Employer-Sponsored Benefits: Many Factors Affect the Treatment of
Pension and Health Benefits in Chapter 11 Bankruptcy (06-SEP-07, 
GAO-07-1101).							 
                                                                 
In recent years, considerable debate has centered on companies	 
using the chapter 11 bankruptcy reorganization process to reduce 
or eliminate employer-sponsored benefits in an effort to become  
more competitive. Congress recently enacted several laws, in	 
part, to help address this issue. Most notably, Congress passed  
the Bankruptcy Abuse Prevention and Consumer Protection Act of	 
2005 (BAPCPA) and the Pension Protection Act of 2006 (PPA).	 
BAPCPA contained provisions related to chapter 11 business	 
bankruptcies and sought to address the treatment of benefits	 
during the bankruptcy process. In addition, the PPA amended	 
several Employee Retirement Income Security Act of 1974 (ERISA)  
provisions related to defined benefit (DB) plans in bankruptcy.  
This report addresses (1) how, if at all, recent legislative	 
changes affected the treatment of pension and health benefits	 
during chapter 11 bankruptcies, and (2) what is known about the  
extent to which businesses have modified employee or retiree	 
pension and health benefits. GAO reviewed filings of 115 public  
companies that filed for bankruptcy between October 17, 2004 and 
October 17, 2006, and conducted interviews with various experts  
on the treatment of benefits in the bankruptcy process. Relevant 
federal agencies agreed with the findings contained in this	 
report. 							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1101					        
    ACCNO:   A75753						        
  TITLE:     Employer-Sponsored Benefits: Many Factors Affect the     
Treatment of Pension and Health Benefits in Chapter 11 Bankruptcy
     DATE:   09/06/2007 
  SUBJECT:   Bankruptcy 					 
	     Employee benefit plans				 
	     Employee medical benefits				 
	     Employee retirement plans				 
	     Legislation					 
	     Legislative procedures				 
	     Pensions						 
	     Retirement benefits				 
	     Policies and procedures				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-07-1101

   

     * [1]Summary of Findings
     * [2]Concluding Observations
     * [3]Agency Comments and Our Evaluation
     * [4]GAO Contacts
     * [5]Staff Acknowledgments
     * [6]GAO's Mission
     * [7]Obtaining Copies of GAO Reports and Testimony

          * [8]Order by Mail or Phone

     * [9]To Report Fraud, Waste, and Abuse in Federal Programs
     * [10]Congressional Relations
     * [11]Public Affairs
     * [12]PDF6-Ordering Information.pdf

          * [13]Order by Mail or Phone

Report to Congressional Requesters

United States Government Accountability Office

GAO

September 2007

EMPLOYER-SPONSORED BENEFITS

Many Factors Affect the Treatment of Pension and Health Benefits in
Chapter 11 Bankruptcy

GAO-07-1101

Contents

Letter 1

Summary of Findings 3
Concluding Observations 5
Agency Comments and Our Evaluation 5
Appendix I Briefing Slides 8
Appendix II Select Information on Bankruptcy Cases Reviewed 38
Appendix III Comments from the Pension Benefit Guaranty Corporation 42
Appendix IV GAO Contacts and Staff Acknowledgments 43

Abbreviations

AOUSC Administrative Office of the United States Courts
BAPCPA Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
CBA collective bargaining agreement
DB defined benefit
DC defined contribution
EBSA Employee Benefits Security Administration
ERISA Employee Retirement Income Security Act of 1974
PACER Public Access to Court Electronic Records
PBGC Pension Benefit Guaranty Corporation
PPA Pension Protection Act of 2006
SEC Securities and Exchange Commission

This is a work of the U.S. government and is not subject to copyright
protection in the United States. The published product may be reproduced
and distributed in its entirety without further permission from GAO.
However, because this work may contain copyrighted images or other
material, permission from the copyright holder may be necessary if you
wish to reproduce this material separately.

United States Government Accountability Office
Washington, DC 20548

September 6, 2007

Congressional Requesters

Each year, thousands of employers file for chapter 11 bankruptcy to
reorganize their finances in an attempt to become profitable.^1 This
process can often be contentious, as many stakeholders, including
creditors, and employee and retiree groups, may be competing for
diminishing portions of the employers' remaining assets. In recent years,
considerable debate has centered on the use of the chapter 11 bankruptcy
process by employers to reduce or eliminate benefit obligations in an
effort to become more competitive, and whether such benefit obligations
have disproportionately affected employers in certain industries. For
example, structural problems in industries such as airlines, steel, and
automotive parts manufacturing have led large employers to declare
bankruptcy and terminate their defined benefit (DB) plans.^212 These
recent high-profile bankruptcy reorganizations have frequently resulted in
significant reductions of jobs and employee benefits--including wages,
retirement, and health benefits--and resulted in the Pension Benefit
Guaranty Corporation (PBGC) assuming billions of dollars in underfunded
pension benefit obligations. Each year, thousands of employers file for
chapter 11 bankruptcy to reorganize their finances in an attempt to become
profitable. This process can often be contentious, as many stakeholders,
including creditors, and employee and retiree groups, may be competing for
diminishing portions of the employers' remaining assets. In recent years,
considerable debate has centered on the use of the chapter 11 bankruptcy
process by employers to reduce or eliminate benefit obligations in an
effort to become more competitive, and whether such benefit obligations
have disproportionately affected employers in certain industries. For
example, structural problems in industries such as airlines, steel, and
automotive parts manufacturing have led large employers to declare
bankruptcy and terminate their defined benefit (DB) plans. These recent
high-profile bankruptcy reorganizations have frequently resulted in
significant reductions of jobs and employee benefits--including wages,
retirement, and health benefits--and resulted in the Pension Benefit
Guaranty Corporation (PBGC) assuming billions of dollars in underfunded
pension benefit obligations.

In recent years, Congress enacted several laws to, in part, help address
some of these issues. Most notably, Congress passed the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 (BAPCPA) and the Pension
Protection Act of 2006 (PPA). BAPCPA sought to reduce the number of
perceived abuses in consumer and corporate bankruptcy filings. Although
BAPCPA mainly focused on consumer bankruptcies, it contained certain
provisions related to chapter 11 business bankruptcies In recent years,
Congress enacted several laws to, in part, help address some of these
issues. Most notably, Congress passed the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA) and the Pension Protection Act of
2006 (PPA). BAPCPA sought to reduce the number of perceived abuses in
consumer and corporate bankruptcy filings. Although BAPCPA mainly focused
on consumer bankruptcies, it contained certain provisions related to
chapter 11 business bankruptcies and sought to address the ways in which
employer-sponsored benefits are treated during the bankruptcy process. For
example, BAPCPA established a "look-back" period allowing courts to
reinstate retiree health benefits to what they were before any
modification by the employer during the 180 days prior to filing for
bankruptcy. Among other things, PPA amended the Employee Retirement Income
Security Act of 1974 (ERISA), including several provisions related to the
termination and funding of DB plans in bankruptcy. In response to your
interest in the effects of business bankruptcies on employee and retiree
pension and health benefits, this report addresses (1) how, if at all,
recent legislative changes have affected how businesses may treat pension
and health benefits during chapter 11 bankruptcies, and (2) what is known
about the extent to which businesses have modified employee or retiree
pension or health benefits in chapter 11 bankruptcies before and after
changes in the bankruptcy law took effect.

^1 In this report, we refer to companies that filed for chapter 11
protection under the Bankruptcy Code as employers. In the legislation,
these employers are referred to as debtors, and if the management of such
employers continue to operate the business during the pendency of the
chapter 11 case, they are also referred to as debtors in possession.

^2DB plans generally provide a guaranteed pension based on salary and
years of service, and are often provided as part of a collective
bargaining agreement (CBA)--a written agreement or contract between an
employer and a union that includes provisions on conditions of employment
and the procedures to be used in settling disputes during the term of the
contract. Employers may also offer a defined contribution (DC) plan in
which the employer, participants, or both make contributions to an
individual account, and the benefits are paid based on the contributions
to and investment returns on this account.

To address these questions, we focused on the 115 public employers^3
identified by the Securities and Exchange Commission (SEC) that filed for
chapter 11 bankruptcy the year prior to and the year following BAPCPA's
general enactment date--October 17, 2005. Therefore, our analysis covers
bankruptcy cases filed between October 17, 2004, and October 17, 2006. To
identify key changes to the U. S. Bankruptcy Code and ERISA, we reviewed
BAPCPA and PPA as well as other laws that affected the treatment of
benefits. We interviewed bankruptcy professionals, including researchers,
federal bankruptcy judges, and attorneys, to gain their insights on these
changes and the potential effects they may have on benefits. The attorneys
we interviewed have represented various stakeholders in the chapter 11
process including unions, retiree committees, debtor employers, and
creditors. We also interviewed officials that represented the government
and the public at the PBGC, Administrative Office of the United States
Courts (AOUSC), Department of Justice's U.S. Trustee Program, Department
of Labor's Employee Benefits Security Administration (EBSA), and
Department of the Treasury to obtain their insights on how recent
legislative changes could affect the treatment of benefits in bankruptcy.
Additionally, we interviewed officials at SEC to gain an understanding of
public companies' SEC filings. We reviewed documents submitted in
connection with court motions to change certain benefits (including DB
plans, retiree health benefits,^4 and benefits covered by collective
bargaining agreements (CBA)), first day orders, and motions to continue
employee benefits. We obtained and reviewed these publicly available
documents from the Public Access to Court Electronic Records system
(PACER). We also reviewed company information from annual SEC filings to
identify employers' various benefit obligations. To provide contextual
information, we obtained and analyzed data from AOUSC on all chapter 11
cases filed over the period. We found these data to be sufficiently
reliable for our purposes. The newness of BAPCPA and PPA and the small
number of changes they contain affecting how employers can treat benefits,
as well as the limited information readily available on benefit changes
proposed and approved, made it difficult to assess the effects of these
laws. We conducted our work between October 2006 and September 2007 in
accordance with generally accepted government auditing standards. On
August 23, 2007 and August 28, 2007, we briefed your staff on the results
of our work using the briefing slides we include in appendix I. The report
formally conveys the information provided during our briefings.

^3 For detailed information on the 115 employers we reviewed, see appendix
II.

Summary of Findings

In summary, the effects of recent legislation on employers' decisions to
modify benefits are difficult to distinguish from the effects of other
factors--both within and outside of the bankruptcy process. Several laws
may affect the way employers treat employee and retiree benefit plans in
bankruptcy, including the Bankruptcy Code and ERISA. BAPCPA and PPA--which
amended the Bankruptcy Code and ERISA, respectively--included some
provisions related to the ways that employers can treat benefits in the
bankruptcy process. While BAPCPA included some changes that will affect
the treatment of employer-sponsored benefits in bankruptcy--such as the
possible reinstatement of retiree health benefits to what they were before
any modification by the employer during the 180 days prior to filing for
bankruptcy--most professionals agreed that the act will not substantially
affect employers' decisions to change benefits. Some bankruptcy
professionals said that PPA may impact employers' treatment of benefits in
bankruptcy and, in particular, how employers may seek to modify DB pension
plans. For example, some bankruptcy professionals said that the additional
time given to airlines to fund their DB plans contributed to at least two
major airlines retaining some or all of their plans in bankruptcy; other
professionals, however, said this change may not fully protect these DB
plans in the long-term. Further, the National Labor Relations Act^5
outlines how most employers can treat benefits covered by collective
bargaining agreements, and the Railway Labor Act^6 can affect the
treatment of benefits affecting airline and railroad employees. Bankrupt
employers may also consider other factors when trying to successfully
reorganize. For example, competing claims in bankruptcy, stakeholders and
creditors, and other outside forces such as the financial market and
industry competition, may contribute to employers' decisions to modify
their employee benefit plans.

^4 While we refer to "health benefits," which are a focus of this report,
the Bankruptcy Code requires court approval for modification of retiree
medical, surgical, or hospital care benefits, and any retiree benefits in
the event of sickness, accident, disability, or death. 11 U.S.C. S 1114(a)
and (e).

More information is known about the extent to which employers made benefit
changes that involved specific court approval--such as the termination of
DB plans, or changes to retiree health benefits or benefits covered by
CBAs--than those that can usually be made without specific court
involvement or approval--such as changes to DC plans or benefits for
active employees not covered by CBAs. Most of the 115 employers we
reviewed did not offer benefits that specifically needed court approval to
change. Specifically, we found that 20 of these employers offered DB
plans, 18 offered retiree health benefits, and 28 offered at least some
employees benefits covered by a CBA^7 Fewer than half of the employers
with these types of benefits sought to modify them in bankruptcy. For
example, in the year prior to and the year after the enactment of BAPCPA,
nine employers terminated their DB plans, resulting in a $1.4 billion
liability to PBGC. An additional three employers had terminations pending.
Five employers sought approval to modify their retiree health benefits.
The presence of a CBA adds another layer of complexity to how employers
may treat benefits in bankruptcy. Generally, employers and unions
negotiate any changes to a CBA--changes that often include benefit and
wage cuts--outside the courts. Eight of the employers that reported having
at least some employees with union representation sought to modify or
reject at least one of their collective bargaining agreements. While most
employers received approval to continue employee benefit plans in their
first day orders, it is unknown how many employers that offered health
benefits to active employees or defined contribution plans continued to
fund them. In particular, employers do not need court approval to change
these benefits if they are outside of a contractual agreement, although
some employers may still seek such approval. Some bankruptcy professionals
said that employers may stop making matching contributions to these plans
or may not remit payments in a timely manner. However, experts stated that
this information is often difficult to track.

^5 29 U.S.C. S 141 et seq.

^6 45 U.S.C. S 151 et seq.

^7 The benefits that employers offer are not mutually exclusive. For
example, one employer may offer (and seek to change) pension benefits,
retiree health benefits, and benefits covered under a collective
bargaining agreement. In total, 15 employers sought to change at least
some of their benefits.

Concluding Observations

Employers continue to play a primary role in financing retirement income
and health benefits for many workers. However, many are finding it
challenging to provide these benefits in an increasingly competitive
environment. Modifying benefit offerings as a cost-cutting measure is not
unique to bankruptcy, and is a trend that is also occurring outside the
bankruptcy process. In addition, changes in benefits, such as the shift
from defined benefit to defined contribution plans, means that fewer
employers may file motions to modify benefits in the future because these
changes typically do not involve specific court approval. While additional
time may be needed to more fully understand how recent legislation has
affected employers' treatment of benefits in specific cases, the full
impact of both of these laws on individuals' benefits or related federal
programs may never be known because employers' decisions to modify
benefits are part of a complex process, of which bankruptcy and pension
laws are only a part.

Many stakeholders are involved in the decision to modify benefits, and
striking a balance between maintaining employee benefits and successful
reorganization can be difficult for all parties involved. Achieving this
balance will often require successful negotiations between various
stakeholders such as unions, creditors, debtors, and in some cases PBGC.
Few employers have sought to modify their benefit plans in bankruptcy.
However, when such modifications are made, the effect on employees,
retirees, and related federal programs may be substantial.

Agency Comments and Our Evaluation

We obtained technical comments on a draft of the briefing slides from
cognizant agency officials, which we incorporated where appropriate prior
to briefing your staff. After the briefing, we provided a draft of the
entire report to officials of the Department of Labor, PBGC, Department of
Justice, and the AOUSC. We received technical comments from PBGC and EBSA,
which we have incorporated where appropriate. The Interim Director of the
Pension Benefit Guaranty Corporation provided written comments on a draft
of this report in a September 4, 2007 letter. PBGC agreed with our
findings and highlighted that PBGC will continue to monitor the effects of
both the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
and the Pension Protection Act of 2006 on PBGC's insurance programs. The
Department of Justice and AOUSC did not provide comments.

We plan to provide copies of this report to the Secretaries of Labor,
Justice, and the Treasury. We will also send copies to EBSA, the
Department of Justice's U.S. Trustee Program, AOUSC, PBGC, and interested
congressional offices. We will make copies available to others upon
request. In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov. If you or your staff have any questions
about this report, please contact me at (202) 512-7215 or
[email protected]. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.

Barbara D. Bovbjerg
Director, Education, Workforce, and Income Security
Issues

Congressional Requesters

The Honorable Patrick J. Leahy
Chairman
Committee on the Judiciary
United States Senate

The Honorable Richard J. Durbin
The Honorable Russell D. Feingold
The Honorable Edward M. Kennedy
United States Senate

The Honorable John Conyers, Jr.
Chairman
Committee on the Judiciary
House of Representatives

The Honorable Howard L. Berman
The Honorable William D. Delahunt
The Honorable Sheila Jackson-Lee
The Honorable Zoe Lofgren
The Honorable Jerrold Nadler
The Honorable Robert C. Scott
The Honorable Chris Van Hollen, Jr.
The Honorable Debbie Wasserman Schultz
The Honorable Melvin L. Watt
House of Representatives

Appendix I: Briefing Slides

Appendix II: Select Information on Bankruptcy Cases Reviewed 

(Dollars in                                                                                   
millions)                                                                                     
                                                                             Other            
                                                                    postretirement            
                                                     DB Obligations        benefit Collective 
                                 Total       Total               at  obligationsat bargaining 
Company name^a     File date    assets liabilities Bankruptcy^b,c,d bankruptcy^b,c  agreement 
Post-BAPCPA cases                                                                             
Sea Containers     2006-10-15      2.4         1.9                                            
Ltd.                                                                                          
Delta Woodside     2006-10-13     38.2         2.2                                            
Industries, Inc.                                                                              
Anvil Holdings,    2006-10-02    108.3       231.1                                            
Inc.                                                                                          
Global Power       2006-09-28    366.9       204.5                                            
Equipment Group,                                                                              
Inc.                                                                                          
The Rowe Companies 2006-09-18    134.2        86.6                                            
Naturade, Inc.     2006-08-31     12.0        13.2                                            
Portrait           2006-08-31      0.2         0.3                                            
Corporation of                                                                                
America, Inc.                                                                                 
Unicomp, Inc.      2006-08-25       NA          NA                                            
Fischer Imaging    2006-08-22     14.7         9.7                                            
Corporation                                                                                   
Deja Foods, Inc.   2006-08-14       NA          NA                                            
Vesta Insurance    2006-07-18  1,980.8     1,880.7                                            
Group, Inc.                                                                                   
OneTravel          2006-07-07     84.3        76.6                                            
Holdings, Inc.                                                                                
Image Innovations  2006-07-06      7.5         2.2                                            
Holdings Inc.                                                                                 
Transcapital       2006-06-19       NA          NA                                            
Financial                                                                                     
Corporation                                                                                   
America Capital    2006-06-19       NA          NA                                            
Corporation                                                                                   
Werner Holding Co. 2006-06-12    283.6       463.7             67.9            3.3        Yes 
Airnet             2006-05-22     29.0         8.1                                            
Communications                                                                                
Corporation                                                                                   
Silicon Graphics,  2006-05-08    452.1       643.3                                            
Inc.                                                                                          
IDI Global, Inc.   2006-04-17      2.2         3.6                                            
USA Commerical     2006-04-13       NA          NA                                            
Mortgage Company                                                                              
Prosoft Learning   2006-04-12      8.6         4.8                                            
Corporation                                                                                   
Verilink           2006-04-09     42.3        26.6                                            
Corporation                                                                                   
Trans-Industries,  2006-04-03     15.7        13.3                                        Yes 
Inc.                                                                                          
SeraCare Life      2006-03-22     89.1        43.4                                            
Sciences, Inc.                                                                                
Oneida Ltd.        2006-03-19    300.2       333.5             79.6            2.5        Yes 
Televideo, Inc.    2006-03-14      9.1        14.2                                            
The Plusfunds      2006-03-06       NA          NA                                            
Group, Inc.                                                                                   
Dana Corporation   2006-03-03  9,019.0     6,608.0          2,151.0        1,543.0        Yes 
Integrated         2006-02-14    580.9       437.8                                            
Electrical                                                                                    
Services, Inc.                                                                                
Glycogenesys, Inc. 2006-02-02      3.1         1.8                                            
Large Scale        2006-01-09     12.8         1.1                                            
Biology                                                                                       
Corporation                                                                                   
Calpine            2005-12-20 27,216.1    22,235.0                                        Yes 
Corporation                                                                                   
Desert Health      2005-12-15      0.3         4.6                                            
Products, Inc.                                                                                
Syndicated Food    2005-12-14      9.0        11.5                                            
Service                                                                                       
International,                                                                                
Inc.                                                                                          
FLYi, Inc.         2005-11-07    677.7       510.5                                        Yes 
21st Century       2005-11-01     13.5         2.0                                            
Technologies, Inc.                                                                            
Mcleodusa          2005-10-28  1,025.8       997.2                                            
Incorporated                                                                                  
Refco, Inc.        2005-10-17       NA          NA                                            
Pre-BAPCPA cases                                                                              
The Boyds          2005-10-16    223.0        85.0                                            
Collection, Ltd.                                                                              
Pliant Corporation 2006-01-03    820.9     1,455.8             87.2                       Yes 
Gardenburger, Inc. 2005-10-14     19.9       101.8                                            
Dynamic Sciences   2005-10-14       NA          NA                                            
International                                                                                 
Cyber Care, Inc.   2005-10-14       NA          NA                                            
Jacobson Resonance 2005-10-13      0.3         2.4                                            
Enterprises, Inc.                                                                             
Stassi Interaxx,   2005-10-13       NA          NA                                            
Inc.                                                                                          
Delphi Corporation 2005-10-08 16,593.0    19,934.0         12,872.0        9,605.0        Yes 
Epixtar Corp.      2005-10-06     18.0        18.8                                            
Tectonic Network,  2005-10-03     10.8         6.4                                            
Inc.                                                                                          
GB Holdings, Inc.  2005-09-29    217.0       181.7                                        Yes 
Home Directors,    2005-09-28      8.7         2.7                                            
Inc.                                                                                          
Thermoview         2005-09-26     30.2        33.8                                        Yes 
Industries Inc.                                                                               
Entergy New        2005-09-23    662.8       488.5             78.4           54.8        Yes 
Orleans, Inc.                                                                                 
Foamex             2005-09-19    645.7     1,004.0            143.9            1.2        Yes 
International                                                                                 
Northwest Airlines 2005-09-14 14,042.0    16,866.0          9,245.0          926.0        Yes 
Corporation                                                                                   
Delta Air Lines,   2005-09-14 21,801.0    27,597.0         12,100.0        1,835.0        Yes 
Inc.                                                                                          
Three-five Systems 2005-09-08    111.8        46.0                                            
Inc.                                                                                          
Trans Max          2005-09-08      1.8         2.4                                            
Technologies, Inc.                                                                            
Arlington          2005-08-31    103.4        90.5                                            
Hospitality, Inc.                                                                             
Anchor Glass       2005-08-08    657.2       472.0             55.8           53.8        Yes 
Container                                                                                     
Corporation                                                                                   
Teraforce          2005-08-03      3.0        11.4                                            
Technology Corp.                                                                              
Allied Holdings,   2005-07-31    421.5       463.1             52.9           15.9        Yes 
Inc.                                                                                          
Able Laboratories, 2005-07-18    104.3         8.0                                            
Inc.                                                                                          
The Project Group, 2005-07-15      0.4         1.0                                            
Inc.                                                                                          
Frontier Insurance 2005-07-05       NA          NA                                            
Group, Inc.                                                                                   
Torch Offshore,    2005-01-07    169.9        99.2                                            
Inc.                                                                                          
Aura Systems, Inc. 2005-06-24     17.8        20.7                                            
Heartland          2005-06-15     11.7         6.5                                            
Technology, Inc.                                                                              
Skyway             2005-06-14      7.0         4.1                                            
Communications                                                                                
Holding                                                                                       
Proxim Corporation 2005-06-11     63.6       108.5                                            
Universal          2005-05-26     32.6        30.0                                            
Automotive                                                                                    
Industries, Inc.                                                                              
Greentech USA,     2005-05-24      3.4         2.1                                            
Inc.                                                                                          
Western Water      2005-05-24     16.9         9.9                                            
Company                                                                                       
Global             2005-05-19     35.7        35.4                                        Yes 
Environmental                                                                                 
Energy Co.                                                                                    
Collins & Aikman   2005-05-17  3,191.2     2,750.9            444.6          100.2        Yes 
Corporation                                                                                   
Certified HR       2005-05-12       NA          NA                                            
Services Company                                                                              
AAIPHARMA Inc.     2005-05-10    339.1       451.0                                            
Natural Golf       2005-05-10      1.2         2.2                                            
Corporation                                                                                   
Composite          2005-05-05     18.1        12.5                                            
Technology                                                                                    
Corporation                                                                                   
Composite          2005-05-05    914.1       900.5                                            
Solutions, Inc.                                                                               
Summit National    2005-04-21       NA          NA                                            
Group, Inc.                                                                                   
Eagle Picher       2005-04-11    598.8       740.8            259.8            9.3        Yes 
Holdings, Inc.                                                                                
Southern Investors 2005-04-08      2.4         8.6                                            
Service Company                                                                               
Tom's Foods Inc.   2005-04-06    101.3       108.4             57.1                           
Claremont          2005-03-25      0.0         0.3                                            
Technologies                                                                                  
Corporation                                                                                   
Intercell          2005-03-16      0.3         0.3                                            
International                                                                                 
Corporation                                                                                   
V-one Corporation  2005-03-11      0.9         2.7                                            
WHX Corporation    2005-03-07    311.9       408.8            410.2            8.6        Yes 
Skin Nuvo          2005-03-07       NA          NA                                            
International, LLC                                                                            
HealthEssentials   2005-03-01       NA          NA                                            
Solutions, Inc.                                                                               
Veritec Inc.       2005-02-28      1.7         3.3                                            
Las Americas       2005-02-28      0.8         3.8                                            
Broadband Inc.                                                                                
Terra              2005-02-22       NA          NA                                            
Telecommunications                                                                            
Corp                                                                                          
WINN-DIXIE Stores, 2005-02-21  2,618.9     1,701.5             68.8           17.0            
Inc.                                                                                          
Syratech           2005-02-16    118.6       174.4                                            
Corporation                                                                                   
Tower Automotive,  2005-02-02  2,560.8     2,681.7            280.7          173.0        Yes 
Inc.                                                                                          
Falcon Products,   2005-01-31    266.5       228.0             41.7                       Yes 
Inc.                                                                                          
American Business  2005-01-21  1,042.9     1,031.0                                            
Financial                                                                                     
Services, Inc.                                                                                
First Virtual      2005-01-20      6.8         8.1                                            
Communications,                                                                               
Inc.                                                                                          
SGD Holdings, LTD  2005-01-20      6.8         4.4                                            
American Banknote  2005-01-19    184.3       178.0                             1.5            
Corporation                                                                                   
Friedman's Inc.    2005-01-14       NA          NA                                            
Ultimate           2005-01-11    336.2       137.3                                            
Electronics, Inc.                                                                             
Acceptance         2005-01-07    279.3       376.7                                            
Insurance                                                                                     
Companies, Inc.                                                                               
Trico Marine       2004-12-21    585.2       443.2                                            
Service, Inc.                                                                                 
The MIIX Group,    2004-12-20  1,278.6     1,557.2             13.6                           
Inc.                                                                                          
Tropical           2004-12-16    214.3       191.5             10.7                       Yes 
Sportswear Int'l                                                                              
Corporation                                                                                   
Yukos Oil Company  2004-12-14       NA          NA                                            
Applied Extrusion  2004-12-01    407.5       413.3                                        Yes 
Technologies, Inc.                                                                            
Amcast Industrial  2004-11-30    230.3       272.3            114.4            0.6        Yes 
Corporation                                                                                   
Trump Hotel &      2004-11-21  1,396.5     1,482.9                                        Yes 
Casino Resorts,                                                                               
Inc.                                                                                          
Shreveport Capital 2004-10-30    141.7       164.1                                            
Corporation                                                                                   
eB2B Commerce Inc. 2004-10-27       NA          NA                                            
ATA Holdings       2004-10-26    651.1     1,571.6                                        Yes 
Corporation                                                                                   
Epicus             2004-10-25      7.6        16.9                                            
Communications                                                                                
Group, Inc.                                                                                   
Huffy Corporation  2004-10-20    293.0       220.3            110.4            4.2        Yes 

NA = Not Available

Source: GAO review of SEC 10-k filing data for the most recent year
available prior to employer's bankruptcy filing and PACER documents.

^a Company data may include information on all of its operating
subsidiaries.

^b Benefit obligations may not be comparable across companies, because
companies may have used different assumptions in calculating these
obligations.

^c Blank cells means that no DB benefit obligations or OPEBs for
non-executives were reported.

^d Some of the DB plans may have been terminated prior to bankruptcy.

Appendix III: Comments from the Pension Benefit Guaranty Corporation

Appendix IV: GAO Contacts and Staff Acknowledgments

GAO Contacts

Barbara D. Bovbjerg, Director (202) 512-7215

Staff Acknowledgments

The following staff members made major contributions to this report: David
R. Lehrer, Assistant Director; Nyree M. Ryder, Analyst-in-Charge; Mee-Yong
Rao; John J. Larsen; Susannah L. Compton; Gloria Hernandez-Saunders;
Walter K. Vance; and Craig H. Winslow.

(130610)

[14]www.gao.gov/cgi-bin/getrpt?GAO-07-1101 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Barbara Bovbjerg at (202) 512-7215 or
[email protected].

Highlights of [15]GAO-07-1101 , a report to congressional requesters

September 2007

EMPLOYER-SPONSORED BENEFITS

Many Factors Affect the Treatment of Pension and Health Benefits in

Chapter 11 Bankruptcy

In recent years, considerable debate has centered on companies using the
chapter 11 bankruptcy reorganization process to reduce or eliminate
employer-sponsored benefits in an effort to become more competitive.
Congress recently enacted several laws, in part, to help address this
issue. Most notably, Congress passed the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA) and the Pension Protection Act of
2006 (PPA). BAPCPA contained provisions related to chapter 11 business
bankruptcies and sought to address the treatment of benefits during the
bankruptcy process. In addition, the PPA amended several Employee
Retirement Income Security Act of 1974 (ERISA) provisions related to
defined benefit (DB) plans in bankruptcy.

This report addresses (1) how, if at all, recent legislative changes
affected the treatment of pension and health benefits during chapter 11
bankruptcies, and (2) what is known about the extent to which businesses
have modified employee or retiree pension and health benefits. GAO
reviewed filings of 115 public companies that filed for bankruptcy between
October 17, 2004 and October 17, 2006, and conducted interviews with
various experts on the treatment of benefits in the bankruptcy process.
Relevant federal agencies agreed with the findings contained in this
report.

The effects of recent legislation, including BAPCPA and PPA, on employers'
decisions to modify benefits are difficult to distinguish from the effects
of other factors that lead to changes in benefits both within and outside
of the bankruptcy process. Most bankruptcy professionals agreed that while
BAPCPA included some changes that will affect the treatment of
employer-sponsored benefits--such as the look-back period for the
reinstatement of retiree health benefits--it will not substantially affect
employers' decisions to modify benefits. Some bankruptcy professionals
suggested that PPA may affect employers' decisions to maintain their
defined benefit (DB) plans. Bankrupt employers consider many other factors
when trying to reorganize successfully, including competing claims, their
stakeholders and creditors, and outside forces such as the financial
market and industry competition.

More information is known about the extent to which selected employers
made benefit changes resulting in court decisions--i.e., changes to DB
plans, retiree health benefits, and benefits covered by a collective
bargaining agreement (CBA)--than changes not resulting in them--i.e.,
changes to defined contribution (DC) plans and active employee health
benefits not covered by a CBA. Most of the 115 employers we reviewed did
not offer benefits that specifically needed court approval to change. We
found only 20 of these employers had DB plans, 18 had retiree health
benefits, and 28 had employees covered by a CBA. Nine employers terminated
at least one of their DB plans, and 3 have terminations pending; 5 sought
to modify their retiree health benefits; and 8 sought to modify or reject
CBAs. While most employers received approval to continue employee benefits
in their initial motions, it is unknown how many employers that offered
health benefits to active employees or DC plans continued to fund them
because employers do not always need to seek court approval to change
these benefits.

Factors That May Affect Employers' Decisions Regarding Benefits

GAO's Mission

The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( [16]www.gao.gov ). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
[17]www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, Waste, and Abuse in Federal Programs

Contact:

Web site: [18]www.gao.gov/fraudnet/fraudnet.htm E-mail:
[19][email protected] Automated answering system: (800) 424-5454 or (202)
512-7470

Congressional Relations

Gloria Jarmon, Managing Director, [20][email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Washington,
D.C. 20548

Public Affairs

Susan Becker, Acting Manager, [21][email protected] (202) 512-4800 U.S.
Government Accountability Office, 441 G Street NW, Room 7149 Washington,
D.C. 20548

References

Visible links
  14. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1101
  15. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1101
  16. http://www.gao.gov/
  17. http://www.gao.gov/
  18. http://www.gao.gov/fraudnet/fraudnet.htm
  19. mailto:[email protected]
  20. mailto:[email protected]
  21. mailto:[email protected]
*** End of document. ***