Pittsburgh Brewing Co., long famous as the maker of Iron City beer, is trying to terminate its underfunded defined-benefit plan and have the Pension Benefit Guaranty Corp. assume the obligations, according to The Wall Street Journal.
The pension plan, which covers 530 current and former employees, is underfunded by $12 million, reported the Journal. What’s unusual, the newspaper added, is that while most companies seeking to terminate their pension obligations do so as part of a bankruptcy filing or reorganization plan, Pittsburgh Brewing is not filing for bankruptcy protection.
The 140-year-old company has lost $1.2 million from operations during the past three years despite $1 million in cost reductions and forbearance by creditors, according to the Journal, which cited a letter from the brewer to the PBGC. In fact, the company reportedly wrote that lenders refused to provide $1.5 million in funding precisely because of its underfunded pension.
Of course, if Pittsburgh Brewing were able to terminate its pension plan outside of bankruptcy, it would probably open up a flood of requests from other companies that want to walk away from what’s often a huge, growing, unpredictable long-term liability.
Don’t count on this happening, however. As the Journal pointed out, the PBGC’s long-term liabilities already exceed its assets by $23 billion, according to the agency’s 2004 annual report.
For a company to walk away from its obligations, PBGC spokesman Jeffrey Speicher told the paper, it must “demonstrate that they couldn’t continue to do business unless they terminate their plan.”
Separately, a bankruptcy judge has approved a request by Delta Air Lines Inc. that it freeze monthly payments to its pilots’ pension plan, beginning with $160 million that had been due October 15. Lawyers for the airline, which filed for bankruptcy last month, argued that without the halt in payments, Delta might owe the pension plan as much as $1 billion by January, according to Reuters.