US - The debate over who should be responsible for bankrupt WCI Steel's US$117m pension deficit looks set to go to court after the Pension Benefit Guaranty Corporation (PBGC) filed suit to prevent the underfunded plan being shifted to the federal pension insurance programme.
The PBGC has claimed WCI’s corporate parent Renco Group should assume responsibility for the pension plan, which has $138m in assets to cover $255m in obligations to roughly 2 000 workers and retirees.
The PBGC said it had a claim against the assets of all Renco “controlled group” members for the underfunding in the WCI pension plan.
The bankruptcy court will today begin a confirmation hearing on a plan of reorganisation sponsored by the holders of WCI’s secured notes.
If confirmed, the plan would transfer ownership of WCI’s assets to a new corporation owned by the company’s secured note holders.
The PBGC has pointed to a statement of facts filed in WCI’s bankruptcy proceedings that said the Renco Controlled Group had “cash substantially in excess of the… maximum termination liabilities” of the pension plan, said PBGC director Bradley Belt.
“WCI’s corporate parent has more than enough money to fill the hole in the pension plan. Renco should either assume responsibility for the plan or buy an annuity from a private insurer to cover all promised benefits.”
Belt said the PBGC filed suit to terminate the WCI pension plan now, or the pension plan would have been abandoned to a liquidating corporate shell with no assets, meaning the pension insurance programme could then have been liable for $94m of the $117 million shortfall, while workers and retirees would have forfeited up to $23m in benefits not guaranteed by PBGC.
“Companies that make pension promises are obligated to pay for those pension promises. Our action today is designed to protect workers from lost benefits and the pension insurance program from an unnecessary claim.”
Meanwhile, the PBGC has continued its meetings around the country with United Airlines staff to explain the federal pension programme and answer questions. PBGC took over the United plans in 2005, and which cover more than 104 000 workers and retirees and are underfunded by about $7.4bn.
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