PBGC, Sunbeam Negotiate Pension Protection After Downsizing
FOR IMMEDIATE RELEASE
July 17, 1998
The Pension Benefit Guaranty Corporation (PBGC) today announced an agreement with Sunbeam Corporation (NYSE: SOC), Delray Beach, Fla., which protects against possible future losses to the agency in the event of termination of three Sunbeam pension plans that are underfunded by approximately $32 million on a PBGC basis.
"After certain workforce reductions at Sunbeam in early 1997, the company and PBGC worked to reach an agreement that adds to the security of retirement benefits in three pension plans," said PBGC Executive Director David M. Strauss.
Under the agreement Sunbeam has provided PBGC letters of credit, valued at $20 million, which apply to the loss if one or more of the plans should terminate. The agreement will be in effect until early 2002. Sunbeam continues to sponsor those plans which have assets of $48 million and liabilities of $80 million.
This settlement relates to a program of plant sales and closings, begun by Sunbeam in 1996, that eliminated half its workforce, or 6,000 employees. By the first half of 1997 the program was substantially complete, with plants sold or closed in Waynesboro, Ga., Coushatta, La., Nagodoches, Tex. and Cookeville and Portland, Tenn.
The letters of credit cover 150 percent of the $13 million in pension underfunding related to the number of workers separated from employment at Sunbeam's closed and sold plants. Under federal pension law (sec. 4043 of the Employee Retirement Income Security Act of 1974), when there is a 20 percent or more reduction of the participants in a pension plan in a year, the company must report the event to PBGC, if a cessation of operations results in more than 20 percent of participants being separated from employment, which can require added financial protection. According to law, an employer may satisfy this obligation with cash or a bond.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by about 42 million American workers and retirees participating in about 45,000 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 investment returns.
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PBGC No. 98-36