WASHINGTON - The Pension Benefit Guaranty Corporation and Sears Holdings Corp. have reached a final agreement that provides substantial protections for the Sears pension plan, which covers nearly 200,000 people. A tentative arrangement was first announced in September 2015. After extensive talks, the agreement is now final.
"This represents what sponsors and PBGC can achieve when we work together for the benefit of current and future retirees," said PBGC Director Tom Reeder. "We applaud Sears for working with us so closely on this issue."
According to the agreement, Sears will continue to protect the assets of certain special purpose subsidiaries, which hold real estate and/or intellectual property assets.
Additionally, the subsidiaries will grant springing liens on the protected assets in favor of PBGC. The liens will be triggered only by failure to make required contributions to the plan, prohibited transfers of ownership interests in the subsidiaries, termination of the plan, or bankruptcy of the company or certain of its subsidiaries. While Sears is currently making required minimum contributions to its pension plan, the plan's assets would not be sufficient to satisfy all benefits if it were to terminate.
PBGC works collaboratively with sponsors to help ensure the continuation of their plans. One of the ways the agency achieves this is to monitor transactions or events that may pose an increased risk to plans and the pension insurance system. If a transaction or other event could increase the risk of plan failure, PBGC works with the sponsor to structure meaningful financial protections for plan participants and the pension insurance program.
PBGC protects the pension benefits of more than 40 million Americans in private-sector pension plans. The agency is directly responsible for paying the benefits of about 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums, investment income, and with assets and recoveries from failed single-employer plans. For more information, visit PBGC.gov.