Pension bailout July 14 2009

PBGC Protects Pensions at Mother’s Cake & Cookie Co.

The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the underfunded pension plan covering about 1,100 workers and retirees of closely-held Mother’s Cake & Cookie Co., Battle Creek, Mich.  The company made cookies under the Archway, Mother’s, and Mrs. Allison’s labels and for store brands, mostly at a plant in Ashland, Ohio.

The PBGC stepped in because the pension plan faces abandonment as the company liquidates in chapter 7 bankruptcy with no asset purchaser willing to assume the plan.  Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other participants will receive their pensions when they are eligible to retire.

According to PBGC estimates, the Metz-Mother’s Cake & Cookie Co. Consolidated Pension Plan is 71 percent funded, with assets of $24 million and benefit liabilities of $34 million. The PBGC expects to cover the shortfall of approximately $10 million.  The agency will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on October 6, 2008, when the company terminated all employees and filed for bankruptcy protection.”

You, the US taxpayer, are on the hook for the $10 million.  This is exactly the same type of event that occurs when the FDIC shuts down a bank.

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