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SYRACUSE, N.Y. -- The federal Pension Benefit Guaranty Corp. (PBGC) took responsibility last week for the pensions of 9,400 current and former nonunion Penn Traffic Co. employees.
Penn Traffic requested permission to terminate its pension plans in a November 2003 court filing. The company says it should emerge by the end of March from the bankruptcy reorganization it entered in May 2003. Penn Traffic earlier declared bankruptcy in 1999 after losing over $324 million between 1994 and 1998.
Following a review of Penn Traffic's ability to fund its various pension plans, the PBGC decided that the retailer could transfer its Cash Balance Plan to the federal pension insurance program. The company will continue to sponsor and fund four other defined benefit plans.
"People in the [Cash Balance Plan] will continue to receive their benefits," PBGC spokesman Jeffrey Speicher told the Syracuse Post-Standard. "There will be very, very few benefit reductions. Everyone should receive the same amount of benefit. Other plans through the company are still going on and will continue to be sponsored by Penn Traffic."
"Having the PBGC take over this one pension plan is a key part of our reorganization plan, so the news is very good for our company and 8,500 employees," Penn Traffic spokesman Marc Jampole told Progressive Grocer.
The PBGC estimates that the Cash Balance Plan is 40 percent funded and has $84 million in assets to cover $210 million in promised benefits. The government will cover $125 million of the $126 million gap.
Penn Traffic operates 111 supermarkets in New York, Vermont, New Hampshire, and Pennsylvania under the P&C Foods, Quality Markets, and BiLo banners. The company additionally operates five warehouses and distribution centers serving 119 independent grocers.
The PBGC, a federal corporation created under the Employee Retirement Income Security Act of 1974, guarantees payment of basic pension benefits for more than 44 million American workers and retirees participating in more than 31,000 private-sector defined benefit pension plans.