Headlines about "Bankruptcy"
Gathered from the web by the editors at BenefitsLink.com.
Cancer Patients Found to Be at Greater Risk for Bankruptcy
"[C]ancer patients were 2.65 times more likely to go bankrupt than people without cancer. Younger cancer patients had 2-5 times higher rates of bankruptcy than cancer patients age sixty-five or older ... Medicare and Social Security may mitigate bankruptcy risk for the older group.... [E]mployers and governments may have a policy role to play in creating programs and incentives that could help people cover expenses in the first year following a cancer diagnosis." (Health Affairs)
CalPERS Claims Bankrupt San Bernardino Has More Cash Than First Admitted
"When it declared bankruptcy the city said it was overwhelmed by pension debt and could barely make payroll, and did not have the cash to keep current on its payments to CalPERS, America's biggest public pension system with assets of $256 billion. But a CalPERS attorney asserted in a court hearing on Tuesday that the city had $26.8 million in the bank as of January of this year -- far more than the $4.2 million that the city said it had on hand." (Thomson Reuters)
Kodak Hands Camera Film Business to U.K. Retirees
"Kodak will hand over to the U.K. Kodak Pension Plan, its largest creditor, its 'personalized imaging' and 'document imaging' businesses ... The pensioners will then be able to either run the businesses or sell them as they see fit. Kodak will no longer owe the pensioners $2.8 billion[.]" (MarketWatch.com)
Federal Circuits Disagree on Beneficiary Excluding IRA From Bankruptcy Estate
"[T]he Seventh Circuit [concluded] that the inherited IRA assets would not be exempted from the bankruptcy estate. Its opinion noted that the exemption under IRC Sec. 522(b)(3)(C) is for retirement funds, that an inherited IRA of a nonspouse beneficiary is subject to distribution rules different from those that applied to the taxpayer who established the IRA to save for retirement, and therefore such assets should not be considered retirement funds." (Ascensus)
[Opinion] 'Troublesome to Think There's a Moral Distinction' Between Bonds and Pensions
"In 'our value system,' which respects contracts, [Richard Ravitch] added, these are 'equal kinds of obligations.' There should be no difference, Ravitch said, between a state or municipal promise to pay off its bond and a state or municipal promise to pay retirement benefits to a person who has worked for that state for decades." (Public Sector Inc.)
Bankrupt San Bernardino Votes to Pay CalPERS, But Not Bondholders
"Bankrupt California city San Bernardino passed a new budget ... that will allow it to resume paying into the state pension fund on July 1 as it continues to renege on other debts including payments to bondholders. The city council vote comes nearly a year after it halted contributions to [CalPERS] ... There was no discussion either about the city's arrears to the pension fund, which tops $12 million." (Thomson Reuters)
Federal Bill Seeks to Tie Municipal Borrowing to Public Pension Disclosure
"[Proposed federal legislation] would strip states and cities of their right to issue tax-exempt bonds unless they first disclosed the true cost of their pension plans and whether they could pay it." (The New York Times)
[Opinion] Philadelphia Mayor Holds Closed Meeting With Wall Street to Discuss Asset Sales
"Philadelphia is bankrupt. Without even seeing the details, it is safe to assume untenable union wages and pension benefits are at the heart of it all. A 47.6% funded pension is rather telling in and of itself." (Mish's Global Economic Trend Analysis)
[Opinion] Municipalities in Bankruptcy: Public Pension Plans and Retirees Will Share the Pain
"CalPERS' debt that once was considered a sacrosanct obligation now looks like just one of many unsecured debts owed by Stockton, San Bernardino and hundreds of other government insolvent government entities. As Judge Klein emphasized ... 'The city is going to have a difficult time confirming a plan over an objection and claim of unfair discrimination without being able to explain that problem away.' These are code words for from now on CalPERS and retirees with pension spikes are going to be sharing bankruptcy losses just like every other municipal bankruptcy creditor." (Chriss Street and Company)
[Opinion] Public Pensions in Bankruptcy Court
"While a Supreme Court decision would help clarify an important area of the law, a drawn-out court case is the last thing Stockton needs. The way to get the city back on its feet is for city officials, creditors and retirees to negotiate a fair settlement quickly. Sophisticated investors and bond insurers have to recognize that they made terrible decisions when they lent the city money during the bubble years and will have to take big losses. Retirees, especially those who were awarded unsustainably generous pensions and health care benefits, should also come to the table by forming a committee, as the bankruptcy judge recently suggested." (The New York Times)
Bankrupt California City to Resume Paying Pension Fund, But Not Bondholders
"Nearly a year after it halted contributions to America's biggest pension fund, San Bernardino will resume payments to CalPERS at the start of the new fiscal year -- but continue to not pay other creditors ... San Bernardino will not make interest and principal payments on $50 million in pension bonds issued in 2005 ... San Bernardino's decision ... will intensify the battle between the pension fund and Wall Street bondholders." (Thomson Reuters)
Stockton Bankruptcy: Roll Back Pension 'Spiking'?
"A problem facing bond insurers who want to cut CalPERS debt is the view, perhaps legally correct, that the pension fund is only a 'conduit' or trustee for funds that actually belong to the members of the pension system.... If so, negotiations to roll back pensions improperly boosted through various 'spiking' methods (usually adding to the final pay on which pension amounts are calculated) would have to include hundreds of scattered retirees." (CalPensions)
[Opinion] Bankruptcy Ruling Not a Clear Win for Stockton, Nor for CalPERS
"The creditors had urged [Judge Christopher] Klein to reject the bankruptcy plea because, they said, Stockton had refused to treat its pension obligations as debts to be reduced through bankruptcy, thus discriminating against private bondholders by forcing them to take big haircuts. But the details of Klein's ruling imply that the city and CalPERS may not prevail on the pension issue when he weighs the city's plan to deal with its debts -- a plan that now excludes CalPERS as a creditor." (Sacramento Bee)
Bankrupt San Bernardino to Resume Payments to CalPERS in July
"The city's obligation to CalPERS is $25.5 million for fiscal 2013, which ends June 30, according to the pension fund's data. While that's just 0.3% of all employer contributions to the retirement system, pension fund and city documents show it's about 21% of San Bernardino's revenue. San Bernardino has told CalPERS that its payments will resume with the start of fiscal 2014 on July 1[.]" (Pensions & Investments)
[Opinion] Federal Judge Green-Lights Stockton Bankruptcy
"Stockton hasn't asked for relief from its pension costs, despite the fact that its pension provider (CalPERS) is the city's largest creditor. Apparently Stockton prefers to lean more heavily on its unsecured bondholders -- the city suspended debt service payments on several of its bonds. If the courts eventually allow pension benefits to be included, bondholders might not have to bear as much weight and might reduce their potential losses. How can investors avoid bonds that could entangle them in such situations?" (Alliance Bernstein)
[Opinion] Next Steps in Stockton Will Be Widely Watched
"If the city presents a plan of adjustment that does not include reductions to CalPERS, the city's other creditors are likely to appeal. So, the real question being asked in Stockton -- the one that Wall Street, public employee unions, and cash-strapped municipal governments across the country want answered -- is: Can public employee pensions be cut when a city goes bankrupt?" (Sacramento Bee)
[Opinion] Stockton, CalPERS and 'Fair' Bankruptcy
"Klein's decision offered more nuance than many initial reports suggested, and his comments from the bench made plain that he felt Wall Street creditors had a case. The judge said that while his Monday ruling did not deal with the fairness issue raised by bondholders, he would address the issue at the proper time, and that the city 'is going to have a difficult time confirming a [bankruptcy reorganization plan] over the objection of unfair discrimination.' He described CalPERS as a -garden-variety creditor' -- not one in a protected class." (San Diego Union-Tribune)
Reporter's Transcript: Stockton Bankruptcy Proceedings (Findings of Fact and Conclusions of Law) (PDF)
54 pages. Excerpt: "Negotiation is, by definition, a two-way street. You cannot 6egotiate with a stone wall. You cannot do it. It cannot be done. It is a contradiction in terms. In evaluating the overall scenario, I am persuaded that the City did negotiate in good faith. That is evidenced by the substantial agreements reached on the collective bargaining agreements.... [T]he question is whether the omission of CalPERS justifies another group of creditors [who] would be impaired from voting with their feet and choosing to act as the stone wall. And my answer to that question is, no, it does not justify a creditor in taking the position that it need not negotiate in good faith on the basis that somebody else is not being taken care of or being treated similarly in the plan." (U.S. Bankruptcy Court, Eastern District of California)
Stockton and San Bernardino, a Tale of Two Bankruptcies
"Stockton has kept current on its payments to CalPERS ... even as it has defaulted on some bond payments and declared its intention to wring concessions from Wall Street creditors. Thus CalPERS has supported Stockton's bankruptcy filing, while the so-called capital-market creditors have opposed it.... In San Bernardino, none of this has happened.... San Bernardino's Wall Street creditors -- some of them the same as in Stockton's case -- have supported its quest for bankruptcy eligibility, because the city is treating them and CalPERS equally. And in another mirror image to Stockton, CalPERS is opposing San Bernardino's request for bankruptcy protection." (Reuters)
[Opinion] Ill-Informed Judgment on Stockton Pensions in Bankruptcy
"Stockton making their $900 million payment to CalPERS will not secure benefits in a plan with an $87 billion deficit that has made no significant inroads into curbing benefit accruals.... Without a process in place like we have in the private sector with the PBGC[,] CalPERS can pretty much claim the right to do anything.... If a judge rules that CalPERS won't get all of their $900 million then it's still anyone's guess what Stockton retirees will get." (Burypensions)
City Bankruptcies Loom Over Public Pension Plans
"Stockton's single biggest debt is the $900 million it owes over the next decade to [CalPERS] ... Pension obligations are one of the biggest problems for most struggling municipal governments, and the issue in general puts federal bankruptcy law -- which gives bankrupt institutions a lot of leeway in restructuring their finances -- in tension with state laws (including California's) that require pension funding to take precedence." (MarketWatch)
Pension Issue Haunts Stockton Bankruptcy
"'This is just the beginning of a multi-dimensional.... well, I can't say chess game because it's not a game,' said attorney Karol Denniston, a municipal restructuring expert. 'There's not one thing that will fix the pension system. The net message is you can't see a restructuring when the largest creditor isn't being restructured.'" (Sacramento Bee)
Ruling Sets Up Pension Battle in Bankrupt Stockton
"In the ruling, ... which affirmed the legal status of Stockton's bankruptcy, Judge Christopher M. Klein said he could see battle lines being drawn between CalPERS ... and the city's other major creditors, including several Wall Street companies that either bought Stockton's bonds or insured them. But he ruled that it was still too early in the case for that battle to be joined. 'There are very complex and difficult questions of law that I can see out there on the horizon,' he said." (The New York Times)
Stockton Bankruptcy Case Defers Decision On Pension Benefit Modifications
"U.S. Bankruptcy Judge Christopher Klein ruled Monday on the most important question facing Stockton, Calif. -- whether it could enter into federal bankruptcy protection. Klein agreed that the city is, in fact, broke. But he didn't decide the question of whether the city must renegotiate its pension obligations, as some of its creditors had hoped." (National Public Radio)
Stockton Can Stay in Bankruptcy Despite Creditor Objections
"Stockton, Calif., can stay in bankruptcy protection after a judge said he found that the biggest U.S. city in bankruptcy negotiated in good faith with its creditors, and that the creditors didn't.... Negotiation is a 'two-way street,' said U.S. Bankruptcy Judge Christopher M. Klein in Sacramento, addressing creditors who he said didn't negotiate in good faith. 'You cannot negotiate with a stone wall.' ... The city never held talks with [CalPERS, which] refused to negotiate with Stockton, claiming that under state law it isn't authorized to reduce the city's contributions to the fund. Mr. Klein said Monday that Stockton didn't have an obligation to negotiate with CalPERS." (Pensions & Investments)
[Opinion] CalPERS Statement on City of Stockton Bankruptcy Ruling
"'We recognize the difficult decisions the City of Stockton needs to make to restore its financial and economic health. Today's action gives the City the opportunity to propose a forward looking plan of adjustment in the bankruptcy case that will allow them to restore long term financial stability and to provide essential services to the Stockton community through the City's valued public employees. The City has consistently acknowledged the importance of providing benefits to its employees through its existing relationship with CalPERS consistent with state law. CalPERS will continue to act as a fiduciary and protect and defend the integrity and soundness of the Pension Plan,' said [Anne Stausboll, CalPERS Chief Executive Officer]." (California Public Employees' Retirement System)
[Opinion] Stockton Bankruptcy: The Case for CalPERS Cuts
"If a federal judge rules today that Stockton is eligible for bankruptcy, bond insurers facing big losses may wonder if they should have taken a harder look at how the city's CalPERS debt could be cut.... Ironically, said a city attorney, the insurers provided no legal basis under California law for cutting pensions in pre-bankruptcy negotiations, but also oppose eligibility for the bankruptcy that might allow pension cuts." (CalPensions)
Stockton Bankruptcy Decision Could Trigger Precedent-Setting State Pension Debt Negotiations
"If it receives bankruptcy protection, the city begins a months-long process of negotiations over debt repayment that some say could end up in the U.S. Supreme Court.... 'Does bankruptcy code apply to CalPERS or not? If bankruptcy code trumps state law, then that's huge and it has huge implications in terms of what happens next for other municipalities across California,' [said attorney Karol Denniston, a municipal restructuring expert]" (The Washington Post)
Bankrupt San Bernardino Approves Over $1 Million in Pay Hikes
"The bankrupt city of San Bernardino, California, approved over $1 million in pay increases for police and firefighters despite claims it can barely make payroll, let alone afford the salary hikes.... The bankruptcy of the city 65 miles east of Los Angeles is a national test case on whether the pensions of government workers take precedence over other payments in a municipal bankruptcy. It is a high-stakes issue for pension plans and their beneficiaries, and for Wall Street bondholders who lend money to governments." (Reuters)
Pension 'Cram Down' in Stockton Bankruptcy?
"A problem for the bond insurers is that Stockton does not want to cut pensions. If the judge rules that Stockton is eligible for bankruptcy, the city might ask for a cram down that spares CalPERS if no agreement on a plan is reached in negotiations.... Stockton argues that eliminating retiree health care and employee pay cuts of up to 30 percent are a fair share of the 'hair cut' for members of [CalPERS]." (CalPensions)
Stockton's CalPERS Payments Will Be Tested in Upcoming Bankruptcy Trial
"Three Wall Street bond creditors, who could lose millions in the bankruptcy, say the city is refusing to face up to its obligations -- and is giving CalPERS a sweetheart deal at the expense of other creditors. Stockton is continuing to make its $29 million in annual pension payments to [CalPERS]." (Sacramento Bee)
2013 Fact Sheet on State and Municipal Bankruptcy, Municipal Bonds, and State and Local Pensions (PDF)
"With nearly $3 trillion set aside in pension trusts for current and future retirees, most states and cities have substantial assets to weather the economic crisis.... State and local governments are taking steps to strengthen their pension reserves and have a long-term time horizon.... Long-term investment returns of public funds continue to exceed expectations.... Retirement systems remain a small portion of state and local government budgets." (National Governors Association, NASRA (National Association of State Retirement Administrators) and nine other associations)
San Bernardino, CalPERS Fail to Reach Deal Ahead of Court Date
"San Bernardino still has not provided crucial financial information, or proposed a plan for resuming its twice-monthly, $1.2 million payments to the fund, [a] CalPERS spokesman said.... CalPERS says its efforts to help the city produce the information have produced nothing, setting the stage for a contentious court hearing on February 12.... Should the bankruptcy judge rule that the pension fund not be paid in full in a restructuring of the city's debt, other struggling California cities could be tempted to alter their payments to CalPERS." (Reuters)
[Guidance Overview] DB Plan Sponsors in Bankruptcy Get Increased Flexibility to Modify Plan Distributions
"Defined benefit plans present particular problems for employers experiencing financial distress. Before the new anti-cutback exception was created, employers in bankruptcy had limited options for addressing underfunded defined benefit plans.... AMR Corporation, the parent of American Airlines, may be first debtor in bankruptcy seeking to use the new exception." (McGuire Woods LLP)
PBGC to Pay Retirement Benefits for Hawker Beechcraft
"[PBGC] will assume benefit payments for more than 9,500 workers and retirees from two of Hawker Beechcraft, Inc.'s pension plans. The settlement also includes $2.5 million to those salaried retirees whose benefits exceed those paid by PBGC under rules set by Congress.... [T]he bankruptcy court approved a settlement between Hawker Beechcraft and PBGC in which two plans covering salaried employees would be assumed by the agency. The third plan, with 8,300 participants, will be frozen and remain with the company." (Pension Benefit Guaranty Corporation)
Judge Wants Hawker Beechcraft to Give More Notice of PBGC Settlement
"A judge on Thursday held off approving a deal between Hawker Beechcraft Inc. and [the PBGC] to scrap two underfunded Hawker pension plans, saying ... that he wouldn't approve the pension pact until certain union members affected by the plan get proper notification of what's going to happen to their benefits once PBGC takes over. 'You need the union,' Judge Bernstein said. 'It's the squeaking wheel that gets the oil.' The judge's concern was over a group of about 70 employees -- among the highest paid union employees in the so-called "salaried" pension plan -- that will see a reduction of benefits once PBGC takes over." (DowJones Daily Bankruptcy Review)
How Would Stockton Bankruptcy Cut Pensions?
"Bond insurers who want CalPERS to share the financial pain of the Stockton bankruptcy do not answer a key question in lengthy court filings: How would 'bloated' and 'overly rich' pensions be cut? ... Stockton does not want to cut pensions, arguing that its proposal to eliminate retiree health care is how debt reduction in bankruptcy is shared by employees, who are the actual creditors while CalPERS is just the middleman." (CalPensions)
PBGC Holding $300 Million in Unclaimed Pension Benefits
"At a time when many Americans are worried about saving enough for retirement, nearly $300 million in pension benefits has gone unclaimed by U.S. workers and retirees. The [PBGC] ... said the money belongs to more than 38,000 Americans -- or their surviving spouses -- that the agency has been unable to locate." (Pittsburgh Post-Gazette)
DOL Regulatory Agenda Released
The U.S. Department of Labor has published the Fall 2012 issue of its regulatory agenda, which lists the regulations under active consideration for publication, proposal or review during the next 12 months. (Employee Benefits Security Administration)
Hawker Reaches Pension Settlement with PBGC
"Hawker Beechcraft has reached a settlement with the [PBGC], allowing for termination of two pension plans and removing the Wichita-based plane maker's largest impediment to approval of its bankruptcy reorganization. [The settlement allows] termination of the pension plans for salaried workers and non-union workers in the customer-support arm of the business. The pension plan for hourly workers will be frozen at the year's end. For its part of the settlement, the PBGC will receive $11 million in cash for the release of liens plus an unsecured claim for $419.5 million to be paid with new stock." (Wichita Eagle)
Pension Experts Hope PBGC 'Creativity' Doesn't Go Too Far
"[PBGC Director Joshua] Gotbaum signaled a new approach for protecting pension plans during periods of corporate change and upheaval by bringing in restructuring expert Sanford Rich in mid-November to head the Pension Benefit Guaranty Corp.'s office of negotiations and restructuring. Mr. Rich and his team -- formerly part of the more innocuous-sounding insurance program -- plan more active engagement with the business community, detecting potential risks to pension plans or offering alternatives to termination for plans already in distress. 'We want to show companies there are other options,' Mr. Gotbaum said[.]" (Pensions & Investments)
[Opinion] Pensions for Police and Firefighters Pose Bankruptcy Risk for Small Towns in Illinois
"Overshadowed by the crisis in long-term funding of the state's five pension funds is a similar issue with municipal police and fire pensions. These local pension bills are growing rapidly and consuming a worrisome portion of towns' budgets -- to the point where smaller towns without home-rule authority (those under property tax caps) eventually may face bankruptcy if nothing is done to relieve the burden.... The situation has worsened since 2000, when lawmakers lowered the minimum retirement age to 50 from 55 and OK'd a compounded, 3 percent yearly cost-of-living raise for retirees." (Chicago Sun-Times; free registration required)
Bankruptcy as Tool to Save Public Pensions?
"The unfolding bankruptcy in the Northern California city of Stockton is revealing the lengths to which public officials are going to protect government union members from even the most modest cuts in their outsized pay and benefit packages.... Assured Guaranty -- which insures the pension-obligation bonds that creditors issued to Stockton in 2007, when it was first unable to make ends meet -- argues that the city is not actually bankrupt. Instead, [Assured says,] '[T]he city hopes to use the Chapter 9 plan process to cram down a non-consensual plan on capital market creditors in order to free up cash to fund above-market labor and pension costs, while refusing to consider -- much less implement -- additional sources of revenue and much-needed expenditure reductions.'" (Orange County Register)
San Bernardino May Have to Pay Full Pension Tab
"A federal judge [has] rejected a CalPERS request to sue bankrupt San Bernardino for a growing unpaid bill, but gave preliminary support to the argument that the bill must be paid in full before the city can leave bankruptcy. The widely watched question of whether the bankruptcy will reduce pensions promised retirees or payments made by the city to CalPERS may now turn on the ability of the city to pay. U.S. Bankruptcy Judge Meredith Jury agreed to a 60-day discovery period sought by CalPERS to probe city finances." (CalPensions)
San Bernardino Wins Partial Victory in Bankruptcy Court
"San Bernardino scored a victory in bankruptcy court [on Friday, Dec. 21,] as Judge Meredith Jury refused a motion by CalPERS that would have allowed the pension giant to sue in state court for millions of dollars in payments the city has stopped making. She said she was inclined to think at least $13 million in payments the city plans to defer until July 2013 are legally required, but the harm to the city would be overwhelming." (The Sun)
Bankruptcy Court Judge Tentatively Rules Against CalPERS' Objection to San Bernardino Bankruptcy
"If the $240.7 billion [CalPERS] is allowed to sue and wins a monetary judgment, '[T]he impact on the city's ability to reorganize would be astronomical,' [said a U.S. Bankruptcy Court Judge, whose] ... initial ruling sides with San Bernardino and its bondholders, which claimed the city can't afford to fund vital public services and also pay past-due obligations to CalPERS. She invited CalPERS and its lawyers to try to change her mind.... The ruling may set a legal precedent at a time when pensions for public employees are straining local governments from California to Rhode Island, according to bankruptcy attorneys that specialize in municipal insolvencies." (Pensions & Investments)
[Opinion] Statement by CalPERS on Bankruptcy Court's Denial of Motion for Relief from the Automatic Stay in the City of San Bernardino Bankruptcy Case
"While it is not surprising that the decision was to keep the issues in bankruptcy court, the court clearly stated today's decision was not a 'great victory' for the City of San Bernardino nor a 'great defeat' for CalPERS. The Court recognized that all debts incurred after filing for bankruptcy by any entity must be paid in full at the time of approval of the plan of adjustment. We are confident that the court will recognize the priority of our members and the obligations owed to them." (California Public Employees' Retirement System)
Judge Allows American Airlines and PBGC to Cancel Lump-Sum Payment Option in Pilots' Pension Plan
"U.S. Bankruptcy Court Judge Sean Lane in New York also approved the new labor contract with the Allied Pilots Association, which calls for the company to contribute 14% of pay into a new 401(k) plan. The ruling denied a request from a group of senior pilots who wanted to preserve the lump-sum option." (Pensions & Investments)
Creditors Say Stockton City Manager Acted in Bad Faith on City's Pension Contribution Obligations to CalPERS
"[Two creditors] seeking to block Stockton's bankruptcy ... contend that Stockton failed to negotiate in good faith and isn't therefore eligible to restructure its finances under Chapter 9 because the city didn't engage CalPERS in negotiations. CalPERS is the city's single largest creditor with an estimated liability at $245 million over the next decade." (Recordnet.com)
CalPERS Pits State Court Versus Federal in San Bernardino Bankruptcy
"The biggest U.S. pension fund argued in a court filing that its status as a state agency gave it sweeping powers in the San Bernardino, California bankruptcy case and that the federal jurisdiction that applies in bankruptcy should be overridden by the state's rights.... [CalPERS'] latest legal argument ... [also] contends that bond insurers who are opposing CalPERS in San Bernardino are actually supporting its legal position in another big municipal bankruptcy in Alabama." (Reuters)
Statement of U.S. Rep. Phil Roe at Hearing on 'Challenges Facing Multiemployer Pension Plans: Evaluating PBGC's Insurance Program and Financial Outlook'
"Provisions in the law governing multiemployer pensions will expire in two years, which means Congress has an important opportunity to study the system, assess its strengths and weaknesses, and pursue solutions that support workers without discouraging participation in the voluntary pension system. To do this successfully, we need the facts as quickly as possible." (U.S. House Committee on Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions)
When Bankruptcy Meets ERISA
"[T]he real Hostess [Brands] story ... is not about a future without Twinkies, but about the men and women who made the Twinkies facing a future where Hostess made their vested retirement benefits disappear. Unfortunately, Hostess is not alone. Over the last several years, there are a number of companies, and one U.S. Territory (the Northern Mariana Islands Retirement Fund) which have looked to a bankruptcy court to resolve their underfunded pension issues." (The Pension Protection Act Blog)
Senior Pilots Battle American Airlines Over Whether Pensions Can Be Cashed Out in Lump Sum
"The pilots' A Plan, a defined-benefit plan, gives pilots the option to take their pension as a lump sum rather than as an annuity. That option has been on hold since American filed for bankruptcy Nov. 29, but would again be available when American emerges from bankruptcy. American has asked U.S. Bankruptcy Judge Sean Lane for the right to kill that option.... But the senior American Airlines pilots, all hired before Nov. 1, 1983, are objecting, saying the change isn't needed and that they have an ironclad promise from 1983 -- Supplement B to their contract -- that the airline would never touch their benefits.... Both the PBGC and the unsecured creditors committee have filed motions supporting American's proposal to cut out the lump sum." (DallasNews.com)
[Guidance Overview] DOL Issues Amendments to Abandoned Plan Guidance (PDF)
"Ordinarily, a termination of the plan would mean that the bankruptcy trustee is responsible for multiple functions that they are likely unfamiliar with, including reporting, document amendments, and correction of operational failures. The proposed rule would allow a bankruptcy trustee to be a QTA, or appoint a financial organization as QTA under the abandoned plan program. The abbreviated plan termination process would, in the DOL's view, increase the retirement security of participants and beneficiaries by reducing expenses and expediting distributions, while at the same time limiting the bankruptcy trustee's fiduciary liability in terminating the plan." (Ascensus)
CalPERS Slams San Bernardino for 'Sham' Bankruptcy and 'Criminal' Behavior
"[T]he largest U.S. pension fund filed court papers denouncing the financially troubled California city of San Bernardino for what it called a 'sham' bankruptcy and accused the city of 'criminal behavior' in withholding payments to the pension plan. The filing by the California Public Employees' Retirement System, or CalPERS, came 10 days after San Bernardino officials traveled to Sacramento to plead with top CalPERS executives for more time to make its payments." (Reuters)
CalPERS Comes Out Swinging in Fight for Overdue Pension Contributions
"The bland bureaucracy that dispenses pension checks to half a million Californians has taken on a new identity: fierce and unyielding champion of government retirees. Facing an unprecedented legal fight over the cash it receives from member cities and counties, CalPERS has come out swinging. It has gone to court to keep the dollars flowing, while portraying itself as the only thing standing between helpless retirees and greedy Wall Street types and irresponsible politicians who would grab their pensions." (Sacramento Bee)
Proposed Changes to DOL Abandoned Plan Rules Could Be Light at End of Tunnel for Employees of Bankrupt Employer
"[E]mployees at Penn Specialty Chemicals, a small company that went bankrupt in 2008 ... were supposed to receive their 401(k) savings when the company collapsed. Instead, the bankruptcy trustee has withheld distributions, pending approval from the [IRS]. While the employees have waited, administrative fees on their accounts have piled up. During 2009 and 2010, for example, $111,463 in fees was charged against the roughly $4 million that the accounts held.... [The DOL has] proposed a rule that it says will prevent cases like this from dragging on." (The New York Times; free registration required)
[Guidance Overview] DOL Proposes Expanded Procedures to Expedite Distributions from Plans of Bankrupt Plan Sponsors
"According to the preamble, the IRS has advised that it will not challenge the qualified status of plans terminated using the abandoned plans procedure, or take any adverse action against a QTA, a participant or beneficiary, or the plan, so long as the QTA ensures that the survivor annuity rules are met, benefits are properly vested upon termination, and participants and beneficiaries are notified of their rollover rights. Based on this indirect guidance, more trustees may decide to forgo the final determination letter, further accelerating the termination process." (Thomson Reuters / EBIA)
[Opinion] San Bernardino's Bankruptcy Case Becomes Battle of Titans
"San Bernardino's bankruptcy effort is poised to become a battle of titans because -- unlike Vallejo and Stockton -- the city stopped making payments to CalPERS some $6.9 million ago. CalPERS claims primacy over all other creditors under California law, but Bankruptcy Court is federal.... Bond sellers and holders see this case as a showdown with CalPERS, in which they hope to do away with the retirement system's payoff primacy and gain equal footing as creditors." (The Sun)
CalPERS Bankruptcy Strategy Pits Retirees vs. All Others
"CalPERS is arguing that all of its debt should be treated as an administrative claim, which means only a handful of creditors would be paid first, such as the lawyers and financial advisers working on the bankruptcy case ... 'What CalPERS is trying to do is rewrite the priorities of the bankruptcy code,' [said] Kenneth N. Klee, who helped revise Chapter 9 of the U.S. Bankruptcy Code in the 1970s[.]" (Bloomberg BusinessWeek)
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