Circuit City, once the nation’s second-largest electronics retailer, filed for bankruptcy protection last year in Richmond, Va. The now defunct retailer began laying off employees and liquidating merchandise earlier this year. But the fate of the retirement plan of those employees remained uncertain until now.
Today the Pension Benefit Guaranty Corporation, a government agency that insures private-sector pensions and pays out benefits if the plan fails, assumed responsibility for the pension plan covering approximately 21,891 former workers and retirees of Circuit City. The PBGC estimates that Circuit City’s retirement plan was 82 percent funded, with $284.9 million in assets to cover $349 million in benefit liabilities. The PBGC will become responsible for about $62 million of the estimated $64 million shortfall.
Current and future retirees in Circuit City’s plan will continue to get pension payments up to the maximum guaranteed amount of $51,750 annually for a 65-year-old, which is the legal limit for plans that ended in 2008. The maximum amount is lower for those who retire earlier or elect survivor benefits. Certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
The PBGC, however, has funding problems of its own. The agency posted a $33.5 billion deficit for the first half of 2009, which is triple fiscal year 2008’s $11 billion shortfall. Vince Snowbarger, acting director of the PBGC, downplayed the agency’s money worries during the Circuit City announcement. “In these troubled economic times, you may wonder if the PBGC will be able to keep paying your benefit,” he said. “Let me assure you that we have the resources to meet all our obligations—next month, next year, and far into the future.”