PBGC Assumes Scotty's Inc. Pension Plan
FOR IMMEDIATE RELEASE
July 17, 2007
WASHINGTON- The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the pensions of more than 900 former employees of Scotty's Inc., a hardware and building supply chain based in Winter Haven, Fla.
The PBGC stepped in because over $1 million in required contributions to the company's underfunded pension plan were due and unpaid, and the pension plan would be abandoned after Scotty's completed bankruptcy liquidation. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other participants will receive their pensions when they are eligible to retire.
According to PBGC estimates, the Scotty's Pension Plan is 55 percent funded, with some $8.3 million in assets to cover $15 million in benefit liabilities. The PBGC expects to be liable for entire $6.7 million shortfall. The agency will take over the assets and use PBGC insurance funds to pay guaranteed benefits earned under the plan, which terminated on June 27, 2005. The PBGC became trustee of the plan on June 20, 2007. Assumption of the plan's unfunded liabilities will have no material effect on the PBGC's financial statements, according to generally accepted accounting principles.
Scotty's filed for Chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del., on Sept. 10, 2004. The case was converted to a Chapter 7 liquidation on June 27, 2005. Proceeds from the liquidation were paid to Congress Financial Corp., the provider of the company's bankruptcy financing package. While the bankruptcy court said assets may be available to unsecured creditors, it is unclear to what extent PBGC claims will be paid.
Within the next several weeks, the PBGC will send notification letters to all plan participants. Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2005 is $45,614 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.
Retirees of Scotty's 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/workers-retirees/benefits-information/content/page13692.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.
PBGC No. 07-34
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PBGC No. 07-34