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Wednesday, November 28, 2012
by Florence Olsen
Recent efforts by Hostess Brands Inc. to use
bankruptcy to discharge withdrawal liabilities totaling nearly $2 billion
highlight a persistent and serious problem for multiemployer plans, a
retirement industry official told BNA.
Employers such as snack food maker Hostess have
tried using bankruptcy to avoid their withdrawal obligations, to the detriment
of multiemployer plan participants, their beneficiaries, and the employers that
continue to contribute to those plans, Randy G. DeFrehn, executive director of
the National Coordinating Committee for Multiemployer Plans (NCCMP), said in a
Nov. 20 interview.
NCCMP made that same argument in an amicus brief that it
submitted in February to the U.S. Bankruptcy Court for the Southern District of
New York in the Chapter 11 bankruptcy case In re: Hostess
Brands Inc. More recently, Hostess announced
Nov. 16 that it had decided to seek bankruptcy court permission to shut down
its operations and liquidate its business in the wake of a bakers' union
strike, and that request was approved by a bankruptcy judge Nov. 21, the
In the case of Hostess, the employer's
withdrawal liabilities are “enormous,” and it should not be permitted “just to
dump those on its competitors,” DeFrehn said.
Withdrawal liability refers to the statutory obligation of an employer that
contributes to a multiemployer plan to pay off its share of benefit obligations
before it withdraws from the plan. Hostess has
withdrawal liabilities associated with 42 multiemployer plans, according to the
Pension Benefit Guaranty Corporation.
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