A news release from the Pension Benefit Guaranty Corporation (PBGC) said the plan covered about 3,250 former employees and retirees of Colonial Bank, the principal subsidiary of Colonial BancGroup. The PBGC said it stepped in because the plan would be abandoned by bankrupt Colonial BancGroup, now a liquidating corporate shell.
The Alabama State Banking Department closed the insolvent Colonial Bank on August 14, 2009, and placed it into Federal Deposit Insurance Corp. (FDIC) receivership. The FDIC sold substantially all Colonial Bank assets to Branch Banking & Trust Co. (BB&T) of Winston-Salem, North Carolina, but BB&T did not assume the pension plan.
According to the PBGC announcement, the Colonial Retirement Plan is 75% funded, with about $57 million in assets and $76 million in benefit liabilities. The agency expects to cover around $18 million of the nearly $19 million shortfall, and will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on August 14, 2009. The PBGC became trustee of the plan on April 27, 2010.
Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2009 is $54,000 per year.
Assumption of the plan’s unfunded liabilities will increase the PBGC’s claims by $18 million and was not previously included in the agency’s fiscal year 2009 financial statements.