The executives allege that the lump-sum payments threaten to weaken Polaroid’s already underfunded pension plan, according to a Boston Globe report.
They also argue that should the pension plan fail and be subsequently taken over by the Pension Benefits Guaranty Corporation (PBGC) they would see their pensions limited to a maximum of about $43,000 a year.
Ann Leibowitz, a former senior corporate attorney who advised Polaroid on labor matters, said the lump-sum payments the company is making are unfair, because those who retired prior to 1998 were not offered the option. They have to receive their pensions in monthly payments.
She contended that by allowing the lump-sum payments to continue while the plan remains underfunded, the company is unfairly putting at risk the payments of those who left prior to 1998.
Leibowitz said Polaroid’s current chairman and chief executive, Gary T. DiCamillo, has ruled out changing the lump-sum rule.
The embattled company filed for Chapter 11 bankruptcy protection last summer.
Before officially filing, Polaroid warned its employees that the pension plan, which ran a surplus at the end of 2000, had become underfunded, and could pay only 90% of its total obligations (see Polaroid Says Its Pension Plan is Underfunded , Polaroid’s Woes Extend to Retirement Plans ).
Meanwhile, Polaroid kept in place an option enabling departing employees to take their pensions in one lump-sum payment. This provision gave employees immediate control over their pensions, and protected them from the payment cap facing all participants if the plan is taken over by PBGC.
The retired executives petitioning Polaroid to change its pension rules have already seen their pensions cut dramatically.
In addition to their regular pension benefits, they also received supplemental pension payments only offered to top company officials.
However, weeks before Polaroid filed for bankruptcy, the company told the retired executives it was terminating that plan and would pay them a lump sum equal to 30 percent of the current value of their annuities.
Recently, the company sought permission from a bankruptcy judge to pay 45 top executives, including DiCamillo, millions of dollars in bonuses (see Polaroid Retirees Try to Block Executive Bonuses ). The company argued that essential personnel would otherwise leave and the bankrupt company would be unable to hire.
The judge gave Polaroid permission to pay about $1.5 million in retention bonuses, with $65,000 to be paid to DiCamillo January 2. The company will return to court next month for permission to pay additional bonuses.
-Nicole Halsey email@example.com