PBGC Moves to Become Trustee of Pension Plan Covering 5,500 at Former Global Crossing Unit
FOR IMMEDIATE RELEASE
November 24, 2002
The Pension Benefit Guaranty Corp. (PBGC) is taking action to protect the pensions of 5,500 workers and retirees of a former Global Crossing unit that was sold last year to Citizens Communications Co., Middletown, N.Y.
PBGC will ask the U.S. District Court for the Southern District of New York to terminate the pension plan as of December 3, 2002, and to have the federal pension insurance agency named trustee. With $473 million in assets and $578 million in liabilities, the plan is underfunded by $105 million according to PBGC estimates.
In 1999, Global Crossing purchased the Rochester, N.Y.-based telecommunications firm Frontier Corp., which sponsored the Frontier Corp. Pension Plan for Non-Bargaining Unit Employees (now called the Global Crossing North America Inc. Frozen Pension Plan). In 2001, Global Crossing sold Frontier to Citizens Communications. The sale agreement called for Global Crossing to transfer virtually the entire plan to Citizens. To date, Global Crossing has not transferred the plan as it had agreed.
In bankruptcy proceedings, Global Crossing proposes a plan of reorganization that includes transfer of the pension plan to a liquidating trust. The plan of reorganization could be approved at a December 4, 2002, court hearing. If the PBGC does not act before then, the agency will be unable to recover anything from the trust to cover the plan's unfunded liabilities, which could harm participants and lead to an unreasonable increase in losses to the insurance program.
"We cannot allow an abusive arrangement that shoves an underfunded pension plan into a liquidating trust where all the gains belong to a select group of creditors and all the losses are dumped on the PBGC," said Steven A. Kandarian, executive director of the federal pension insurance agency. "We would prefer that the pension be transferred to Citizens Communications as originally planned. But we have to act now to protect participants and to increase the chances of recovering enough to minimize the hit to the pension insurance program."
Most workers and retirees in terminating pension plans are fully covered by PBGC's guarantee. The maximum guarantee for workers in plans that terminate in 2002 is $3,579.55 a month (or $42,954.60 a year) for those retiring at age 65. Maximum guarantees are adjusted for retirees at other ages or those who elect survivor benefits. Initially, PBGC continues payments to retirees at current levels. Within a few months, after a preliminary review of the plan, PBGC notifies affected retirees if it has to reduce payment of certain supplements and benefit improvements because the additional amounts may not be fully guaranteed.
Workers and retirees do not need to take any action. Anyone with questions about benefits or wishing to retire may contact PBGC's Customer Service Center toll-free at 1-800-400-7242. For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to 800-400-7242. Information about pension insurance also may be found on PBGC's Web site, www.pbgc.gov.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees 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.
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PBGC No. 03-04