Sears Bankruptcy Update: Are Employee Pension Plans Safe?

Sears Pensions — Chairman Eddie Lampert's $5.2 billion bid to save Sears is being protested by the federal Pension Benefit Guaranty Corp. because it lacks funding for employee pension plans. A man walks out of a Sears store on October 15, 2018 in Montebello, California. The iconic American retailer has filed for Chapter 11 protection from creditors early on Monday, listing more than $10 billion in debts and more than $1 billion in assets. Sears and its Kmart stores plan to stay in business for now, with help from $600 million in new loans. Getty Images/Mario Tama

Despite the efforts that Chairman Eddie Lampert made to save Sears (SHLDQ) from liquidation, it appears that the company’s pensioners were forgotten about.

The federal Pension Benefit Guaranty Corp. (PBGC) is protesting the $5.2 billion bid from Lambert with the U.S. Bankruptcy Court, saying in court documents that is does not provide funding for employee pension plans that have been in place for years.

Sears has two pension plans that cover 90,000 employees. PBCG said it was going to assume liability for the pension plans “because it is clear that Sears’ continuation of the plans is no longer possible.” PBCG expects to end the employee pension plans by the end of January.

Sears’ pension plans have more than a $1 billion deficit and have had so for years as they are only 64 percent funded, PBGC recently said. PBGC insures pensions on behalf of the federal government to protect workers and their pension plans. It is the largest unsecured creditor of Sears to date, Fox Business reported.

Sears accepted the $5.2 billion proposal from Lampert’s hedge fund ESL to save the company from liquidation. The bid is still pending approval from the bankruptcy court. If approved, the bid will keep approximately 400 store locations open and 50,000 jobs intact.

Shares of Sears were down 0.04 percent as of 3:28 p.m. ET on Tuesday.