The Pension Benefit Guaranty Corporation said The Piccadilly Cafeterias Inc. pension plan is 50% funded, with $54 million in assets to cover $108 million in benefit promises. Of the $54 million shortfall, the PBGC estimates it will be liable for about $51 million.
In its announcement, the agency said the plan will end as of February 13, 2004 – upon court approval of a bankruptcy asset auction – and the PBGC expects to become plan trustee soon after that. Piccadilly operates 145 cafeterias in 15 southern and mid-Atlantic states.
According to the PBGC, Piccadilly Cafeterias filed for bankruptcy protection on October 29, 2003. The company also announced it would sell its restaurant operations to a joint venture formed by TruFoods Corp., the operator of Wall Street Deli and Arthur Treacher’s Fish and Chips, and H.I.G. Capital, a private venture capital firm. The sale auction date is February 11, with bankruptcy court approval expected on February 13.
The Piccadilly Cafeterias pension plan was frozen in December 2001, and workers have accrued no new benefits since that date. Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2004 is $44,386 per year.
After the PBGC becomes trustee of the pension plan, the agency will send notification letters to all participants in the Piccadilly Cafeterias’ plan. After the transfer of plan documents, the agency will review individual records and calculate each person’s benefit according to plan provisions, asset allocation rules, and federal guarantee limits.
Created under the Employee Retirement Income Security Act (ERISA), the agency currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans.