WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it will assume responsibility for the pensions of almost 1,500 current and former employees of Interstate Bakeries Corp. (IBC), now known as Hostess Brands Inc. These workers and retirees earned benefits under the American Bakers Assn. Retirement Plan (ABA Plan), an ongoing multiple-employer pension plan that IBC had contributed to until 2008.
On October 13, 2010, at the request of the ABA Plan trustees, the PBGC divided the ABA Plan's assets and benefit liabilities between IBC employees and those who are, or were employed by the ABA Plan's other contributing employers. This division established the IBC Portion of the American Bakers Assn. Retirement Plan (IBC Portion).
The IBC Portion will terminate as of October 20, 2010, and the PBGC will become responsible for the portion's entire $82.5 million unfunded benefit liability. The IBC Portion has no assets, as there were no funds in the ABA Plan attributable to IBC employees when the PBGC divided it.
The IBC Defined Benefit Plan, a separate pension plan sponsored by Hostess Brands Inc., headquartered in Irving, Tex., with operations based in Kansas City, Mo., remains ongoing and is not affected by the division of the ABA Plan or the termination of the IBC Portion.
The PBGC will use insurance funds to pay guaranteed benefits earned by IBC employees under the ABA Plan. IBC retirees and beneficiaries who earned benefits under the ABA Plan will continue to receive their monthly benefit checks without interruption, and other IBC workers who earned benefits under the ABA Plan will receive their pensions when they are eligible to retire.
Under federal pension law, the maximum guaranteed pension at age 65 for IBC employees who earned benefits under the ABA Plan 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.
The PBGC will not have specific information about benefits for IBC employees who earned benefits under the ABA Plan until the agency becomes the trustee of the IBC Portion. At that time, the agency will send notification letters to all IBC employees who earned benefits under the ABA Plan. Workers and retirees with general questions about the PBGC and its benefit guarantees may consult the PBGC Web site, www.pbgc.gov.
Retirees of the IBC Portion 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/hctc-faqs.html.
Assumption of the IBC Portion's unfunded liabilities will have no significant effect on the PBGC's financial statements in FY 2011 because the claim will be included in the agency's fiscal year 2010 financial statements, in accordance with generally accepted accounting principles.
The PBGC is a federal agency that guarantees payment of private pension benefits when companies and plans fail. It protects some 44 million Americans in over 29,000 private defined benefit pension plans. PBGC pays benefits using insurance premiums and assets and other recoveries from plans and their sponsors; it receives no taxpayer funds.