PBGC Protects Pensions at Collins & Aikman
FOR IMMEDIATE RELEASE
March 30, 2007
WASHINGTON - The Pension Benefit Guaranty Corporation (PBGC) today announced it is moving to assume responsibility for the underfunded pension plan covering about 21,000 employees and retirees of Collins & Aikman Corp., Troy, Mich. The company and its U.S. subsidiaries, which propose to liquidate in bankruptcy, manufacture auto parts at several locations, primarily in the U.S. Midwest and Southeast.
The PBGC is stepping in because the company has missed $7.6 million in required contributions and the pension plan will be abandoned when the company sells all of its assets, as contemplated in its bankruptcy proceeding. Retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire.
According to PBGC estimates, the Collins & Aikman Pension Plan is 58 percent funded, with $253 million in assets to cover $434 million in benefit liabilities. The PBGC expects to be liable for about $161 million of the $181 million shortfall. The agency will take over the assets and use PBGC insurance funds to pay guaranteed benefits earned under the plan, which terminates on Mar. 31, 2007. Assumption of the plan will have no material effect on the PBGC's balance sheet, as an estimate of the liability was included in its fiscal 2006 financial statements according to generally accepted accounting principles.
Collins & Aikman filed for Chapter 11 bankruptcy protection on May 17, 2005. A confirmation hearing on the company's liquidating plan of reorganization is scheduled in federal bankruptcy court for April 19, 2007. The Chapter 11 plan contemplates that the assets of Collins & Aikman and all of its subsidiaries will be liquidated and that no asset purchaser will assume the pension plan.
Until the PBGC becomes trustee of the pension plan, the plan will remain ongoing under company sponsorship. The agency will send notification letters to all plan participants when it becomes trustee. Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2007 is $49,500 per year. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
Workers and retirees with questions may consult the PBGC Web site, www.pbgc.gov or call 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 for 800-400-7242.
Collins & Aikman retirees who draw a benefit from the PBGC may be eligible for the federal Health Coverage Tax Credit. Further information may be found on the PBGC Web site at http://www.pbgc.gov/wr/benefits/hctc.html.
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 44 million American workers and retirees participating in over 30,000 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 investment returns.
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PBGC No. 07-19