The Pension Benefit Guaranty Corporation (PBGC) announced Friday that it would take on administrative and financial responsibility for the J.C. Penney Corp. Inc. Pension Plan, which covers approximately 36,000 current and future retirees.
The takeover comes nearly six months after the J.C. Penney Corp., along with more than a dozen subsidiaries and related entities, filed for Chapter 11 protection in the U.S. Bankruptcy Court in Corpus Christi, Texas, and just a few weeks after the retail company sought court approval of the sale of its operating assets to a joint venture led by Brookfield Asset Management Inc. and the Simon Property Group.
The joint venture did not agree to assume the pension plan, PBGC reports, leaving it without an ongoing, viable sponsor. Thus, PBGC has stepped in to become trustee of the pension plan.
“This action allows the agency to continue delivering hard-earned benefits as allowed under the law and to provide retirees with information that will help them plan for the future,” PBGC Director Gordon Hartogensis says. “As with all plans we insure, PBGC is acting to protect the retirement security of the J.C. Penney plan participants, and we will continue to do the same for the millions of other workers, retirees and families who rely on us.”
PGBC says retirees will continue to receive benefits, and future retirees can apply for benefits as soon as they are eligible, but PBGC will only pay pension benefits earned by J.C. Penney’s current and future retirees up to the legal limits.
The termination of the plan will be effective as of November 6. PBGC estimates that J.C. Penney’s plan is 92% funded, with approximately $3.3 billion in assets and about $3.6 billion in benefit liabilities.
In September, the McClatchy Co. Retirement Plan, which covers more than 24,000 current and future retirees, was similarly taken over by PGBC as a part of Chapter 11 bankruptcy proceedings, though its estimated funded status was far lower, at 57%.