Pension Regulator Gets Involved in Philadelphia Newspapers' Bankruptcy Plan

By: Mark Fitzgerald The federal corporation that guarantees pensions wants to know what Philadelphia Newspapers intends to do with its union pension plan when it emerges from bankruptcy -- keep it or terminate it, and on what terms?

In documents filed in U.S. Bankruptcy Court in Philadelphia, attorneys for the Pension Benefits Guarantee Corp. (PBGC) object to the proposed reorganization of the publishing company for The Philadelphia Inquirer and Philadelphia Daily News because it suggests the pension plan, covering about 250 employees and retirees, can be kept or dropped like any other contract in a bankruptcy proceeding.

But the PBGC argues that plans can be terminated only according to the standards of the Employee Retirement Income Security Act (ERISA).

The Philadelphia Newspaper reorganization plan -- which states that some information on how pension issues will be dealt with is "to come" -- does not say if there will be a so-called "distress termination" of the pension plan, which requires a showing that a company is in liquidation, or cannot reorganize in bankruptcy unless the pension plan is terminated, or cannot pay debts and continue inn business unless the pension plan is dropped.

The PBGC also noted pointedly that it cannot approve a distress termination of a pension plan if that would violate the terms of a collective bargaining agreement. The pension plan is for Local 14199 of the printing and media sector of the Communications Workers of America (CWA).

"The disclosure statement should inform creditors whether the debtors intend to continue or terminate the pension plan pursuant to ERISA and, if the intent is to terminate, the extent of debtors' resulting liabilities under ERISA," the PBGC argued. "In addition, if the debtors intend to seek a distress termination of the pension plan, the disclosure statement should explain how the debtors will address their collective bargaining obligations related to the pension plan since ... (ERISA) prohibits PBGC from processing a distress termination if it 'would violate the terms and conditions of an existing collective bargaining agreement.'"

Philadelphia Newspapers pension plan had an unfunded benefit liability of $10,340,763 as of April 30, the PBGC said.