Foss Back In Court
By Patrick Cronin
Hampton Union, Tuesday, February 21, 2006
[The following article is courtesy of the Hampton Union and Seacoast Online.]
HAMPTON -- The bankrupt Foss Manufacturing is asking a judge for permission to modify the company's underfunded retirement plan.
Patrick O'Malley, who was appointed to oversee the company during its Chapter 11 proceedings, is asking a bankruptcy judge for authority to suspend al* pay credits" in the retirement plan.
Company employees were notified a hearing on the matter will take place in federal court on March 23.
The change, if approved, will affect 350 current employees, but not the 800 retirees currently receiving benefits from the plan, according to court documents.
The company wants to cease al* pay credits" in the plan starting March 31.
Under the current retirement plan, current employees accrue "pay credits" for each hour worked. Credits are awarded based upon, among other things, length of service and salary.
When an employee retires or leaves the company, he or she is entitled to receive payments over time based on the total credits they earned during their employment.
O'Malley, who is currently seeking an investor or sale of the company, stated the suspension of "pay credits" may make the retirement plan more appealing to a potential investor and or buyer.
He also argued there is no money in the budget right now to continue funding "pay credits."
The company failed to make the minimum funding requirements of the federal Employee Retirement Income Security Act, and it has filed a waiver with the Internal Revenue Service. That request is still pending.
If approved by the judge, all pay credits earned by an employee up until March 31 will still be given out, but after that day there will be no more. Employees will still be able to accrue earning benefits on their retirement plan.
The retirement plan, which was formed in 1959 and amended in 2000, specifically states the company has the authority to modify or terminate the plan.
The company filed Chapter 11 in September after its chief lender, CapitalSource Finance, cut off credit alleging the company fraudulently borrowed millions of dollars to benefit itself and company insiders.
At the time, the board of directors asked for and received the resignation of Stephen Foss.
The board of directors requested a trustee to run the company because of friction between the board and CapitalSource.