The Pension Benefit Guaranty Corporation (PBGC) is assuming responsibility for two pension plans sponsored by El Segundo, Calif.-based Verity Health System, which has filed for Chapter 11 protection.
The two plans, the Verity Health System Retirement Plan A and the Verity Health System Retirement Plan Bcover nearly 8,000 people. The Verity Health System Retirement Plan A is underfunded by approximately $306 million, while the Verity Health System Retirement Plan B is underfunded by approximately $2.8 million.
PBGC will pay pension benefits earned by Verity’s current and future retirees up to the legal limits.
According to the PBGC, both Verity Health System pension plans are covered under Title IV of ERISA. However, because neither pension plan has been covered by PBGC’s insurance program for five years, payments will be affected by the five-year phase-in limit on PBGC’s benefit guarantee for new and newly covered plans that begins with the date of coverage.
Plan members who are already receiving a pension from Verity Health System will continue to receive payments without interruption in the annuity form chosen at retirement. However, in several months, the PBGC will adjust benefit payments to an estimate of the amount required by law. For those not yet receiving a pension, the PBGC will pay an estimated benefit when they become eligible and apply for pension benefits.
According to the PBGC’s preliminary analysis, almost everyone covered under the pension plans will receive reduced benefits because the pension plans were insured by PBGC for less than three years when the company entered into bankruptcy. The PBGC will pay retirees estimated benefits while it completes the auditing, actuarial and legal work necessary to determine exact benefit entitlements under the law.