What will happen to former Kodak employees’ pensions?
The question has come up as the company’s recent filing led to fears Kodak might be going out of business. The bottom-line answer is that people who were in the defined benefit retirement plan should be getting lump-sum payment options by the end of 2025, as the company has terminated the plan. Or they should be offered a choice to take an annual payment, an annuity, from a third-party management company Kodak intends to hire.
That has not all come about yet though and tere is context to understand, though, about fears of Kodak shuttering.
Is Kodak going out of business?
A company in Kodak’s position can restructure upcoming debt obligations to avoid insolvency, said Daniel Burnside, clinical professor at the University of Rochester’s Simon Business School.
Creditors are often incentivized to extend or refinance or swap for other securities rather than risk the debtor falling into bankruptcy. If Kodak is confident it can pay off the debt, they’ve likely spoken with their creditors and have a plan already, he said.
Kodak pensions in trouble
The breadcrumbs to Kodak’s repayment of its debt trace back to last November, when it filed a material change form, announcing a plan to sell the assets of the Kodak Retirement Income Plan (KRIP.) The sale of $764.4 million in illiquid assets, primarily private equity holdings, would generate $550.6 million to investors.
The funds from the sale would then pay out to pensioners in lump sums or annuities from insurance companies, Burnside said.
As the program is overfunded, the remaining assets — between $885 million and $975 million — could be used to pay back creditors, minus a 20% excise tax. Kodak’s board voted to terminate KRIP on Jan. 21, freezing all benefits under the program on March 31.
According to a report in the Wall Street Journal, about 35,000 current and former Kodak employees receive a pension.
Kodak in the news
The Rochester-based Eastman Kodak Co. offered a bleak picture of its financials in earnings reports and filings, tracking a second quarter loss and sending shares tumbling in early trading Tuesday, Aug. 12, wrote Kathryn Palmer for USA TODAY.
The iconic brand said in Monday, Aug. 11 government filings that there is “substantial doubt” about the company’s ability to continue, as it faces more than $470 million in debt and slashes its pension plan in an attempt to remain afloat. In its most recent earnings report, Kodak said its consolidated revenues were $263 million at the end of the quarter on June 30, a decrease of $4 million since the same period last year.
We are following this pension topic and will have more reporting today, Aug. 13, at DemocratandChronicle.com.
— Steve Howe reports on weather, climate and the Great Lakes for the Democrat and Chronicle. An RIT graduate, he has covered myriad topics over the years, including public safety, local government, national politics and economic development in New York and Utah.
— Kathryn Palmer of USA TODAY contributed to this story.
This article originally appeared on Rochester Democrat and Chronicle: What will happen to Kodak employees’ pensions? Here’s what’s at stake
Reporting by Steve Howe, Rochester Democrat and Chronicle / Rochester Democrat and Chronicle
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