First Page


Last Page



The Pension Benefit Guaranty Corporation, the federal agency charged with insuring private-sector defined benefit pension plans, has long had a prominent role in corporate bankruptcies. PBGC focuses its effort on the continuation of pension plans, in true reorganizations and in sales of businesses. To this end, ERISA has made it more difficult for a sponsor to terminate a plan in its own economic interest. For example, a sponsor’s latitude to terminate an underfunded plan was limited to circumstances involving the sponsor’s financial distress. Likewise, the termination premium, which was added to ERISA in recent years, is an obligation that survives bankruptcy and it may help to deter some unwarranted terminations. Unfortunately, in some cases, PBGC must seek plan termination, and PBGC then seeks to maximize its recoveries. These are blunt tools, however, and the case law has further dulled them. With plan continuation the preferred outcome, PBGC succeeds in its statutory mission whenever a sponsor emerges from bankruptcy with its pension plan ongoing.