The regulatory agency that protects the nation's private-sector pension plans said Tuesday it will fight Harry & David Holdings' move to ditch its pension plan, which covers 2,700 workers and retirees.
The Pension Benefit Guaranty Corp. previously hinted in U.S. Bankruptcy Court filings it would oppose the plan. The Medford-based gourmet food and gift company said, however, that dropping the pensions is a key component in its reorganization plan to exit Chapter 11 court protection later this summer.
"We work to preserve both businesses and their pensions," PBGC Director Josh Gotbaum said in a statement.
"PBGC doesn't ask a company to risk its business if it can't afford its pension plan, but many companies have gone through bankruptcy with their pensions intact, and we think Harry & David might be one of them."
There was no comment from the New York firm handling Harry & David's public relations during its reorganization.
The pension plan is underfunded by about $23.6 million, Harry & David said in a May 9 court filing. PBGC said the company would owe $45 million should the plan be canceled.
While Harry & David claims it can't reorganize unless it terminates its pension plan, PBGC said its financial analysis shows that the company will be able to emerge from bankruptcy without cutting off its workers' pensions. The Delaware bankruptcy court will hold a hearing on the issue on July 22.
If the pension plan is terminated, PBGC will pay pension benefits to Harry & David employees. Because of limits set by law, some retirees might get reduced pensions. A PBGC spokesman indicated this spring that those most likely to be affected would be on the upper income end. PBGC noted in today's announcement it does not ensure health benefits at all.
"Time after time, PBGC has worked successfully with companies and their creditors to make sure that the bankruptcy process recognizes the rights of pensioners, too," Gotbaum said. "We know that Harry & David can reorganize successfully. We'd just like to make sure that their employees and retirees share in that success. Preserving a plan is almost always better for employees."
The PBGC assures pension benefits of 44 million people connected with 27,500 pension plans. The agency pays the benefits of more than 1.5 million people in failed pension plans, but receives no taxpayer dollars. Its operations are financed by insurance premiums and with assets and recoveries from failed plans.
Reach reporter Greg Stiles at 541-776-4463 or email firstname.lastname@example.org.