Pension Plans:

Terminations, Asset Reversions, and Replacements Following Leveraged Buyouts

HRD-91-21: Published: Mar 4, 1991. Publicly Released: Mar 4, 1991.

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Pursuant to a congressional request, GAO reviewed what happened to the 558 defined pension plans of 121 public companies acquired in leveraged buyouts (LBO).

GAO found that: (1) 20 percent of the defined benefit plans sponsored by the companies were terminated after LBO; (2) the most common reasons for plan terminations included adopting a new plan and the sale of a plant or division; (3) 99 percent of the terminated plans were overfunded, resulting in a reversion of excess assets to the company; (4) 75 percent of the terminated plans were to be replaced, 38 percent as defined benefit plans and 37 percent as defined contribution plans; (5) it could not determine if participants received the same benefits from the replacement plan as from the terminated plan; and (6) the limited information on the plans that continued showed that the financial condition of most plans did not deteriorate after LBO.

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