ABI Quick Poll Respondents Closely Divided over Whether Premiums Owed to PBGC for Terminated Pension Plan Terminated During Chapter 11 are Dischargable Pre-Petition Claims
Contact: John Hartgen
ABI QUICK POLL RESPONDENTS CLOSELY DIVIDED OVER WHETHER PREMIUMS OWED TO PBGC FOR TERMINATED PENSION PLAN TERMINATED DURING CHAPTER 11 ARE DISCHARGABLE PRE-PETITION CLAIMS
July 31, 2009, Alexandria, Va. —Respondents in a recent ABI Quick Poll were closely divided over whether premiums due to the Pension Benefit Guarantee Corp. (PBGC) by a debtor regarding a pension plan terminated during its chapter 11 case are pre-petition claims that are discharged. Forty-five percent of respondents agreed that they are pre-petition claims, while 41 percent disagreed. Thirty percent “strongly agreed” and fifteen percent “agreed somewhat,” while 31 percent “strongly disagreed” and 10 percent “disagreed somewhat.” Eleven percent did not know or had no opinion on the issue.
The U.S. Court of Appeals for the Second Circuit ruled in April that premiums due by a chapter 11 debtor to the PBGC for termination of a pension plan during the bankruptcy do not arise until after the bankruptcy proceeding itself is terminated. This is pursuant to the language of the Deficit Reduction Act of 2005 (DRA), which provides for these premiums and was meant to protect the PBGC from employer bankruptcies. Thus, the premiums are not a pre-bankruptcy claim that was discharged. Prior to the DRA, a pension plan termination in a chapter 11 proceeding usually gave the PBGC only a dischargeable general unsecured claim on which it did not recover much of the original premium amount.
ABI members and members of the public were welcome to submit their response to the statement: “The bankruptcy court erred in holding that payments due the Pension Benefit Guaranty Corporation as a result of an employer's termination of a pension plan while undergoing reorganization in bankruptcy are dischargeable, contingent pre-petition claims. PBGC v. Oneida Ltd., 562 F.3d 154 (2d Cir. Apr. 8, 2009).”
ABI’s Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.