High Court Lets Stand Decision on Discharging PBGC Termination Premiums

December 15, 2009 (PLANSPONSOR.com) - The U.S. Supreme Court has denied review of a federal appeals court's ruling that Oneida Ltd. could not discharge during its bankruptcy reorganization termination premiums it owed to the Pension Benefit Guaranty Corporation (PBGC), BNA reports.

In April, the 2nd U.S. Court of Appeals found that the termination premiums created by the Deficit Reduction Act of 2005 did not constitute a claim that could be discharged in bankruptcy. The act requires employers who terminate their plans in bankruptcy to pay the PBGC $1,250 per participant per year for three years.

In arguments before the appellate court, James Eggeman, an attorney representing the PBGC, said Congress had intended the law to shore up the finances of the PBGC (see Court Hears Arguments on PBGC Plan Termination Fees). “Congress intended this to be a post-(bankruptcy) obligation,” he said.

However, William Roll, an attorney representing Oneida Ltd., which filed the original challenge in U.S. Bankruptcy Court, argued that the termination fee should be treated like any other claim in bankruptcy and that Congress would have had to specifically amend the U.S. bankruptcy code to exclude the fee from being treated as a claim.

The Bankruptcy Court had sided with Oneida, but the PBGC appealed the decision.

The case is Oneida Ltd. v. Pension Benefit Guaranty Corporation, U.S., No. 09-442, cert. denied 12/14/09.