Benefits November 11, 2004

CT State Pension Fund Posts $1 Billion Negative Cash Flow

November 11, 2004 (PLANSPONSOR.com) - The Connecticut state pension fund, wracked by computer troubles and an increasingly large amount of retirees, had a negative operating cash flow of $827 million over the last fiscal year.
Reported by

Such deficits are likely to continue as well, according to a warning by the Investment Advisory Council Chairman Clarence Roberts Jr. Roberts wrote in a report that the $20 billion fund, covering mainly teachers and state employees, took its losses by paying out $1.023 billion while taking in only $196 million, according to the New London Day. He said that this deficit represented nearly a 9% increase over last year’s deficit.

Get more!  Sign up for PLANSPONSOR newsletters.

Roberts is stressing that lawmakers can no longer contribute less to the fund than the fund’s actuaries are recommending. The teacher’s plan is currently underfunded by 75.9%, while the state employees’ plan is underfunded by 61.6%, according to the Day. Together, these funds represent 92% of the pension plan’s assets under management.

The deficit issue was released at the request of a Connecticut newspaper as a draft report because the computer system needed to create a finished report was not working properly, according to the Day. The system, which cost the state $110 million, was launched last summer, but is still causing the state problems.

Illinois Pension Bonds

In other news regarding state pension funds, Illinois lawmakers are considering issuing another set of bonds to cover the state’s pension liabilities, according to Crain’s Chicago Business.

According to a state commission, Illinois will have to pay out $2.5 billion in the fiscal year starting in July, over $600 million more than last year, to cover pension obligations and debt services on last year’s bond issues. With the state having to cover $1.9 billion for early retirement incentives, on option being studied is further bond issues. Illinois has already utilized this avenue for partially financing its fund, issuing $10 billion in bonds last year (See Illinois Legislature Okays $10 Billion Pension Bond Issue ).

Administration November 10, 2004

PBGC Seeks $28M in US Airways Stock

October 23, 2003 (PLANSPONSOR.com) - When it appears in the US Bankruptcy Court on Monday, the Pension Benefit Guaranty Corporation (PBGC) hopes to be awarded between $12 million and $28 million in US Airways stock set aside for unsecured creditor claims.
Reported by

US Airways filed Chapter 11 in August 2002 and its creditor protection ended March 31, 2003. When US Airways ended its defined benefit pension plan, the PBGC assumed responsibility for it, agreeing to pay pension benefits to roughly 7,000 active and retired US Airways pilots and beneficiaries.

Ten percent of US Airways stock, approximately $560 million, was reserved for settlement with unsecured creditors. Since the PBGC is an unsecured creditor, it would be paid with this post-bankruptcy stock.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

When the PBGC took responsibility for the plan, it estimated the pension plan to be underfunded by $2.5 billion, since the plan only had $1.2 billion in assets to cover $3.7 billion in benefit liabilities. However, a recent assumed return on plan assets has led the airline to decrease the plan liability value to $890 million.

The pension agency will present their case to a US Bankruptcy judge in eastern Virginia, where US Airways filed Chapter 11, and if the court sides with the PBGC, it could be awarded between $12 million and $28 million.

Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2003 is $43,977.24 a year. However, pilots must retire at 60, so the maximum paid by the pension agency per year to beneficiaries is approximately $28,500.

More information about the US Airways’ pension plan for pilots is available at the PBGC Web site, www.pbgc.gov/usairways . Workers and retirees with additional questions may contact PBGC’s Customer Service Center toll-free at 1-800-400-7242.

The PBGC is a federal corporation created under the Employee Retirement Income Security Act (ERISA). It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in about 32,500 private-sector defined benefit pension plans.

Alison Cooke

Reported by
Reprints
To place your order, please e-mail Reprints.

«