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Tuesday, November 27, 2012

After failed court-ordered mediation, Hostess Brands, Inc. – makers of iconic bakery goods that include Twinkies, Ding Dongs, Ho Hos and Wonder Bread – received permission from a bankruptcy court to cease operations and liquidate last week.

So, what does the impending liquidation of Hostess have to do with employee benefits? Well, one of the largest issues facing Hostess has been crippling union pension contributions, which have been reported as high as $1 billion.

Members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents roughly 30% of the Hostess workforce, went on strike after rejecting the company’s latest contract offer which would have reduced the employees’ wages, pension contributions and health care benefits. Management at Hostess threatened that a failure to get the union members back to work would tie their hands and force them to close their doors.  Following the expiration of a deadline set for the union workers to come back to work, Hostess followed through on its threat and announced it would close its doors.  While the bankruptcy judge overseeing the case initially required that Hostess mediate with the union to see if the liquidation could be avoided, the mediation efforts quickly broke down and the judge approved the liquidation.

Roughly 18,500 Hostess workers will lose their jobs over the next year.  The small silver lining? Many of the bakery brands that Americans have come to know and love, like Twinkies, are likely to be scooped up by the highest bidder – who would be freed from the pension contribution obligations which crippled Hostess.

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