PBGC Takes Over Madoff Victim Pension Fund

March 10, 2009 (PLANSPONSOR.com) - The nation's private pension insurer on Tuesday took over the pension plan covering 88 former employees of a New York City building service provider that lost all of its assets to accused swindler Bernard Madoff.

The Pension Benefit Guaranty Corporation (PBGC) said it stepped in and assumed responsibility for the pension plan of the East River Management Corp. after the plan was unable to pay benefits owed to 61 retired workers when it lost its assets in the Madoff scheme.

According to the agency’s news release, the PBGC started paying benefits to East River participants on an emergency basis after learning of the plan’s problems in December. The PBGC estimated it will assume about $2 million in benefits liabilities as a result of the plan’s termination. The PBGC said the plan had been maintained by an inactive successor company before the takeover.

The agency said the plan ended as of December 18, 2008, and the PBGC became trustee on March 5, 2009.

Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminated in 2008 is $51,750 per year.

The PBGC issued a reminder in February to single-employer defined benefit sponsors of their responsibility to formally notify the agency if any such losses render them unable to pay their accrued benefits (See Plan Sponsors Must Notify PBGC of Crippling Madoff Losses ).

Madoff’s lawyer announced in a federal court hearing on Tuesday that the accused Ponzi scheme swindler would plead guilty to a string of felony charges in a hearing scheduled for Thursday before a federal judge in New York City (See Madoff Scheduled to Plead Guilty in $50B Ponzi Scheme ).