The Pension Benefit Guaranty Corporation filed a complaint on March 4 against the Sheltering Arms Children and Family Services Inc. defined benefit plan, seeking to terminate the pension plan, appoint the PBGC as the legal trustee of the plan and direct the shuttered nonprofit to deliver all plan records, assets and property of the plan to the PBGC. The organization, which ceased operations in the first half of 2023, was a nonprofit dedicated to low-income children and families in New York City.

The PBGC determined the plan will be unable to pay the promised DB retirement plan benefits to participants when due. On December 18, 2023, the PBGC sent Sheltering Arms an agreement to terminate the plan and appoint PBGC as statutory trustee.

“To date, Sheltering Arms has not signed the agreement allowing PBGC to trustee the plan and has not agreed on a date of termination,” the PBGC wrote.

The PBGC sued Sheltering Arms because it is necessary to terminate the DB plan to protect the interests of DB plan participants, according to the complaint. The PBGC is authorized to commence proceedings to terminate a plan whenever the PBGC determines the plan will be unable to pay benefits when due; the PBGC estimated that the plan was underfunded by $2.9 million when the nonprofit closed on March 31, 2023. Sheltering Arms froze DB plan accruals on June 30, 2008.

The Sheltering Arms Children & Family Services, Inc. Defined Benefit Plan comprises approximately 205 participants and $5.67 million in assets, according to the latest regulatory filing. 

In February 2023, Sheltering Arms announced the shutdown and transfer of its programs, along with its employees, to other organizations that serve the community. In October 2023 and January 2024, Sheltering Arms missed its minimum required contributions to the plan of $129,240 each, citing “financial challenges” as the reason, according to the complaint.

The PBGC was established under the Employee Retirement Income Security Act of 1974 to support the continuation and maintenance of defined benefit plans. The PBGC collects insurance premiums, set by Congress, from employers that sponsor DB pension plans.

The PBGC is represented by Karen Morris, its general counsel; Kartar Khalsa, its deputy general counsel; Stephanie Thomas and Erin Kim, assistant general counsels; and Zoe Wadge, attorney.

The lawsuit is the Pension Benefit Guaranty Corporation v. Sheltering Arms Children and Family Services Inc. as plan administrator of the Sheltering Arms Children and Family Services Inc. Defined Benefit Plan. The lawsuit will be adjudicated in U.S. District Court for the Eastern District of New York.

Representatives of the PBGC returned a request for comment by email, noting the agency does not comment on ongoing litigation. Sheltering Arms representatives did not return a comment on the lawsuit.