Pension Rights Center Asks Congress to Protect Workers’ Retirement Security in Corporate Bankruptcies

Pension Rights Center Asks Congress to Protect Workers’ Retirement Security in Corporate Bankruptcies

WASHINGTON – At a Congressional hearing today, the Pension Rights Center expressed its support for a bill that would stop companies from abusing bankruptcy laws to escape their pension obligations.  Testifying on H.R. 3652, the Protecting Employees and Retirees in Business Bankruptcies Act of 2007, the Center illustrated how thousands of workers and retirees are hurt by certain corporate bankruptcy practices – practices that would be restricted by the bill.

“H.R. 3652 will provide critical retirement protections,” said Karen Friedman, policy director for the Center, who appeared before the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee.  “While companies once used bankruptcy proceedings only as a tool of last resort, they now commonly view bankruptcies as a viable business strategy that allows them to unfairly eliminate long-standing pension obligations.”

Drawing on real-life bankruptcies, such as United Airlines and Enron, Friedman detailed how H.R. 3652 would strengthen retirement security by

• Enabling workers and retirees whose pension benefits are not fully covered by the Pension Benefit Guaranty Corporation (PBGC) to file a claim against the plan sponsor in bankruptcy court for the full amount they earned.  Under current law, they are precluded from making such a claim for the difference between what the PBGC provides and what the plan had promised.
• Giving higher priority in bankruptcy court to workers whose company stock in a 401(k) plan plummets because of corporate misdeeds or fraud.
• Ensuring that company executives cannot enrich themselves while employees suffer benefit cuts.  If an employer terminates a pension plan for workers, the executive compensation arrangements must be discontinued as well.

“Pension dumping is a short-term strategy with devastating long-term consequences for workers who were relying on those pensions in their retirement,” said Friedman.  “This bill recognizes that employees have upheld their end of their bargain, giving their labor and loyalty to their employers.  At the very least, these workers should be allowed to have their day in court to protect what they have earned.”

Read the Pension Rights Center’s testimony.

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Contact Name: Nancy Hwa
202-296-3776