Bankruptcy Court to Decide Oneida/PBGC "Termination Fee" Dispute

The penalty fee was imposed by the private sector pension insurer as a way to shore up a mounting deficit and would require that Oneida pay a fee of $1,250 per year for three years for each plan participant (See  House Budget Bill Imposes Fee for Dumped Pension Plans ).

Oneida handed its pension liabilities to the PBGC in September 2006 after a bankruptcy court gave the flatware maker and its affiliates the go ahead (See Oneida Hands $48.3M in Pension Liabilities to the PBGC ). The plans were 31% funded, with $21.6 million in assets to cover $72 million in liabilities.

However, the Oneida, New York-based company has challenged that law, claiming that the PBGC’s fees were actually part of the agency’s pre-bankruptcy unsecured claims, which were dismissed under the company’s court-approved reorganization plan (SeeOneida Challenges PBGC Termination Fee ). The PBGC contends that the reorganization plan has no affect on Oneida’s obligation to pay the fees.  

The question is whether federal bankruptcy law allowing companies to reject their pensions essentially trumps other federal laws requiring that companies make termination payments to the PBGC, Oneida attorney Michael Torkin said in November 2006.

According to the AP, the PBGC had asked U.S. District Judge Miriam Goldman Cedarbaum to settle the dispute, but she passed that job toBankruptcy Judge Allan L. Gropper, the engineer of the reorganization plan.

“Bankruptcy Judge Gropper has presided over this case for more than a year and has carefully considered and confirmed Oneida’s plan of reorganization as to all other claims,” Cedarbaum told the AP. “He is thoroughly familiar with the dispute between Oneida and the PBGC and his view would assist the district court in reviewing the issue in case of an appeal.”