Employee Benefits in Bankruptcy Committee Meeting Minutes
2008 Annual Spring Meeting
The meeting commenced at approximately 4:00 p.m. Co-chair Carol Connor Cohen announced the officers of the committee for 2008: in addition to herself, Jeffrey B. Cohen and Charles M. Dyke as co-chairs, new officers are Lisa Bittle Tancredi, Education Director; Dan Morse, Listserv Moderator; Mark Bogdanowicz, Newsletter Editor, Nancy Snyder Heermans, Membership Relations Director; and Joel Ruderman, Special Projects & Task Force Leader. Carol then solicited ideas for special projects for the year, noting that the last one was the Pension Manual, published in 2006, the first year of the committee’s existence. She invited members to contact any of the officers with ideas and suggestions.
Carol then introduced the panel entitled “Benefits Potpourri: Executive Compensation in Chapter 11, Benefits Issues in Individual Bankruptcies, and other Current Developments” with panelists Jeffrey B. Cohen of Ivins, Phillips & Barker Chartered and Lisa Bittle Tancredi of Venable LLP.
Lisa led a lively
discussion of the new provisions in BAPCPA dealing with executive
compensation, noting that judges are interpreting the new law’s
requirements similar to another version of the business judgment
test. She outlined the elements of the test,
and discussed how the test had been applied in cases such as
Jeff discussed the Supreme Court trilogy addressing individual employee benefits in bankruptcy: Patterson v. Shumate, Yates v. Herndon, and Rousey v. Jacoway. He then described some of the new provisions in BAPCPA governing these issues, including § 541(b)(7), which excludes from “property of the estate” contributions to or payments from an ERISA plan, a governmental plan, an IRC § 457 plan, or an IRC § 403(b) plan. He too engendered numerous questions and comments from the audience.
Finally, the panel
discussed two other current developments: Judge Gropper’s decision in Oneida Ltd. V. PBGC, 2008 Bankr. LEXIS 442 (Bankr.
S.D.N.Y. 2008), holding that the new “termination premium”
added by DEFRA 2005 and made permanent by PPA 2006 is dischargeable in a
plan of reorganization; and Judge Massey’s decision in Dugan
v. PBGC (In re Rhodes), 382 B.R. 550 (Bankr. N.D.
The meeting adjourned at approximately 5:30 p.m.
2007 Annual Spring Meeting
The meeting commenced at approximately 8:05 a.m. Outgoing co-chair Professor G. Ray Warner thanked the following individuals for their efforts during the committee’s first year: outgoing co-chair Judy Thompson, vice-chair Carol Connor Flowe, and newsletter editor Charles M. Dyke. Professor Warner noted that in its very first year, the committee had published the ABI Pension Manual, which he believed was a singular accomplishment in the history of the ABI. Professor Warner then introduced the co-chairs for the 2007-2008 year: Carol Connor Flowe, Charles M. Dyke, and Jeffrey B. Cohen, and turned the meeting over to the new leadership.
Chuck Dyke announced that
the Committee needed a newsletter editor and a list-serve moderator and
solicited the input of the members in attendance. He invited attendees to consider writing both shorter articles
for the newsletter, as well as longer pieces on employee
benefits in bankruptcy topics, suitable for publication in the
Carol, acting as moderator for the panel entitled “What Hath PPA Wrought?” introduced the panelists: James Feltman of Mesirow Financial Consulting, David Seligman of Kirkland & Ellis, and Charles L. Finke, Associate Chief Counsel of the Pension Benefit Guaranty Corporation. The panel then engaged in a provocative discussion of some of the more significant amendments (from a bankruptcy perspective) enacted in the Pension Protection Act of 2006, and how those changes might have impacted pre-PPA cases such as United Air Lines, had those provisions been in effect. The discussion also touched on the impact that some of the PPA provisions did in fact have on some of the current mega-cases, such as Delta and Northwest Airlines.
At the close of the meeting, Carol presented certificates of appreciation issued by ABI to out-going co-chairs Ray Warner and Judy Thompson. The meeting adjourned at approximately 9:30 a.m.
2006 Annual Spring Meeting
A joint meeting of the Legislative and Pensions/Benefits Committees was held at the Annual Spring Meeting. R. Scott Williams of Haskell Slaughter Young & Rediker, LLC opened the meeting with an update on the current status of legislation in Congress, including pension legislation. He advised that Congress missed their self-imposed deadline of April 15th for a reconciliation of the bills passed by the House and Senate. Further, debate is ongoing and Congress hopes for a final resolution of this legislation before adjourning in the fall.
Judy Thompson of Poyner & Spruill and Ray Warner, Professor of Law and Director of the LLM Program in Bankruptcy at St. John’s University School of Law, co-chairs of the Pension/Benefits Committee, introduced the new Pensions/Benefits Committee leadership to the membership:
*Carol Connor Flowe – Vice Chair
*Charles Dyke – Newsletter Editor
*Kristin Going – Assistant Newsletter Editor
*John Hall – List-serve Editor
*Daniel Morse – Pension Manual Project Chair
Terrence Deneen, Director of Insurance Programs at the Pension Benefit Guaranty Corporation and Carol Connor Flowe of Arent Fox gave an eye-opening overview of the current status of pension/benefit issues with particular attention to the impact of business bankruptcies on the PPGC. Ms. Flowe pointed out that PBGC is currently operating with a deficit of $23 billion, with the total rising daily. She noted that PBGC estimates that there is an additional $450 billion in potential liability not yet asserted. The huge deficits come from the few, very large Chapter 11 cases. Current deficits come 53% from companies in primary metals and 15% from air transport, with the rest spread across various industries. Looking into the crystal ball, she predicted that the current troubles in the auto industry promise an ever greater burden on retirees and the PBGC.
Mr. Deneen and Ms. Flowe then presented an overview of PBGC issues in bankruptcy, focusing on minimum funding contributions, pension plan terminations, and the amount and priority of PBGC’s claims. Mr. Deneen emphasized that the agency believes that the decisions in US Airways and United Air Lines, which upheld the use of PBGC’s discount rate for calculating its claims after rejecting several older decisions that reached the contrary result, will be followed in future cases. This will mean much larger PBGC claims.
Members of the audience were encouraged to become involved with the new Pensions/Benefits Committee. The co-chairs announced that there are multiple opportunities for persons to write for the various publications on Pensions/Benefits issues and invited anyone interested to contact them. The Pension Benefits Committee is currently preparing a program for the Winter Leadership Meeting in December ’06.
The Legislative Committee is continuing to monitor various legislative efforts regarding bankruptcy currently pending before Congress. Further, at this time, it appears highly unlikely that any substantial bankruptcy revisions will pass before the end of the legislative session.