PBGC, Philip Morris Agree to Protect Miller Brewing Pensions
FOR IMMEDIATE RELEASE
July 10, 2002
The Pension Benefit Guaranty Corporation (PBGC) and the Philip Morris Companies [NYSE: MO] today announced an agreement to protect the pensions of more than 9,500 employees of its Miller Brewing Company subsidiary, which is being purchased by London-based South African Breweries (SAB).
"Philip Morris's financial commitment will help safeguard the pension security of Miller Brewing workers and retirees," said PBGC Executive Director Steven A. Kandarian. "Today's agreement demonstrates how PBGC and companies cooperate to ensure that corporate transactions do not jeopardize workers' pension benefits or the federal pension insurance program."
PBGC estimates the Miller Brewing pension obligations are currently underfunded by more than $150 million on a termination basis. Under the agreement, Philip Morris guarantees that it will make up the current underfunding in case the money is needed to cover the pension benefits promised to Miller Brewing workers and retirees. Philip Morris may at its option replace its guarantee with a letter of credit that PBGC may use to secure the required payments.
The agreement will be in effect for a minimum of five years and will continue thereafter until the pension plans are fully funded on a PBGC basis or until SAB's unsecured debt achieves investment-grade ratings.
The agreement is a product of PBGC's Early Warning Program under which the agency monitors companies with underfunded pension plans and negotiates agreements when transactions occur that might imperil workers' pensions or the federal pension insurance program.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by about 44 million American workers and retirees participating in over 35,000 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 by PBGC's investment returns.
— ### —
PBGC No. 02-30