The Pension Benefit Guaranty Corporation (PBGC) said the Nortel Networks Retirement Income Plan is 58% funded, with assets of $716 million to cover benefit liabilities of $1.23 billion. The agency expects to cover the entire $514-million shortfall for the plan that was frozen as of December 31, 2007, for all participants.
According to the PBGC, it moved to take over the plan as the company prepared to liquidate its assets with none of the proposed asset sales set to include the pension plan. The agency said that if it had delayed action until after the sales, no entity would be available to finance or administer the plan and the possibility of recovering on the agency’s claims for unfunded pension liabilities would be “severely diminished.”
The plan’s ending date was Friday.
Under provisions of the Pension Protection Act, the maximum guaranteed pension the PBGC can pay is determined by the legal limits in force on the date of the plan sponsor’s bankruptcy. Participants in the Nortel plan are subject to the limits in effect on January 14, 2009, which set a maximum guaranteed amount of $54,000 for a 65-year-old.
Assumption of the plan’s unfunded liabilities will increase the PBGC’s claims by $513.7 million and was not previously included in the agency’s fiscal year 2008 financial statements, according to the announcement.
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