The Pension Benefit Guaranty Corp. used its early warning system to reach pension agreements with two plan sponsors, before the companies completed significant changes.
In one case, the PBGC and Woodward & Lothrop Inc., Alexandria, Va., reached an agreement preventing the department store chain's pension fund from terminating, and covering all benefit payments. The plan is underfunded by about $30 million and has about $76 million in assets, according to the Money Market Directory.
Under the agreement, Woodward & Lothrop's chairman, A. Alfred Taubman, will pay all pension benefits through his company, The Taubman Investment Co. L.P. Woodward & Lothrop has been in bankruptcy proceedings since January 1994, and had most of its assets sold at an auction Aug. 8.
In the second case, the PBGC reached an agreement with Pitney Bowes Inc., Stamford, Conn., that will guarantee the solvency of the pension plan of subsidiary Dictaphone Corp., underfunded by about $15 million.
Dictaphone, a Stratford, Conn.-based company that manufactures dictation systems, is being acquired by Stonington (New York) Capital Appreciation 1994 Fund.
In this case, the PBGC stepped in before Stonington purchased Dictaphone.
Without any provisions to shore up the pension plan's unfunded liability, the PBGC would not be able to go after Pitney Bowes.
"We learned of the prospective sale and moved to safeguard the pension benefits of Dictaphone's workers and retirees," said PBGC Executive Director Martin Slate.
Pitney Bowes will remain responsible for the pension benefits of 1,600 Dictaphone retirees and former employees; the new Dictaphone will take over the pensions of about 2,700 active employees. Pitney Bowes will serve as the backstop for the current underfunding of the pension plan being transferred to the new Dictaphone.
The early warning program currently monitors about 400 companies with underfunded plans. The agency looks for key transactions, such as the sale of a subsidiary, that may end up hurting the pension plan. Once the PBGC identifies a transaction that may jeopardize retirement benefits, it tries to negotiate a settlement with the company - such as additional contributions - to save the plan from being terminated. The PBGC will take the company to court if it refuses to negotiate a settlement.
