People who retired after spending decades working for department store Sears came together early in 2019 to protest the company's plan to terminate their life insurance as part of its bankruptcy, according to Bloomberg.
And it seems as though they have good reason to. Benefits that once would have been worth as much as tens of thousands of dollars have been priced at just $135 by the Sears estate in a proposal to its former employees.
It's another blow in a long line of disasters for Sears employees who have worked for - or are still working for - the company through its transition into bankruptcy. Sears filed for bankruptcy last year and sold its stores and most of its assets to the Eddie Lampert-owned ESL Investments, Inc. in the beginning of this year.
The Sears estate, responsible for settling old debts, was left behind.
The plan for retirees provided policies to about 29,000 former workers with benefits between $5,000 and $14,000. A smaller group of senior executives had policies with death benefits that ranged from $356,000 and $2.7 million.
The new proposal would terminate the plan altogether and award employees an unsecured claim of $5,000. But due to the estate's limited resources, unsecured claims would get about 2.3% to 2.7% of what they are owed in payouts. This would be between $115 to $135.
Ronald Olbrysh, chairman of the National Association of Retired Sears Employees said:
“The new plan is totally unacceptable to the retirees. Many Sears retirees aren’t able to obtain new life insurance policies now because they’re too old. It’s totally unfair, what Sears is attempting to do.”
Retirees who died after the plan was terminated but before the proposal was approved would receive an administrative claim of $5,000. Administrative claims get higher priority for payment, which means these plans would likely pay out the full amount.
The estate did away with the retiree plan in March and offered participants the choice to pay into a new individual life insurance policy at their own cost. Lawyers for the retirees objected to the termination and the court approved the formation of a committee to represent the interests of retired workers in June.
A Sears estate lawyer in court last month said that the estate tried to make Lampert's ESL Investments assume the retiree benefits, but that they were unsuccessful.