Sears pensions may no longer be protected by ERISA

For a number of years, consumers in Tennessee have watched as Sears and Kmart struggled to remain viable while major retailers closed all around them. Of particular concern to employees and former employees is that the Sears Holdings Corporation, the owner of the two department stores, seems to be taking some drastic steps to fulfill its obligations to retirees receiving pensions. Some of those actions remove the pensions from the protections of the Employee Retirements Income Security Act (ERISA).

Sears recently announced that some of the proceeds of over $607 million in new loans will go toward the company's pension obligations. Sears was also granted an extension of an existing loan. Some analysts see these moves as a desperate way for Sears to pacify its vendors, many of whom are losing confidence in the retailer's future.

Pensioners may have taken comfort in 2016 when Sears won protection for their plans through the Pension Benefit Guaranty Corp, which placed a lien on Sears' assets to keep them from declining in value. Nevertheless, Sears ended up selling its Craftsman tools brand with the understanding that a large portion of the sale revenue would go to the pension. Even with the sale of Craftsman, Sears' pension is underfunded by billions of dollars.

In an effort to reduce the risk that some may lose their pensions, Sears has purchased two annuity contracts with MetLife. This means that benefits for about 71,000 Sears retirees will come from MetLife instead of Sears. Other retailers have done this in the past to lighten their financial obligations and free up some cash. However, since Sears is no longer the fiduciary for the pension plans, those retirees are not protected by ERISA.

Sears is not the only retailer struggling as the economy evolves away from brick and mortar department stores. Tennessee retirees who counted on a pension from a now-failing business may have many concerns about their funds. Seeking advice from an attorney may be a wise move to protect their futures.

Source:, "Is Sears Mortgaging the Future of Its Retirees?", Rich Duprey, Dec. 22, 2017

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