US - The Pension Benefit Guaranty Corporation (PBGC) is seeking comment on a proposed ERISA rule that uses an alternative method for calculating the amount of bond or escrow provided by employers if, as a result of termination of operations at a facility, more than 20% of employees who are plan participants are separated from employment.
The proposed rule, under section 4062(e) of the Employee Retirement Income Security Act (ERISA) of 1974, calculates the amount of bond or escrow based on the percentage reduction in employees covered by the plan as a result of the cessation of operations. The bond is cancelled or the escrow returned if the plan remains ongoing for 5 years after operations cease.
The rule is to be published in the Federal Register today.
Meanwhile, the PBGC has announced it will pay the pensions of 9400 non-union workers of Penn Traffic, which operated retail supermarkets under the trade names Riverside Markets, Bi-Low Foods, Quality Markets, P Foods and Big Bear.
Under the agreement, the federal insurer will be liable for US$125m of the company’s US$126m shortfall from its largest pension plan, which is 40% funded. The reorganised Penn Traffic will continue to sponsor and fund four other defined benefit plans.
The PBGC said Penn Traffic filed for bankruptcy protection on May 30, 2003 and applied to terminate its pension plans on November 21, 2003. The company’s cash balance plan ended as of January 21, 2004 and the PBGC became trustee on February 23, 2005.
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