PBGC Protects Pension Plans at Propex Inc.
FOR IMMEDIATE RELEASE
March 23, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it will assume responsibility for two pension plans covering about 3,300 workers and retirees of Propex Inc., a bankrupt maker of carpet backing based in Chattanooga, Tenn.
The PBGC stepped in because the underfunded pensions face abandonment following the sale of substantially all Propex assets, as contemplated in the company's bankruptcy proceeding. The transactions do not include the pension plans. 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 Propex Inc. Cash Balance Retirement Plan and the Propex Inc. Cash Value Retirement Plan are about 67 percent funded, with combined assets of $40.6 million and benefit liabilities of $61.0 million. The agency expects to cover $19.4 million of the $20.4 million total shortfall. The two plans were frozen, in 2006 and 2005 respectively.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plans, which end on March 23, 2009. Assumption of the plans' unfunded liabilities will have no material effect on the PBGC's financial statements, according to generally accepted accounting principles.
Principal employment locations of workers and retirees covered by the Propex pension plans are in Chattanooga, Tenn., and at four facilities in Georgia: Bainbridge, Hazlehurst, Nashville and Ringgold.
Within the next several weeks, the PBGC will send notification letters to all participants in the two Propex pension 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 these pension plans are subject to the limits in effect on January 18, 2008, which set a maximum guaranteed amount of $51,750 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 Propex Inc. 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 29,000 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. 09-19