According to a Boston Globe news report, the probe centers on whether officials of the beleaguered instant photo company violated ERSIA in its actions and public statements at the time it filed its bankruptcy case. The company canceled its retiree health and life insurance benefits just before heading for Bankruptcy Court.
Investigators from the DoL’s Pension and Welfare Benefits Administration (PWBA) are looking into whether a benefits cancellation notice mailed late in the day represented an ERISA violation. Many recipients didn’t learn their benefits had been canceled until after Polaroid was operating in bankruptcy.
Polaroid’s pension plan is facing a federal takeover if officials can’t find a bidder willing to take it on along with the company’s assets (see Polaroid’s Woes Extend to Retirement Plans ).
According to court documents, the PWBA is focusing on a number of Polaroid benefit programs including:
- employee savings
- group life insurance
- retiree health insurance
- long-term disability plans
DoL Secretary Elaine Chao is considering whether to file claims in bankruptcy court to recover funds for the plans. Such claims could amount to millions of dollars for the company, which employed 21,000 workers at its peak in 1978.
Investigators are also are seeking information about Polaroid executives who retired just prior to the October bankruptcy and were immediately rehired as consultants.
A bankruptcy court document listing payments to insiders shows several Polaroid executives receiving large severance payments, lump-sump payments from an executive pension plan, and other ‘transitional” payments, and immediately afterward receiving paychecks as consultants.
Betty Moss, a former Polaroid employee in Atlanta, said a government investigator called her two weeks ago and asked about corporate and divisional officers who retired and returned as consultants. Moss said she provided a list of names to the investigator.
Anne O’Neil of Lexington, a 31-year Polaroid veteran who was laid off in October, said she gave the DoL detailed information on pension and other benefit programs just after the bankruptcy filing. She said she also spoke to a government investigator in recent weeks, who seemed “very interested” in the case.
The DoL’s continuing interest in the Polaroid case may have been sparked at February Senate hearing. Former Polaroid employees and a variety of specialists testified how having employees’ assets locked into company stock can lead to financial disaster.
Most Polaroid employees were required to buy company stock, but couldn’t sell the stock until they left the company.
It wasn’t until November, after Polaroid shares had dropped to less than a dime, that State Street Bank and Trust, the trustee of the employee stock plan, decided to sell the shares and distribute cash to participants.
Separately yesterday, the Massachusetts congressional delegation sent a sharply worded letter to Polaroid general counsel Neal Goldman, asking that Polaroid urge prospective bidders for the company to take over its pension plan.
If the plan isn’t assumed by a buyer at a court auction of Polaroid next week, the underfunded plan will probably be taken over by the Pension Benefit Guaranty Corp.
While that would ensure the safety of pension payments for most retirees, a takeover by the government agency also would reduce pension payments to many, and would generate big administrative costs that would take money away from other company creditors.
Read more at Massachusetts Probes Origins of Polaroid ESOP .