PBGC Assumes Pension Plan of Marcal Paper Mills Inc.
FOR IMMEDIATE RELEASE
September 30, 2008
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the pensions of nearly 1,200 workers and retirees of Marcal Paper Mills Inc. of Elmwood Park, N.J.
The PBGC stepped in because the underfunded Marcal Paper Mills Inc. Retirement Plan 1 for Union Employees would be unable to pay benefits when due and faced abandonment following the company's bankruptcy proceedings.
Marcal retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire. The pension plan covers both union and non-union employees of Marcal.
The PBGC estimates that the plan is 73 percent funded, with $18.7 million in assets to cover $25.7 million in benefit liabilities. The agency expects to be responsible for $5.4 million of the $7 million shortfall.
The agency will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which terminated as of May 31, 2008. The PBGC became trustee of the plan on Sept. 12, 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.
Marcal Paper Mills made and distributed household paper products sold mainly by retail grocers in the northeastern U.S. On Nov. 30, 2006, the company filed for Chapter 11 protection in the U.S. Bankruptcy Court in Newark, N.J. On Jan. 29, 2008, the court approved the sale of substantially all of the company's assets to NexBank SSB, an affiliate of Highland Capital Management LP, Dallas, Tex. The transaction closed on May 30, 2008 and did not include the pension plan.
Within the next several weeks, the PBGC will send notification letters to all plan participants. 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 Marcal pension plan are subject to the limits in effect on November 30, 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.
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 Marcal Paper Mills 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.
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PBGC No. 08-50