PBGC Reaches Deal Strengthening Pensions of Greyhound Bus Workers
FOR IMMEDIATE RELEASE
January 23, 2003
The Pension Benefit Guaranty Corporation (PBGC) has reached a deal with Laidlaw Inc. of Burlington, Ont., to strengthen seven pension plans sponsored by its U.S. subsidiary Greyhound Lines, Inc. Under the terms of the agreement, Laidlaw will contribute $150 million more to the pension plans by the end of 2004 than required by law.
"This agreement provides new protections for Greyhound's 16,000 workers and retirees and for the federal pension insurance system," said PBGC Executive Director Steven A. Kandarian.
With assets of $528 million to cover benefit liabilities of $916 million, the seven Greyhound pension plans are underfunded by $388 million according to PBGC estimates. The deal comes as Laidlaw prepares to emerge from bankruptcy. The PBGC determined that the plans needed additional protection because Laidlaw's plan of reorganization would, in effect, replace debt subordinated to the pension plans with higher-priority secured debt. As a result, the PBGC's ability to recover money from the company in the event the plans had to be terminated would be severely diminished.
The agreement calls for Laidlaw to make pension contributions of $50 million upon emergence from bankruptcy in 2003, $50 million in June 2004, and another $50 million as soon as possible, but no later than the end of 2004. The PBGC will hold a lien on most of Laidlaw's assets, as security for the installments due by the end of 2004. The agreement also calls for the company to hold the pension plans' funding level $150 million above the minimum required by law for a minimum of five years and until the company's debt becomes investment grade.
The agreement is a product of the PBGC's Early Warning Program under which the agency monitors companies with underfunded pension plans and negotiates protections when transactions put workers' pensions or the federal pension insurance program at risk.
Pension plans to receive the additional funding are: Greyhound Lines, Inc. Salaried Employees Defined Benefit Plan; Greyhound Inc. Amalgamated Transit Union Local 1700 Council Retirement & Disability Plan; Texas New Mexico and Oklahoma Coaches, Inc. Employees Retirement Plan; Vermont Transit Co. Inc. Employees Defined Benefit Pension Plan; Carolina Coach Co. Pension Plan; Carolina Coach Co. International Association of Machinists Pension Plan; and Carolina Coach Co. Amalgamated Transit Union Pension Plan.
The 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 the PBGC's investment returns.
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PBGC No. 03-18