Pay'n Save Pensioners Likely To Get Money They Are Owed

About 9,000 former and current workers at Pay'n Save Corp. can breathe a sigh of relief.

It now appears that their pensions will be paid in full, even if the insurance company obligated to pay them goes bankrupt. Retired pensioners now are being paid 70 percent of what they are owed.

An independent study, sponsored by state regulators and the company administering the pensions, found that the money is fully protected by the state's insurance-industry guarantee fund.

Although the study by a national actuarial firm is not binding, a spokesman for the guarantee fund said he expects the fund will abide by the finding.

Full payment of $41.5 million worth of pensions was in doubt because of the near bankruptcy this spring of Executive Life Insurance Co. of Los Angeles. Because of its financial problems, the California insurance commission took over Executive Life operations earlier this year.

Executive Life's problems threatened the pensions of 9,000 workers at Pay'n Save Drug Stores, Lamonts and Ernst Home Centers. Those chains, owned at one time under the same umbrella, cashed out $44 million worth of pensions and bought $31 million worth of Executive Life annuities in 1985.

For the rest of the 1980s, the restructuring of the pension plan was not an issue. Pay'n Save and Lamonts stores were sold to separate companies and a Seattle-based shell company called Seattle Holdings took over administration of the pensions. The new companies that own Pay'n Save and Lamonts aren't involved in the pension problems, but many employees are.

When Executive Life slipped into trouble, the Pay'n Save pensions were threatened, because Washington insurance regulators questioned whether the pensions were fully protected under the gaurantee fund.

The fund has different guarantee limits, depending on the type of policy under consideration. For one type, called a group annuity, the limit is $5 million for the entire group. For the other type, classified as individual annuities, the limit is $500,000 per person.

The pensioners were concerned, because the state initially thought they were covered under a group annuity, which meant only $5 million of $41.5 million worth of pensions would be guaranteed.

The concern prompted Seattle Holdings to seek an independent opinion. It teamed up with the state guarantee fund and the Washington insurance commissioner to sponsor a study.

This week, the actuarial firm, Tillinghast, delivered its verdict. The pensions are individual annuities and should be guaranteed to as much as $500,000 each.

John Woodall, assistant deputy insurance commissioner for Washington, said only a handful of pensioners would have annuities of more than $500,000.

The fate of Executive Life remains in limbo. Until it is liquidated, which is expected in the next three months - the state insurance-guarantee fund will not cover the unpaid portion of the pensions.