What happens to retirees pensions when a major company files chapter 11?
With Lehman Bros. filing for chapter 11, what happens to retireee pensions and medical benefits? Will they just cease, will they be restructured, will they be untouched?
Any info would be very helpful, Thank you.
If the company fails, you would most likely lose your retiree medical benefits. You could most likely get continuation coverage under COBRA, but this would be expensive as you would be out in the individual market and no longer under a group plan.
You don’t mention what type of pension you have. If it is a 401(k) plan, all the money contributed is in an account in your name and nothing changes except maybe your plan administrator. If you have a defined benefit plan, the plan is insured up to a point by the federal government (Pension Benefit Guarantee Corp.), however, depending upon your pension level, you may not get 100% (it will depend upon how fully funded the Lehman pension is).
If the pension plans are fully funded, then it’s a non-issue – the pension funds should be under control of the pension administrator – not the company – If the pension is not fully funded, then the employees get hurt, because they probably won’t get everything they expected at retirement
They are safe if the retirement is something not controlled by the company, like a 401K, unless it is invested too heavily in company stock.