[3/23/17] Sears and Kmart retirees are worried about their pensions as the parent company raises doubts about its future and stirs speculation that it could seek bankruptcy protection.
Sears Holdings has an almost $1.6 billion shortfall in obligations to its underfunded pension system for nearly 200,000 retirees, the parent firm’s public filings show. The company’s retirees also could face termination of life insurance policies that provide roughly $10,000 to $12,000 in benefits for some.
Stunned by the company’s Tuesday night disclosure that it faces “substantial doubt” about being able to stay in business, the retirees are awaiting Sears Holdings’ next move.
“This has come as a shock. Sears has always put on a glad face,” Ronald Olbrysh, chairman of the National Association of Retired Sears Employees, said in telephone interview Wednesday. “All of this is definitely a significant concern for the retirees.”
Sears Holdings has contributed nearly $4 billion to its pension plan over the last 12 years, Jason Hollar, the company’s chief financial officer, told financial analysts during a fourth-quarter earnings conference call on March 8th. The plan provides benefits for past service by Kmart and Sears retirees. Current employees don’t earn pension benefits because the plan is frozen.
But the pension contributions, while draining some of Sears Holdings’ income, nonetheless left a shortfall. As of late January, the company listed its pension obligations at roughly $5.2 billion, and the fair value of the plan at nearly $3.6 billion.
“Our pension and postretirement benefit plan obligations are currently underfunded, and we may have to make significant cash payments to some or all of these plans, which would reduce the cash available for our businesses,” the company said in its Securities and Exchange Commission filing.
