The pension termination

1964, and the law that followed

The plan: The hourly workers' pension plan had been built up from 1950 on terms the company's prosperity made generous and its decline made fatal: benefits were increased through successive negotiations while the funding was not increased to match. At the termination, in the benefits-law account of the case, the plan held about $24 million of assets against about $39 million of liabilities. When the South Bend works closed, the plan was terminated, and there was no federal insurance of pensions — the Pension Benefit Guaranty Corporation did not yet exist. The benefits were paid in the order the plan's terms allowed, which meant they ran out partway down the list.

Who was paid, who was not: The distribution is the documented core of the case, carried in the Employee Benefits Law literature's account of the termination: the plan covered roughly 10,500 workers. About 3,600 of them, already retired, received their full benefits. About 4,000 employees between the ages of 40 and 59 — averaging 52 years of age and 23 years of service — received approximately 15 cents for each dollar of benefit they had been promised. The remaining 2,900, all with less than ten years of service, received nothing. The PBGC's own fact sheet rounds the affected to about 11,000 workers. The shortfall is also stated as a single figure in the accounts of the works: the pension fund came up some $14–15 million short.

The consequence in law: The Studebaker termination became the standing American example of the unprotected pension. A presidential committee on corporate pension plans, appointed in 1961, issued its report in 1965 in the case's shadow; NBC's 1972 documentary Pensions: The Broken Promise carried the stories of Studebaker's and other workers to a national audience; and on 2 September 1974 President Ford signed the Employee Retirement Income Security Act — ERISA — which set federal funding and vesting standards for private pensions and created the PBGC to insure them. The American Bar Association's journal states the line directly: the December 1963 Studebaker closing was one of the pivotal events that led to ERISA's enactment. The men and women who received fifteen cents on the dollar were not made whole by it; the law their case produced governs every private pension in the country since.

Sources:

1. "ERISA: 40 Years Later" (The Free Library) — the termination's distribution: roughly 10,500 covered, 3,600 retired paid in full, 4,000 aged 40–59 at about 15 cents on the dollar (average age 52, average service 23 years), 2,900 with under ten years' service paid nothing; the 1972 NBC documentary and ERISA's enactment on 2 September 1974 with the creation of the PBGC.
2. Introduction to Employee Benefits Law (course text, 2016) — the plan's terms from 1950, the $24 million of assets against $39 million of liabilities at termination, and the 1965 report of the presidential committee.
3. Pension Benefit Guaranty Corporation, "Basics of the PBGC" (2007) — about 11,000 workers affected by the termination, and the case as the pivotal event behind comprehensive federal pension regulation; ABA Journal of Labor & Employment Law — the closing as one of the pivotal events leading to ERISA.