PBGC Assumes Francisco Mendoza Inc. Pension Plan
FOR IMMEDIATE RELEASE
June 24, 2009
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the pensions of more than 620 former employees of Francisco Mendoza Inc., a retailer of furniture and household appliances based in Cayey, Puerto Rico.
The PBGC stepped in because the underfunded Francisco Mendoza Inc. Pension Plan failed to meet minimum funding requirements under the Internal Revenue Code and faced imminent abandonment following the company's liquidation in bankruptcy proceedings.
Francisco Mendoza retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire.
The PBGC estimates that the plan is 52 percent funded, with $3.5 million in assets to cover $6.8 million in benefit liabilities. The agency expects to be responsible for $3.1 million of the $3.3 million shortfall.
The agency will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended as of February 7, 2008. The PBGC became trustee of the plan on March 4, 2009.
Francisco Mendoza Inc. was incorporated on Jan. 25, 1961 in Puerto Rico by Francisco Mendoza Rivera and his wife, Carmen. Francisco Mendoza Rivera and his wife died in 2006 and 2005, respectively. The privately held company sought Chapter 11 protection on March 21, 2007 in the U.S. Bankruptcy Court in Puerto Rico. The company operated more than 50 retail locations throughout Puerto Rico. That figure fell to 14 stores before filing for bankruptcy. Operations ceased on June 15, 2007.
Within the next several weeks, the PBGC will send notification letters to all plan participants. 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 Francisco Mendoza Inc. Pension Plan are subject to the limits in effect on March 21, 2007, which set a maximum guaranteed amount of $49,500 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 Francisco Mendoza 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 $3 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. 09-42