PBGC Moves to Protect Contech Pension Plan
FOR IMMEDIATE RELEASE
May 26, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it will take responsibility for the underfunded pension plan covering 532 workers and retirees of Contech US LLC, an auto parts maker based in Portage, Mich.
The agency's action comes during Contech's bankruptcy proceeding, in which the company is liquidating through sales of its divisions and subsidiaries to third party purchasers. The buyers have not agreed to assume the retirement plan. As a result, the pension plan will be without a sponsor at the conclusion of the proceedings.
According to PBGC estimates, the Contech US LLC Pension Plan No. 203 is 38 percent funded, with assets of $8.4 million to cover benefit liabilities of $22 million. The agency expects to cover $12 million of the $13.6 million shortfall. The plan was frozen on Dec. 31, 2007.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ends on May 26, 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 Contech 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 Jan. 30, 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.
Privately held Contech was founded in 1950 and performs light metal die casting and machining for automobile and parts manufacturers. The business was sold from former owner SPX Corp. to Marathon Asset Management, a private equity firm in 2007. Spurred by the economic downturn, on Jan. 30, 2009, the company filed for Chapter 11 protection in the U.S. Bankruptcy Court in Detroit. The case changed from a reorganization to a liquidation following court approval for a sale of the company's major assets.
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.
Contech 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 $12 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. 09-31