Hostess Brands Inc., Irving, Texas, proposed withholding contributions to its company defined benefit plan and multiemployer pension plans for two years as part of its Chapter 11 bankruptcy reorganization plan, confirmed spokesman Lance Ignon.
In the plan filed with U.S. Bankruptcy Court in New York, Hostess said it would stop contributing to the IBC Defined Benefit Plan, which had $56 million in assets and $84 million in liabilities as of June 2, for two years and will then restart contributions at the beginning of 2015.
Hostess also proposed withdrawing for two years effective Jan. 1, 2013, from the 42 multiemployer pension plans to which it contributes. The company could then decide to re-enter the plans based on certain criteria that ensures Hostess would have certain rights to protect itself, Mr. Ignon said. Contributions would then start again in 2015 and would be “significantly reduced,” according to the filing.
Hostess cited high legacy pension and benefit costs as one of the main factors for the bankruptcy filing.
“Over the last several decades, the number of companies supporting the MEPPs has shrunk significantly as a result of the voluntary and involuntary withdrawal of many employers and the fact that virtually no new employers join multiemployer plans today,” the filing states. “This significantly increases the burden on the companies, such as the debtors, that remain.”
Hostess contributed about $8 million per month to multiemployer plans up to August 2011 and has since not made any contributions. It also owes $1.04 million for fiscal year 2011, ended Sept. 30, and $6.5 million for fiscal year 2012, to the IBC plan.
The Hostess proposal still needs to be approved by the courts. The company is waiting for Judge Robert D. Drain to schedule the next hearing, Mr. Ignon said.