PBGC takes over Blumenthal Print Works pension plan
The Pension Benefit Guaranty Corporation (PBGC) announced it has assumed responsibility for the underfunded pension plan covering more than 740 former workers and retirees of Blumenthal Print Works Inc., a textile company in New Orleans, La.
The PBGC took action because the company is liquidating its assets under bankruptcy proceedings, and no sponsor would be left to fund or administer the plan. Retirees will continue to receive their monthly benefit payments without interruption, and other workers will receive their pensions when they are eligible to retire.
According to PBGC estimates, the Blumenthal Print Works Inc. Retirement Income Plan is 52 percent funded, with $14.2 million in assets to cover $27.1 million in benefit liabilities. The PBGC expects to be responsible for $12.7 million of the $12.9 million shortfall.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on Jan. 27, 2010. The Blumenthal plan was frozen to new participants as of Dec. 31, 2005. Benefit accruals ceased for the plan as of Dec. 31, 2008. The agency assumed responsibility for the plan on May 26, 2010.
Within the next several weeks, the PBGC will send notification letters to all participants in the Blumenthal plan. Under provisions of the Pension Protection Act of 2006, the maximum guaranteed pension the PBGC can pay is determined by the legal limits in force on the date of the plan sponsor's bankruptcy. Therefore, participants in the plan are subject to the limits in effect on Oct. 20, 2008, which set a maximum guaranteed amount of $51,750 a year for a 65-year-old.
The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
Blumenthal Print Works was founded in 1924, its primary product was ticking, a fabric that protects mattresses. The company also made embroidered upholstery. Unable to adjust to a decline in demand for ticking and imports from China, the company and its units sought Chapter 11 in the U.S. Bankruptcy Court in New Orleans. The case was later converted to a Chapter 7 liquidation on Jan 27, 2010.
Assumption of the plan's unfunded liabilities will increase the PBGC's claims by $12.7 million and was not previously included in the agency's fiscal year 2009 financial statements.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 29,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.
Pension Benefit Guaranty Corporation (PBGC)