Under a newly announced agreement, the Pension Benefit Guaranty Corporation (PBGC) has directed The Renco Group Inc. to restore two pension plans covering 1,350 people who worked at Renco’s former subsidiary, RG Steel LLC, which is liquidating in bankruptcy.

Restoration means that PBGC “returns the plan to the former plan sponsor, the employer, as an ongoing pension plan.” After the plan is restored, the sponsor assumes responsibility for paying current and future retirees their benefits, and those benefits are no longer subject to the legal limits on what PBGC may pay.

PBGC had previously taken responsibility for the two plans at issue, which had a combined funding gap of about $70 million, in 2012, the federal pension insurer explains. The participants in the two plans worked at RG Steel facilities in Wheeling, West Virginia, and Warren, Ohio.

PBGC says the agreement resolves 2013 litigation that PBGC brought in the U.S. district court in Manhattan. At the time, PBGC alleged that Renco attempted to evade financial responsibility for the RG Steel pension plans by “concealing the transfer of its ownership interest in RG Steel.”

“The vast majority of companies that sponsor pension plans keep the promises they make, but when companies attempt to evade their obligations, PBGC will act to protect participants’ benefits and PBGC’s premium payers from unnecessary losses,” says PBGC Director Tom Reeder. “Our action restores the expectation RG Steel’s former employees have that their promised benefits will be paid and restores the obligation to keep that promise back to the employer.”

In the settlement, Renco agreed to take the plans back as of June 1, 2016, and to pay all future benefits promised to the former RG Steel employees. The company will make back payments for benefits not guaranteed by PBGC. According to PBGC, Renco also agreed to reimburse the agency for $15 million in benefits that it paid to RG Steel retirees since PBGC took over the plans. Additionally, the company will pay about $35 million in shutdown benefits that would have gone unpaid absent the restoration of the pension plans.

The restoration of the RG Steel plans marks only the second time in PBGC’s history that terminated pension plans were restored to an employer. In 1993, after litigation that reached the Supreme Court, PBGC restored three LTV Steel pension plans, it explains.

Renco tells PLANADVISER it was pleased to reach these terms with PBGC, noting the initial dispute “arose out of the bankruptcy of RG Steel, which had once been a subsidiary of Renco and which sponsored certain defined benefit pension plans that were terminated and taken over by PBGC as a result of the bankruptcy. As part of the settlement, Renco has agreed to assume from PBGC two defined benefit plans that were sponsored by RG Steel subsidiaries. Restoration of the plans to Renco in this manner was a creative, non-traditional approach that allowed Renco to resolve the matter on favorable economic terms.

“As part of the restoration, PBGC will give back to the plans $49.4 million in assets (prior to the repayment of previous benefit payments made by PBGC). Renco strongly believes, as we have throughout, that the PBGC’s allegations were erroneous and that the company acted appropriately and within its rights when it concluded a financing transaction that had the incidental effect of releasing Renco from liability for RG Steel’s pension plans. The singular purpose of Renco’s efforts to obtain financing for RG Steel was to solve the Company’s liquidity problem and save it from bankruptcy. Renco denies any liability or wrongdoing. However, settlement with PBGC was the most sensible, economic, and practical resolution to the dispute, and it puts an end to the significant expense and distraction of continued litigation. Renco has a strong record of supporting the pension benefits of former employees of Renco companies. With this agreement, Renco’s strong record continues.”

PBGC also published a frequently asked question publication about the litigation, negotiation and resolution, online here.