Will court approve Texas company’s pension freeze?
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Will court approve Texas company’s pension freeze?

| Oct 12, 2012 | ERISA

In Texas and throughout the country, employee benefits including pension plans are governed by the Employee Retirement Income Security Act. When a company makes a change to its benefits offerings or administration, it must make sure its policies all comply with ERISA. And, when an employee is denied insurance or other benefits, they may often file an ERISA claim.

Recently, Hostess Brands, Inc., of Irving, Texas, asked a bankruptcy court to allow it to withhold contributions to it multiemployer pension plans and company defined benefit plan as part of its Chapter 11 bankruptcy filing. In order for these changes to be allowed, they must be in compliance with ERISA.

Hostess has proposed halting contributions to the benefit plan for two years, restarting again in 2015. As of June, the benefit plan had $84 million in liabilities and $56 million in assets.

In addition, Hostess would also like to withdraw from multiemployer pension plans to which it currently contributes. The company would decide later whether to re-enter the plans.

Hostess is already behind on its contributions. It was contributing around $8 million monthly until August 2011, but it owes $1.04 million for 2011 and $6.5 million for 2012.

This change will of course have a very significant effect on the employee benefits utilized by Hostess employees.

The company has blamed high pension and benefit costs for its bankruptcy. Because these changes are being made as part of the bankruptcy process, anything that will be done will likely be legal, if unfortunate for employees. In other situations, companies make changes without court approval and when employees notice they are being denied benefits they may be wise to seek legal counsel to learn whether ERISA violations exist.

Source: Pensions & Investments, “Hostess Brands proposes 2-year contribution holiday for DB, multiemployer plans,” Kevin Olsen, Oct. 11, 2012