White Consolidated Agrees to Resume Sponsorship of Pension Plans; Retirees Promised Full Benefits
FOR IMMEDIATE RELEASE
July 06, 2000
Under a settlement with the Pension Benefit Guaranty Corporation (PBGC) that will be submitted to other government agencies for their approval, White Consolidated Industries (WCI) has agreed to resume sponsorship of six pension plans covering about 5,000 workers and buy annuities for participants and beneficiaries. PBGC has administered the plans since they terminated in the early- to mid-1990s. Terms call for WCI to pay retirees their full plan benefits with a five percent increase, plus any benefits PBGC did not pay because of pension guarantee limits. WCI also agreed to reimburse PBGC for about $30 million in losses from paying benefits as trustee and some $10 million in legal and administrative costs. WCI later became a U.S. unit of Sweden's Electrolux AB (NasdaqNM: ELUX).
"This agreement will make it possible for thousands of WCI retirees to receive retirement benefits over and above PBGC's guarantee," said PBGC Executive Director David M. Strauss.
Approval and implementation of the agreement could take 12 to 18 months. If this proposal does not go forward for any reason, WCI will pay covered workers the value of their unpaid, non-guaranteed benefits plus interest and will pay PBGC $180 million, less the amount WCI pays directly to participants. WCI will provide a letter of credit to secure its obligations under the agreement.
The pact resolves federal litigation PBGC began in 1991, challenging WCI's transfer of the six underfunded plans to an insolvent corporate shell, Blaw Knox Corp., as an unlawful evasion of pension liabilities. By 1994, PBGC had taken over the plans, which otherwise would have been abandoned with $120 million in unfunded benefit liabilities after Blaw Knox Corp. liquidated. In 1999, a U.S. district judge in Pittsburgh ruled that WCI's transfer was an evasive transaction under federal pension law and held the firm liable for the pensions. The ruling was affirmed last month by the U.S. Court of Appeals for the Third Circuit.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 (ERISA) to guarantee payment of basic pension benefits earned by about 43 million American workers and retirees participating in nearly 40,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.
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PBGC No. 00-33