Currently, counsel for the PBGC and the debtors are involved in discussions regarding the plans, with the agency filing the objection and request in the event that the discussions do not lead to a resolution. This after the debtors in the bankruptcy proceeding filed an amended reorganization plan July 3, according to Washington-based legal publisher BNA.
However, the PBGC has a beef with the amended reorganization plan’s lack of adequate assurance to either the PBGC or the plans’ participants that the pension plans will be assumed and administered in accordance with ERISA and the IRC. Thus, it does not protect the ability of PBGC and the pension plans to enforce ERISA liabilities following the effective date of the reorganization plan.
In its objection, PBGC said if the reorganization plan is amended in two respects, its objection will be satisfied:
- to specifically provide for the reorganized debtors to assume and continue the pension plans, administer them in accordance with ERISA and the tax code, and preserve any and all ERISA-related claims of the PBGC and the pension plans.
- clarify that any benefits earned under the pension plans shall not be alienated.
If the debtors amend the plan accordingly, and the bankruptcy court confirms the plan, PBGC will withdraw its claims as soon as reasonably possible after the effective date, PBGC said. However, the debtors have their own objections to the proceedings, specifically with the PBGC’s estimate of the unfounded liabilities – an aggregate $281 million. This number is off base, the debtors contend, because the plans have not been terminated and are to be assumed under the debtor’s bankruptcy plan,
The pension plans in question are:
- The WorldCom International Data Services Inc. Pension Plan
- The Pension Plan for Employees of MCI Communication Corporation and Subsidiaries.
The PBGC was created under ERISA. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in about 32,500 private sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed by insurance premiums paid by companies that sponsor pension plans and by PBGC’s investment returns.