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Compliance March 30, 2007
PBGC Steps in Again
March 30, 2007 (PLANSPONSOR.com) - The Pension
Benefit Guaranty Corporation (PBGC) has taken over the
underfunded pension plan of Collins & Aikman
Corp.
Reported by Nevin E. Adams
The nation’s private pension insurer said it was stepping in because the company has missed $7.6 million in required contributions and the pension plan will be abandoned when the company sells all of its assets, as contemplated in its bankruptcy proceeding. According to PBGC estimates, the Collins & Aikman Pension Plan is 58% funded, with $253 million in assets to cover $434 million in benefit liabilities. The PBGC expects to be liable for about $161 million of the $181 million shortfall.
The plan covers about 21,000 employees and retirees of the Troy, Michigan-based firm. The company and its U.S. subsidiaries, which propose to liquidate in bankruptcy, manufacture auto parts at several locations, primarily in the U.S. Midwest and Southeast.
The PBGC says that retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire. Until the PBGC becomes trustee of the pension plan, the plan will remain ongoing under company sponsorship. The agency will send notification letters to all plan participants when it becomes trustee.
Chapter 11 Filing
The agency will take over the assets and use PBGC insurance funds to pay guaranteed benefits earned under the plan, which terminates on March 31, 2007. Collins & Aikman filed for Chapter 11 bankruptcy protection on May 17, 2005, and a confirmation hearing on the company’s liquidating plan of reorganization is scheduled in federal bankruptcy court for April 19, 2007. The Chapter 11 plan contemplates that the assets of Collins & Aikman and all of its subsidiaries will be liquidated and that no asset purchaser will assume the pension plan, according to a PBGC press release.
The PBGC also notes that Collins & Aikman retirees who draw a benefit from the PBGC may be eligible for the federal Health Coverage Tax Credit. MORE
Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2007 is $49,500 per year, though the maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits, and certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
Workers and retirees with questions may consult the PBGC Web site, www.pbgc.gov or call toll-free at 1-800-400-7242. For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask for 800-400-7242.