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More than 250 police and firefighters have quit in Memphis and new recruits are proving difficult to attract, after the city opted to end its traditional defined-benefit pension and cycle a portion of retirement benefits for many current employees next year into a 401(k)-style account, the Wall Street Journal reported today. Memphis Mayor A C Wharton, Jr. said that a widening retirement gap in his city left him with “no other option” than to trim guaranteed payments from an existing pool of employees. Obligations soared to $554 million as of Dec. 31, from a surplus of $94.1 million just six years before. The Memphis pension’s investments were pummeled during the financial crisis, with its mid-2008 assets of $2.2 billion plummeting by 18 percent in a year to $1.8 billion. Its funded ratio sunk during that time from 104.5 percent — a surplus of assets — to 79.8 percent. Nearly 675 police officers, out of a uniformed force of about 1,300, took a sick day in early July to protest the proposed cuts. After a wrenching political debate, the City Council voted in December to end a defined-benefit plan common among public employers for more than 40 percent of its 4,100 employees.

A federal judge on Friday said the U.S. Pension Benefit Guaranty Corp's lawsuit accusing billionaire Ira Rennert's Renco Group Inc. of trying to evade pension obligations of its RG Steel unit should go to trial, Reuters reported on Friday. U.S. District Judge Richard Sullivan in Manhattan rejected requests by both sides to decide the case in their favor. He scheduled a trial for July 6. The PBGC had sued Renco in January 2013 for $97 million, claiming that it sold a 24.5 percent RG stake to private equity firm Cerberus Capital Management LP mainly to escape the steelmaker's pension plans, which were underfunded by $70 million. The PBGC said that it had been preparing on Jan. 13, 2012 to terminate RG's pension plans, but agreed not to after Renco assured it would not imminently cut its ownership stake to below 80 percent, the level at which it would retain the pension liabilities. Instead, the PBGC said Renco did just that four days later when it sold a stake to Cerberus, saying the transaction would bolster RG's finances. The steelmaker ultimately filed for bankruptcy in May 2012, and the PBGC took responsibility for its pension plans six months later.

As Gov. Chris Christie (R) crisscrosses New Jersey to push an overhaul of the state’s troubled public pension system, the governor’s road map to pension reform is running into roadblocks, the Wall Street Journal reported today. Sixteen unions representing public sector workers are ramping up their fight to force the administration to invest more into the pension system. They say that they plan to file two lawsuits calling for Christie to make a larger pension payment in his newly introduced budget. The unions won a court decision last month after Christie didn’t make the fully promised payments over the past two years. “It’s a legal obligation,” said Hetty Rosenstein, New Jersey director of the Communications Workers of America. Even the union that agreed to discuss some of the changes, the New Jersey Education Association, says Christie exaggerated its degree of cooperation. Christie is undeterred, taking his pension push directly to residents in a series of town hall meetings, including one in this Bergen County borough on Wednesday.

There is still time to register for today’s ABI Live Webinar, titled "Pension Tension: Dealing with Plans in the Restructuring World," scheduled from noon – 1:15 p.m. EST! Presented by ABI's Labor and Employment Committee, this webinar will address current employee- and labor-related issues in chapter 11 and out-of-court restructurings, including, among other things: (a) whether private equity sponsors may be subject to pension fund withdrawal liability under ERISA in light of the First Circuit's Sun Capital decision; (b) whether pension plan withdrawal liability is entitled to administrative claim status; and (c) the status of the Pension Benefit Guaranty Corp.'s moratorium on 4062(e) enforcement. Attorneys and other restructuring professionals dealing with the PBGC will learn about current developments in this dynamic and changing area of law that plays an important role in many reorganizations today.

Speakers include:

- David R. Seligman (Kirkland & Ellis LLP, Chicago)

- Gregory F. Pesce (Kirkland & Ellis LLP, Chicago)

- James J. Mazza, Jr. (Skadden, Arps, Slate, Meagher & Flom LLP, Chicago)

- Craig T. Fessenden (Pension Benefit Guaranty Corp., Washington, D.C.)

- Theresa Anderson (Pension Benefit Guaranty Corp., Washington, D.C.)

Click here to register. 

Don’t miss tomorrow’s ABI Live Webinar, titled "Pension Tension: Dealing with Plans in the Restructuring World," scheduled from noon – 1:15 p.m. EST! Presented by ABI's Labor and Employment Committee, this webinar will address current employee- and labor-related issues in chapter 11 and out-of-court restructurings, including, among other things: (a) whether private equity sponsors may be subject to pension fund withdrawal liability under ERISA in light of the First Circuit's Sun Capital decision; (b) whether pension plan withdrawal liability is entitled to administrative claim status; and (c) the status of the Pension Benefit Guaranty Corp.'s moratorium on 4062(e) enforcement. Attorneys and other restructuring professionals dealing with the PBGC will learn about current developments in this dynamic and changing area of law that plays an important role in many reorganizations today. Speakers include:

- David R. Seligman (Kirkland & Ellis LLP, Chicago)

- Gregory F. Pesce (Kirkland & Ellis LLP, Chicago)

- James J. Mazza, Jr. (Skadden, Arps, Slate, Meagher & Flom LLP, Chicago)

- Craig T. Fessenden (Pension Benefit Guaranty Corp., Washington, D.C.)

- Theresa Anderson (Pension Benefit Guaranty Corp., Washington, D.C.)

Click here to register. 

New Jersey Superior Court Judge Mary Jacobson ruled in favor of the unions that sued Governor Chris Christie, saying that his failure to make full payments to their pension system violated the state’s constitutional obligation to workers, the Washington Post reported today. She also ordered Christie to work with the legislature to satisfy the state’s obligation. The decision came after Christie pushed unions into an agreement that required public employees to sharply increase the amount of money they contribute to their pensions. In exchange, the state promised to increase its contributions to the state’s underfunded retirement system.

Bankruptcy Judge Steven Rhodes said that it was an easy legal decision to authorize pension reductions in Detroit's bankruptcy but that he felt still compassion for the city's retirees and citizens who suffered because of the city's financial collapse and water shutoffs, the Detroit Free Press reported today. Judge Rhodes, who presided over the largest municipal bankruptcy in U.S. history from start to finish, said that he invited citizens to speak in his courtroom on multiple occasions during the case because he wanted to hear their input. "I was genuinely interested in what their concerns were and how I could possibly deal with them, if I could,” Judge Rhodes said. Still, his groundbreaking ruling on Dec. 3, 2013 giving Detroit emergency manager Kevyn Orr the authority to reduce the city's pension obligations was prudent, the judge said. Michigan's Constitution describes public pensions as a contractual obligation that cannot be cut, but federal bankruptcy law allows contracts to be severed. "I have to say that from a legal perspective, it was not a particularly difficult decision," he said.