Folks who retired from Circuit City before it went under will continue to draw their benefit checks, thanks to the American taxpayer.
The Pension Benefit Guaranty Corporation has taken over responsibility for a pension plan covering more than 21,000 former workers and retirees of the defunct electronics retailer based in Richmond, Va.
"The Circuit City pension plan is now under the protection of the PBGC, America's pension insurance program," said Acting Director Vince Snowbarger in a video message. "Circuit City workers now join the almost one and a half million Americans who rely on the PBGC for their pension benefit."
The PBGC stepped in because the underfunded pension plan will be abandoned following the liquidation of the company's assets during bankruptcy proceedings. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other participants will receive their pensions when they are eligible to retire.
On the basis of company-provided information, the PBGC estimated the Retirement Plan of Circuit City Stores Inc. was 82 percent funded, with $284.9 million in assets to cover $349 million in benefit liabilities.
Of the estimated $64 million shortfall, the agency would be responsible for about $62 million. The PBGC is receiving updated information concerning the plan's assets and liabilities, and will be revising its underfunding estimates in the future.
The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on March 31, 2009.
Within the next several weeks, the PBGC will send notification letters to all participants in Circuit City's retirement plan. Under provisions of the Pension Protection Act of 2006, the maximum guaranteed pension the PBGC can pay is determined by the legal limits in force on the date of the plan sponsor's bankruptcy.
Therefore, participants in the plan are subject to the limits in effect on Nov. 10, 2008, which set a maximum guaranteed amount of $51,750 for a 65-year-old. The agency became trustee of the plan on May 26, 2009.
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.
Circuit City was the nation's second-largest electronics retailer. After a period of declining sales and unable to execute a turnaround strategy, the company and all of its subsidiaries filed for Chapter 11 protection in the U.S. bankruptcy court in Richmond. The company was unable to reorganize or find a buyer and began liquidation efforts through going out of business sales that concluded on March 8, 2009.
Assumption of the plan's unfunded liabilities will increase the PBGC's claims by $62 million and was not previously included in the agency's fiscal year 2008 financial statements.
