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
Dana and Delphi.
There were numerous comments and questions from the
audience.
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.
Ga. 2008),
joining Judge Mitchell in U.S. Airways, Judge Wedoff in
United Airlines, and Judge Feeney in High Voltage
Engineering, in holding that the amount of PBGC’s claim for
termination liability is defined by ERISA and PBGC’s valuation
regulation, and not by the judicially-created “prudent
investor” approach.
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
ABI Journal. Finally,
he noted that the Committee leadership was open to suggestions for a new
significant project, since the Pension Manual had been completed.
Chuck passed the baton to Carol Connor
Flowe.
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.
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