Federal Agency Seeks Control of Pension Plan

The government’s pension insurance program is asking a federal court to give it control of the underfunded retirement plan of a company formerly owned by Global Crossing Ltd.

Pensions of 5,500 workers and retirees of Frontier Corp. are short by $105 million, the Pension Benefit Guaranty Corp. estimates. The telecommunications company, based in Rochester, N.Y., was owned by Global Crossing until it was sold last year.

The PBGC is asking the U.S. District Court in New York to terminate the pension plan as of Dec. 3 and to name it as the trustee.

Frontier was sold to Citizens Communications Co. in 2001, and the sale agreement specified that Global Crossing transfer almost all of the pension plan to the buyer. Global Crossing, the fiber-optics company that has filed for bankruptcy protection, has not made the transfer, according to the PBGC.

In bankruptcy proceedings, Global Crossing, founded by Los Angeles financier Gary Winnick, has proposed a reorganization that includes transferring the retirement plan to a liquidating trust controlled by its creditors. The reorganization plan could be approved at a Dec. 4 court hearing, and the PBGC wants to act before then.

“We cannot allow an abusive arrangement that shoves an underfunded pension plan into a liquidating trust where all the gains belong to a select group of creditors and all the losses are dumped on the PBGC,” Executive Director Steven Kandarian said.

The PBGC would prefer that the retirement plan be transferred to Citizens Communications as originally planned.

“But we have to act now to protect participants and to increase the chances of recovering enough to minimize the hit to the pension insurance program,” Kandarian said.

Global Crossing spokeswoman Rebecca Yeamans said: “All payments to retirees are continuing uninterrupted during this process, and participants’ money is protected under federal law regardless of the outcome of this objection.”

The government corporation was created in 1974 to insure payment of basic pension benefits for workers in the private sector. It is financed largely from insurance premiums paid by companies that sponsor pension plans and by the PBGC’s investment returns. Participants in a plan taken over by the program receive, on average, about 94% of benefits they had earned.

Frontier workers and retirees do not need to take any action.