Hostess used pension money before folding

[marmar]

Hostess Brands Inc. said it used wages that were supposed to help fund employee pensions for the company's operations as it sank toward bankruptcy.

It isn't clear how many of the Irving, Texas, company's workers were affected by the move or how much money never wound up in their pension plans as promised.

After the company said in August 2011 that it would stop making pension contributions, the foregone wages weren't put toward the pension. Nor were they restored.

The maker of Twinkies, Ho-Hos and Wonder Bread filed for bankruptcy protection in January and shut down last month following a strike by one of the unions representing Hostess workers. A judge is overseeing the sale of company assets. ....................(more)

The complete piece is at: http://finance.yahoo.com/news/hostess-maneuver-deprived-pension-051400720.html

[mercuryblues]

1. color me surprised

typical vampire capitalism. When the hedge fund bought Hostess, Hostess was to be nothing more than a cash cow for them for a few years. Then off to the graveyard when there was no more blood to suck out of them.

[dballance]

2. And How Much of that Money went to Exec's Compensation/Bonuses

Surely that would have to be fraud or conversion or unjust enrichment of some sort.

[freshwest]

45. Some of that was stopped by the bankruptcy judge. I wonder if there's a case to be made about the

retirees possibly ending up getting paid by:

The Pension Benefit Guaranty Corporation (PBGC) is an independent agency of the United States government that was created by the Employee Retirement Income Security Act of 1974 (ERISA) to encourage the continuation and maintenance of voluntary private defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at the lowest level necessary to carry out its operations. Subject to other statutory limitations, the PBGC insurance program pays pension benefits up to the maximum guaranteed benefit set by law to participants who retire at age 65 ($54,000 a year as of 2011).[2] The benefits payable to insured retirees who start their benefits at ages other than 65, or who elect survivor coverage, are adjusted to be equivalent in value.

During fiscal year 2010, the PBGC paid $5.6 billion in benefits to participants of failed pension plans. That year, 147 pension plans failed, and the PBGC's deficit increased 4.5 percent to $23 billion. The PBGC has a total of $102.5 billion in obligations and $79.5 billion in assets.[3]

http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

This seems like the same thing that WalMart is doing to current employees, dumping them on the taxpayers for food stamps and health care.

The reason I bring the PBGC into this post is that I had to check this out when earlier this year the firm managing pensions for my employer began sending statements warning us they had the right to terminate the plan. They cited legales that said that ecause their revenues were not maintaining the amount needed to cover the liabilities they had coming in the future (like me), we might need to get paid by the PBGC.

It was depressing. After receiving several notices, I'd given up hope of getting it, and really thought hard about the promises made, even with a union contract, that get broken. I don't know that the company was having any business problems.

Then a few months ago the corporation I worked for reorganized itself. Suddenly they dumped the well-known, long-term investment firm who'd managed the fund for many, many years. And the company made the fund solvent again with an infusion of over $9B.

They sent out letters telling us to disregard all the notices we'd received, and a new explanation, which showed they would not only not be any changes, but some improvements, so we'll get our pensions as planned. A happy ending.

Perhaps Hostess could have done this. Since the taxpayers will have to take the hit, I would think the federal government has a stake in this and should seek compensation. I'm no attorney, though. But I wish these folks could have had a better outcome.

[reteachinwi]

53. pension insurance?

I think the practice of underfunding pensions and using the funds for other purposes in bankruptcy proceedings while dumping the responsibility for the pensioners on the PBGC needs to be changed. The takers enrich themselves by making the PBGC insolvent.

[freshwest]

59. True. That's why I say the government has a stake in this. But I can just here the howls now...

More regulation? That's Socialism! Look! Obama's taking aways our free-dumb and liberty!



If we had a social democracy, all these tricksters would be stopped in their tracks before they got things like this. I'm betting that Warren is going to kick some major tail next year.

[dballance]

61. Yep, Lets Stop Talking About that 47%

That 47% of people who take up less than the defense budget or the bailout out programs.

Let's have a discussion about fat cat CEOs who load up a company with debt, declare bankruptcy, and get the courts to say they don't have to pay the pensions they promised people so those pensions fall on us, the tax payer. All while those CEOs still collect a great salary and bonuses to help liquidate the company they totally ruined. Why exactly are we giving them bonuses to stay and liquidate the company they ruined? Why aren't we sending them away and empowering a trustee for the shareholders and employees?

[1StrongBlackMan]

3. Gee ...

I wonder what would happen to me if I took all the money in the escrow account for my home and maxed out all my card cards, just before I file bankrupcty?

[HiPointDem]

5. probably a lot worse than will happen to these execs. i would be hard-pressed not to support

tarring and feathering for their ilk -- rich people who steal from the poor.

[HiPointDem]

4. those thieves should be thrown in jail and all their assets seized. you can bet some of that

money went to fund the raises and perks for the people running the company. outright theft, & then they have the nerve to badmouth the workers for forcing the closure.

closure was part of their fucking agenda; they drained and bankrupted the company on purpose.

[dchill]

36. "their fucking agenda"

Yep. Exactly what it was/is. I hope that someone in charge of these proceedings is able to determine that something in this "agenda" was illegal. Criminal. If corporations are now people, then they should be subject to prison terms.

[JaneyVee]

6. This part is something I never knew:

"Most companies provide pensions through single-employer plans that they fund themselves. When companies with these plans file for bankruptcy protection, they sometimes terminate the plans, leading the Pension Benefit Guaranty Corp., the government agency that insures corporate pensions, to take over the plans and make payouts to their retirees."

Capitalize the profits, socialize the losses.

[antigop]

13. The PBGC is NOT funded by taxpayers.. see the PBGC website (link)

http://www.pbgc.gov/about/how-pbgc-operates.html

How PBGC operates:

PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

[JaneyVee]

14. Good for that, but those losses will find their way to the taxpayers somehow.

[antigop]

17. No they don't ...it's a misconception about the PBGC

The only way the taxpayers are on the hook is if the PBGC needs a bailout and Congress approves. That hasn't happened.

In fact, PBGC premiums were increased this year with the highway bill:

http://www.proskauer.com/news/detail.aspx?news=8064

On July 6, 2012, President Obama signed into law the Moving Ahead for Progress in the 21st Century Act ("MAP-21&quot , a transportation bill that contained revenue-generating pension provisions that are particularly relevant for sponsors of defined benefit pension plans. Specifically, the pension provisions contain (i) relief from the pension funding requirements attendant to the current low interest rate environment; (ii) Pension Benefit Guaranty Corporation ("PBGC&quot premium increases for single employer and multiemployer plans;

The PBGC premiums are paid for by the companies that sponsor defined benefit pension plans.


As the PBGC website says,

Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

[Yavapai]

33. Don't forget that the pension benefits are about 25% of the original pension.

This happened to me after 19 years at Kaiser Steal corporation in California.

I get about $250 per month instead of the $1200 a month I should have received.

We can thank Ronald fucking Reagan and the Republican party for this legalized theft.

This equals a loss of about $80,000 so far!!!

[Ilsa]

39. Read & Rec this post. Conclusion: employees

get screwed out of the majority of their pensions while the executives walk away with bonuses, etc if they can get the bankruptcy judge to allow them so they can "keep their talented execs through the bankruptcy process."
Organized, legal theft of wages to employees. And before anyone says pensions aren't wages, then they've never worked for less because of the promise of a good pension.

[JaneyVee]

41. Yup, and you can guarantee the money they stole isn't even in the U.S. anymore.

[abelenkpe]

49. employees have their pensions stolen

401ks are the pensions fee heavy market dependent piss poor substitute but republicans like Coburn think social security and medicare aren't necessities. Is that right?

[antigop]

57. absolutely, Ilsa. Pensions are "deferred compensation". n/t

[happyslug]

22. Prices "Set by Congress" is another name for "Tax".

That is what the Supreme Court ruled on Obama-care, just because the word "Tax" is NOT used and money goes somewhere other then into the General Fund, does NOT mean it is NOT a tax. It is a tax on the pensions themselves, but is still a TAX and as a tax is paid by Taxpayers, in this case people who are expecting to get pensions.

[antigop]

23. no, that is NOT the way it works. The Corporations pay premiums to PBGC.

The rates for the PBGC premiums are set by Congress.

And the transportation bill that was passed this year increased those premiums that the corporations pay.

[A Simple Game]

50. Of course you are right, the taxpayers don't cover the bills.

Try swapping consumer for taxpayer, how does that change things.

Here's how it works: the consumer pays for the initial pension plan, then the consumer pays for the secondary pension plan.

Does that make you happier?

[antigop]

55. the consumer doesn't pay for a "secondary pension plan" if the PBGC takes over the pension plan

The pensions are paid out of the PBGC funds that were contributed by corporations who offer pension plans, the interest on the investments in the PBGC, and assets from the pension plan that was taken over.

This is clearly stated on the PBGC website I linked to above.

[A Simple Game]

64. So you admit that the primary pension plan gets it's money from the consumer?

We know this to be true because all corporate money eventually comes from the consumer. Do you disagree?

If it is true that the money to fund the primary pension plan comes from the consumer, why don't the PBGC funds ultimately come from the consumer?

[antigop]

66. no I didn't say that. nt

[A Simple Game]

67. So do you believe that when all is said and done,

that you and I and everyone else are paying twice for those peoples pensions?

[happyslug]

77. That is still a requirement to pay set by Congress, which is the definition of a TAX

Just because Congress calls it something else means nothing. Congress can NOT set premiums, but it can demand that people, like self insured pension plans pay a TAX. Thus this is a TAX, no matter what Congress decides to call.

With a premium, you do NOT have to pay for you can OPT out of such insurance, Congress says such pension plans can NOT opt out thus the payment set by Congress thus this required payment is is NOT a premium but a tax.

[antigop]

78. The corporations who sponsor db pension plans pay the premiiums to the PBGC.

The PBGC is like an insurance program that sponsors of defined benefit pension programs participate in.

I don't know how many times I have to quote the PBGC website:
http://www.pbgc.gov/about/how-pbgc-operates.html

PBGC receives no funds from general tax revenues.

I do not have any more time to respond to this...I have stated how it works and have linked to the actual PBGC website.

[kirby]

79. Not really true...

They aren't funded by the taxpayer just like 'Fannie Mae' and 'Freddie Mac' are not.
It says so on paper, but if things go south, they are deemed too big to fail and the taxpayers end up paying for the corporate greed.

The PBGC is already like $30billion dollars in the red and keep in mind that they do not pay dollar for dollar on claims.

[antigop]

80. yes, it is true. As I mentioned in reply #17

The only way the taxpayers are on the hook is if the PBGC needs a bailout and Congress approves. That hasn't happened.


edit to add: and the highway bill passed this year increased PBGC premiums.

[kirby]

87. You just made the point that I made...

If the PBGC needs a bailout it will cost the taxpayer. As I said i my original post, PBGC is already $30billion in debt and there has been an increase in corporations filing bankruptcy with the intent of shifting their underfunded pensions onto the PBGC.

So, no it has not happened yet, but we are on that glide path. Yes the highway bill increased the premiums and even allow them to adjust for inflation, however, pension outflows will exceed this. The highway bills helps PBGC stay self-funded, but if there continues to be massive shocks to the pension systems, the PBGC will need a bailout.

The bigger injustice here is when employees end up getting 30 cents on the dollar of the retirements that they earned.

[antigop]

89. "no it has not happened" --- thank you. That's what I said. And there are other things going on

with pensions such as selling them to third parties (like Prudential) so there is no more PBGC guarantee.

PBGC guarantees are being removed,

Verizon:
http://www.businessinsurance.com/article/20121207/NEWS03/121209894

GM:
http://news.prudential.com/article_display.cfm?article_id=6271

And companies are offering lump sums so people just take their money out of the pension plan in a lump sum.
Ford:
http://www.forbes.com/sites/joannmuller/2012/04/27/ford-offers-retirees-a-bag-of-cash-to-go-away/

Lockheed Martin:
http://www.pionline.com/article/20121211/DAILYREG/121219975/lockheed-martin-offers-lump-sums-to-some-salaried-non-union-former-employees

Google" "lump sum" + "pension" for more.

PBGC guarantees are going away for lots of employees.

My statement is true: "The PBGC is not funded out of general revenue taxes."

[avebury]

16. That is just what Bain did routinely. nt

[nadinbrzezinski]

7. I am shocked I tell you, SHOCKED!!!

[Sherman A1]

30. Agreed

This is beyond outrageous, but hardly surprising. They have been stealing from their employees for years.

[RoccoR5955]

8. This kind of garbage

Has got to be made illegal. These vultures are gobbling up everything they can, and leaving workers with nothing.

Perhaps it's time for the tar and feathers.

[99th_Monkey]

20. Don't forget the pitchforks. ~nt

[Efilroft Sul]

21. You're too kind, Rocco.

[Initech]

85. If I were in charge this type of thing would be a federal felony punished by minimum 20 years in jai

[Historic NY]

9. Isn't there some kind of pension protect legislation?

[jtuck004]

40. Absolutely. It protects the rights of companies to steal workers pensions. n/t

[Rocky888]

10. They took a page from Bain's rule book of "How to steal from the lesser people".

[JaneyVee]

15. Yeah they did. Vulture capitalism, it's all the rage for the 21st century.

[AllyCat]

11. Of course. The 1% see a pile of cash

and if they see it, they think it's theirs. Doesn't matter if it's someone's pension, their social security, their tax money. No one has money except them. So it MUST be theirs. Money is them.

[Initech]

84. Yup. They'd take candy from a baby if it helped their profit margins.

[mtasselin]

12. Prison

These assholes should be in prison for allowing this company to be run in the ground but no they got bonuses from the judge.

[AnotherMcIntosh]

18. Does Holder know about this? If so, does it matter?

[cstanleytech]

19. I thought that was called embezzlement?

[antigop]

24. For a very good book on how people have been screwed on their pensions.....

read "Retirement Heist" by Ellen Schultz, a WSJ reporter who has written many articles on the subject.

[nadinbrzezinski]

34. Thanks, next on reading "pile"

Kindle.

[antigop]

56. I found it to bea very difficult read because I got so angry reading each chapter. But Ms. Schultz

does an excellent job of explaining how the money goes from the retirees to the executives.

[femrap]

25. Who knew?

"Betrayal Without Remedy" happens unfortunately.

Now I know what I've been experiencing since 1980!

[mike_c]

26. someone should go to jail for that....

But I'm not holding my breath. This isn't Iceland.

[Dont call me Shirley]

27. More accurate title reads: Hostses Stole Pension Money before Folding

[mountain grammy]

28. I always wonder how many of these former employees

consider themselves Republican. This is the Rmoney, republicon way of doing business. If they could make these products in another country, they would in a heartbeat. I'm watching the mess in Michigan and wondering who votes for these representatives and governors? Nationally, Boehner, Cantor, Bachmann all re-elected. Is it all due to gerrymandering and money? I know a lot of it is, but geez, folks, why?

[lpbk2713]

29. "Sorry guys, but we had to make sure our Golden Parachutes were covered"

"You understand ... right?"






Assholes.

[October]

31. This has been going on in the airline industry for decades. /nt

[geckosfeet]

32. dang those unions

[KamaAina]

35. What a buch of Ding Dongs.

[tclambert]

37. Didn't Denny McLain, former pitcher for the Detroit Tigers, go to prison for the exact same thing?

He and a group of partners bought Peet Packing. It went bankrupt and he spent six years in prison in connection with the theft of $2.5 million from the company's pension fund.

[benld74]

38. 'Scum of the Earth that management was!!!

[jtuck004]

42. This has been happening for decades. Did everyone just fall off the truck?

This happened to workers in the companies in the Obama ads for re-election. Several Congresses have written laws to make this possible, and advantageous for tax purposes. There's whole books written about it.

I can't figure out why anyone is surprised. It's been going on for years, public knowledge, printed in the newsie papers for everyone to read.

Are you just pissed they interrupted your supply of Twinkies?

[marmar]

47. No one is surprised, but Hostess has been in the news, so naturally it's a story.

I think we can do without the sanctimoniousness.

[jtuck004]

54. Sanctimonious indeed. It's not news, it happens repeatedly, people have their

money stolen, in this very way, while the thieves sail off with the cash.

Those comments indicate that a number of people are in fact surprised. I really don't see how they could not know, if they really care. Or maybe it's just more useless sniping by people too lazy to educate themselves.

Maybe people should learn to spell "library" as well as "sanctimonious".

It's no wonder these bastards are taking everyone's money. There is no competition that rises to the level of effort they are willing to put in to steal it.

Instead people stand around and call people names while pretending to give a shit.

[abelenkpe]

43. So the courts will claw that money back from CEO's in order to not screw workers right?

Cause y'know in a just world that is what would happen.

[me b zola]

44. Isn't this theft?

They've been stealing our pensions for years and getting away with it.

[aquart]

46. To me, stealing pension funds is a form of mass homicide warranting the death penalty.

[HiPointDem]

51. +100.

[Starry Messenger]

75. +200

[mwooldri]

48. Yet another good reason for what I call "Social Security Plus".

Instead of contributing to a 401k plan or a company pension, employees should have the right to make contributions to a Federal Second Pension plan, based on their salary made. I call it Social Security Plus, because it could be seen as an add-on to Social Security - when the time comes to draw on SS... if Plus contributions were made the SS given out would be bigger than standard SS. No companies bailing out on their pension funds, and no 401ks becoming 101ks...

[antigop]

58. as long as we use Al Gore's lock box so the funds can't be used for anything else. nt

[Flatulo]

71. Nah, then the politicians would just steal it. nt

[Berlum]

52. Republican "values"

as usual.

[Swede Atlanta]

60. This is the kind of S**T that should not be allowed.....

the frigging executives screwed up so they cannibalize the workers' pensions to try to save the company.

They should commit public suicide when they do this shit. They do it in Japan.

I'm tired of letting the laws allow companies to raid the futures of employees because the executives fuck up and they walk way with millions in golden parachutes. My idea for them of a golden anything cannot be communicated in this forum.

[doc03]

62. My employer went through two bankruptcies and both times they

robbed our pension fund and the f---g bankruptcy judge approved it. When a company liquidates I think the pensions should get 1st priority but the employees are last in line. When a company dumps their pensions on the PBGC they should take all their assets if necessary to fund their pensions. After the PBGC was created companies have used it to dump their pensions on the government. The PBGC has been used as a corporate welfare program.

[SmileyRose]

73. banks get first dibs. peons can go suck it. bankruptcy law in America

they bankrupted the holding company but I can promise you there's money up to their eyeballs. most of the assets will be held by the few who own the other corporations. Mostly only what they consider liabilities will get bankrupted.

[tabasco]

63. Unconscionable.

The USA in 2012.

[DemoTex]

65. WOW! Just like US Airways did.

This ain't nothing new, folks.

[Yo_Mama_Been_Loggin]

68. Yes these assholes should be in prison but

from the article:

The maneuver probably doesn't violate federal law because the money Hostess failed to put into the pension didn't come directly from employees, experts said.

"It's what lawyers call betrayal without remedy," said James P. Baker, a partner at Baker & McKenzie LLP who specializes in employee benefits and isn't involved in the Hostess case. "It's sad, but that stuff does happen, unfortunately."

Congress needs to get off their asses and reform this but with tea bagging assholes like John Boehner and Mitch McConnell I don't expect this to happen anytime soon.

[Kablooie]

69. Why isn't this illegal? It's theft but no one ever get charged.

[cbdo2007]

70. Just another reason why the stock market is safer than pensions.

Why put your trust in one company when you could spread risk over hundreds or thousands?? Don't bash me, look at the data.

[nc4bo]

82. If what companies like Hostess does were to become illegal............

but seems everything is written on behalf of the 1%ers.

It also seems it matters not that the majority of citizens do not agree with it and our votes in elections don't seem to matter and no matter how many phone calls, letters written or emailed, petitions signed and delivered, protests waged, what We, The People think, believe, demand, our voices remain, for the most part, ignored by all.

We don't have many peaceful options left to us.

[SomeGuyInEagan]

86. Correct - laws are written to benefit the 1 %. This is America under Reagan+30.

Both parties are complicit in the screwing of the middle and lower classes in this country, to the benefit of the upper, upper class.

Sure, there are always a couple of decent pols out there, but the majority work on behalf of the top 1 %..

[99Forever]

72. And they will get away with it.

After all, Eric Holder and Crew have Pot Smoking Hippies to go after in two more states.

[woo me with science]

76. Nothing to see here? Move along?

Time to go after someone for pot?

[jmowreader]

81. Go to my two favorite tutorials on this

Watch Wall Street then read Barbarians at the Gate.

Wall Street is especially fun: when Bud Fox was pitching Bluestar to Gekko, he cited the "overfunded pension plan" as one of the assets to be used to pay for the buyout. Fox's own father would be irreparably damaged by this, but all Bud saw was his own bank account.

Barbarians is more techniical but after reading it you'll know two things: how to buy a company, and why not to.

[Initech]

83. Take the money and run. That's what these greedy assholes do best.

[SoCalDem]

88. Hunters usually butcher the kill before they leave the bloody carcass in the woods..n/t