PBGC Moves to Protect Foamex Pension Plan
FOR IMMEDIATE RELEASE
May 18, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it will take responsibility for the underfunded pension plan covering some 5,500 employees and retirees of Media, Pa.-based Foamex L.P., a producer of foam products primarily for the transportation, healthcare and electronics industries.
The pension insurer's move comes as Foamex, in chapter 11 bankruptcy, prepares to sell substantially all of its assets at a hearing set for May 21. Foamex will seek bankruptcy court approval of the transaction that currently will not include the pension plan. If the PBGC delayed action until after the sale, the plan would face abandonment and there would be no assets to pay the agency's claims for unfunded pension liabilities.
The Foamex L.P. Pension Plan is 48 percent funded, with assets of $74 million to cover benefit liabilities of $153 million , according to PBGC estimates. The agency expects to cover $76 million of the $79 million shortfall. The plan was frozen as of December 31, 2007 for all participants except certain hourly employees at plants in Eddystone, Pa. and Tupelo, Miss.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ends on May 18, 2009. 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.
Within the next several weeks, the PBGC will send notification letters to all participants in the Foamex plan. 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 this pension plan are subject to the limits in effect on February 18, 2009, which set a maximum guaranteed amount of $54,000 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.
Foamex retirees 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.
Assumption of the plan's unfunded liabilities will increase the PBGC's claims by approximately $76 million and was not previously included in the agency's fiscal year 2008 financial statements.
The PBGC is a federal corporation created under the ERISA. 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. 09-28