PBGC Assumes FormTech Industries LLC Pension Plan
FOR IMMEDIATE RELEASE
October 21, 2010
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the underfunded pension plan covering 570 former workers and retirees of FormTech Industries, an automotive supplier based in Royal Oak, Mich.
The PBGC stepped in because FormTech is liquidating in bankruptcy proceedings, and there will be no sponsor left to fund or administer the plan. Retirees will continue to receive their monthly benefit payments without interruption, and other workers will receive their pensions when they are eligible to retire.
According to PBGC estimates, the FormTech Industries LLC Pension Plan is 38 percent funded, with assets of $2.23 million to cover $5.86 million in benefit liabilities. The PBGC expects to be responsible for $2.05 million of the $3.63 million shortfall.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan. The plan ended on Dec. 31, 2009, and the agency assumed responsibility for the plan on Sept. 10, 2010.
Within the next several weeks, the PBGC will send notification letters to all participants in the FormTech 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 when FormTech filed for bankruptcy protection on Aug. 26, 2009, which set a maximum guaranteed amount of $54,000 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 five years immediately before the Aug. 26, 2009 bankruptcy date may not be fully guaranteed.
FormTech was founded in 2006 and was a leading manufacturer of gears and shafts for transmissions and transfer cases that were used in almost every car and truck produced in the United States. The company operated plants in Michigan, Ohio and New York. In 2009, FormTech defaulted on a credit agreement and many of the company's suppliers demanded cash upon delivery, which pushed the company to the verge of bankruptcy. After a controlling portion of FormTech's credit agreement was purchased by HHI Funding LLC, the company filed for Chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del., on Aug. 26, 2009. Shortly thereafter, HHI purchased FormTech's assets and declined to assume responsibility for the pension plan.
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.
FormTech 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 and was not previously included in the agency's fiscal year 2009 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.
— ### —
PBGC No. 11-06