PBGC Assumes Pension Plans of Auburn Memorial Hospital
FOR IMMEDIATE RELEASE
July 29, 2008
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the pensions of more than 1,500 workers and retirees of Auburn Memorial Hospital, a non-profit medical center in Auburn, NY.
The PBGC stepped in after a bankruptcy court found that Auburn Memorial would not be able to survive outside of bankruptcy protection unless each of its four underfunded pension plans ended. The agency also moved to assume the plans because nearly $13 million in required contributions to the plans were due and unpaid.
"We have been actively monitoring the financial status of hospital systems across the country as the environment has gotten harder for them to remain viable," said PBGC Director Charles E.F. Millard. "In New York, the Berger Commission has shown the vulnerability of certain health care institutions in the state. Other states face similar pressures. The agency will step in to protect the pension benefits of workers and retirees, like the ones at Auburn Memorial. These are hard-working professionals who have devoted their lives to providing medical treatment to members of their community. During their time of service, they believed that the retirement funds they were earning would be there when they needed them. We are here to make sure that happens."
The four plans are:
- Auburn Memorial Hospital Retirement Plan for Non-Bargaining Unit Employees.
- Auburn Memorial Hospital Retirement Plan for Auburn Memorial Hospital Employees Represented by Licensed Practical Nurses & Technicians of New York, Inc., Local 721.
- Auburn Memorial Hospital Retirement Plan for Auburn Memorial Hospital Employees Represented by Local 1199 Upstate.
- Auburn Memorial Hospital Retirement Plan for Auburn Memorial Hospital Employees Represented by Local 3124 and Council 66, American Federation of State, County, and Municipal Employees.
The hospital's retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire.
Together, the plans have assets of about $37 million to cover $66.5 million in benefit liabilities, according to PBGC estimates. The agency expects to be responsible for about $28.2 million of the $29.5 million shortfall.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plans, which ended as of Dec. 31, 2007. The PBGC became trustee of the plans on July 24, 2008. Assumption of the plan's unfunded liabilities will have no material effect on the PBGC's financial statements, according to generally accepted accounting principles.
Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminated 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.
Auburn Memorial sought Chapter 11 protection in the U.S. Bankruptcy Court in Syracuse on April 24, 2007. The filing was made to restructure the hospital's debt and resolve its pension-related liability issues. In December 2007, the court ruled that Auburn met the requirements under ERISA, the federal pension law that created the PBGC, for a distress termination of each of the plans.
Retirees of Auburn Memorial 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.
Within the next several weeks, the PBGC will send trusteeship notification letters to all plan participants. Workers and retirees with questions may consult the PBGC Web site, www.pbgc.gov or call toll-free at 1-800-400-7242. TTY/TDD users should call the federal relay service at 1-800-877-8339 and ask to be connected to 800-400-7242.
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 PBGC receives no general tax revenue and is not backed by the full faith and credit of the U.S. government. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.
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PBGC No. 08-41