Update — Third Quarter Results

McClatchy
McClatchy
Nov 13 · Unlisted

McClatchy announced its third quarter earnings on November 13, 2019. In a video message to colleagues, Craig Forman, President & CEO, shared highlights, the challenges ahead and his vision for the future of the company.


Pension Plan Participants — FAQ

What is happening to my pension?

Right now, nothing has changed.

The plan currently has over $1.32 billion in assets, approximately $580 million of which were voluntary contributions made by McClatchy above the legally-required contribution amounts.

However, the plan is still underfunded by approximately $535 million as of March 31, 2019.

As a result of that underfunding, the law requires that McClatchy make approximately $124 million of contributions over the course of 2020. This amount exceeds the company’s anticipated cash balances and cash flow.

As you know, earlier this year we submitted an application for a three-year waiver of the minimum required contributions to our qualified defined benefit pension plan. The IRS has declined to grant our request.

We have now commenced discussions with the Pension Benefit Guaranty Corporation (PBGC) and our largest single debt holder for the purpose of exploring other alternatives with respect to our qualified pension obligations, unqualified pension obligations and capital structure.

Management is in discussions with the PBGC regarding a distress termination of the qualified plan while continuing its ordinary business operations, allowing it to reach payment terms with the PBGC that will relieve the current liquidity pressures of the minimum required contributions under Employee Retirement Income Security Act (ERISA).

Should the PBGC and the company reach such a solution, the assets and obligations of the qualified plan would be assumed by the PBGC, which would continue to pay the company’s pension plan participants their benefits.

Under current law, we expect no adverse impact on qualified pension benefits for substantially all plan participants, including substantially all current retirees and employee participants. Note, however, that if PBGC takes over the plan, it will make the final determination regarding the amounts payable and available options for a particular participant’s or beneficiary’s plan benefits.

We also continue to believe that a legislative solution to the challenge could provide debt relief to our business and reassurance to our pension plan participants. We are working tirelessly with members of Congress in an attempt to obtain such relief.

Unfortunately, the bill pending before Congress — the SECURE Act — even if passed, would not provide relief for McClatchy. We are working hard with Congress to amend the SECURE Act to include McClatchy, and get it passed.


What is the PBGC?

The PBGC is the Pension Benefit Guaranty Corporation, which is a federal government agency that insures qualified pension plan benefits like McClatchy’s.

When a pension plan covered by PBGC terminates without enough assets to pay the benefits promised under the plan, PBGC takes over the plan and pays benefits to the plan’s participants and beneficiaries, up to the guarantee limits set by law.


What kind of solution would the PBGC provide?

Should the PBGC and the company reach a solution, the assets and obligations of the qualified pension plan would be assumed by the PBGC, which would pay qualified pension benefits to the plan’s participants and beneficiaries.

This move would ensure that pensions are protected and that plan benefits will be paid, subject to certain guarantee limits set by law.

Note that under the current law, we expect that turning the qualified pension plan over to the PBGC would not adversely impact qualified pension benefits for substantially all plan participants, including current retirees and employee participants. Note, however, that if PBGC takes over the plan, it will make the final determination regarding the amounts payable and available options for a particular participant’s or beneficiary’s plan benefits.


How much of my plan would be covered by the PBGC?

Under current law, even if the plan terminates and is trusteed by PBGC, we expect no negative impact on benefits for substantially all plan participants of the qualified plan — including substantially all current retirees and employee participants. Note, however, that if PBGC takes over the plan, it will make the final determination regarding the amounts payable and available options for a particular participant’s or beneficiary’s plan benefits.


What is being discussed with our largest debt holder?

Considerations include one or more de-leveraging transactions including some or all of the debt holders’ loans under the Junior Term Loan Credit Agreement and 6.875% senior secured junior lien notes, which are secured by second and third liens on substantially all of the company’s assets.


How will I know if I’ve been impacted?

Under current law, we expect no adverse impact on benefits for substantially all plan participants of the qualified plan. You may want to check the Maximum Monthly Guarantee Tables on the PBGC website to make an independent assessment as to whether your benefits may be impacted. Note, however, that if PBGC takes over the plan, it will make the final determination regarding the amounts payable and available options for a particular participant’s or beneficiary’s plan benefits.

Remember that those who joined the company in the last 10 years do not participate in the qualified pension plan.


What do I need to do?

Nothing — as part of our commitment to transparency, we created these FAQs to ensure you are kept informed. We will provide updates as appropriate and available.


When will you reach a definite solution?

Our goal is to reach a resolution on or before March 30, 2020.

The company is in ongoing discussions with multiple parties to find a solution. We will provide updates when appropriate and available.

There can be no assurance that the ongoing discussions with PBGC and our largest debt holder will result in any consensual transaction.


I read in the press release that McClatchy is exploring alternatives for qualified pensions AND non-qualified pensions. What is a non-qualified pension? Am I affected?

Only a small number of employees are entitled to receive non-qualified pension benefits at all. Those benefits were only available to certain employees who were part of McClatchy or Knight Ridder before March 31, 2009. If you were not, then changes to non-qualified pension benefits do not affect you.

Even if you were a McClatchy or Knight Ridder employee before March 31, 2009, non-qualified pensions were only available to certain employees who fell into three categories. First, certain senior executives were eligible for supplemental benefits separate from the qualified pension. Second, you might be entitled to non-qualified benefits if McClatchy or Knight Ridder executed a written separation agreement with you when you left the company, and that agreement included non-qualified pension benefits. Finally, certain individuals receive a monthly stipend to support their access to Medicare Part B.

If none of these situations seem familiar to you, you are likely unaffected by any changes to the non-qualified pension benefits


I am a participant in the McClatchy Retirement Plan. Who do I contact for more information about my benefits?

If you are a current participant in the pension plan, and want an estimate of your pension benefit amount, please visit the Pension section of the LiveWell website from a company computer. You can run estimates for starting your pension at different ages. If you have additional questions about your pension benefit, you can contact McClatchy’s Retirement team at

Unlisted

    McClatchy

    Written by

    McClatchy

    A leading publisher of independent local journalism dedicated to delivering news and information that is essential to communities. #ReadLocal

    Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
    Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
    Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade