Second Circuit Holds that PBGC Pension Termination Premiums are Non-Dischargeable in Bankruptcy
In an important decision published last week, the Second Circuit reversed a decision by the Southern District of New York Bankruptcy Court, which had held that premiums payable to the Pension Benefit Guaranty Corporation following the termination of a pension plan are dischargeable as unsecured pre-petition claims in bankruptcy. The Second Circuit is the first court of appeals to address this issue since a 2005 statute implemented the so-called “termination premiums,” and its decision gives effect to Congress’s apparent intent, which was to make it significantly more expensive for debtors to terminate pension plans.
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