Steve Knox, a Church of God minister and a mechanic at a small North Carolina manufacturing company, is worried. It's only a matter of time, he believes, before Reeves Brothers, his employer for the last 10 years, terminates his pension plan and freezes his pension at $61 a month. That nest egg, he will tell a group of congressmen and senators at hearings today will not be worth much when he retires in another 30 years.
``Even now, you can't pay for food on $61 a month, much less utilities and medical expenses,'' says Mr. Knox, a father of five.
Unlike LTV Steel Company and Wheeling-Pittsburgh Steel Corporation, where plans were terminated because they filed for bankruptcy, Reeves has a sterling bottom line. In fact, it is filing to terminate the pension plan for salaried employees - and may be on the verge of doing the same to the hourly workers' plan - because it is doing so well.
Because of the booming stock market, the company's pension funds had collected some $23 million in surplus assets above what Reeves needed to provide its employees with retirement income. Then last May, Schick Inc. agreed to buy Reeves.
To get banks to help finance the deal, the two companies agreed to pay the banks a maximum of $20 million out of Reeves's two pension funds. Under current law, the only way they could get their hands on the money was to terminate the plans.
This is a new twist on a problem pitting some 53 million workers who are covered by private pension plans against their employers.
Simply put, once a company figures out its obligations to employees, plus a cushion, to whom does that surplus belong - the employees or the company? It is no small question, because the raging bull market has tripled the value of pension fund portfolios to $1.5 trillion in the last five years. The Labor Department figures there was $218 billion in surplus assets at the end of 1986.
The issue heated up in 1985 when companies took back $6.2 billion in excess assets, up from $18 million in 1980. Last year, the figure dropped to $4.6 billion.
Still, employees and unions say such pension plan reversions are occurring for the wrong reasons - to help finance takeovers or to fend them off, to beef up operations or executive salaries - rather than to invest in employees' retirement.
Initially, says Michael Zucker at the Amalgamated Clothing and Textile Workers Union, only companies that were close to or already in bankruptcy terminated their plans. The union is fighting the petition to end the reversion at Reeves.
``Now we see you don't have to be in economic duress,'' he says. ``In fact, all you have to do is really want to buy something, and that's a sufficient condition to raid the fund.''
The Reeves case is the ``third step,'' Mr. Zucker says, where the bankers or investment bankers (in this case, Drexel Burnham Lambert) suggest using overfunded plans as a condition for a loan. While the Reeves case is tiny, other banks are watching it, he says: ``We think this is the cutting edge of where this whole process is going.''
Congress and the Reagan administration are reluctant to put curbs on how companies manage their pension assets. Companies do not have to provide employees with retirement plans, and Congress is afraid that too many regulations will spur companies to pick up their marbles and go home - not provide any private pensions at all.
Moreover, companies that do terminate plans to get at excess assets almost always set up a new plan, says Bonnie Newton at the Employee Benefit Research Institute.
However, the problem of underfunded plans - especially in troubled industries like steel, where companies cannot pay the benefits they promised - is stirring the winds of change.
Last month the Reagan administration proposed sweeping changes to the private pension fund system that would make it easier for overfunded plans to withdraw surplus assets without terminating their plans, thus protecting employees' funds. The administration's plan would also require many companies to set aside more money than they now do to cover a given level of promised benefits, thus staving off terminations made under duress.
The latter issue is of no small interest to the government. When a company cannot pay its promised benefits, the government's Public Benefit Guaranty Corporation picks up most of the tab (80 to 85 percent, on average). Recently, the problems of smokestack industries like steel are coming to haunt the PBGC. It now claims to have a $4 billion deficit, a figure congressional staffers say is overstated.
``Only a few [private pension plans] are badly funded,'' says Ms. Newton. ``But they are badly funded, and they are causing a stir.''
In January, for example, the steelmaker LTV dropped pension plans that were underfunded by $2.3 billion in the PBGC's lap. In an industry where 10 of the top 12 companies are in trouble, the PBGC is worried that more will follow.
Now the PBGC wants to raise the premiums employers pay to be insured by the government plan. To erase the $4 billion deficit, it says, the premiums must rise from the current monthly charge of $8.50 per employee to $42. (Alternatively, the rates could rise more slowly, eventually reaching $210 per employee.)
Phyllis Borzi, a counsel for pensions at the House subcommittee on labor management relations, thinks legislators will reject those kinds of hikes. But Congress may be more open to allow variable premiums, lower ones for well-funded companies that are unlikely to default, higher ones for companies on shakier financial footing.
``It's a Catch-22,'' Newton says. ``You're placing an extra burden on firms in an industry that are already in danger of going under.''
Most people think Congress will take some action this session, though not this year. With red ink flowing and the pensions of 53 million Americans involved, Ms. Borzi says, ``We're definitely going to do something.''