Opinion ID: 3044762
Heading Depth: 2
Heading Rank: 2

Heading: PBGC Settlement Pension Payments

Text: Harvard filed for Chapter 11 bankruptcy in May of 1991.5 Thereafter, the bankruptcy court confirmed a plan of reorganization which required Harvard to pay all holders of allowed unsecured claims 100 cents on the dollar by 1994. In order to meet its obligations under the plan, Harvard sought to obtain $100 million in financing by offering senior unsecured notes. However, the PBGC was concerned about the issuance of the notes. Harvard’s pension plans had a “substantial amount 5 This 1991 bankruptcy and reorganization is distinct from the 2002 bankruptcy which gave rise to the present dispute. 11 of unfunded benefit liabilities” due to erroneous actuarial assumptions underlying pension plan contributions for 1992 and 1993. The PBGC therefore took the position that the note offering might provide “sufficient basis for the PBGC to seek termination of one or more of [Harvard’s] pension plans pursuant to section 4042(a)(4) of ERISA, [29 U.S.C. § 1342(a)(4)].” Negotiations followed in which the PBGC and Harvard reached a settlement agreement. Pursuant to that agreement, Harvard made a $ 6 million additional contribution to its pension plans in 1996 and agreed to pay an additional $1.5 million for each of twelve consecutive quarters thereafter.6 The PBGC Settlement Agreement contains restrictions on the amount and use of the proposed Senior Notes. Harvard warranted in the agreement that: “as of the date of execution of 6 Only the $ 6 million payment in 1996 is at issue in this appeal. 12 this Settlement Agreement there are no past due minimum funding contributions owed to any of” its pension plans, and the PBGC agreed that it would not institute proceedings to terminate any of taxpayer’s pension plans “as a result of the Senior Notes offering.”