Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Termination Premiums Under ERISA Held to Be Dischargeable Prepetition Claims

By William J.F. Roll, III, Michael H. Torkin and Solomon J. Noh
April 25, 2008

In a matter of first impression, the United States Bankruptcy Court for the Southern District of New York held that the termination premiums assessed against Oneida Ltd. ('Oneida') as a result of the termination of one of Oneida's pension plans during its Chapter 11 case were prepetition 'claims' (as defined in
' 101(5) of title 11 of the United States Code (the 'Bankruptcy Code')) that were discharged under Oneida's confirmed plan of reorganization. Oneida Ltd. v. Pension Ben. Guar. Corp. (In re Oneida Ltd.), Case No. 06-01920 (ALG), 2008 WL 516493 (Bankr. S.D.N.Y. Feb. 27, 2008) (the 'Memorandum Opinion').

The controversy at issue in the court's decision originated from The Deficit Reduction Act of 2005 ('DRA'), which amended the Employee Retirement Income Security Act of 1974 ('ERISA') to require a debtor that effectuates a 'distress' termination of an underfunded pension plan in Chapter 11 to pay termination premiums to the Pension Benefit Guaranty Corporation (the 'PBGC') following its discharge in bankruptcy. (The termination premiums are not applicable to a debtor that does not receive a bankruptcy discharge, including a debtor that liquidates after terminating its pension plan obligations.) Those premiums, set at $1,250 per employee covered by the terminated plan, per year for three years, could amount to hundreds of millions of dollars in post-bankruptcy liabilities for reorganized debtors, and could limit significantly the benefits of terminating an underfunded pension plan in Chapter 11. In certain cases, the cost of the termination premiums could even exceed the amount of the terminated pension funding liability.

The bankruptcy court's decision establishing the dischargeability of these post-bankruptcy emergence obligations has broad-ranging implications, not just for troubled industries that are burdened with unsustainable 'legacy' liabilities (such as the automotive sector, for example), but for all Chapter 11 debtors.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Legal Possession: What Does It Mean? Image

Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.

The Anti-Assignment Override Provisions Image

UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?