by: Nichole Brunk
Pension Benefit Guaranty Corporation; Washington, D.C.
On July 1, 2008, PBGC published proposed rules implementing the new provisions created by PPA 2006. The following article summarizes many of the resulting changes related to the calculation of guaranteed benefits as well as the allocation of benefits to “priority category 3.” Priority categories, part of the statutory method under which PBGC must allocate plan assets, dictate the order in which benefits under a plan are paid. To read the proposed rule and the preamble in their entirety, go to http://www.pbgc.gov/docs/E8-14813.pdf.
The PPA 2006 amendments to sections 4022 and 4044 of ERISA are among the most significant changes to PBGC’s benefit guarantee in many years. The substitution of the bankruptcy filing date for the plan termination date will certainly affect the level of benefits payable to many participants in PPA 2006 Bankruptcy Terminations and may change the way that pension plans are handled during a plan sponsor’s bankruptcy.
Read the full article.
Fiduciary Counselors Inc.; Washington, D.C.
In 2006, Congress amended the Employee Retirement Income Security Act of 1974 (ERISA) to add a termination premium to be paid to the Pension Benefit Guaranty Corporation (PBGC) in certain situations when the PBGC took over an underfunded defined benefit plan. For a plan terminated "during the pendency of any bankruptcy reorganization proceeding under chapter 11," the termination premium is due only after the debtor is discharged from bankruptcy. As yet there are few decisions interpreting the interplay between the termination premium and the Bankruptcy Code.
The Second Circuit recently agreed to hear a direct appeal of the bankruptcy court decision in Oneida Ltd. v. PBGC (In re Oneida Ltd.), the first case to test whether the due date made the termination premium a postpetition claim. In Oneida, the bankruptcy court held that the termination premium claim arose prepetition and therefore was discharged by Oneida's plan of reorganization. Meanwhile, the bankruptcy court in USA Commercial Mortgage concluded that PBGC had no claim in a liquidating chapter 11 case.
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The Winter Leadership Conference was held at the beautiful Westin La Paloma in Tucson, Dec. 4-6. This year's conference featured an interesting and informative group of sessions and speakers. In the Employee Benefits Committee session, "The WARN Act Makes a Comeback, with Class," panelists discussed the amendment of section 503 of the Bankruptcy Code and the subsequent setback it has caused. The panel included Steven M. Cox of Waterfall, Economidis, Caldwell, et al. in Tucson, Ariz. and Bonnie Glantz Fatell of Blank Rome LLP in Wilmington, Del. Lisa Bittle Tancredi of Venable LLP in Baltimore moderated. Please click here to review the materials.
