The Pension Benefit Guaranty Corporation (PBGC) is taking steps to assume responsibility for Sears Holdings Corporation’s two defined benefit pension plans, which cover about 90,000 people.
The national retail chain headquartered in Hoffman Estates, Illinois, operates through its subsidiaries, which include Sears, Roebuck and Co. and Kmart Corporation.
Both Sears and Kmart have faced Employee Retirement Income Security Act (ERISA) lawsuits over their offerings of company stock in their retirement plans when the two companies’ financial situations declined.
Sears filed for Chapter 11 protection on October 15, 2018. PBGC is stepping in to become responsible for the company’s two pension plans because it is clear that Sears’ continuation of the plans is no longer possible.
PBGC has worked with Sears for several years to improve funding for the company’s plans, first reaching an agreement in 2016. As part of agreements with the agency, Sears first sold its Craftsman brand to bring in funding for the pension plans, then was allowed to sell properties to raise funding.
PBGC estimates that the Sears’ plans are underfunded by $1.4 billion, leaving them 64% funded. PBGC is seeking to terminate the plans as of January 31, 2019. The agency will become responsible for the pension plans when Sears agrees or a court orders plan termination.“Our mission is to protect the retirement income of plan participants and their families,” says PBGC Director Tom Reeder. “When it’s no longer possible for plan sponsors to maintain their pension plans, PBGC plays the crucial role of providing lifetime retirement income for the workers and retirees.”