PBGC Assumes Pension Plans of Dan River Inc.
FOR IMMEDIATE RELEASE
June 22, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the pensions of more than 6,000 former workers and retirees of Dan River Inc., a home textile products retailer in Danville, Va.
The PBGC stepped in because Dan River is liquidating substantially all of its assets in bankruptcy proceedings. Additionally, the company's pension plans are insufficiently funded and would be unable to pay benefits when due. The three plans are the Dan River Inc. Hourly Retirement Plan, the Dan River Inc. Salary Retirement Plan, and the Bibb Company Pension Plan.
Dan River retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire.
Together, the plans are 46 percent funded, with assets of $40 million to cover $86 million in benefit liabilities. The agency expects to be responsible for the entire $46 million shortfall.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on Jan. 31, 2009.
Within the next several weeks, the PBGC will send notification letters to all participants in Dan River's retirement plans. 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 April 20, 2008, which set a maximum guaranteed amount of $51,750 for a 65-year-old. The agency became trustee of the plan on June 8, 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.
Dan River was a designer, manufacturer and marketer of home fashions and apparel fabrics such as comforters, bed sheets, and pillowcases. The company first sought bankruptcy protection on March 31, 2004 and emerged on Feb. 15, 2005. The company
attempted to restructure again outside of bankruptcy, but was unable to attract the necessary capital. The company filed for Chapter 11 protection for a second time on April 20, 2008 in the U.S. Bankruptcy Court in Wilmington, Del. The case converted to a Chapter 7 liquidation.
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.
Dan River 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 $24.1 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. 09-40