PBGC Assumes Source Financing's Fortunoff Pension Plan
FOR IMMEDIATE RELEASE
June 16, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the pension plan covering nearly 3,000 workers and retirees of the Fortunoff Fine Jewelry & Silverware LLC and M. Fortunoff of Westbury LLC units of Source Financing Corp., a retail holding company based in Uniondale, N.Y.
The PBGC stepped in because the underfunded pension plan faced abandonment after Source Financing, in chapter 11 bankruptcy, sold substantially all of its assets in a transaction that did not include the pension plan. The company's Fortunoff subsidiaries were specialty retailers of jewelry, house wares, small appliances, gifts and luggage, with stores in New York, New Jersey, Connecticut and Pennsylvania.
According to PBGC estimates, the Fortunoff, The Source, Cash Balance Plan is 54 percent funded, with assets of $45 million and benefit liabilities of $82 million. The agency expects to cover the entire $37 million shortfall. The plan has been frozen since October 29, 2006.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended as of March 6, 2008. 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 Fortunoff pension 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 these pension plans are subject to the limits in effect on February 4, 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 Fortunoff Fine Jewelry & Silverware and M. Fortunoff of Westbury 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 $13 million as the claim was previously included at a lower estimated amount in the agency's fiscal year 2008 financial statements, in accordance with generally accepted accounting principles.
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. 09-38