PBGC, Health System Reach Agreement to Preserve Pensions

May 13, 2009 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation (PBGC) announced an agreement that will preserve a pension plan covering 3,800 workers and retirees at Wyoming Valley Health Care System Inc. in Wilkes Barre, Pennsylvania.

According to the announcement, the pension plan faced abandonment following the sale of Wyoming Valley’s assets to Community Health Systems Inc. of Franklin, Tennessee – a transaction that did not include the pension plan.

Under an agreement with the PBGC, $50 million in sale proceeds will be used to shore up the pension plan. Following the sale’s completion on May 1, a significant portion of the $50 million will be contributed to the plan. The remainder will be placed in a trust on behalf of the plan until 2013, when the plan sponsor is required to initiate a standard termination of the pension plan if the sponsor can satisfy the requirements for a standard termination at that time.

The agency explained that in a standard termination, the plan sponsor opts to end a plan with assets sufficient to pay all benefits earned by those enrolled. To achieve this, the plan either buys annuities for participants and beneficiaries from a private-sector insurance company that provides annuities, or if the plan permits, pays the benefits directly to participants as lump sums.

If there are not sufficient assets to fund a standard termination of the Wyoming Valley Health Care Pension Plan in 2013, then all remaining trust assets must be contributed to the plan, the announcement said.

“We have been monitoring the pressures facing medical care providers and have been actively working to help them find solutions to their plan funding difficulties (see  Millard Responds to Committee Questions ),” said Vince Snowbarger, acting director of the PBGC, in the announcement. “The agency will continue to work with plan sponsors like Wyoming Valley to help keep their plans ongoing so current and retired employees can receive all the benefits they have earned.”