A federal agency is preparing to take responsibility for Sears’ pension plans, which cover more than 90,000 people.
The Pension Benefit Guaranty Corp. said in a new release Friday that it believes Hoffman Estates-based Sears Holdings Corp.’s “continuation of the plans is no longer possible”, after the company filed for bankruptcy.
The agency covers individuals’ pensions, up to certain limits, if an insured pension plan shuts down without enough money to pay all benefits. It estimates Sears’ two pension plans are underfunded by about $1.4 billion.
Ron Olbrysh, chairman of the National Association of Retired Sears Employees, said the guarantee means retirees aren’t worried about losing pensions, but they do have concerns about other benefits.
“The pensions are secure through Sears or through the Pension Benefit Guaranty Corp.,” he said. “The big impact if Sears does liquidate is that retirees will lose life insurance.”
The PBGC said it expects its guarantee will cover the “vast majority” of pension benefits earned under Sears’ plans. Retirees who have questions about what the takeover would mean for their pensions can visit www.pbgc.gov/Sears-QA.
Sears will remain responsible for the plans until it agrees to have them terminated, or a court orders the plans terminated, according to the PBGC. The agency is seeking to take over the plans as of Jan. 31.
Sears declined to comment Friday.
The retailer, which filed for bankruptcy protection in October, confirmed Thursday that its chairman, Edward Lampert, won a bankruptcy auction with a $5.2 billion proposal to keep the retailer in business and preserve 45,000 jobs.
The purchase agreement, disclosed in a regulatory filing Friday, does not include the pension plans.
Lampert’s offer still requires approval from the U.S. Bankruptcy Court for the Southern District of New York, and has already garnered opposition from a committee of Sears’ creditors. The PBGC, which is a member of that committee, could not immediately be reached for additional comment.