Bankruptcy

[Guidance Overview] The ERISA Litigation Newsletter, September 2010
Excerpt:"[The] focus this month is on the Third Circuit's decision in In re Visteon, which held that Section 1114 of the Bankruptcy Code applies to all retiree benefits -- vested and unvested -- and, as a result, a plan must continue to pay unvested retiree benefits during the pendency of bankruptcy unless the bankruptcy court approves otherwise."(Proskauer Rose LLP)

Companies Reorganizing Under Chapter 11 Battle with Former Employees over Lifetime Health Benefits
Excerpt:"Companies that go through the Chapter 11 process maintain'they can simply no longer afford the costs to pay for retirees'health care and pensions'and they usually win when a fight brews over ending these contracts."(Henry J. Kaiser Family Foundation)

3rd Circuit Rules Bankrupt Employer Must Negotiate Retiree Health and Death Benefit Cuts
Excerpt:"Employers in bankruptcy cannot unilaterally reduce or terminate retiree health or death benefits, even if plan documents and SPDs reserve the right to do so, the 3rd US Circuit Court of Appeals has ruled."(Mercer LLC)

[Guidance Overview] Bankruptcy and Retirement Plans
Excerpt:"In Patterson v. Shumate . . ., the Supreme Court held that the anti-assignment provision of ERISA section 206(d) is an enforceable nonbankruptcy law which results in the plan benefit being excluded from the bankruptcy estate of the plan participant. This landmark case ended the inconsistent application of the bankruptcy law to ERISA plans."(McKay Hochman Co.)

[Guidance Overview] Landmark Case Ends the Inconsistent Application of the Bankruptcy Law to ERISA Plans
Excerpt:"In Patterson v. Shumate, . . . the Supreme Court held that the anti-assignment provision of ERISA section 206(d) is an enforceable nonbankruptcy law which results in the plan benefit being excluded from the bankruptcy estate of the plan participant."(McKay Hochman Co.)

[Guidance Overview] Retirees'Bankruptcy Protection Act Trumps ERISA, 3rd Circuit Rules
Excerpt:"The 95-page decision from the 3rd U.S. Circuit Court of Appeals in In re Visteon Corp. promises to alter the playing field in big corporate bankruptcies by mandating compliance with Section 1114 of the Retiree Benefits Bankruptcy Protection Act without exception."(Law.com)

[Guidance Overview] Retirees'Bankruptcy Protection Act Applies Over ERISA, According to Federal Appeals Court
Excerpt:"In a ruling that will apply to all types of retiree employee benefits, a federal appeals court has ruled that a corporation in bankruptcy may not terminate retiree health and life insurance plans unless the company can show that terminating a plan is a necessary part of its reorganization."(John V. Tucker and Tucker&Ludin, P.A.)

[Guidance Overview] Visteon Must Follow the Rules before Terminating Retiree Benefits
Excerpt:"The 3rd U.S. Circuit Court of Appeals has reversed lower court rulings that Visteon Corp. can terminate retiree benefits during bankruptcy."(PLANSPONSOR.com)

Newspaper Pension Plans Blocked from Delaying Reorganization
Excerpt:"A federal judge has rejected a move by employee pension plans at The Philadelphia Inquirer and the Philadelphia Daily News to delay the reorganization of the bankrupt media company."(PLANSPONSOR.com)

Proposed Bankruptcy Rules Restrict Compensation
Excerpt:"The proposed legislation would subject executive comp to court approval, prohibit bonuses and incentive payments, link executive pay to that of other workers, and grant unions creditor status, among other items."(Human Resource Executive Online)

[Opinion] The Lessons of the GM Bankruptcy: Everybody Knew It Was Ridiculous and Unsustainable to Pay UAW Workers Not to Work
Excerpt:"[W]e, as a country, should take away some lessons from the experience. The following get my vote for the three most important: Problems denied and solutions delayed will result in a painful and costly day of reckoning. In corporate governance, the right people count more than the right structure. Appearances can be deceiving."(The Wall Street Journal)

[Guidance Overview] Inherited IRA Not Exempt from Debtors'Bankruptcy Estate, According to Court
Excerpt:"Debtors could not claim an exemption for an inherited IRA from their bankruptcy estate because inherited IRAs do not contain retirement funds as required under Bankruptcy Code Sec. 522(d)(12), a U. S. Bankruptcy Court for the Eastern District of Texas has ruled in In re Chilton."(Wolters Kluwer)

U.S. Labor Seeks Bankruptcy Reform and Executive Pay Curbs
Excerpt:"Labor unions are pushing for greater worker protection and added scrutiny of executive pay at companies in bankruptcy, but restructuring professionals fear the changes might force more companies to liquidate rather than reorganize. Congress is considering a bill backed by unions that proposes to raise the limit on wage claims in bankruptcy, make it harder to change collective bargaining agreements, and limit the ability of companies to shed retiree benefits. The bill also proposes what one critic called nearly'impossible to satisfy'restrictions on bonus and incentive payments for executives of bankrupt companies."(Reuters)

[Guidance Overview] Keogh Plan Need Not Comply with ERISA to Be Exempt in Bankruptcy
In Re: Baker, Case No. 09-13144 (US 11th Cir., December 22, 2009). Excerpt:"A United States District Court has affirmed the decision of a bankruptcy court that Baker's Keogh plan was not exempt under Section 222.21(2)(a)(1), Florida Statutes. Baker was the sole participant in and beneficiary of a Keogh plan managed by Fidelity Investments, which had obtained letter rulings from Internal Revenue Service that the plan was'acceptable under Section 401 of the Internal Revenue Code.'"(Cypen&Cypen)

GASB Issues OPEB, Bankruptcy Guidance Statements
Excerpt:"The rulemaking organization has released Statement No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans and Statement No. 58, Accounting and Financial Reporting for Chapter 9 Bankruptcies."(PLANSPONSOR.com)

[Guidance Overview] High Court Ends Indiana Pension Funds'Chrysler Fight
Excerpt:"A battle by three Indiana pension funds to overturn the government-backed sale of bankrupt automaker Chrysler LLC has come to an end at the U.S. Supreme Court."(PLANSPONSOR.com)

Verizon Retirees Seek Class-Action Status for Pension Lawsuit
Excerpt:"Retirees of Verizon Communications Inc., Basking Ridge, N.J., are seeking class-action status from a U.S. District Court in Dallas, claiming that in November 2006 they and other employees were involuntarily switched from Verizon's pension plan to a pension plan run by Dallas-based Idearc Inc., a Verizon spinoff company that filed for Chapter 11 bankruptcy in March."(Pensions&Investments; free registration required)

Links to Testimony Presented at House Hearing on'Examining the Delphi Bankruptcy's Impact on Workers and Retirees'
Target page includes a recorded webcast of the hearing. Excerpt:"The Health, Employment, Labor and Pensions Subcommittee of the House Education and Labor Committee held a hearing on Wednesday, December 2 to examine how the 2005 bankruptcy of the automotive parts manufacturer Delphi has impacted workers and retirees."(Subcommittee on Health, Employment, Labor, and Pensions; Committee on Education and Labor; U.S. House of Representatives)

House Panel to Hear Concerns Over Delphi Retirees'Pensions and Benefits
Excerpt:"The U.S. House Education and Labor Committee will conduct a hearing Wednesday on the pensions and benefits that may be cut because of the Delphi Corp. bankruptcy. U.S. Rep. Tim Ryan, U.S. Sen. Sherrod Brown and Bruce Gump, Delphi retiree representative, are scheduled to testify. . . . In July, Ryan introduced legislation to provide funding for a Voluntary Employees Beneficiary Association, which would cover Delphi hourly and salaried employees and retirees who lost their health coverage through Delphi and GM's Chapter 11 bankruptcies. Gump, of Howland, testified at a Senate hearing on this issue Oct. 29 and came away from that hearing optimistic that senators will work to restore pension benefits."(Vindy.com)

Prichard Alabama Files Bankruptcy Over Pensions
Excerpt:"I have looked at every opportunity available to obtain money to help fund the retirement plan for the City of Prichard. After careful review of all of our options, bankruptcy protection seems to be the only solution left at this time. Over the past 50 years, the pension plan was amended by the Legislature more than fifteen times, and always the economic burden on the City was increased. . . . After several lawsuits filed by pensioners, it has forced us to come to this decision . . . ."(WKRG)

Creditor Protection for Your 401(k)
Excerpt:"Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (a.k.a. the Bankruptcy Reform Act) tax-exempt retirement plan accounts (including qualified plans, traditional IRAs, Roth IRAs, 403(b) plans, 457(b) plans, SEPs, and SIMPLE plans), are protected from an employee's creditors in the event of bankruptcy. With the exception of the Traditional IRA and Roth IRA assets, all of these tax-exempt retirement assets are protected without a dollar limit."(The Boston Globe)

[Guidance Overview] Supreme Court of Montana Upholds Verdict for Retirees
See item #7. Excerpt:"Northwestern Corporation and others appealed a jury verdict rendered against them and in favor of Ammondson and others, which awarded plaintiffs/retirees approximately $17.5 million dollars in compensatory damages and $4 million dollars in punitive damages based on a claim for breach of contract, and the torts of breach of the covenant of good faith and fair dealing, abuse of process and malicious prosecution. Ammondson and the others were all former employees of Montana Power Company for periods ranging from 3 to 40 years. Each retiree left MPC after entering into separate agreements that provided them monthly payments to supplement their regular retirement plans. These agreements were known as'Top Hat Contracts,'a term derived from the Employee Retirement Income Security Act."(Cypen&Cypen)

[Guidance Overview] Former Employees Have No Claim Against Bankrupt Employer for Unpaid Medical Bills, But Can Seek Unpaid Employee Health Premiums
Excerpt:"EBIA Comment: At the end of the day, the only relief that these employees could seek from their employer was the recovery of the employee portion of the unremitted health insurance premiums. This illustrates not only the litany of claims that employees may make when their employer fails to remit health insurance premiums, but also the harsh reality that in many instances this is a wrong without a remedy."(Employee Benefits Institute of America)

PBGC Objects to Philadelphia Newspapers Bankruptcy Exit Plan
Excerpt:"The Pension Benefit Guaranty Corporation is objecting to Philadelphia Newspapers LLC's plan for restructuring after bankruptcy, asking for more details on how the publisher of the Philadelphia Inquirer will address its pension obligations."(PLANSPONSOR.com)

[Opinion] Ohio's Retirement Systems Need More Than a Mere Nip and Tuck
Excerpt:"Two years ago the Thomas B. Fordham Institute issued a report critical of the financial sustainability of the State Teachers Retirement System (STRS) and the adverse effects the system's benefits policy has on recruiting young teachers. The June 2007 report noted the system's unfunded liability was $19.4 billion, which then represented a debt of over $4,300 per Ohio household.'At current contribution rates, STRS actuaries estimate that it will take 47.2 years to amortize the unfunded liability, a funding period that exceeds the 30-year requirement established in state law (see here),'the report noted. This was at a time when the Dow Jones Industrial Average stood at almost 14,000. Today it stands at about 9,500. When our report came out, STRS officials angrily denied problems . . . . But what a difference a couple of years make. Last week, STRS Executive Director Michael Nehf stood in front of lawmakers and state officials and admitted that without a massive infusion of taxpayers'dollars and trimming and adjusting of benefits, the fund eventually would be bankrupt."(The Thomas B. Fordham Institute)

Kansas Public Employees Retirement System Facing Bankruptcy If Changes Not Made, Report Says
Excerpt:"A report released yesterday by the Center for Applied Economics at the University of Kansas School of Business reveals that unless drastic changes are made to the structure of KPERS, the Kansas Public Employees Retirement System, the system will be unable to pay out promised benefits, and the shortfall -- as much as $10 billion -- will fall onto taxpayers'shoulders. . . . The report said that though the recession has added to the decline of KPERS, the public pension fund was headed for bankruptcy before the recession because of structural problems. One main cause for concern is the level of unfunded liability within KPERS. Unfunded liability refers to the difference between promised benefits and the benefits that will be collected. These unfunded liabilities are thought of as a debt. The report concludes that'KPERS is bankrupt under current operating assumptions'and points out that when utilizing the market value of assets, the total unfunded actuarial liabilities have more than doubled within the last year from $4.8 billion to $10.25 billion. Based on current data, these unfunded actuarial liabilities are expected to continue to increase."(Kansas Liberty)

[Guidance Overview] Public Pension Funds Lose Effort to Stop Chrysler Sale
Excerpt:"The 2nd U.S. Circuit Court of Appeals has decided that a U.S. Bankruptcy Court judge properly allowed the sale of Chrysler LLC's assets to Fiat SpA to move forward despite objections from three pension funds. The latest 2nd Circuit ruling follows up an earlier move by the appellate court allowing the deal to move forward without issuing an opinion. The 2nd Circuit appellate panel said in its latest pronouncement that The Indiana State Police Pension Trust, the Indiana State Teachers Retirement Fund, and the Indiana Major Moves Construction Fund were wrong to argue that Chrysler's disputed auto manufacturing asset sale actually represented an impermissible bankruptcy reorganization plan . . . ."(PLANSPONSOR.com; free registration required)

GM Retirees Who Lost Health Care Benefits in Bankruptcy Fight to Get Them Back
Excerpt:"While retirees represented by the United Auto Workers will have a partially funded health care trust managing their health benefits, more than 50,000 retirees represented by three unions -- the IUE-CWA, the United Steelworkers and the International Union of Operating Engineers -- will have no money from the automaker to fund the more than $3 billion in health care obligations."(Workforce.com)

[Guidance Overview] Debtor Can't Deduct 401(k) Loan Repayments Under Bankruptcy Means Test As Necessary Expense
Excerpt:"A debtor's repayment of a 401(k) plan loan did not constitute a payment of secured debts or a necessary expense that could be deducted from the debtor's monthly income for purposes of applying the means test under Chapter 7 of the Bankruptcy Code, according to the U.S. Court of Appeals in San Francisco (CA-9), in Egjebjerg v. Anderson, a case of first impression."(Wolters Kluwer)

Chrysler Bankruptcy Cuts Deep Into Retirees'Pensions
Excerpt:"The collapse of the old Chrysler isn't just hitting the folks on the line. Federal law protects pension funds held in qualified plans from the company's creditors in bankruptcy. But a non-qualified plan participant technically becomes an unsecured creditor in a bankruptcy case. Executives and other managers can be offered a non-qualified plan once the company and/or the employee already has hit the limits for funding contributions into qualified plans. Then, bonus money or other compensation can apply to nonqualified plans. Trouble can hit, though, once companies go through bankruptcy."(Detroit Free Press)

Is GM Facing a Repeat of Bankruptcy?
Excerpt:"In the thunderous collapse of GM, one detail seems to have gone almost unnoticed. The old GM's US pension fund, with its near-$100bn of liabilities, is being transferred lock, stock and barrel to the new entity. As a direct result, the new GM could be bankrupt again in a very few years. GM's US fund is, of course, in deficit, but the company has made no contributions since 2003. Back then, it put in $18.5bn, which it raised through a bond issue. Since this counted as a pre-payment, GM is not obliged to pay any more for the next year or two. However, it will then have to start plugging the gap, under the new rules set down by the Pension Protection Act of 2006."(Alberto Dominguez via What's an Actuary?)

Fiduciary Duty to'Assess and Protect'Plan Interests
Excerpt:"It has been reported that there were many ERISA-covered retirement plans impacted by the Madoff-Ponzi scheme. As a result, the DOL issued a notice back in February . . . indicating that fiduciaries of ERISA plans should take'appropriate steps'to'assess and protect the interests of the plan and its participants and beneficiaries.'The DOL then went on to include in the notice a list of'appropriate steps'for fiduciaries to take in fulfilling their duty to'assess and protect'the interests of plan participants. One of those steps included filing and asserting claims against the bankruptcy estate."(ERISA Fiduciary Guidebook)

Salaried GM Retirees Request Bankruptcy Court Voice
Excerpt:"With a reduction in some retiree benefits by about two-thirds a possibility, a group of retired General Motors salaried employees has asked to be granted a say in the auto giant's restructuring. A Detroit Free Press story said the retiree group has asked a bankruptcy judge to appoint an official panel to represent their interests as GM reorganizes its business.'The unfairness of hourly retirees keeping their benefits and even getting a stake in New GM to fund their health benefit trust, while salaried retirees receive no protections, also cries out for the need for salaried retiree representation,'the group's court filing said, according to the newspaper."(PLANSPONSOR.com; free registration required)

Supreme Court Delays Sale of Chrysler to Fiat
Excerpt:"The Obama administration's effort to hurry Chrysler through bankruptcy court ran into an unexpected last-minute delay on Monday, when the Supreme Court said it would consider whether to hear the objections of three Indiana state funds and consumer groups. The implications of the court's move -- Judge Ruth Bader Ginsburg issued a one-sentence order that amounted to a holding action -- are unclear."(The New York Times; free registration required)

ScotusBlog Following the Indiana Pension Funds'Supreme Court Challenge to Chrysler Sale
Excerpt:"'The case of In re Chrysler LLC, Debtor has the potential to produce the most significant Supreme Court ruling on the governments power to deal with economic crisis since the Court struck down major parts of President Franklin Roosevelts New Deal, in Schechter Poultry Corp. v. U.S. in 1935 and U.S. v. Butler in 1936. But the Supreme Court will not actually rule onany of the basic legal challenges unless it first puts the Chrysler sale on hold, and then agrees to hear and decide the case itself. It has no legal obligation to do either. Two challenges have now been filed. UPDATE: A third challenge has been filed. . .'"(Attorney B. Janell Grenier via Benefitsblog.com)

Supreme Court Asked to Delay Chrysler Sale
Excerpt:"Indiana pension funds and consumer groups asked the U.S. Supreme Court on Sunday to stop the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA while they challenge the deal. The separate requests, which moved the legal battle to the nation's highest court, were filed after a U.S. appeals court in New York approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments."(Reuters via The New York Times; free registration required)

Court Gives Indiana Funds More Time to Appeal Chrysler Sale
Excerpt:"A federal appeals court approved the sale of Chrysler assets to Fiat but kept the deal on hold until Monday to allow a possible appeal to the Supreme Court, the Wall Street Journal reports. The 2nd U.S. Circuit Court of Appeals heard an appeal filed by a group of Indiana state pension and investment funds, which had sought to block the deal (see Court Agrees to Hear Indiana Funds'Chrysler Appeal). The carmaker's proposed restructuring seeks to pay billions of dollars to unsecured Chrysler creditors, while paying secured creditors only 29 cents on the dollar."(PLANSPONSOR.com; free registration required)

Court of Appeals Today Hears Indiana Pension Funds'Appeal of Chrysler Deal
Various Indiana state employee pension funds are contesting their treatment as bondholders, saying unsecured creditors are being favored ahead of Chrysler's bondholders. OppenheimerFunds filed a brief in support of the pension funds. (AP via New York Times)

Major Auto Parts Supplier Intends to End Salaried Employees'Pension Plan
Excerpt:"Financially troubled auto parts manufacturer Delphi Corp. said it intends to shed its underfunded pension plan for salaried employees and retirees as part of a plan to emerge from bankruptcy reorganization."(Business Insurance)

No Bond Safe from Obama's'Shared-Sacrifice'Plan
Excerpt:"Bondholders have a new risk to contend with -- the Obama administration's policy of'shared sacrifice.'"(David Reilly on Bloomberg.com)

Court of Appeals Hearing is Friday on Treatment of Indiana Pension Fund as Bondholder in Chrysler Deal
Excerpt:"A U.S. Court of Appeals agreed on Tuesday [June 2] to hear a challenge to Chrysler LLC's sale of most of its assets to a group led by Italian automaker Fiat . . . . A three-judge panel for the U.S. Court of Appeals for the Second Circuit will hear arguments in the appeal on Friday at 2 p.m. EDT (1800 GMT) in New York, according to a court order on Tuesday."(New York Times)

Indiana State Treasurer Appeals Chrysler Deal; Says Priority for Unsecured Creditors is Unacceptable
Excerpt:"Under the bankruptcy plan, money was mostly set aside for secured creditors, but not enough to cover the millions that will be lost by retired State Police officers and teachers in Indiana. . . . Chrysler wants to pay them 29 cents on the dollar. Indiana State Treasurer Richard Mourdock says that's unacceptable.'This is the first time in American history when secured creditors, Indiana retirees got less than non-secured creditors. That is fundamentally wrong. It is a violation of the law,'he said hours after filing an immediate appeal to the plan."(WTHR.com)

General Motors Files for Bankruptcy Protection
The UAW VEBA will assume all retiree healthcare liabilities next year. In the deal the VEBA receives a 17.5% share of the company's common stock, interest-bearing preferred stock, and a $2.5 billion note. (AP via New York Times; free registration required)

[Guidance Overview] Debtor's Chapter 7 Bankruptcy Filing Was'Presumptively Abusive'; 401k Loan Repayments Not'Necessary Expense'
Excerpt:"Applying the'means test'from the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the United States Court of Appeals for the 9th Circuit held (in an issue of first impression for the court) that the section 401(k) plan loan was not a'secured debt'or a'necessary expense'of the debtor."(PLANSPONSOR.com; free registration required)

[Guidance Overview] Retiree Benefits and Section 1114
Excerpt:"Although the question of whether ? 1114 applies to the modification or termination of retiree benefits that would otherwise be modifiable at will remains an open one, Judge Drain's recent decision [in the Delphi Corporation bankruptcy] is significant for several reasons. First, it adds further support to the seemingly growing consensus that ? 1114 does not apply in such circumstances. Second, it gives debtor-employers a well-reasoned treatment of the issue to follow in fighting off objections to their attempts to escape or lessen the crushing burden of retiree benefits costs, the success of which may be the difference between a successful reorganization or a failed effort. Finally, it may spur further attempts by Congress and President Obama's administration to amend the Bankruptcy Code to strengthen the protections for retiree benefits, particularly since this issue is one that will likely take center stage in future automotive and other cases."(Haynes&Boone)

Indiana Pension Funds Won't Get Chrysler Case Moved to District Court
Excerpt:"In a second legal defeat, a U.S. federal judge denied a request by a group of Indiana public funds to delay bankrupt automaker Chrysler LLC's sale hearing and remove the bankruptcy case to district court. Reuters reports that on Tuesday, U.S. District Judge Thomas Griesa denied a motion by The Indiana State Teachers'Retirement Fund, Indiana State Police Pension Trust, and Indiana Major Moves Construction Fund that the government did not have the authority to provide funds to Chrysler for its proposed sale. Griesa also denied a request to prevent Chrysler's scheduled sale hearing in bankruptcy court on Wednesday from going forward."(PLANSPONSOR.com; free registration required)

Indiana State Treasurer Says Pension Funds Being'Ripped Off'by Chrysler Bankruptcy
Excerpt:"State Treasurer Richard Mourdock says the state cannot allow its'retired police officers and teachers to be ripped off by the federal government.'Speaking about the filing of an objection with the bankruptcy court handling the Chrysler LLC proceedings on behalf of the Indiana State Police Pension Trust, Indiana State Teachers'Retirement Fund and the Major Moves Construction Fund, Mourdock says the proposed restructuring seeks to pay billions of dollars to unsecured Chrysler creditors, while paying secured creditors only 29 cents on the dollar, according to The (Munster) Times."(PLANSPONSOR.com; free registration required)

GM Bankruptcy Plan Would Use Stock Worth 39% of Firm To Fund Half of VEBA Obligation
Excerpt:"The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it. Yesterday, the union announced that it reached an agreement with GM that will reduce the company's labor costs."(The Washington Post; free registration required)

Chrysler's Pensions Are Underfunded by $10 Billion
Excerpt:"Bankrupt Chrysler LLC's pension plans may be underfunded by more than $10 billion, the federal Pension Benefit Guaranty Corp. has estimated. If the pensions are terminated, the agency's claim for the shortfall in the automaker's bankruptcy case'would exceed $9 billion,'Chrysler lawyers said in a filing today in U.S. Bankruptcy Court in New York."(Bloomberg L.P.)

Chrysler Expands Worker Retirement and Separation Plan
Excerpt:"Chrysler LLC will expand its retirement and separation program for employees at seven facilities it is set to close before December 2010 as part of its restructuring plan. . . . The company will close eight facilities, but employees at its Detroit Axle plant won't get the expanded separation program because they are being transferred to a Marysville, Mich., facility scheduled to open next year. The retirement and separation program window has been extended until May 26, and job cuts will take place a day later."(The Wall Street Journal)

Bankruptcy Judge Denies Chrysler Retirees'Motion
Excerpt:"A bankruptcy judge on Thursday denied a request from a group representing Chrysler LLC's retired white collar workers to appoint an official retiree committee to take part in the automaker's bankruptcy proceedings. U.S. Judge Arthur Gonzales said that any decisions regarding the future of retiree benefits ultimately will be made by the automaker's new owners and as a result there isn't much point in the retirees group negotiating with Chrysler now."(AP via Gold Country Media)

GM Nears Crucial Deal With UAW That Affects Retiree Health Care Benefits
Excerpt:"General Motors Corp., under the direction of the U.S. Treasury, is near a deal that would cut its hourly labor costs by more than $1 billion a year and reduce its $20 billion pledge to the United Auto Workers to cover health-care obligations, said people familiar with the matter. The plan is still in flux, but GM and the union could finalize terms as early as next week. The Detroit auto maker expects to halve its remaining cash outlays for retiree health costs to about $10 billion, and supplement that contribution with a 39% equity stake in the reorganized GM, the people familiar with the matter said."(The Wall Street Journal)

Ninth Circuit Addresses Retiree Claims Under Bankrupt Employer's Self-Funded Medical Plan
Excerpt:"With bankruptcy filings soaring during this economic downturn, it is always of great interest to benefits practitioners to learn how bankruptcy courts are dealing with the unmet employee benefit obligations that get thrown in the mix. The Ninth Circuit in the case of Consolidated Freightways Corp. v. Aetna, Inc. dealt a blow to retirees (and the insurer who had advanced amounts in payment of retiree claims) by ruling that the retirees'claims for benefits under a self-funded retiree medical portion of the employer's health plan were not entitled to'priority'in determining the number of employees under Section 507(a)(5) of the Bankruptcy Code, even though active employees'claims were so entitled."(Attorney B. Janell Grenier via Benefitsblog.com)

[Guidance Overview] PBGC Termination Premium Not an Unsecured, Dischargeable Bankruptcy Claim
Excerpt:"An employer that terminated a defined benefit plan while undergoing a Chapter 11 bankruptcy reorganization could not avoid paying a termination premium to the PBGC by calling the termination premium an unsecured, pre-petition claim that was dischargeable under the Bankruptcy Code, the U.S. Court of Appeals in New York City (CA-2) has ruled in PBGC v. Oneida."(Wolters Kluwer)

The Hidden Peril of Deferred-Compensation Plans
Excerpt:"Here's a nightmare for you: Imagine waking up one morning to discover that your employer is bankrupt and the money you have set aside in your deferred compensation plan belongs to the company's creditors. Unfortunately, this possibility is a real one for employees of companies like Chrysler. A 401(k) plan is safe from those your company owes money. But creditors can -- and will -- go after deferred-compensation plans, which allow high-level employees and many others earning more than $100,000 to $200,000 or so annually to contribute money, which then grows on a tax-deferred basis for use later. And if a company goes bankrupt, employees may end up with nothing."(The New York Times; free registration required)

[Opinion] With Pensions at Risk It's Fair to Ask'Who Will Pay?'
Excerpt:"With GM flirting with bankruptcy and Chrysler already there, it's fair to ask whether taxpayers will be expected to cover the costs of the pensions the companies promised their workers. The cost for GM alone is estimated at $13.5 billion. The Big Three automakers'retiree health benefits are not insured by anybody and conceivably could be scrapped. When they reach age 65, retired workers would have to rely on Medicare. But the government does guarantee autoworker pensions, which are insured for as much as $54,000 a year. Though still common in the public sector,'defined-benefit'pensions exist today in the private sector mainly in heavily unionized industries. U.S. automakers are the poster boys for such generous pensions."(American Institute for Economic Research via McClatchy-Tribune News Service)

Chrysler Union Taking Big Risk, Its Chief Says
Excerpt:"The president of the United Automobile Workers union, Ron Gettelfinger, said Monday evening that concessions granted to Chrysler would leave the U.A.W.'s new retiree health care fund'on life support initially.'. . . Mr. Gettelfinger, in his first public comments since Chrysler filed for bankruptcy protection last week, said the equity that Chrysler was substituting for $5.1 billion in cash was worth'zero today,'and added that the U.A.W. planned on selling its stock as soon as doing so was financially feasible."(The New York Times; free registration required)

Is Chrysler the Next Pension Crisis?
Excerpt:"When the details of Chrysler's restructuring plan were announced on Apr. 30, few could have breathed a deeper sigh of relief than the managers of the Pension Benefit Guaranty Corp. . . . But for the PBGC, and for Chrysler employees, it's quite possible that all that's been done is to delay the inevitable. Chrysler's pension plans are $9.3 billion underfunded. The company likely won't have to make a contribution for about two years, because of the intricacies of pension funding rules, says Charles E.F. Millard, director of the PBGC until this past January. But once that respite is over, the company will have to hurry up to fill the gap, contributing as much as $1 billion a year."(BusinessWeek)

Chrysler Deal Could Jeopardize Retiree Health Benefits if Restructured Company Does Not Return to Profitability
Excerpt:"According to the AP/Seattle Post-Intelligencer,'the union could still come out the winner at Chrysler'and GM, but'that depends on the iffy prospect of the companies making money again and their stock values rising sharply'(Krisher/Carpenter, AP/Seattle Post-Intelligencer, 5/2). The Times reports that Chrysler's failure would put the voluntary employees'beneficiary association in'dire straits,'as it would owe the Treasury Department but would not have the funds to pay off its loans, according to the Times (New York Times, 5/2)."(Kaiser Family Foundation)

Chrysler Bankruptcy Could Lower Pension Benefits in the Future
Excerpt:"The Chrysler bankruptcy filing Thursday, April 30, could result in lower federally guaranteed pension benefits for Chrysler employees and retirees if the financially troubled automaker later jettisons its massively underfunded plans. In a new question-and-answer guide about Chrysler's pension plans, the federal Pension Benefit Guaranty Corp. notes that a bankruptcy filing can result in a reduction of benefits if plans are later taken over by the PBGC. For example, under law, the PBGC does not guarantee benefits earned after a bankruptcy filing. The PBGC provides in its guide an example of a company that filed for bankruptcy on July 1, 2009."(Workforce Management; free registration required)