WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the underfunded pension plan covering more than 1,800 former workers and retirees of Eddie Bauer Inc., a specialty retailer of sportswear and accessories based in Lake Forest, Ill.
The PBGC stepped in because the plan failed to meet minimum funding requirements and faced abandonment after the company, in bankruptcy since June 17, 2009, sold all of its assets to purchasers who did not assume responsibility for financing or administering the plan.
Retirees under the Eddie Bauer Pension Plan will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire. The plan, established in 1976, was known as the Spiegel Inc. Pension Plan until 2005.
The Eddie Bauer Pension Plan is 58 percent funded, with assets of $29.8 million to cover $51.4 million in benefit liabilities, according to PBGC estimates. The agency expects to be responsible for the entire $21.7 million shortfall. The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan which ended as of August 4, 2009.
Within the next several weeks, the PBGC will send notification letters to all participants in the plan. Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2009 is $54,000 per year. 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 Eddie Bauer Inc. 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/wr/benefits/hctc.
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 2009 financial statements, in accordance with generally accepted accounting principles.
Eddie Bauer, founded in Bellevue, Wash., in 1920, was acquired by General Mills Inc. in 1971 and then sold to catalog retailer Spiegel Inc. in 1988. Spiegel emerged from bankruptcy in 2005 under the Eddie Bauer name.
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.