United States Government Accountability Office

GAO Report to Congressional Requesters

EMPLOYERSPONSORED 

BENEFITS 

Many Factors Affect 

the Treatment of 

Pension and Health 

Benefits in Chapter 11 

Bankruptcy 

September 2007 

 

GAO-07-1101 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2007

EMPLOYER-SPONSORED BENEFITS

Many Factors Affect the Treatment of 

Pension and Health Benefits in 

Chapter 11 Bankruptcy 

Highlights of GAO-07-1101, a report to 

congressional requesters 

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 employersponsored 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 

Source: GAO analysis.

Stakeholders

· Unions

· Retiree committee

· Pension Benefit Guaranty 

 Corporation

· Lenders

· Other creditors

· Employees

Law

· Bankruptcy Code (BAPCPA)

· ERISA (PPA)

· National Labor Relations Act 

and Railway Labor Act

Employers’ 

decisions

about benefits

Competing claims

· Wages

· Utility payments

· Leases

· Other claims

Outside forces

· Industry and trends

· Competition–benefit costs

· Financial markets

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 

bovbjergb@gao.gov. 
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 

Page i GAO-07-1101 Employer-Sponsored Benefits
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. 

Page ii GAO-07-1101 Employer-Sponsored Benefits
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.2

 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.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.2

 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 

Employer-Sponsored Benefits

 

7-1101

 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. 

2

DB 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. 

Page 1 GAO-07-1101
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.

To address these questions, we focused on the 115 public employers3

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

 3

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

Page 2 GAO-07-1101 Employer-Sponsored Benefits
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. 

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 

Summary of Findings 

 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. § 1114(a) and (e). 

Page 3 GAO-07-1101 Employer-Sponsored Benefits
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 Act5

 outlines how most employers can treat benefits 

covered by collective bargaining agreements, and the Railway Labor Act6

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.

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 CBA7

 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 

 5

 29 U.S.C. § 141 et seq. 

6

 45 U.S.C. § 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. 

Page 4 GAO-07-1101 Employer-Sponsored Benefits
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. 

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. 

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 

Concluding 

Observations 

Agency Comments 

and Our Evaluation 

Page 5 GAO-07-1101 Employer-Sponsored Benefits
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 

bovbjergb@gao.gov. 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 

Page 6 GAO-07-1101 Employer-Sponsored Benefits
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 

Page 7 GAO-07-1101 Employer-Sponsored Benefits
Appendix I: Briefing Slides Appendix I: Briefing Slides 

Employer-Sponsored Benefits: Many Factors Affect 

the Treatment of Pension and Health Benefits in

Chapter 11 Bankruptcy

Briefing for Senate and House

Committees on the Judiciary

August 2007

Page 8 GAO-07-1101 Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 9 GAO-07-1101

2

Introduction

• In recent years, considerable debate has centered on the use of the 

chapter 11 bankruptcy process by employers to reduce or eliminate 

employer-sponsored benefit obligations.

• In part, because of these concerns, Congress passed legislation 

that included provisions affecting how employers may treat benefits

in chapter 11 bankruptcy.

• The Bankruptcy Abuse Prevention and Consumer Protection 

Act of 2005 (BAPCPA) amended the Bankruptcy Code.

• The Pension Protection Act of 2006 (PPA) amended the 

Employee Retirement Income Security Act of 1974 (ERISA).

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 10 GAO-07-1101

3

Key Questions

• How, if at all, have recent legislative changes affected the treatment of

pension and health benefits during chapter 11 bankruptcies?

• What is known about the extent to which businesses have modified

employee or retiree pension and health benefits in chapter 11 bankruptcies

before and after changes in the bankruptcy law took effect? 

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 11 GAO-07-1101

4

Scope and Methodology

To answer these questions, we:

• Reviewed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and other laws, including the Pension 

Protection Act of 2006, to identify how they affect the way that businesses may treat benefits in bankruptcy.

• Reviewed publicly available court documents of the 115 public companies identified by the Securities and Exchange

Commission (SEC) as having filed for chapter 11 bankruptcy in the years before and after BAPCPA’s general enactment

date—October 17, 2005, (76 companies before, 39 after), including motions to change benefits, such as defined benefit (DB)

plans, retiree health benefits, and those protected by collective bargaining agreements (CBA). We also reviewed whether

employers sought approval to continue benefit programs. The scope of analysis was limited to public companies due to

data limitations and is not generalizable to all companies in bankruptcy.

• Interviewed selected bankruptcy professionals, including researchers, judges, and attorneys who have represented various

stakeholders including unions, retiree committees, debtor employers, and creditors, as well as officials who have

represented the government and the public at the Pension Benefit Guaranty Corporation (PBGC), Administrative Office of

the United States Courts, Department of Justice’s U.S. Trustee Program, Department of Labor’s Employee Benefits Security

Administration (EBSA), Department of the Treasury, and SEC.

• Our work was performed between October 2006 and July 2007 in accordance with generally accepted government auditing

standards.

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 12 GAO-07-1101

5

Summary of Findings

• 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 the bankruptcy process and outside of the 

bankruptcy process such as competitive pressures in certain industries.

• More is known about benefit changes subject to court approval—such as the

termination of DB plans, and changes to retiree health benefits* or benefits covered 

by collective bargaining agreements—than about other types of benefits such as

defined contribution plans.

• Nearly one-half of the employers we reviewed with DB plans terminated them in 

bankruptcy.

• About 28 percent of employers we reviewed with retiree health obligations 

sought to modify these benefits.

• About 29 percent of employers we reviewed with collective bargaining

agreements sought to reject these agreements.

*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. § 1114(a) and (e).

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 13 GAO-07-1101

6

Background: Examples of Employer-Sponsored Benefits

• Employers generally can sponsor two types of pension plans.

• Defined benefit (DB) plans provide a pension benefit that is typically expressed 

as a monthly benefit based on a formula that generally combines salary and 

years of service to the company.

• Defined contribution (DC) plans, which include 401(k) plans, base retirement 

benefits on employee and/or employer contributions to and investment returns

on individual accounts; participants may be able to direct the investment of the

assets in their individual accounts. 

• Employers may sponsor several types of health benefits, and the amounts they

contribute can vary. 

• Benefits may be offered as part of a collective bargaining agreement (CBA)—a 

written agreement or contract between an employer and a union or professional or 

trade association. Typically, labor and management negotiate the terms of

employment, which include salaries, work rules, and health and pension benefits.

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 14 GAO-07-1101

7

Background: Treatment of Benefits under the Bankruptcy Code

and the Employee Retirement Income Security Act of 1974 

(ERISA)

ERISA:

Pension

Sets certain standards for most voluntarilyestablished employer-sponsored pension benefit 

plans in the private sector. Generally, employers 

may seek to terminate a pension plan, in the 

absence of a contractual agreement prohibiting it, if

they meet certain requirements. Employers may 

not decrease participants’ DB benefits or increase

benefits during bankruptcy if the plan is

underfunded. PPA amended several ERISA

provisions related to DB plan funding and 

termination, among other things.

Health

While ERISA generally governs employee health

benefit plans, these plans are subject to less 

extensive requirements than pension plans. 

Bankruptcy Code:

Generally, employers will file for bankruptcy 

protection either under chapter 7 (liquidation) or

chapter 11 (reorganization). Chapter 11

provides an opportunity for a debtor to

reorganize its financial obligations during which

time the debtor may continue to conduct its 

business. 

BAPCPA amended the Bankruptcy Code. Many

of the changes focused on consumer

bankruptcies, but it also contained provisions

related to chapter 11.

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 15 GAO-07-1101

8

Background (cont.): Treatment of Pension Benefits under the

Bankruptcy Code and ERISA

ERISA:

Contributions made to a pension plan must be

maintained for the exclusive benefit of participants and 

their beneficiaries.

• DB plans are typically insured by PBGC. An

employer’s DB plan can be terminated in one of 

three ways:

• Standard termination—the employer wants to

end its DB plan and the plan has sufficient funds

to pay all benefits owed to participants.

• Distress termination—the employer is in

financial distress and must prove it cannot 

remain in business unless the plan is

terminated.

• Involuntary termination—PBGC can end the 

plan if it determines that the termination is

needed to protect the interests of plan

participants or the PBGC insurance program.

Defined contribution plans, e.g., 401(k) plans, are held in

trust and not insured by PBGC.

Bankruptcy Code:

Pension assets that have been deposited into the trust

are not part of the debtor’s estate.

BAPCPA specified that the definition of “property of the 

estate” excludes employee contributions to benefit plans, 

protecting contributions that were withheld but not yet 

deposited into the trust. 

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 16 GAO-07-1101

9

Background (cont.): Treatment of Retiree Health Benefits under 

the Bankruptcy Code and ERISA

ERISA:

Generally, employers can reserve the right to

modify or terminate employee health benefit

plans.* Employers must provide employees with

a minimum of 60 days advanced notice of its

intent to terminate a plan.

Bankruptcy Code:

To modify or terminate retiree health benefits, 

the debtor must be able to show that:

• It negotiated in good faith with authorized

representatives of the retirees. 

• The retirees’ authorized representative

refused the proposal without good cause.

• The modification is necessary to permit the 

reorganization, assures that all parties are

treated equitably, and is clearly favored by

the balance of the equities.

BAPCPA amended the law to allow the court to

reinstate retiree health benefits that were

modified within 180 days prior to filing for 

bankruptcy.

*In the event of the elimination or substantial elimination of health benefits during bankruptcy, covered employees and retirees must be offered 

continuation coverage at their own expense. 29 U.S.C. §§ 1161-1167. If an employee's or retiree's spouse has access to an employee health

plan, coverage may also be available through it.

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 17 GAO-07-1101

10

Background (cont.): Treatment of Benefits Covered by a

Collective Bargaining Agreement

National Labor Relations Act* and

ERISA:

A CBA may require that an employer 

establish or maintain pension and health

benefits for employees and/or retirees. 

These agreements generally cannot be 

changed without negotiations and 

agreement by both parties. PBGC may,

however, terminate a DB plan (involuntary

termination) or undo a termination—

restoring the plan to the employer as the 

trustee—regardless of whether the plan is

part of a CBA.

Bankruptcy Code:

To terminate or change a CBA, the debtor 

must be able to show that:

• Prior to filing the motion, the debtor

made a proposal based on the most

complete and reliable information and 

that the proposal treats all affected

parties fairly and equitably.

• The employees’ authorized

representative refused the proposal 

without good cause.

• The balance of the equities clearly

favors rejection.**

*The National Labor Relations Act is the primary law governing relations between unions and employers in the private sector. In the airline and railroad

industries, labor relations are regulated by the Railway Labor Act (RLA). Under the RLA, CBAs do not expire but, rather, become amendable.

**Courts may consider various criteria in evaluating the balance of equities, including the likelihood of an employer’s liquidating if the CBA is not rejected

or other creditors’ claims.

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 18 GAO-07-1101

11

Background (cont.): Other Key Changes in BAPCPA

• Increased the amount of wages and benefits allowed as a priority claim

(those paid before other unsecured claims) from $4,925 per covered

employee earned within 90 days of the bankruptcy to $10,000 earned within

180 days prior to bankruptcy. 

• Limited the amount of and approval procedures for key employee retention 

plans (KERP), including limiting certain retention or severance payments to 

executives to, for example, 10 times the average amount of similar

payments to nonmanagement employees.

• Shortened the possible exclusivity period—where debtors have the 

exclusive right to file a reorganization plan—limiting the maximum

exclusivity period to 18 months.

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 19 GAO-07-1101

12

Background (cont.): Other Key Changes to ERISA

PPA amended ERISA and included several provisions specifically related to the treatment of pension plans

in bankruptcy, including:

• Made permanent the $1,250 per participant premium, added by the Deficit Reduction Act of 2005, that

an employer is required to pay to PBGC if its DB plan is terminated during chapter 11 bankruptcy. 

These employers are to pay this premium for 3 years after they emerge from bankruptcy. 

• For terminated DB plans, PPA changed the date used to calculate the pension guarantee from the 

plan termination date to the bankruptcy petition filing date. 

• In response to financial weakness of the commercial airline industry, allowed an alternative funding

schedule for airlines’ DB plans. Airlines may amortize their unfunded liabilities over 17 years if benefit 

accruals are frozen or 10 years if benefit accruals are not frozen.

• Taxed benefits set aside to prefund certain deferred compensation plans for top executives—known

as nonqualified plans—if, among other things, the employer is in bankruptcy. 

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 20 GAO-07-1101

13

Background (cont.): Role of Federal Agencies

• The Department of Justice’s U.S. Trustee Program

• Oversees the administration of bankruptcy cases and private trustees.

• The Department of Labor’s Employee Benefits Security Administration

• Administers and enforces the fiduciary, reporting, disclosure, and other 

provisions of ERISA.

• Administrative Office of the United States Courts

• Among other things, provides a wide range of administrative, legal, financial, 

management, program, and information technology services to the federal 

courts.

• Pension Benefit Guaranty Corporation

• Insures certain DB pension plans and becomes statutory trustee of terminated 

plans when an employer has insufficient assets to pay the benefits that

participants are owed. 

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 21 GAO-07-1101

14

Background (cont.): Information on All Chapter 11

Bankruptcies Filed

Figure 1: Chapter 11 Bankruptcy Filings in the Year Before and the Year After BAPCPA’s Effective Date

(October 17, 2005)

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 22 GAO-07-1101

15

The Effects of Recent Legislation on Employers’ Decisions to 

Modify Benefits Are Difficult to Distinguish from Those of Other

Factors

• Bankruptcy professionals generally agreed that BAPCPA will have a

limited effect on employers’ decisions to modify benefits.

• Changes included in the PPA, such as the change in termination date and

to funding rules, may affect employers’ decisions to maintain their DB

plans. 

• Several other factors such as market conditions and benefit obligations can 

also influence employers’ decisions in bankruptcy.

Effects of Recent Legislation

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 23 GAO-07-1101

16

Many Factors Affect Employers’ Benefit Decisions

Effects of Recent Legislation

Figure 2: Factors That May Affect Employers’ Decisions Regarding Benefits

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 24 GAO-07-1101

17

BAPCPA Had Few Provisions Affecting Treatment of Benefits

Bankruptcy professionals identified two changes directly affecting benefits in chapter

11.

• Possible reinstatement of retiree health benefits modified within 180 days

prior to filing for bankruptcy: Some professionals stated this was a positive

change; others stated that it addressed a nonexistent problem. Bankruptcy

professionals said that they were not aware of any cases filed since BAPCPA

involving such retiree benefit changes.

• Increase in the amount of employee wages and benefits considered

priority payments: While this change increased the potential amount of funds

available to pay wages and benefits, professionals varied in their opinions of

how this change would affect benefits. Some stated it may not be enough and 

would all be used on wages; others stated most participants would not reach the

$10,000 limit, with the exception of highly paid employees.

Effects of Recent Legislation

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 25 GAO-07-1101

18

BAPCPA Had Few Provisions Affecting Treatment of Benefits

(cont.)

Bankruptcy professionals identified some provisions not directly related to benefits that might affect 

how employers treat benefits and the amount of benefits that employees receive.

• Lease assumptions and utility payments: The tightening of the time for assuming leases 

and enhanced protection for utility payments could contribute to employers seeking savings 

elsewhere (including by modifying benefits).

• Key employee retention plans: Several professionals said that the restrictions on

KERPs—which were meant, in part, to curb employers from awarding large executive

bonuses while cutting employees’ benefits—may not be effective. For example, employers 

can try to circumvent the provision by proposing incentive plans rather than retention 

plans.* Others felt that the restrictions were too stringent and could hinder successful

reorganization. 

• Exclusivity period: Shortening the time for filing a reorganization plan decreases the

amount of time employers have to negotiate and make decisions, which could cause some

employers to cut benefits without exploring alternatives. Employers are just now reaching

the 18-month exclusivity limit, so the effect of the change is unknown.

*A recent case concerning Dana Corporation dealt with KERPs. The Bankruptcy Court for the Southern District of New York ruled that the original

proposed incentive plan was a “pay to stay” retention plan subject to the restrictions established by BAPCPA and not a “produce value for pay” plan, i.e., 

a true incentive plan. In re: Dana Corp., 351 B.R. 96 (Bankr. S.D.N.Y. 2006 ). Dana modified its plan by incorporating more stringent performance

targets, and the court approved it. In re: Dana Corp., 358 B.R. 567 (Bankr. S.D.N.Y. 2006 ).

Effects of Recent Legislation

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 26 GAO-07-1101

19

PPA Had Some Provisions That May Affect the Treatment of DB 

Plans in Bankruptcy

• Termination premium: While this premium may provide additional revenue to

PBGC, some professionals stated the cost could cause more employers to liquidate 

their assets instead of reorganizing—generally eliminating any employee benefit

obligations. 

• Termination date: Some professionals stated that this could reduce an individual’s

benefit because of the decrease in time used to calculate the guaranteed benefits.

The change may also reduce an employer’s incentive to delay plan termination. For 

example, PBGC officials said that prior to PPA, employers could have delayed plan 

termination, increasing the amount for which PBGC was liable. 

• Airline “stretch-out”: Some professionals stated this contributed to Delta Air Lines 

maintaining plans for its ground employees and Northwest Airlines maintaining its

employee plans throughout the bankruptcy process. However, it is unknown whether 

either will be able to fund its plans by the end of the stretch-out period.

Effects of Recent Legislation

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 27 GAO-07-1101

20

Professionals Cited Other Factors That May Influence Employers’

Treatment of Benefits

• Competing pressures between maintaining benefits and long-term stability after reorganization.

• Employers with high employee benefit costs and in specific industries—such as airlines or

automotive manufacturing—may find it difficult to compete given the potential cost of these 

obligations.* 

• Lenders may affect employers’ treatment of benefits. For example, in at least one case, the

lender would only provide financing if the DB plan were terminated. In another instance, an

employer was able to retain its DB plan because it received additional financing.

• The composition and actions of the creditors or creditors’ committee may affect employers’

treatment of benefits.

• The cost and risk factors of providing benefits also influence employers’ decisions to modify these

benefits outside the bankruptcy process.**

Effects of Recent Legislation

*See GAO, Commercial Aviation: Bankruptcy and Pension Problems Are Symptoms of Underlying Structural Issues, GAO-05-945 (Washington, D.C.:

Sept. 6, 2005).

**See GAO, Employer-Sponsored Health and Retirement Benefits: Efforts to Control Employer Costs and the Implications for Workers, GAO-07-355

(Washington, D.C.: Mar. 30, 2007).

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 28 GAO-07-1101

21

More Is Known about Benefit Changes Subject to Court Approval

• More is known about the extent to which employers make benefit 

changes subject to court approval, including changes to:

• DB pensions,

• retiree health benefits, and

• benefits covered by a CBA. 

Extent of Benefit Modifications 

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 29 GAO-07-1101

22

More is Known about Benefit Changes Subject to Court 

Approval: DB Plans

• Employers may consider terminating DB plans in bankruptcy because they

are a large liability. However, while DB plan obligations topped several 

billion dollars for some employers, not all of them terminated their plans.

• Several employers froze their DB plans prior to filing for bankruptcy.

• In the year prior to and after BAPCPA, 20 of the 115 employers offered at 

least one DB plan:

• 9 of these terminated their plans in bankruptcy (4 post-BAPCPA 

cases);

• 3 of these have terminations pending (2 post-BAPCPA cases); and

• 8 of these emerged or are planning to emerge with their plans intact 

(2 post-BAPCPA cases).

Extent of Benefit Modifications

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 30 GAO-07-1101

23

More Is Known about Benefit Changes Subject to Court 

Approval: DB Plans

The employers that terminated pension plans during bankruptcy resulted in an

estimated $1.4 billion liability to PBGC, as shown below.

Table 1: Liability of DB Pension Terminations and Number Affected, as of Plan Termination Date

Extent of Benefit Modifications

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 31 GAO-07-1101

24

More Is Known about Benefit Changes Subject to Court 

Approval: DB Plans

• Employees may still receive some DB benefits when a DB plan is terminated. 

• While covered participants receive a pension benefit from the PBGC, the level of guarantee

varies.* PBGC officials stated that most individuals receive their full benefit if the pension is

terminated. However, the percentage receiving their full benefit when a plan terminates

has decreased. This is, in part, attributable to the rise in terminations of airline pilots’ 

pension plans.**

• According to PBGC, it does not collect data on the percentage of benefits that individuals

receive.

• Some employers that terminated their DB plans created “follow-on” DC plans or increased

their contributions to an existing DC plan. For example, Delta Air Lines, which recently

emerged from bankruptcy, increased its DC plan contribution.

• PBGC may file claims against the debtor for the unfunded benefit liability amount, among

other things. PBGC officials stated that PBGC uses a portion of the recoveries on claims to

pay non-guaranteed benefits to plan participants.

*The maximum amount that PBGC guarantees is set each year under provisions of ERISA. This guarantee amount may be higher or lower, in part

depending on the age of the individual receiving benefits. 

**Pilots typically have higher pension accruals and retire at an earlier age. These two factors contribute to a potential reduction in their pension

benefits when they are derived from PBGC.

Extent of Benefit Modifications

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 32 GAO-07-1101

25

More Is Known about Benefit Changes Subject to Court 

Approval: Retiree Health Benefits

• Several bankruptcy professionals stated that employers consider changing retiree health benefits, in part, because 

they often carry a high cost and are not usually prefunded. 

• In the year prior to and after BAPCPA, 18 of the 115 employers reported retiree health benefit obligations. 

• 5 of these (one post-BAPCPA case) sought to modify benefits. Several others changed their benefits

prior to bankruptcy.

Extent of Benefit Modifications

Table 2: Information on Employers That Filed to Modify Retiree Health Benefits, Year Prior to Filing for Bankruptcy

(dollars in millions)

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 33 GAO-07-1101

26

More Is Known about Benefit Changes Subject to Court 

Approval: Retiree Health Benefits

• Several bankruptcy professionals stated that modifications to retiree health benefits

will have the biggest effect on individuals because these benefits generally are not 

insured by the government or funded and held in trust. Similarly, participants do not 

generally have statutory vesting rights.

• To help mitigate some of the potential negative effect on participants, some

employers created a fund to help pay for certain retiree health benefits. For example, 

the Dana Corporation and Tower Automotive both set up voluntary employee

beneficiary associations (VEBA)* and funded these accounts for retirees whose

health coverage was eliminated.

• Some federal provisions such as those requiring employers to offer continuation 

coverage, or the Health Coverage Tax Credit (HCTC),** may also help to mitigate the

potential negative effect.

Extent of Benefit Modifications

*VEBA’s are trusts that an employer may establish to fund retiree health benefits such as medical, dental, disability, severance, and life 

insurance. According to Treasury, VEBA assets are not available to creditors in bankruptcy.

**The HCTC is available to individuals age 55 or over who are currently being paid PBGC benefits or received a lump sum from PBGC after

August 5, 2002, among other groups. The tax credit can be used to pay 65 percent of the cost of qualified health insurance.

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 34 GAO-07-1101

27

More Is Known about Benefit Changes Subject to Court 

Approval: CBAs

• The presence of a collective bargaining agreement adds another layer of complexity

to how employers may treat benefits. Twenty-eight of the 115 public employers

reported having at least some employees who were represented by a union.

• Eight of the 28 employers that reported union representation sought to modify or 

reject their CBAs.

• Generally, employers and unions negotiate the changes to the CBA.

Negotiations often include wage and benefit cuts.

• Many of the employers terminating their DB plans, and all 5 employers

modifying retiree health benefits had CBAs.

• Changes to wages or benefit packages may be made to the CBA leading up to

bankruptcy filing.

Extent of Benefit Modifications 

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 35 GAO-07-1101

28

More Is Known about Benefit Changes Subject to Court 

Approval: CBAs

Extent of Benefit Modifications 

Table 3: Examples of Changes Made to Collective Bargaining Agreements

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 36 GAO-07-1101

29

Limited Information Is Available on Benefit Changes Not Subject 

to Court Approval

• In most of the cases we reviewed, employers received court approval—usually in first day 

orders—to continue employee benefits. While court approval allows employers to continue their 

benefit programs, it may not require them to do so.

• Employers may stop making matching contributions during bankruptcy or seek to terminate their 

DC plans, but absent a contractual agreement often do not file for approval from the court. 

Several of the employers halted their contributions (at least temporarily) prior to bankruptcy.

• Some professionals stated that employers may miss DC plan or health plan contribution

payments or not remit pension contributions to the trusts in a timely manner, and this could lessen

individuals’ benefits. According to EBSA officials, employee contributions not remitted to the trust 

are sometimes difficult to track.

• To the extent an employer fails to remit certain employee benefit plan contributions, such as DC

plan or health plan contributions owed, EBSA may file a proof of claim and/or commence an

adversary proceeding against a debtor.

Extent of Benefit Modifications 

Employer-Sponsored Benefits
Appendix I: Briefing Slides 

Page 37 GAO-07-1101

30

Concluding Observations

• Many stakeholders are involved in the decision to modify benefits,

and striking a balance between maintaining employee benefit 

programs and successful reorganization can be difficult for all 

parties involved. 

• While additional time may be needed to more fully understand how

some aspects of BAPCPA and PPA affect benefits in specific cases,

the full impact of both pieces of legislation on individuals’ benefits or

federal agencies may never be known because employers’

decisions to modify benefits are part of a more complex process,

and bankruptcy and pension laws are only part of this process.

Employer-Sponsored Benefits
Appendix II: Select Information on

Bankruptcy Cases Reviewed 

(Dollars in millions) 

Company namea File date Total assets 

Total

liabilities 

DB 

Obligations at

Bankruptcyb,c,d

Other

postretirement 

benefit obligations

at bankruptcyb,c

Collective 

bargaining

agreement

Post-BAPCPA cases

Sea Containers Ltd. 2006-10-15 2.4 1.9 

Delta Woodside Industries, Inc. 2006-10-13 38.2 2.2 

Anvil Holdings, Inc. 2006-10-02 108.3 231.1 

Global Power Equipment Group, Inc. 2006-09-28 366.9 204.5

The Rowe Companies 2006-09-18 134.2 86.6 

Naturade, Inc. 2006-08-31 12.0 13.2 

Portrait Corporation of America, Inc. 2006-08-31 0.2 0.3 

Unicomp, Inc. 2006-08-25 NA NA 

Fischer Imaging Corporation 2006-08-22 14.7 9.7 

Deja Foods, Inc. 2006-08-14 NA NA 

Vesta Insurance Group, Inc. 2006-07-18 1,980.8 1,880.7

OneTravel Holdings, Inc. 2006-07-07 84.3 76.6 

Image Innovations Holdings Inc. 2006-07-06 7.5 2.2

Transcapital Financial Corporation 2006-06-19 NA NA 

America Capital Corporation 2006-06-19 NA NA 

Werner Holding Co. 2006-06-12 283.6 463.7 67.9 3.3 Yes

Airnet Communications Corporation 2006-05-22 29.0 8.1

Silicon Graphics, Inc. 2006-05-08 452.1 643.3 

IDI Global, Inc. 2006-04-17 2.2 3.6 

USA Commerical Mortgage Company 2006-04-13 NA NA 

Prosoft Learning Corporation 2006-04-12 8.6 4.8 

Verilink Corporation 2006-04-09 42.3 26.6 

Trans-Industries, Inc. 2006-04-03 15.7 13.3 Yes

SeraCare Life Sciences, Inc. 2006-03-22 89.1 43.4 

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 Group, Inc. 2006-03-06 NA NA 

Dana Corporation 2006-03-03 9,019.0 6,608.0 2,151.0 1,543.0 Yes

Integrated Electrical Services, Inc. 2006-02-14 580.9 437.8

Glycogenesys, Inc. 2006-02-02 3.1 1.8 

Large Scale Biology Corporation 2006-01-09 12.8 1.1 

Calpine Corporation 2005-12-20 27,216.1 22,235.0 Yes

Appendix II: Select Information on 

Bankruptcy Cases Reviewed 

Page 38 GAO-07-1101 Employer-Sponsored Benefits
Appendix II: Select Information on

Bankruptcy Cases Reviewed 

(Dollars in millions) 

Company namea File date Total assets 

Total

liabilities 

DB 

Obligations at

Bankruptcyb,c,d

Other

postretirement 

benefit obligations

at bankruptcyb,c

Collective 

bargaining

agreement

Desert Health Products, Inc. 2005-12-15 0.3 4.6 

Syndicated Food Service International, 

Inc. 

2005-12-14 9.0 11.5

FLYi, Inc. 2005-11-07 677.7 510.5 Yes

21st Century Technologies, Inc. 2005-11-01 13.5 2.0 

Mcleodusa Incorporated 2005-10-28 1,025.8 997.2 

Refco, Inc. 2005-10-17 NA NA 

Pre-BAPCPA cases 

The Boyds Collection, Ltd. 2005-10-16 223.0 85.0

Pliant Corporation 2006-01-03 820.9 1,455.8 87.2 Yes

Gardenburger, Inc. 2005-10-14 19.9 101.8 

Dynamic Sciences International 2005-10-14 NA NA 

Cyber Care, Inc. 2005-10-14 NA NA 

Jacobson Resonance Enterprises, Inc. 2005-10-13 0.3 2.4 

Stassi Interaxx, Inc. 2005-10-13 NA NA 

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, Inc. 2005-10-03 10.8 6.4 

GB Holdings, Inc. 2005-09-29 217.0 181.7 Yes

Home Directors, Inc. 2005-09-28 8.7 2.7 

Thermoview Industries Inc. 2005-09-26 30.2 33.8 Yes

Entergy New Orleans, Inc. 2005-09-23 662.8 488.5 78.4 54.8 Yes

Foamex International 2005-09-19 645.7 1,004.0 143.9 1.2 Yes

Northwest Airlines Corporation 2005-09-14 14,042.0 16,866.0 9,245.0 926.0 Yes

Delta Air Lines, Inc. 2005-09-14 21,801.0 27,597.0 12,100.0 1,835.0 Yes

Three-five Systems Inc. 2005-09-08 111.8 46.0 

Trans Max Technologies, Inc. 2005-09-08 1.8 2.4 

Arlington Hospitality, Inc. 2005-08-31 103.4 90.5 

Anchor Glass Container Corporation 2005-08-08 657.2 472.0 55.8 53.8 Yes

Teraforce Technology Corp. 2005-08-03 3.0 11.4 

Allied Holdings, Inc. 2005-07-31 421.5 463.1 52.9 15.9 Yes

Able Laboratories, Inc. 2005-07-18 104.3 8.0 

The Project Group, Inc. 2005-07-15 0.4 1.0 

Frontier Insurance Group, Inc. 2005-07-05 NA NA 

Page 39 GAO-07-1101 Employer-Sponsored Benefits
Appendix II: Select Information on

Bankruptcy Cases Reviewed 

(Dollars in millions) 

Company namea File date Total assets 

Total

liabilities 

DB 

Obligations at

Bankruptcyb,c,d

Other

postretirement 

benefit obligations

at bankruptcyb,c

Collective 

bargaining

agreement

Torch Offshore, Inc. 2005-01-07 169.9 99.2 

Aura Systems, Inc. 2005-06-24 17.8 20.7 

Heartland Technology, Inc. 2005-06-15 11.7 6.5 

Skyway Communications Holding 2005-06-14 7.0 4.1 

Proxim Corporation 2005-06-11 63.6 108.5 

Universal Automotive Industries, Inc. 2005-05-26 32.6 30.0 

Greentech USA, Inc. 2005-05-24 3.4 2.1 

Western Water Company 2005-05-24 16.9 9.9 

Global Environmental Energy Co. 2005-05-19 35.7 35.4 Yes

Collins & Aikman Corporation 2005-05-17 3,191.2 2,750.9 444.6 100.2 Yes

Certified HR Services Company 2005-05-12 NA NA 

AAIPHARMA Inc. 2005-05-10 339.1 451.0 

Natural Golf Corporation 2005-05-10 1.2 2.2 

Composite Technology Corporation 2005-05-05 18.1 12.5 

Composite Solutions, Inc. 2005-05-05 914.1 900.5

Summit National Group, Inc. 2005-04-21 NA NA 

Eagle Picher Holdings, Inc. 2005-04-11 598.8 740.8 259.8 9.3 Yes

Southern Investors Service Company 2005-04-08 2.4 8.6 

Tom’s Foods Inc. 2005-04-06 101.3 108.4 57.1 

Claremont Technologies Corporation 2005-03-25 0.0 0.3

Intercell International Corporation 2005-03-16 0.3 0.3 

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 International, LLC 2005-03-07 NA NA 

HealthEssentials Solutions, Inc. 2005-03-01 NA NA 

Veritec Inc. 2005-02-28 1.7 3.3 

Las Americas Broadband Inc. 2005-02-28 0.8 3.8 

Terra Telecommunications Corp 2005-02-22 NA NA 

WINN-DIXIE Stores, Inc. 2005-02-21 2,618.9 1,701.5 68.8 17.0

Syratech Corporation 2005-02-16 118.6 174.4 

Tower Automotive, Inc. 2005-02-02 2,560.8 2,681.7 280.7 173.0 Yes

Falcon Products, Inc. 2005-01-31 266.5 228.0 41.7 Yes

American Business Financial Services, 

Inc. 

2005-01-21 1,042.9 1,031.0

Page 40 GAO-07-1101 Employer-Sponsored Benefits
Appendix II: Select Information on

Bankruptcy Cases Reviewed 

(Dollars in millions) 

Company namea File date Total assets 

Total

liabilities 

DB 

Obligations at

Bankruptcyb,c,d

Other

postretirement 

benefit obligations

at bankruptcyb,c

Collective 

bargaining

agreement

First Virtual Communications, Inc. 2005-01-20 6.8 8.1

SGD Holdings, LTD 2005-01-20 6.8 4.4 

American Banknote Corporation 2005-01-19 184.3 178.0 1.5

Friedman’s Inc. 2005-01-14 NA NA 

Ultimate Electronics, Inc. 2005-01-11 336.2 137.3 

Acceptance Insurance Companies, Inc. 2005-01-07 279.3 376.7 

Trico Marine Service, Inc. 2004-12-21 585.2 443.2 

The MIIX Group, Inc. 2004-12-20 1,278.6 1,557.2 13.6

Tropical Sportswear Int’l Corporation 2004-12-16 214.3 191.5 10.7 Yes

Yukos Oil Company 2004-12-14 NA NA 

Applied Extrusion Technologies, Inc. 2004-12-01 407.5 413.3 Yes

Amcast Industrial Corporation 2004-11-30 230.3 272.3 114.4 0.6 Yes

Trump Hotel & Casino Resorts, Inc. 2004-11-21 1,396.5 1,482.9 Yes

Shreveport Capital Corporation 2004-10-30 141.7 164.1 

eB2B Commerce Inc. 2004-10-27 NA NA 

ATA Holdings Corporation 2004-10-26 651.1 1,571.6 Yes

Epicus Communications Group, Inc. 2004-10-25 7.6 16.9

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. 

Page 41 GAO-07-1101 Employer-Sponsored Benefits
Appendix III: Comments from the Pension Benefit Guaranty Corporation Appendix III: Comments from the Pension 

Benefit Guaranty Corporation 

Page 42 GAO-07-1101 Employer-Sponsored Benefits
Appendix IV: 

A

GAO Contacts and Staff 

cknowledgments 

Page 43 GAO-07-1101

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

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

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 HernandezSaunders; Walter K. Vance; and Craig H. Winslow. 

Employer-Sponsored Benefits

GAO Contacts 

Staff 

Acknowledgments 

(130610) 
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