The Pension Benefit Guarantee Corp. will pay the retirementbenefits of more than 1,400 current and future retirees ofInterfaith Medical Center, a 287-bed hospital in Brooklyn, N.Y.

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The news Thursday comes amid a brewing battle on Capital Hillthat pits PBGC against a coalition of private defined benefit plan sponsors and tradeassociations resisting proposed increases to the premiums they payto guarantee pensions.

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Interfaith Medical sought Chapter 11 protection on Dec. 2, 2012.The hospital sponsored two defined benefit plans for its workers,its Health Services Retirement Plan and Interfaith Medical CenterNurses Pension Plan.

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According to PBGC estimates, the plans collectively held $108million in assets against $176 million in liabilities. That 64percent funding level is markedly lower than the national averageof corporate-sponsored DB programs. The aggregate funding status ofthe 100 largest DB plans in the country improved to 95 percent atthe end of last year, up from 74 percent in 2009, according toMilliman Inc.

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Interfaith Medical was unable to meet minimum fundingrequirements. To date, the shortfall in its contribution paymentsis about $13 million. The inability to cover minimum contributionsultimately forced the hospital system into bankruptcy.

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Eight clinics run by Interfaith Medical supportBedford-Stuyvesant, Crown Heights and other lower-incomecommunities in Brooklyn.

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The retirement plans were officially terminated on May 22. PBGCwill pay all benefits earned by retirees up to the legal limit of$55,840 for a 65-year old. Retirees will continue to receivebenefits without interruption, and future retirees can apply forbenefits as soon as they are eligible, the PBGC said.

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PBGC receives no government funding. Its revenues are derivedfrom premiums paid by nearly 26,000 DB plans, liquidated assetsfrom failed plans, and investment income. It’s net premium revenuestotaled $2.7 billion in 2012.

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Its single-employer program protects 33 million enrollees inabout 24,000 plans, and the multi-employer program protects 10million enrollees in about 1,500 plans.

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When a single-employer plan fails, PBGC takes responsibility fordirectly paying retiree benefits. With multi-employer plans, theagency provides the needed financial assistance for plans tocontinue paying retirees themselves.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.