PBGC Assumes Circuit City Retirement Plan
FOR IMMEDIATE RELEASE
May 27, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for a pension plan covering more than 21,000 former workers and retirees of Circuit City, a defunct electronics retailer based in Richmond, Va.
"The Circuit City pension plan is now under the protection of the PBGC, America's pension insurance program," said Acting Director Vince Snowbarger in a video message. "Circuit City workers now join the almost one and a half million Americans who rely on the PBGC for their pension benefit."
The PBGC stepped in because the underfunded pension plan will be abandoned following the liquidation of the company's assets during bankruptcy proceedings. 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.
On the basis of company-provided information, the PBGC estimated the Retirement Plan of Circuit City Stores Inc. was 82 percent funded, with $284.9 million in assets to cover $349 million in benefit liabilities. Of the estimated $64 million shortfall, the agency would be responsible for about $62 million. The PBGC is receiving updated information concerning the plan's assets and liabilities, and will be revising its underfunding estimates in the future.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on March 31, 2009.
Within the next several weeks, the PBGC will send notification letters to all participants in Circuit City's retirement 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 the plan are subject to the limits in effect on Nov. 10, 2008, which set a maximum guaranteed amount of $51,750 for a 65-year-old. The agency became trustee of the plan on May 26, 2009.
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.
Circuit City was the nation's second-largest electronics retailer. After a period of declining sales and unable to execute a turnaround strategy, the company and all of its subsidiaries filed for Chapter 11 protection in the U.S. bankruptcy court in Richmond. The company was unable to reorganize or find a buyer and began liquidation efforts through going out of business sales that concluded on March 8, 2009.
Workers and retirees with questions may consult the PBGC Web site, www.pbgc.gov/circuitcity 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 Circuit City 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/wr/benefits/hctc.html.
Assumption of the plan's unfunded liabilities will increase the PBGC's claims by $62 million and was not previously included in the agency's fiscal year 2008 financial statements.
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. 09-32