Feds move to take over Sears pension plans, will cover ‘vast majority’ of benefits for retailer’s 90,000 retirees

Chicago Tribune (IL)

Jan. 18--A federal agency is preparing to take responsibility for Sears' pension plans, which cover more than 90,000 people.

The Pension Benefit Guaranty Corp. said in a new release Friday that it believes Hoffman Estates-based Sears Holdings Corp.'s "continuation of the plans is no longer possible" after the company filed for bankruptcy in the fall.

The agency covers individuals' pensions, up to certain limits, if an insured pension plan shuts down without enough money to pay all benefits. It estimates Sears' two pension plans are underfunded by about $1.4 billion. As a creditor, the agency could attempt to recover some of that money through the bankruptcy.

Ron Olbrysh, chairman of the National Association of Retired Sears Employees, said the guarantee means retirees aren't worried about losing pensions, but they do have concerns about other benefits.

"The pensions are secure through Sears or through the Pension Benefit Guaranty Corp.," he said. "The big impact if Sears does liquidate is that retirees will lose life insurance."

The PBGC said it expects its guarantee will cover the "vast majority" of pension benefits earned under Sears' plans. Retirees who have questions about what the takeover would mean for their pensions can visit www.pbgc.gov/Sears-QA.

While the PBGC is a federal agency, it is not funded by taxpayer dollars. Its operations are financed by insurance premiums, investment income and recoveries from failed single-employer plans. Sears entered into a five-year pension protection plan with the agency in 2016.

Sears will remain responsible for the plans until it agrees to terminate them or a court orders the plans terminated, according to the PBGC. The agency is seeking to take over the plans as of Jan. 31.

Sears declined to comment Friday. In a September blog post, Sears Chairman Edward Lampert -- then the company's CEO -- wrote that the company's pension obligations hampered its turnaround efforts. Sears had contributed $4.5 billion to its pension plans since 2005, he wrote.

The retailer, which filed for bankruptcy protection in October, confirmed Thursday that Lampert's hedge fund, ESL Investments, won a bankruptcy auction with a $5.2 billion proposal to keep the company in business and preserve 45,000 jobs.

The purchase agreement, disclosed in a regulatory filing Friday, does not include the pension plans.

Lampert's offer still requires approval from the U.S. Bankruptcy Court for the Southern District of New York, and it has already garnered opposition from a committee of Sears' creditors.

The PBGC, which is member of that committee, said in an emailed statement that it has concerns about the terms of the proposed sale and what the transaction would mean for the pension protection agreements the agency previously negotiated with Sears.

Chicago Tribune's Corilyn Shropshire contributed.

lzumbach@chicagotribune.com

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