A government agency will assume responsibility for Butzel Long’s pension plan, the Detroit law firm announced Wednesday.
Butzel Long filed an application with the Pension Benefit Guaranty Corp. in January to help cover its $33 million pension obligation, citing a shortfall of about $9 million to pay about 450 partners and employees covered by its plan. About 350 of those people are no longer with the firm.
The PBGC, which approved the request on Tuesday, will take over the law firm’s pension obligations up to the agency’s annual cap, $57,500 for workers who retire at 65.
Butzel Long managing partner Justin Klimko said that about 10 percent of the fund participants are entitled to more than the PBGC annual cap provides. The firm has 125 lawyers.
It is rare for law firms to seek relief from the PBGC, law firm consultant Peter Zeughauser said. Those that have filed for relief, including defunct Dewey & LeBoeuf, have done so during bankruptcy.
Klimko said that Butzel Long has no intention of declaring bankruptcy and that its partners sought PBGC relief to make the firm stronger. “This is a positive move going forward,” he said.
The PBGC is a federal agency supported by insurance premiums paid by companies with defined-benefit pension plans and by assets of pension plans the agency takes over.
Butzel Long has an IRS-qualified defined-benefit plan, designed to pay participants a set benefit based on their earnings history, tenure and age.
At its peak in 2008, Butzel Long, which focused heavily on the automotive and aerospace industries, had 243 lawyers. Klimko said the firm has been able to control compensation and overhead costs in recent years, but the pension obligation has been a dark cloud.
“We had a large legacy obligation that we were powerless to address,” he said.
The agreement with the PBGC is expected to be finalized this month, he said.
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