PBGC Moves to Protect Pensions at New York Racing Association Inc.
FOR IMMEDIATE RELEASE
December 26, 2007
WASHINGTON-The Pension Benefit Guaranty Corporation today initiated court action to protect the benefits of more than 1,700 workers and retirees covered by the pension plans of the New York Racing Association Inc., a nonprofit corporation that operates the Aqueduct, Belmont and Saratoga racetracks under a New York state franchise. The NYRA franchise is due to expire on Dec. 31, 2007.
The PBGC filed papers to seek approval from the U.S. District Court in Brooklyn to end five pension plans sponsored by NYRA. The pension insurer's move comes on the eve of a Dec. 27 bankruptcy court confirmation hearing on NYRA's plan of reorganization. In a Sept. 21, 2007 filing with the bankruptcy court, the PBGC objected to the plan of reorganization because it fails to adequately fund and protect NYRA's pension plans.
NYRA filed for Chapter 11 protection in the U.S. Bankruptcy Court in Manhattan on Nov. 2, 2006. NYRA attributed its bankruptcy filing to a decline in returns from racing operations, delays in constructing a video lottery gaming facility at Aqueduct, and the looming expiration of its racing franchise.
The PBGC has acted to end the pension plans due to the uncertainty of NYRA's ability to fund the plans in the future, and the likelihood that its racing franchise will not be renewed by the end of the year.
In its filing with the District Court, the PBGC cited NYRA's failure to comply with pension funding laws, the pension plans' inability to pay benefits if the franchise expires, and the increased financial risk to the PBGC if the agency delayed taking action. The PBGC asked the District Court to terminate the pension plans to protect participants and limit losses to the pension insurance program.
Collectively, NYRA's five pension plans are 66 percent funded. According to PBGC estimates, the plans have $137.3 million in assets to cover about $208.8 million in benefit promises. If the PBGC becomes statutory trustee of the plans, it expects to be responsible for $59.7 million of the $71.5 million shortfall.
The PBGC's fiscal year 2007 financial statements do not reflect the liabilities the PBGC would assume upon trusteeship of NYRA's five plans.
Until the PBGC becomes trustee of the five pension plans, they remain ongoing under NYRA's sponsorship. The agency will send notification letters to all plan participants when it assumes responsibility for the plans.
Under provisions of the Pension Protection Act of 2006, the maximum guaranteed pension the PBGC can pay is determined by the legal limits in force on the date of the plan sponsor's bankruptcy. Therefore participants in the NYRA pension plans are subject to the limits in effect on November 2, 2006, which set a maximum guaranteed amount of $47,659 for a 65-year-old. 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.
NYRA also participates in a number of multiemployer pension plans covering employees such as plumbers, electricians and carpenters. These plans will not be affected by PBGC's actions.
Workers and retirees with general questions about the insurance program 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 who draw a PBGC benefit 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. 08-16