Headlines about "Bankruptcy"

Gathered from the web by the editors at BenefitsLink.com.
Prichard Alabama Files Bankruptcy Over Pensions
Excerpt: "I have looked at every opportunity available to obtain money to help fund the retirement plan for the City of Prichard. After careful review of all of our options, bankruptcy protection seems to be the only solution left at this time. Over the past 50 years, the pension plan was amended by the Legislature more than fifteen times, and always the economic burden on the City was increased. . . . After several lawsuits filed by pensioners, it has forced us to come to this decision . . . ." (WKRG)

Creditor Protection for Your 401(k)
Excerpt: "Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (a.k.a. the Bankruptcy Reform Act) tax-exempt retirement plan accounts (including qualified plans, traditional IRAs, Roth IRAs, 403(b) plans, 457(b) plans, SEPs, and SIMPLE plans), are protected from an employee's creditors in the event of bankruptcy. With the exception of the Traditional IRA and Roth IRA assets, all of these tax-exempt retirement assets are protected without a dollar limit." (The Boston Globe)

[Guidance Overview] Supreme Court of Montana Upholds Verdict for Retirees
See item #7. Excerpt: "Northwestern Corporation and others appealed a jury verdict rendered against them and in favor of Ammondson and others, which awarded plaintiffs/retirees approximately $17.5 million dollars in compensatory damages and $4 million dollars in punitive damages based on a claim for breach of contract, and the torts of breach of the covenant of good faith and fair dealing, abuse of process and malicious prosecution. Ammondson and the others were all former employees of Montana Power Company for periods ranging from 3 to 40 years. Each retiree left MPC after entering into separate agreements that provided them monthly payments to supplement their regular retirement plans. These agreements were known as 'Top Hat Contracts,' a term derived from the Employee Retirement Income Security Act." (Cypen & Cypen)

[Guidance Overview] Former Employees Have No Claim Against Bankrupt Employer for Unpaid Medical Bills, But Can Seek Unpaid Employee Health Premiums
Excerpt: "EBIA Comment: At the end of the day, the only relief that these employees could seek from their employer was the recovery of the employee portion of the unremitted health insurance premiums. This illustrates not only the litany of claims that employees may make when their employer fails to remit health insurance premiums, but also the harsh reality that in many instances this is a wrong without a remedy." (Employee Benefits Institute of America)

PBGC Objects to Philadelphia Newspapers Bankruptcy Exit Plan
Excerpt: "The Pension Benefit Guaranty Corporation is objecting to Philadelphia Newspapers LLC's plan for restructuring after bankruptcy, asking for more details on how the publisher of the Philadelphia Inquirer will address its pension obligations." (PLANSPONSOR.com)

[Opinion] Ohio's Retirement Systems Need More Than a Mere Nip and Tuck
Excerpt: "Two years ago the Thomas B. Fordham Institute issued a report critical of the financial sustainability of the State Teachers Retirement System (STRS) and the adverse effects the system's benefits policy has on recruiting young teachers. The June 2007 report noted the system's unfunded liability was $19.4 billion, which then represented a debt of over $4,300 per Ohio household.'At current contribution rates, STRS actuaries estimate that it will take 47.2 years to amortize the unfunded liability, a funding period that exceeds the 30-year requirement established in state law (see here),' the report noted. This was at a time when the Dow Jones Industrial Average stood at almost 14,000. Today it stands at about 9,500. When our report came out, STRS officials angrily denied problems . . . . But what a difference a couple of years make. Last week, STRS Executive Director Michael Nehf stood in front of lawmakers and state officials and admitted that without a massive infusion of taxpayers' dollars and trimming and adjusting of benefits, the fund eventually would be bankrupt." (The Thomas B. Fordham Institute)

Kansas Public Employees Retirement System Facing Bankruptcy If Changes Not Made, Report Says
Excerpt: "A report released yesterday by the Center for Applied Economics at the University of Kansas School of Business reveals that unless drastic changes are made to the structure of KPERS, the Kansas Public Employees Retirement System, the system will be unable to pay out promised benefits, and the shortfall -- as much as $10 billion -- will fall onto taxpayers' shoulders. . . . The report said that though the recession has added to the decline of KPERS, the public pension fund was headed for bankruptcy before the recession because of structural problems. One main cause for concern is the level of unfunded liability within KPERS. Unfunded liability refers to the difference between promised benefits and the benefits that will be collected. These unfunded liabilities are thought of as a debt. The report concludes that 'KPERS is bankrupt under current operating assumptions' and points out that when utilizing the market value of assets, the total unfunded actuarial liabilities have more than doubled within the last year from $4.8 billion to $10.25 billion. Based on current data, these unfunded actuarial liabilities are expected to continue to increase." (Kansas Liberty)

[Guidance Overview] Public Pension Funds Lose Effort to Stop Chrysler Sale
Excerpt: "The 2nd U.S. Circuit Court of Appeals has decided that a U.S. Bankruptcy Court judge properly allowed the sale of Chrysler LLC's assets to Fiat SpA to move forward despite objections from three pension funds. The latest 2nd Circuit ruling follows up an earlier move by the appellate court allowing the deal to move forward without issuing an opinion. The 2nd Circuit appellate panel said in its latest pronouncement that The Indiana State Police Pension Trust, the Indiana State Teachers Retirement Fund, and the Indiana Major Moves Construction Fund were wrong to argue that Chrysler's disputed auto manufacturing asset sale actually represented an impermissible bankruptcy reorganization plan . . . ." (PLANSPONSOR.com; free registration required)

GM Retirees Who Lost Health Care Benefits in Bankruptcy Fight to Get Them Back
Excerpt: "While retirees represented by the United Auto Workers will have a partially funded health care trust managing their health benefits, more than 50,000 retirees represented by three unions -- the IUE-CWA, the United Steelworkers and the International Union of Operating Engineers -- will have no money from the automaker to fund the more than $3 billion in health care obligations." (Workforce.com)

[Guidance Overview] Debtor Can't Deduct 401(k) Loan Repayments Under Bankruptcy Means Test As Necessary Expense
Excerpt: "A debtor's repayment of a 401(k) plan loan did not constitute a payment of secured debts or a necessary expense that could be deducted from the debtor's monthly income for purposes of applying the means test under Chapter 7 of the Bankruptcy Code, according to the U.S. Court of Appeals in San Francisco (CA-9), in Egjebjerg v. Anderson, a case of first impression." (Wolters Kluwer)

Chrysler Bankruptcy Cuts Deep Into Retirees' Pensions
Excerpt: "The collapse of the old Chrysler isn't just hitting the folks on the line. Federal law protects pension funds held in qualified plans from the company's creditors in bankruptcy. But a non-qualified plan participant technically becomes an unsecured creditor in a bankruptcy case. Executives and other managers can be offered a non-qualified plan once the company and/or the employee already has hit the limits for funding contributions into qualified plans. Then, bonus money or other compensation can apply to nonqualified plans. Trouble can hit, though, once companies go through bankruptcy." (Detroit Free Press)

Is GM Facing a Repeat of Bankruptcy?
Excerpt: "In the thunderous collapse of GM, one detail seems to have gone almost unnoticed. The old GM's US pension fund, with its near-$100bn of liabilities, is being transferred lock, stock and barrel to the new entity. As a direct result, the new GM could be bankrupt again in a very few years. GM's US fund is, of course, in deficit, but the company has made no contributions since 2003. Back then, it put in $18.5bn, which it raised through a bond issue. Since this counted as a pre-payment, GM is not obliged to pay any more for the next year or two. However, it will then have to start plugging the gap, under the new rules set down by the Pension Protection Act of 2006." (Alberto Dominguez via What's an Actuary?)

Fiduciary Duty to 'Assess and Protect' Plan Interests
Excerpt: "It has been reported that there were many ERISA-covered retirement plans impacted by the Madoff-Ponzi scheme. As a result, the DOL issued a notice back in February . . . indicating that fiduciaries of ERISA plans should take 'appropriate steps' to 'assess and protect the interests of the plan and its participants and beneficiaries.' The DOL then went on to include in the notice a list of 'appropriate steps' for fiduciaries to take in fulfilling their duty to 'assess and protect' the interests of plan participants. One of those steps included filing and asserting claims against the bankruptcy estate." (ERISA Fiduciary Guidebook)

Salaried GM Retirees Request Bankruptcy Court Voice
Excerpt: "With a reduction in some retiree benefits by about two-thirds a possibility, a group of retired General Motors salaried employees has asked to be granted a say in the auto giant's restructuring. A Detroit Free Press story said the retiree group has asked a bankruptcy judge to appoint an official panel to represent their interests as GM reorganizes its business. 'The unfairness of hourly retirees keeping their benefits and even getting a stake in New GM to fund their health benefit trust, while salaried retirees receive no protections, also cries out for the need for salaried retiree representation,' the group's court filing said, according to the newspaper." (PLANSPONSOR.com; free registration required)

Supreme Court Delays Sale of Chrysler to Fiat
Excerpt: "The Obama administration's effort to hurry Chrysler through bankruptcy court ran into an unexpected last-minute delay on Monday, when the Supreme Court said it would consider whether to hear the objections of three Indiana state funds and consumer groups. The implications of the court's move -- Judge Ruth Bader Ginsburg issued a one-sentence order that amounted to a holding action -- are unclear." (The New York Times; free registration required)

ScotusBlog Following the Indiana Pension Funds' Supreme Court Challenge to Chrysler Sale
Excerpt: "'The case of In re Chrysler LLC, Debtor has the potential to produce the most significant Supreme Court ruling on the governments power to deal with economic crisis since the Court struck down major parts of President Franklin Roosevelts New Deal, in Schechter Poultry Corp. v. U.S. in 1935 and U.S. v. Butler in 1936. But the Supreme Court will not actually rule on any of the basic legal challenges unless it first puts the Chrysler sale on hold, and then agrees to hear and decide the case itself. It has no legal obligation to do either. Two challenges have now been filed. UPDATE: A third challenge has been filed. . .'" (Attorney B. Janell Grenier via Benefitsblog.com)

Supreme Court Asked to Delay Chrysler Sale
Excerpt: "Indiana pension funds and consumer groups asked the U.S. Supreme Court on Sunday to stop the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA while they challenge the deal. The separate requests, which moved the legal battle to the nation's highest court, were filed after a U.S. appeals court in New York approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments." (Reuters via The New York Times; free registration required)

Court Gives Indiana Funds More Time to Appeal Chrysler Sale
Excerpt: "A federal appeals court approved the sale of Chrysler assets to Fiat but kept the deal on hold until Monday to allow a possible appeal to the Supreme Court, the Wall Street Journal reports. The 2nd U.S. Circuit Court of Appeals heard an appeal filed by a group of Indiana state pension and investment funds, which had sought to block the deal (see Court Agrees to Hear Indiana Funds' Chrysler Appeal). The carmaker's proposed restructuring seeks to pay billions of dollars to unsecured Chrysler creditors, while paying secured creditors only 29 cents on the dollar." (PLANSPONSOR.com; free registration required)

Court of Appeals Today Hears Indiana Pension Funds' Appeal of Chrysler Deal
Various Indiana state employee pension funds are contesting their treatment as bondholders, saying unsecured creditors are being favored ahead of Chrysler's bondholders. OppenheimerFunds filed a brief in support of the pension funds. (AP via New York Times)

Major Auto Parts Supplier Intends to End Salaried Employees' Pension Plan
Excerpt: "Financially troubled auto parts manufacturer Delphi Corp. said it intends to shed its underfunded pension plan for salaried employees and retirees as part of a plan to emerge from bankruptcy reorganization." (Business Insurance)

No Bond Safe from Obama's 'Shared-Sacrifice' Plan
Excerpt: "Bondholders have a new risk to contend with -- the Obama administration's policy of 'shared sacrifice.'" (David Reilly on Bloomberg.com)

Court of Appeals Hearing is Friday on Treatment of Indiana Pension Fund as Bondholder in Chrysler Deal
Excerpt: "A U.S. Court of Appeals agreed on Tuesday [June 2] to hear a challenge to Chrysler LLC's sale of most of its assets to a group led by Italian automaker Fiat . . . . A three-judge panel for the U.S. Court of Appeals for the Second Circuit will hear arguments in the appeal on Friday at 2 p.m. EDT (1800 GMT) in New York, according to a court order on Tuesday." (New York Times)

Indiana State Treasurer Appeals Chrysler Deal; Says Priority for Unsecured Creditors is Unacceptable
Excerpt: "Under the bankruptcy plan, money was mostly set aside for secured creditors, but not enough to cover the millions that will be lost by retired State Police officers and teachers in Indiana. . . . Chrysler wants to pay them 29 cents on the dollar. Indiana State Treasurer Richard Mourdock says that's unacceptable. 'This is the first time in American history when secured creditors, Indiana retirees got less than non-secured creditors. That is fundamentally wrong. It is a violation of the law,' he said hours after filing an immediate appeal to the plan." (WTHR.com)

General Motors Files for Bankruptcy Protection
The UAW VEBA will assume all retiree healthcare liabilities next year. In the deal the VEBA receives a 17.5% share of the company's common stock, interest-bearing preferred stock, and a $2.5 billion note. (AP via New York Times; free registration required)

[Guidance Overview] Debtor's Chapter 7 Bankruptcy Filing Was 'Presumptively Abusive'; 401k Loan Repayments Not 'Necessary Expense'
Excerpt: "Applying the 'means test' from the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the United States Court of Appeals for the 9th Circuit held (in an issue of first impression for the court) that the section 401(k) plan loan was not a 'secured debt' or a 'necessary expense' of the debtor." (PLANSPONSOR.com; free registration required)

[Guidance Overview] Retiree Benefits and Section 1114
Excerpt: "Although the question of whether ? 1114 applies to the modification or termination of retiree benefits that would otherwise be modifiable at will remains an open one, Judge Drain's recent decision [in the Delphi Corporation bankruptcy] is significant for several reasons. First, it adds further support to the seemingly growing consensus that ? 1114 does not apply in such circumstances. Second, it gives debtor-employers a well-reasoned treatment of the issue to follow in fighting off objections to their attempts to escape or lessen the crushing burden of retiree benefits costs, the success of which may be the difference between a successful reorganization or a failed effort. Finally, it may spur further attempts by Congress and President Obama's administration to amend the Bankruptcy Code to strengthen the protections for retiree benefits, particularly since this issue is one that will likely take center stage in future automotive and other cases." (Haynes & Boone)

Indiana Pension Funds Won't Get Chrysler Case Moved to District Court
Excerpt: "In a second legal defeat, a U.S. federal judge denied a request by a group of Indiana public funds to delay bankrupt automaker Chrysler LLC's sale hearing and remove the bankruptcy case to district court. Reuters reports that on Tuesday, U.S. District Judge Thomas Griesa denied a motion by The Indiana State Teachers' Retirement Fund, Indiana State Police Pension Trust, and Indiana Major Moves Construction Fund that the government did not have the authority to provide funds to Chrysler for its proposed sale. Griesa also denied a request to prevent Chrysler's scheduled sale hearing in bankruptcy court on Wednesday from going forward." (PLANSPONSOR.com; free registration required)

Indiana State Treasurer Says Pension Funds Being 'Ripped Off' by Chrysler Bankruptcy
Excerpt: "State Treasurer Richard Mourdock says the state cannot allow its 'retired police officers and teachers to be ripped off by the federal government.' Speaking about the filing of an objection with the bankruptcy court handling the Chrysler LLC proceedings on behalf of the Indiana State Police Pension Trust, Indiana State Teachers' Retirement Fund and the Major Moves Construction Fund, Mourdock says the proposed restructuring seeks to pay billions of dollars to unsecured Chrysler creditors, while paying secured creditors only 29 cents on the dollar, according to The (Munster) Times." (PLANSPONSOR.com; free registration required)

GM Bankruptcy Plan Would Use Stock Worth 39% of Firm To Fund Half of VEBA Obligation
Excerpt: "The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it. Yesterday, the union announced that it reached an agreement with GM that will reduce the company's labor costs." (The Washington Post; free registration required)

Chrysler's Pensions Are Underfunded by $10 Billion
Excerpt: "Bankrupt Chrysler LLC's pension plans may be underfunded by more than $10 billion, the federal Pension Benefit Guaranty Corp. has estimated. If the pensions are terminated, the agency's claim for the shortfall in the automaker's bankruptcy case 'would exceed $9 billion,' Chrysler lawyers said in a filing today in U.S. Bankruptcy Court in New York." (Bloomberg L.P.)

Chrysler Expands Worker Retirement and Separation Plan
Excerpt: "Chrysler LLC will expand its retirement and separation program for employees at seven facilities it is set to close before December 2010 as part of its restructuring plan. . . . The company will close eight facilities, but employees at its Detroit Axle plant won't get the expanded separation program because they are being transferred to a Marysville, Mich., facility scheduled to open next year. The retirement and separation program window has been extended until May 26, and job cuts will take place a day later." (The Wall Street Journal)

Bankruptcy Judge Denies Chrysler Retirees' Motion
Excerpt: "A bankruptcy judge on Thursday denied a request from a group representing Chrysler LLC's retired white collar workers to appoint an official retiree committee to take part in the automaker's bankruptcy proceedings. U.S. Judge Arthur Gonzales said that any decisions regarding the future of retiree benefits ultimately will be made by the automaker's new owners and as a result there isn't much point in the retirees group negotiating with Chrysler now." (AP via Gold Country Media)

GM Nears Crucial Deal With UAW That Affects Retiree Health Care Benefits
Excerpt: "General Motors Corp., under the direction of the U.S. Treasury, is near a deal that would cut its hourly labor costs by more than $1 billion a year and reduce its $20 billion pledge to the United Auto Workers to cover health-care obligations, said people familiar with the matter. The plan is still in flux, but GM and the union could finalize terms as early as next week. The Detroit auto maker expects to halve its remaining cash outlays for retiree health costs to about $10 billion, and supplement that contribution with a 39% equity stake in the reorganized GM, the people familiar with the matter said." (The Wall Street Journal)

Ninth Circuit Addresses Retiree Claims Under Bankrupt Employer's Self-Funded Medical Plan
Excerpt: "With bankruptcy filings soaring during this economic downturn, it is always of great interest to benefits practitioners to learn how bankruptcy courts are dealing with the unmet employee benefit obligations that get thrown in the mix. The Ninth Circuit in the case of Consolidated Freightways Corp. v. Aetna, Inc. dealt a blow to retirees (and the insurer who had advanced amounts in payment of retiree claims) by ruling that the retirees' claims for benefits under a self-funded retiree medical portion of the employer's health plan were not entitled to 'priority' in determining the number of employees under Section 507(a)(5) of the Bankruptcy Code, even though active employees' claims were so entitled." (Attorney B. Janell Grenier via Benefitsblog.com)

[Guidance Overview] PBGC Termination Premium Not an Unsecured, Dischargeable Bankruptcy Claim
Excerpt: "An employer that terminated a defined benefit plan while undergoing a Chapter 11 bankruptcy reorganization could not avoid paying a termination premium to the PBGC by calling the termination premium an unsecured, pre-petition claim that was dischargeable under the Bankruptcy Code, the U.S. Court of Appeals in New York City (CA-2) has ruled in PBGC v. Oneida." (Wolters Kluwer)

The Hidden Peril of Deferred-Compensation Plans
Excerpt: "Here's a nightmare for you: Imagine waking up one morning to discover that your employer is bankrupt and the money you have set aside in your deferred compensation plan belongs to the company's creditors. Unfortunately, this possibility is a real one for employees of companies like Chrysler. A 401(k) plan is safe from those your company owes money. But creditors can -- and will -- go after deferred-compensation plans, which allow high-level employees and many others earning more than $100,000 to $200,000 or so annually to contribute money, which then grows on a tax-deferred basis for use later. And if a company goes bankrupt, employees may end up with nothing." (The New York Times; free registration required)

[Opinion] With Pensions at Risk It's Fair to Ask 'Who Will Pay?'
Excerpt: "With GM flirting with bankruptcy and Chrysler already there, it's fair to ask whether taxpayers will be expected to cover the costs of the pensions the companies promised their workers. The cost for GM alone is estimated at $13.5 billion. The Big Three automakers' retiree health benefits are not insured by anybody and conceivably could be scrapped. When they reach age 65, retired workers would have to rely on Medicare. But the government does guarantee autoworker pensions, which are insured for as much as $54,000 a year. Though still common in the public sector, 'defined-benefit' pensions exist today in the private sector mainly in heavily unionized industries. U.S. automakers are the poster boys for such generous pensions." (American Institute for Economic Research via McClatchy-Tribune News Service)

Chrysler Union Taking Big Risk, Its Chief Says
Excerpt: "The president of the United Automobile Workers union, Ron Gettelfinger, said Monday evening that concessions granted to Chrysler would leave the U.A.W.'s new retiree health care fund 'on life support initially.'. . . Mr. Gettelfinger, in his first public comments since Chrysler filed for bankruptcy protection last week, said the equity that Chrysler was substituting for $5.1 billion in cash was worth 'zero today,' and added that the U.A.W. planned on selling its stock as soon as doing so was financially feasible." (The New York Times; free registration required)

Is Chrysler the Next Pension Crisis?
Excerpt: "When the details of Chrysler's restructuring plan were announced on Apr. 30, few could have breathed a deeper sigh of relief than the managers of the Pension Benefit Guaranty Corp. . . . But for the PBGC, and for Chrysler employees, it's quite possible that all that's been done is to delay the inevitable. Chrysler's pension plans are $9.3 billion underfunded. The company likely won't have to make a contribution for about two years, because of the intricacies of pension funding rules, says Charles E.F. Millard, director of the PBGC until this past January. But once that respite is over, the company will have to hurry up to fill the gap, contributing as much as $1 billion a year." (BusinessWeek)

Chrysler Deal Could Jeopardize Retiree Health Benefits if Restructured Company Does Not Return to Profitability
Excerpt: "According to the AP/Seattle Post-Intelligencer, 'the union could still come out the winner at Chrysler' and GM, but 'that depends on the iffy prospect of the companies making money again and their stock values rising sharply' (Krisher/Carpenter, AP/Seattle Post-Intelligencer, 5/2). The Times reports that Chrysler's failure would put the voluntary employees' beneficiary association in 'dire straits,' as it would owe the Treasury Department but would not have the funds to pay off its loans, according to the Times (New York Times, 5/2)." (Kaiser Family Foundation)

Chrysler Bankruptcy Could Lower Pension Benefits in the Future
Excerpt: "The Chrysler bankruptcy filing Thursday, April 30, could result in lower federally guaranteed pension benefits for Chrysler employees and retirees if the financially troubled automaker later jettisons its massively underfunded plans. In a new question-and-answer guide about Chrysler's pension plans, the federal Pension Benefit Guaranty Corp. notes that a bankruptcy filing can result in a reduction of benefits if plans are later taken over by the PBGC. For example, under law, the PBGC does not guarantee benefits earned after a bankruptcy filing. The PBGC provides in its guide an example of a company that filed for bankruptcy on July 1, 2009." (Workforce Management; free registration required)

Bankruptcy Reality Sets in for Chrysler and Workers
Excerpt: "About 1,800 Chrysler retirees were shocked to discover that their benefit payments were voided Friday morning. . . . The problem affected people who have a supplemental pension, which is not insured by the Pension Benefit Guaranty Corp. Because that portion is backed only by Chrysler, it becomes part of Chrysler's asset base in the bankruptcy." (Detroit Free Press)

Chrysler Plans to Leave 8 Factories in Bankruptcy
Excerpt: "'While some facilities may eventually close, none other than Newark and St. Louis South are scheduled for closure in the near term,' Max Gates, a Chrysler spokesman, said in an e-mailed statement today. 'Virtually all of the labor associated with these facilities will be offered employment with the new company.' The Fiat alliance will create or preserve more than 5,000 manufacturing jobs, Chrysler said in a statement. All union-represented workers still have the option of taking a buyout or early retirement incentive of as much as $75,000 and a $25,000 car voucher under a previously announced plan that expires May 26, Gates said." (Bloomberg L.P.)

Hourly Employees Spared Painful Benefits Cuts in Chrysler Bankruptcy
Excerpt: "Union employees will still receive company-sponsored health care. CEO Bob Nardelli says 'all qualified employee' pension and 401(k) funds would be protected from Chrysler's creditors." (Workforce Management; free registration required)

PBGC Offers Reassurance about Chrysler Bankruptcy Effect on Pensions
Excerpt: "Vince Snowbarger, acting director of the Pension Benefit Guaranty Corporation, said Chrysler's entry into Chapter 11 bankruptcy protection does not change the status of its defined benefit pension plans." (PLANSPONSOR.com; free registration required)

Chrysler Bankruptcy Plan Is Announced
Excerpt: "Chrysler, the third-largest American auto company, will seek bankruptcy protection and enter an alliance with the Italian automaker Fiat, the White House announced Thursday. . . . On Wednesday, union members approved contract changes with Chrysler that will mean pay and benefit cuts, and their contract is expected to remain in effect during the bankruptcy." (The New York Times; free registration required)

U.S. Said to Seek a Chrysler Plan for Bankruptcy
Excerpt: "The Treasury Department is directing Chrysler to prepare a Chapter 11 bankruptcy filing as soon as next week, people with direct knowledge of the talks said Thursday. . . . The Obama administration has told Chrysler it will provide up to $6 billion in new financing, on top of the $4 billion in loans it has already given the company, if Chrysler can complete a deal by next Thursday with a cost structure that gives it a chance of survival. The creditors have so far balked at the terms suggested by the Treasury. But the negotiations have taken a new direction. Treasury now has an agreement in principle with the U.A.W., whose members' pensions and retiree health care benefits would be protected in the event of a bankruptcy filing, said the people with knowledge of the discussions, who asked for anonymity because they were not authorized to discuss the case." (The New York Times; free registration required)

[Guidance Overview] Second Circuit Rules Bankrupt Companies Must Pay Substantial Pension Termination Fees (PDF)
Excerpt: "In a recent reversal of a Bankruptcy Court decision, the U.S. Court of Appeals for the Second Circuit upheld a law which could further burden financially distressed companies attempting to reorganize and exit bankruptcy. The Second Circuit ruled that 'termination premiums' owed to the Pension Benefit Guarantee Corp. ('PBGC') are not pre-petition claims which may be discharged under the Bankruptcy Code." (Winston & Strawn LLP)

[Guidance Overview] Second Circuit Reverses Bankruptcy Court's Decision on PBGC Termination Premiums
Excerpt: "In Pension Benefit Guaranty Corporation v. Oneida, Ltd. dated April 8, 2009, the U.S. Court of Appeals for the Second Circuit reversed a ruling by the U.S. Bankruptcy Court for the Southern District of New York characterizing certain 'termination premiums' owed to the Pension Benefit Guaranty Corporation (PBGC) pursuant to the Deficit Reduction Act of 2005 as contingent, pre-petition claims and thus dischargeable in bankruptcy." (McDermott Will & Emery)

GM and Chrysler Retirees and Employees Could Lose $23 Billion in Pension Benefits If the Companies Terminate Retirement Plans in Bankruptcy
Excerpt: "Neither GM nor Chrysler plans to file for bankruptcy, but both are taking steps to prepare in case they are forced to do so in the coming weeks. While neither has said it plans to terminate its pension program, struggling steel companies and airlines have used bankruptcy to get out from under large pension obligations and turn them over to the government." (The Detroit News)

[Guidance Overview] Second Circuit Finds Termination Premiums Not Dischargeable 'Claims' in Bankruptcy (PDF)
Excerpt: "On April 8, 2009, the United States Court of Appeals for the Second Circuit found that 'termination premiums' due under Section 4006(a)(7) of the Employee Retirement Income Security Act ('ERISA') are not 'claims' under the Bankruptcy Code and are therefore not dischargeable in bankruptcy. This decision has a substantial impact on any company considering a Chapter 11 bankruptcy proceeding as a means to eliminate pension obligations." (Pillsbury Winthrop Shaw Pittman LLP)

DOL Subpoenas Tribune on ESOP
Excerpt: "The U.S. Department of Labor has subpoenaed Tribune Co. in an investigation connected to the media company's employee stock-ownership plan (ESOP). Citing a bankruptcy court filing, the WSJ notes that Labor Dept. is examining aspects of the ESOP under provisions in the federal Employee Retirement Income Security Act, which requires proper disclosure of funding details and risks related to workers' retirement plans. 'We view this as a routine inquiry and we are responding by producing the requested documents concerning the ESOP,' Tribune said in a statement." (PLANSPONSOR.com; free registration required)

Tribune Co. Subpoenaed Over Employee Stock Plan
Excerpt: "The Labor Department subpoenaed the Tribune Company over its employee stock plan, which was crucial to the purchase of the company by the billionaire Sam Zell . . . . The company disclosed the subpoena, issued in March, in a bankruptcy court filing and said it had handed over the documents." (Reuters via The New York Times; free registration required)

GM Bankruptcy Would Expose $13.5 Billion Pension Liability
Excerpt: "A General Motors bankruptcy could become a nightmare for the federal government's Pension Benefit Guaranty Corp. As much as $13.5 billion in unfunded pension liabilities could be dumped onto the U.S. agency that takes over troubled pension plans." (Workforce Management; free registration required)

[Opinion] AIG Bonus Scandal Adds Insult to Injury of 'Pension Dumping'
Excerpt: "Actually, the defined-benefit pension is one of the only employment promises that employers of non-unionized workplaces are legally obligated to keep. Federal law is supposed to protect pension rights and guarantee that pensions are adequately funded. For the dwindling number of private sector employees who still enjoy one, it's a comforting thought. Too bad it's not true. Do you hear that sawing sound? That's what federal bankruptcy courts are doing to the three-legged stool of retirement, as companies divest themselves of the 'legacy costs' of their defined-benefit pension plans." (The Salt Lake Tribune)

Retirees Scramble as Auto Parts Firm Aims to Cease Health Benefits
Excerpt: "Retirees of auto parts maker Delphi have frantically organized themselves in recent weeks to fight their former employer's attempts to terminate their health care coverage by working to form a health care trust similar to one created for their unionized colleagues. Last month, Delphi received qualified permission from a bankruptcy judge to terminate health care benefits for its 15,000 salaried retirees." (Workforce Management; free registration required)

Court OKs Delphi Retiree Benefits Cutback
Excerpt: "A U.S. Bankruptcy Court judge gave Delphi Corp. permission to cut health care and insurance benefits for about 15,000 white-collar retirees. According to a Reuters news report, U.S. Bankruptcy Judge Robert Drain of the U.S. District Court for the Southern District of New York cited Delphi's need to conserve liquidity and said that the company had waited for a sufficient time before seeking to suspend the benefits. Lawyers for the salaried retirees had argued that parts of the U.S. Bankruptcy code limited the ability of a debtor to modify retiree benefits, but Delphi countered that those benefits are provided 'at will.' Drain ruled that the code only applied when retirees could prove they have a guaranteed right to those benefits, Reuters said." (PLANSPONSOR.com; free registration required)

Employees of Bankrupt Companies Have Employee Benefits' Homework
Excerpt: "While unemployment can be stressful, employees laid off due to the bankruptcy of their employer's firm should be prepared for some additional homework. In particular, employees receiving pension or health benefits must investigate how those benefits may be affected. Most firms will either file a bankruptcy under Chapter 11 of the Bankruptcy Code (a 'reorganization' plan), or liquidation under Chapter 7, also referred to as 'straight bankruptcy'. In a Chapter 11 bankruptcy, an employee's health or pension plan may or may not be affected. In a Chapter 7 bankruptcy, both plans are likely to be terminated." (Credit.com)

Capital Loss on ESOP Stock? Maybe
Excerpt: "Q: Can I take a capital loss on my shares in an Employee Stock Ownership Plan (ESOP) if the company was bought out while under bankruptcy protection?" (USA TODAY)

Pension Benefit Guaranty Corp. Doesn't Automatically Take Over a Pension Plan When a Company Goes Bankrupt
Excerpt: "'First of all, the company needs to decide if it wants to terminate the plan,' he said. 'If it does want to, it has to demonstrate it cannot afford the plan.' If a bankruptcy court agrees that the company can't afford the plan, the PBGC will then guarantee individual pensions up to a certain amount." (Newport News, Va., Daily Press)

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