PBGC Assumes Pensions at Lehman Brothers Holdings Inc
FOR IMMEDIATE RELEASE
June 19, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the pension plan of more than 22,000 workers and retirees of Lehman Brothers Holdings Inc. and its subsidiaries. The New York City-based investment bank is liquidating under bankruptcy court protection.
The PBGC stepped in because the underfunded pension plan would be without a sponsor following the liquidation of substantially all the firm's assets. None of the buyers assumed responsibility for the retirement plan.
The PBGC will take over the plan's assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended as of Dec. 12, 2008. At that time, the Lehman Brothers Holdings Inc. Retirement Plan had a shortfall of $115 million, with $800 million in assets to cover $915 million in benefit liabilities. The $115 million underfunding figure has been revised upward from previously announced estimates, which had been made before December asset information was available.
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.
The agency became trustee of the plan on June 17, 2009.
The bankruptcy court recently approved a settlement between the agency and Lehman for $127.6 million plus interest. Under the agreement, PBGC received $115 million for the funding shortfall, and $12 million for the company's liabilities for termination premiums.
Within the next several weeks, the PBGC will send notification letters to all participants in the Lehman Brothers 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 the plan are subject to the limits in effect on Sept. 15, 2008, the date Lehman filed for Chapter 11 protection in the U.S. Bankruptcy Court in Manhattan. The maximum guaranteed amount is $51,750 per year 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 Lehman Brothers 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 have no significant effect on the PBGC's financial statements because an estimate of the claim was previously included 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. 09-39