBGC’s website (www.pbgc.gov), you will find information about the PBGC’s insurance program and how the PBGC operates, including the ERISA insurance guarantee, which these FAQs also briefly describe. As explained above, the Plan Administrator of the Plan is applying to have the Plan terminated and trusteed in what is known as a “distress termination.” If the application is approved, the PBGC will obtain and review the Company’s records about all participants’ benefits under the Plan, which usually takes several months, and then will write to you directly about your benefit.
FAQ #6: What happens when the PBGC takes over as trustee of a pension plan?
Answer: The PBGC reviews the plan’s records to determine the benefits that each participant or beneficiary may receive. The amount of a benefit cannot be greater than limits set by law. If you already are receiving your pension, the PBGC will continue paying your benefit without interruption during the review. The payments, which are estimates of the amounts of the benefits that the PBGC can pay under the ERISA insurance program, usually are in the same amount that you already are receiving, and will be paid in the annuity form you chose at retirement.
If you have not yet retired, the PBGC will pay you an estimated benefit when you become eligible to receive your pension and apply to the PBGC to begin receiving your benefit payments. The PBGC will offer you the opportunity to select from several forms of benefits, some of which may be different from what the Plan offers. This estimated benefit usually is in the same amount that the Plan would have paid.
After the PBGC completes an in depth review of all plan benefits for accuracy, you will be sent a letter that is called a “benefit determination” of your final benefit amount. For most people, benefit amounts will not change. You may appeal your benefit determination to the PBGC Appeals Board if you believe it is incorrect. Appeal rights also are communicated in writing.
FAQ #7: How is the PBGC’s final determination of my benefit implemented?
Answer: If your estimated benefit has been lower than the amount that the PBGC determines you should be receiving, the PBGC will make up the difference in a single payment, with interest. If your estimated benefit has been higher than the amount that the PBGC determines you should have been receiving, your future monthly payments will be adjusted to the final amount calculated by the PBGC, generally reduced by no more than ten percent each month to account for the higher payment already received, without interest, until the overpayment is recovered. This is called “recoupment.” However, most of the time there are no adjustments to benefit payments.
FAQ #8: What benefits does the PBGC guarantee?
Answer: The PBGC guarantees “basic pension benefits,” subject to legal guarantee limits. These include:
- pension benefits at normal retirement age;
- most early retirement benefits;
- disability benefits for disability before termination of the plan; and
- certain benefits for survivors of plan participants.
The PBGC’s guarantee applies only to benefits earned before a plan terminates. The PBGC does not guarantee health and welfare benefits, vacation pay, or severance pay.
FAQ #9: What is the maximum amount that the PBGC can guarantee by law?
Answer: The PBGC’s maximum benefit guarantee is set each year under the provisions of ERISA. The maximum guarantee applicable to a plan is fixed as of the plan’s termination date. For 2013, the maximum guaranteed amount is $4,789.77 per month ($57,477.24 per year) for participants who begin receiving payments from the PBGC at age 65. The maximum guaranty is lower if you begin receiving payments from the PBGC before age 65 or if your pension includes payments for a survivor or other beneficiary. The maximum guarantee is higher if you are over age 65 when you begin receiving benefits from the PBGC. The maximum guaranteed benefit is based on your age on the date when you begin receiving a benefit payment from the PBGC. The Plan may terminate during 2014. The PBGC has not yet released information concerning the maximum guaranteed benefit for 2014.
FAQ #10: Am I vested in the Plan?
Answer: For most participants, vesting in the Plan occurred after five full years of employment. Based on information supplied by the Plan’s actuary, and subject to the PBGC’s review of relevant Plan and Company records, all participants and beneficiaries under the Plan have a fully vested benefit
FAQ #11: Can I earn additional benefits after the Plan’s termination date?
Answer: No, you cannot earn additional benefits after the Plan terminates. As you know, there have been no benefit accruals under the Plan for many years. Benefit accruals under the Plan ceased as of March 31, 1994, in accordance with Section 204(h) of the Employee Retirement Income Security Act (“ERISA”). For employees covered by the Heileman Salaried Employees’ Pension Plan, which was merged into the Plan effective December 31, 1996, benefit accruals had previously ceased as of June 30, 1996, in accordance with Section 204(h) of ERISA.
FAQ #12: What forms of benefit will the PBGC pay?
Answer: If you are already retired when the PBGC takes over the Plan, the PBGC will continue to pay your benefit in the form that you chose at retirement.
If you retire after PBGC takes over the Plan, you may elect to receive your benefits in one of the following ways:
- A straight-life annuity that provides you with fixed monthly benefit payments for your lifetime. No survivor benefit will be paid after your death.
- A 5-year, 10-year or 15-year certain-and-continuous annuity that provides you with fixed monthly benefit payments for your lifetime. If you elect this type of life annuity and die before the end of the 5-, 10- or 15-year time period you selected, your designated beneficiary will receive the same monthly benefit for the remainder of the period. If you die after the end of the period, benefit payments end upon your death.
- A joint-and-survivor annuity that provides you with fixed monthly benefit payments for your lifetime and, upon your death, continues payments to your spouse or other beneficiary for the rest of his or her life. The monthly benefit your spouse or other beneficiary receives is 50, 75 or 100 percent — depending on your choice — of the amount you were receiving while you were alive. If your beneficiary dies before you, your monthly benefit will not change.
- A joint-and-50% survivor “pop-up” annuity that differs from the joint-and-survivor annuity described above in that, if your spouse or other beneficiary dies before you, your monthly benefit “pops-up” to the straight-life annuity amount for the rest of your life.
- The “automatic” form of benefit provided to you under the Plan (i.e., for a married participant, a “Joint & 50″ Survivor Annuity, and for an unmarried participant, a Life Annuity).
If you are married when your benefit payments begin, your spouse must provide written consent for you to elect any form of benefit other than the automatic form that the Plan would pay to a married participant.
A Qualified Domestic Relations Order (“QDRO”) also may affect benefit payments.
FAQ #13: Will I be eligible for early retirement benefits?
Answer: The Plan’s normal retirement age is age 65. Under the various early retirement provisions of the Plan, most participants may begin receiving an actuarially reduced benefit at age 55 if they have met a service requirement 10 years of vesting service. If you have already met the age and vesting service requirements for an early retirement benefit as of the date of the Plan’s termination, you will be eligible for an early retirement benefit from the PBGC.
FAQ #14: Does the PBGC pay survivor benefits?
Answer: Yes. If you retired before the Plan terminates, the PBGC will pay benefits to your surviving beneficiary if you elected a benefit form that provides survivor benefits. If you chose an annuity that pays benefits for the life of your beneficiary, such as a joint and survivor annuity, the PBGC will pay these benefits only to the beneficiary you chose when you retired. If you chose an annuity that pays your beneficiary only for a fixed period, such as a certain and continuous annuity, the PBGC will pay any remaining benefits to your most recently named beneficiary.
The PBGC allows all future retirees, whether or not married, to elect a benefit form that provides survivor benefits and to name a beneficiary at that time.
If you die before retiring but after the Plan is terminated, the PBGC will pay your spouse a survivor benefit.
A Qualified Domestic Relations Order (“QDRO”) also may affect benefit payments.
FAQ #15: Can I receive my benefit from the Plan or the PBGC in a lump sum?
Answer: After the issuance of the enclosed Notice of Intent to Terminate, which now has occurred, the PBGC’s regulations prohibit the Plan from paying benefits in the form of a lump sum, which is a single, one-time payment. After trusteeship of the Plan, the PBGC normally pays benefits in monthly payments in annuity form, for life, rather than as a lump sum. If the PBGC determines that the total value of your benefit is $5,000 or less, following trusteeship of the Plan, you may receive your benefit in a lump sum.
FAQ #16: Can I put my lump sum into an Individual Retirement Arrangement (“IRA”)?
Answer: Yes, most traditional IRAs or other qualified retirement plans will accept a lump-sum payment from the PBGC. See also FAQ #15. If you direct the PBGC to pay the lump sum directly to your IRA or other plan, the PBGC will not withhold income tax from the payment. With this type of payment, known as a “tax free rollover,” you will not have to pay income tax until you receive payments from the IRA or other plan.
FAQ #17: Will the PBGC adjust my pension yearly for inflation?
Answer: No, the PBGC does not guarantee or pay cost of living adjustments after a plan terminates, and there is no cost of living adjustment to PBGC benefits under the law.
FAQ #18: What is the HCTC?
Answer: The HCTC is a government program that is administered by the Internal Revenue Service. The HCTC makes health insurance more affordable for certain PBGC payees over age 55 and their families. For example, the HCTC currently covers 72.5 percent of health insurance premiums. If you qualify for the HCTC, the HCTC is available on a monthly basis to help you make ongoing payments for your health insurance, or on a yearly basis when you file your federal tax return.
Once the Plan is terminated and taken over by the PBGC, if you are at least 55 years of age, are receiving a pension benefit from your participation in the Plan, and register for the monthly program, you will pay your portion of your premium (currently 27.5 percent), the government agency HCTC Program will pay its portion of the premium (currently 72.5 percent), and the government agency HCTC Program will send the full 100 percent to your health plan for you. The HCTC is a refundable tax credit. It is paid in full no matter how much federal income tax a recipient owes. The PBGC’s national office in Washington, D.C. notifies the HCTC Program of an individual’s eligibility. More information about the HCTC program can be found on the PBGC’s website at www.pbgc.gov/wr/benefits/hctc.html.
FAQ #19: How soon after a pension plan is taken over by the PBGC can an individual claim the monthly or yearly HCTC?
Answer: As long as the individual is enrolled in a qualified health plan for that month, the first month that an individual can claim the yearly HCTC on his or her federal tax return is the month of the PBGC’s official trusteeship of the pension plan. For example, if the PBGC trustees a plan on March 31, the individual can claim the credit for all of March. An individual can register for the monthly HCTC as soon as he or she receives the HCTC Program kit in the mail, which is after the PBGC sends eligibility records to the HCTC Program via a secure electronic file transfer. If the individual is enrolled in a qualified health plan for months prior to receiving the first monthly credit for the HCTC, the individual can claim the yearly HCTC for those months on his or her federal tax return.
FAQ #20: Can I request a benefit estimate?
Answer: Until the PBGC becomes trustee of the Plan, you may request an estimate of your benefit from Mercer, the Plan’s Third Party Benefits Administrator. Mercer can be contacted toll free at 1 (866) 277-2141, which is the Stroh Pension Plan Helpline. After the PBGC becomes trustee of the Plan, you will receive a letter from the PBGC that will contain information on how to obtain an estimate of your benefit.
FAQ #21: What is the Notice to Interested Parties?
The Notice to Interested Parties lets you know that the Plan Administrator will also be submitting the Plan to the Internal Revenue Service for review that as terminated, the Plan satisfies all of the applicable tax-qualification provisions of the Internal Revenue Code. The Internal Revenue Service’s review is separate from the PBGC’s review of the distress termination application.
Download Frequently Asked Questions (FAQs) here.