October 12, 2012
Brands Inc. proposed withholding contributions to its company defined benefit
(DB) and multiemployer pension plans (MEPPs) for two years, according to a
court filing. ---
In a plan filed with the U.S. Bankruptcy Court in New York, Hostess
said it would stop contributing to the Interstate Bakeries Corp. (IBC) Defined
Benefit Plan—which had $56 million in assets and $84 million in liabilities as
of June 2, 2012— for two years and will restart the contributions in 2015. The
suspension is intended to reduce Hostess’ debt and permit the company to
restructure and emerge from Chapter 11.
The company’s union employees will be subject to an
immediate 8% wage cut in the first year, with modest increases in following
years, as well as a 17% reduction in health and welfare benefits. The company
will withdraw from the 42 MEPPs to which it contributes, followed by a freeze
on pension contributions for two years and reduced contributions thereafter,
and will reenter if these and other conditions are met. Nonunion employees will
be required to make similar sacrifices, with an 8% reduction in wages; the
matching contribution provided under the DC plan that was suspended in 2011
will continue to be suspended for two years with reduced matching contributions
Hostess sponsors two different retiree medical benefit plans
and two supplemental medical insurance plans, as well as a post-retirement life
and health benefit plan. From June 3, 2012 to June 1, 2013, the projected cost
of providing retiree benefits is approximately $1,130,225. As of June 2, 2012,
the value of the total benefit obligation for retiree benefits was
approximately $29.3 million.
Hostess contributed about $8 million a month to MEPPs prior
to August 2011; after failing to make contributions that month, no further
contributions were made to the plans. The company still owes approximately
$1.04 million for the plan year that ended September 30, 2011 and approximately
$6.5 million for the plan year that ended September 30, 2012.
In January 2012, Hostess announced intentions to withdraw
from MEPPs, and reported about $860 million in debt (see “Hostess Files Bankruptcy After Failing to Reach Pension
Agreement” and “PBGC Assumes Pension Liability for Bakery Workers”).
For the full court filing, click here.