JC Penney’s unpaid pension claims disappoint in bankruptcy settlement – The Dallas Morning News | Vette Leader

Several hundred former JC Penney employees and retirees who were counting on extra retirement benefits will have to wait another year to find out if they will get any money from the company’s bankruptcy. But in this case, “a little” means less than 1 cent on the dollar.

JC Penney’s department stores emerged from bankruptcy more than a year ago, and new owners say the company is doing well. The real estate trust, formed to repay lenders by selling Penney’s properties, has performed better than expected. But old JC Penney’s unsecured creditors, which include sellers and some longtime employees, are still awaiting settlement of their claims.

“We’re lucky to get something,” said James Knesek, 56, whose position as merchandising director was eliminated in 2020. He worked at Penney for more than 32 years and filed a claim for the $340,642 in additional retirement benefits he is losing, including some earnings he has deferred over the years.

Knesek has worked with former colleagues to stay abreast of complex bankruptcy documents.

“There was a huge information vacuum,” he said. Some former employees are confused about what it means if their claim is accepted. That doesn’t mean they’re in the money, Knesek said. “Plan documents say 1% or less for unsecured claims.”

Penney’s defined retirement plan, which was fully funded and acquired by Athene Holding, continued to provide monthly checks to 30,000 retirees, and the company’s employee 401(k)s were protected and unaffected by the bankruptcy.

But there are a few thousand individuals who lost supplemental retirement benefits when Penney filed for bankruptcy in May 2020 after the pandemic shut down its stores. Not all of them have filed claims, but those who have are among the company’s unsecured creditors.

Shirley Bard, 91, of Los Alamitos, California, retired in 1996 and wrote in a letter to the court that she “is no longer able to work. I have no choice but to try to save up the supplementary pension that I am entitled to.”

In the letter to US Bankruptcy Court Judge David Jones, Bard continued, “With all this stress, I wonder how long JC Penney thinks my $397 payment will have to be paid?”

The Houston bankruptcy judge has shown some sympathy for these plaintiffs when explaining the laws he must enforce. Jones told Bard, who attended a hearing remotely last year, that years ago he was an attorney representing 166 Enron employees after they lost similar pension benefits in the infamous bankruptcy.

“I’ve lost 166 times,” Jones said.

Former employees who saved their earnings into so-called top-hat company-sponsored pension plans and suppliers like Columbia Sportswear and beauty brand Coty, which sold Penney merchandise, will get the same payout of less than 1%, according to Penney’s restructuring plan.

There are 29,800 unsecured claims totaling $37.7 million outstanding in Penney’s bankruptcy. Around 700 are from former employees and retirees who have made claims. Of the few thousand eligible claimants, only 700 submitted applications. Many either declined to attend to the process or were unaware that they had to make an individual application. A select few had earned benefits from taking advantage of early retirement plans as recently as 2017 and 2020.

The court now says it may not settle those claims until March 2023, and it’s not clear how much money is in the pool to pay the unsecured creditors.

Funds from sales at Penney Stores could be added to the pool of unsecured receivables, but it doesn’t look like it. The Penney operating company was sold to mall owners Simon and Brookfield as part of the bankruptcy reorganization.

What is Forever 21 doing in JC Penney?

David Simon, CEO of Simon Property Group, said in November that Penney was “performing amazingly well.” He reiterated that on a earnings conference call in February, when he said that “JC Penney’s results have been impressive.” But the actual results will not be disclosed separately. The 650 chain of stores is not expected to reach thresholds that would force the new company to meet the pension entitlements of its former employees by contributing funds to settle the bankruptcy.

Regardless, the trust set up to sell properties to pay off lenders has done very well, but that money won’t go to unsecured creditors.

Much of Penney’s real estate was placed in a real estate investment trust that was transferred to a group led by H/2 Capital Partners as payment for $900 million in debt. This transfer included six distribution centers, 161 stores and a master lease to lease back those properties for approximately $156 million per year.

On March 16, during a call with investors, Neil Aaronson, Copper Property Trust’s chief executive officer, said it had “had a very good first year and both operations and sales continue to go well.”

The value of these properties was heavily contested by both creditors and shareholders when the 2020 restructuring plan was being drawn up. After the formation of the trust, the shops and warehouses were initially established with a profit of 1.9 billion in the first year.

In 2021, the Trust sold 13 stores and six distribution centers for net proceeds of nearly $800 million and total income of $109 million. In January, the trust sold another business for $21 million in net proceeds and a profit of $4 million.

“We have a very good feeling about future sales,” Aaronson said.

The trust’s chief financial officer, Larry Finger, tempered expectations by saying that 90% of the $109 million in profits came from its six distribution centers and a store in San Bruno, California.

The six distribution centers included a 1.13 million square foot facility in Haslet at Alliance Airport that sold for $68 million.

The Penney store at Stonebriar Center in Frisco was among the first to be sold a year ago and was bought by Brookfield for $10.5 million. Several other Texas stores were later sold in 2021.

The Village at Fairview store was sold to Dallas-based MGHerring Group for $9.74 million. Flower Mound’s Robertson’s Creek Penney store was sold to Inland Real Estate for $4.43 million.

JCPenney Beauty shines a spotlight on the brands founded by BIPOC

It is difficult for older retirees to understand why the bankruptcy estate does not have the assets to maintain their benefits.

Edward T. Howard of Scottsdale, Arizona, who retired in 2003 and has been with the company for 38 years, said during a hearing that he didn’t understand why Penney couldn’t pay. He said he’s turned down higher-paying offers from other retailers over the years, including Walmart, because he wanted to keep his retirement plan, which he now claims is worth $2.5 million.

“Nobody likes the final settlement of the JC Penney case, least of all me,” Jones Howard said at a hearing last August. “We made the best of what we had. I am not insensitive to the fact that you have devoted more of your life to a company you believed in and they are not here to take care of you at the end of the day.”

JC Penney still has no headquarters, but it’s making itself felt at the mall

Many large companies offer these supplemental retirement plans to executives and higher-paying employees, said Brandon McCormick, an advisor at Qualified Plan Advisors. Now he hears more from small and medium-sized companies.

“It’s a growing trend in this job market and it has to do with recruitment and retention,” McCormick said. These plans allow better-paid people to defer more of their income into their retirement years. This year, the maximum individual contribution to a 401(k) allowed by the IRS is $20,500.

The Top Hat plans allow for tax-free growth of deferred income, but the funds aren’t held in a separate account that the employee can access like a 401(k) plan.

“At the end of the day, those funds are considered employer property,” McCormick said.

Twitter: @MariaHalkias

Looking for more retail coverage? click here to read all retail news and updates. click here to subscribe to D-FW Retail and other newsletters The Dallas Morning News.

Leave a Comment