Colonial BancGroup unit's underfunded pension plan assumed by PBGC

By Caroline Salls

Pittsburgh, April 30 - Colonial BancGroup Inc. subsidiary Colonial Bank's underfunded pension plan has been assumed by the Pension Benefit Guaranty Corp., according to a PBGC news release.

The plan covers about 3,250 former employees and retirees.

As previously reported, The Alabama State Banking Department closed the insolvent Colonial Bank on Aug. 14, 2009, and placed it into Federal Deposit Insurance Corp. receivership.

The PBGC said the FDIC sold substantially all Colonial Bank assets to Branch Banking & Trust Co. of Winston-Salem, N.C.

BB&T did not assume the pension plan, and the agency stepped in because the plan would be abandoned by bankrupt Colonial BancGroup, now a liquidating corporate shell.

The Colonial Retirement Plan is 75% funded, with about $57 million in assets and $76 million in benefit liabilities, according to PBGC estimates.

The agency said it expects to cover around $18 million of the nearly $19 million shortfall and will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan.

The PBGC became trustee of the plan on April 27.

Colonial BancGroup is the Montgomery, Ala.-based holding company for Colonial Bank. The company filed for bankruptcy on Aug. 25, 2009 in the U.S. Bankruptcy Court for the Middle District of Alabama. Its Chapter 11 case number is 09-32303.

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