IndyMac had a pension plan -- and managed not to ruin it

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IndyMac Bancorp’s former executive team ran the Pasadena lender into the ground with their ridiculously risky mortgage lending.

Yet the company did get one financial-management job right: its employee pension fund.

The defined-benefit plan for IndyMac Bank was taken over by the federal Pension Benefit Guaranty Corp. on Tuesday, after the plan was in effect abandoned because the holding company for the bank is in liquidation.

But the PBGC said the pension plan was in much better shape than many of the funds the agency has been forced to absorb.

The IndyMac plan is 89% funded, with assets of $33 million and benefit liabilities of $37 million, the PBGC said.

The 89% coverage of liabilities ‘is a high number . . . it’s a well-funded plan,’ said Gary Pastorius, a spokesman for the PBGC in Washington. That’s a good thing, considering other challenges facing the PBGC.

It seems unlikely that the IndyMac fund owned much, if any, of the bank’s stock, which now is virtually worthless.

IndyMac was declared insolvent in July 2008, and its failure is expected to cost the Federal Deposit Insurance Corp. fund almost $11 billlion. The FDIC in March sold most of IndyMac’s assets to an investor group that has renamed the successor bank OneWest.

But OneWest didn’t want responsibility for the pension plan, which covers nearly 1,900 workers and retirees of the bank. So under federal law the PBGC was obligated to step in and guarantee the promised benefits of the plan.

Pastorius said he didn’t know if former senior executives of IndyMac were covered by the pension fund, though he said such plans ‘tend to cover rank-and-file workers.’ Though many companies halted enrollment in their defined-benefit pension plans years ago, IndyMac’s plan wasn’t frozen until May 2007.

For pension plans terminated in 2008, including the IndyMac plan, the maximum annual pension guaranteed by the PBGC is $51,750 for workers at age 65. Many beneficiaries, of course, will get much less, depending on their plan’s original rules.

The PBGC also noted that, in general with plans it takes over, ‘Certain early-retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.’ So future IndyMac retirees may not yet know exactly what their benefits will be.

But current IndyMac retirees ‘will continue to receive their monthly benefit checks without interruption,’ the PBGC said.

-- Tom Petruno