In a memo sent to employees this week the company said the plan had $900 million in assets at the beginning of October, only enough to pay 90% of the benefits accrued by employees under the pension plan.
In the memo the company said the plan, which was over-funded at the end of last year, has suffered from the decline in the stock market this year.
The company also blamed the plight of the pension plan on two recent rounds of layoffs, which are intended to bring total employment from 8,865 in December to about 5,500 by the end of 2002. The layoffs increased the payout volume of the plan, according to the memo.
The company has retained specialists who are reviewing the plan and will recommend a course of action that is in the best interest of all pension holders.
Pension plans often solve their funding problems by making additional cash contributions. Unfortunately that option may not by open to cash-strapped Polaroid, which owes about $950 million to banks and bondholders.
The pension shortfall is more bad news on the benefits front for Polaroid employees, who recently saw their co-payments for health insurance increasing to about 50% of the total premium, up from about 20%.
Polaroid also offers its employees a 401(k) plan, a company cash contribution, and a mandatory employee stock ownership plan. The savings plan also has suffered enormous losses. The total investments in the plan declined from $858.7 million at the close of 1999, to $698.5 million a year later, a drop of 19%.
That decline included a 67% drop in the value of Polaroid shares held by the plan, to $45.7 million from $138.3 million. Since their high in mid-1997 of about $60, the shares have lost more than 99% of their value.
According to several sources cited by the Boston Globe, employees and retirees who recently tried to liquidate or transfer their savings plan holdings were told the accounts were frozen at Polaroid’s request because of problems with the “cash portion” of the account.
– Camilla Klein firstname.lastname@example.org