Termination Premiums Payable to the PBGC Survive Chapter 11 Bankruptcy Proceedings

April 16, 2009

On April 8, 2009, the United States Court of Appeals for the Second Circuit in Pension Benefit Guaranty Corp. v. Oneida Ltd., held that the termination premium imposed on a plan sponsor in connection with the involuntary termination of its defined benefit plan during chapter 11 bankruptcy proceedings survives that bankruptcy process and becomes payable upon the debtor’s emergence. The ruling is the first published decision on the issue. The attached memorandum discusses the facts and holdings of the case and the broader implications the decision potentially could have on chapter 11 debtors facing termination of their defined benefit pension plans.