Hostess, in a plan filed with the U.S. Bankruptcy Court in New York, said it would stop contributing to the Interstate Bakeries Corp. (IBC) Defined Benefit Plan—which had $56 million in assets and $84 million in liabilities as of June 2, 2012— for two years and will restart the contributions in 2015. The suspension is intended to reduce Hostess’ debt and permit the company to restructure and emerge from Chapter 11.
The company’s union employees will be subject to an immediate 8% wage cut in the first year, with modest increases in following years, as well as a 17% reduction in health and welfare benefits. The company will withdraw from the 42 MEPPs to which it contributes, followed by a freeze on pension contributions for two years and reduced contributions thereafter, and will reenter if these and other conditions are met. Nonunion employees will be required to make similar sacrifices, with an 8% reduction in wages; the matching contribution provided under the DC plan that was suspended in 2011 will continue to be suspended for two years with reduced matching contributions thereafter.
Hostess sponsors two different retiree medical benefit plans and two supplemental medical insurance plans, as well as a post-retirement life and health benefit plan. From June 3, 2012 to June 1, 2013, the projected cost of providing retiree benefits is approximately $1,130,225. As of June 2, 2012, the value of the total benefit obligation for retiree benefits was approximately $29.3 million.
Hostess contributed about $8 million a month to MEPPs prior to August 2011; after failing to make contributions that month, no further contributions were made to the plans. The company still owes approximately $1.04 million for the plan year that ended September 30, 2011 and approximately $6.5 million for the plan year that ended September 30, 2012.
In January 2012, Hostess announced intentions to withdraw from MEPPs, and reported about $860 million in debt (see “Hostess Files Bankruptcy After Failing to Reach Pension Agreement” and “PBGC Assumes Pension Liability for Bakery Workers”).
For the full court filing, click here.
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