Lehman Brothers, a New York-based financial services firm, filed for the largest Chapter 11 bankruptcy protection in U.S. history in September. The capital markets and investment banking operations were then sold to Barclays Capital Inc. for $1.75 billion.
More than 26,500 Lehman workers and retirees are eligible for some form of retirement benefits. The U.S. Pension Benefit Guaranty Corp. (PBGC), a government agency that insures private-sector pension plans and pays out benefits if the a plan fails, initiated action to end Lehman's pension plan today because the plan stands to be abandoned following the liquidation of the firm's assets at a Dec. 22 bankruptcy court hearing.
The pension plan is 95 percent funded, with $898.2 million in assets to cover $940.8 million in benefit liabilities. If the plan ends, the agency expects to be responsible for $17.9 million of the $42.6 million shortfall. PBGC says:
“None of the buyers have assumed responsibility for the pension plan. The agency believes that Lehman's non-bankrupt controlled group members could afford to take care of the pension plan. Should that fail to happen, the agency will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which will end as of December 12, 2008.”
This is how a PBGC takeover affects employees.
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