The Pension Benefit Guaranty Corporation has announced that it will pay retirement benefits for more than 21,000 current and future retirees of the Montvale, New Jersey-based Great Atlantic & Pacific Tea Co., a supermarket chain commonly known as A&P.
In addition, PBGC has reached a final agreement with Sears Holdings Corp. that provides substantial protections for the Sears pension plan, which covers nearly 200,000 people. A tentative arrangement was first announced in September 2015. After extensive talks, the agreement is now final.
In the case of A&P, PBGC is stepping in because A&P has sold the majority of its assets in bankruptcy proceedings and most of the buyers declined to keep the plans going. The three plans that PBGC will assume ended on November 30. The agency will pay all pension benefits earned by A&P retirees up to the legal maximum of $60,136 a year for a 65-year-old.
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Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible. During the transition of shifting benefit payment responsibility to PBGC, participants who are in pay status in the company's pension plans will continue to receive benefits from A&P and its affiliates.
PBGC is becoming responsible for the following pension plans:
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The Great Atlantic & Pacific Tea Co. Inc. Plan, which is 55 percent funded and has 14,783 participants. PBGC estimates that the plan has $135 million in assets to pay $244.4 million in benefit liabilities. The agency expects to cover $105.6 million of the $109.4 million shortfall.
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The Pathmark Stores Inc. Pension Plan, which is 64 percent funded and has 6,278 participants. PBGC estimates the plan has $327.2 million in assets to pay $509.5 million in benefits liabilities, and the agency expects to cover nearly all of the $182.3 million shortfall.
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The Delaware County Dairies Inc. Hourly Employees Pension Plan, which has no assets and covers eight people. The plan owes participants $100,000 in benefits, and PBGC will cover the entire amount.
The New York-New Jersey Amalgamated Pension Plan for A&P Employees, however, has not been terminated and is an ongoing plan. This plan is jointly administered by UFCW Local 464A and Acme Markets Inc. and has been renamed the New York-New Jersey Amalgamated Pension Plan for ACME Employees.
In the case of the Sears plan, Sears will continue to protect the assets of certain special purpose subsidiaries, which hold real estate and/or intellectual property assets. Additionally, the subsidiaries will grant springing liens on the protected assets in favor of PBGC.
The liens will be triggered only by failure to make required contributions to the plan, prohibited transfers of ownership interests in the subsidiaries, termination of the plan or bankruptcy of the company or certain of its subsidiaries.
While Sears is currently making required minimum contributions to its pension plan, the plan's assets would not be sufficient to satisfy all benefits if it were to terminate the plan.
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