The Pension Benefit Guaranty Corporation assumed control Tuesday of US Airways
pilots' underfunded pension plan.
But the PBGC, which operates as the government's pension-protection program,
only will fund about a fourth of the losses - or $600 million of the $2.5 billion
in underfunding, according to the Associated Press. As a result, the airline's
6,000 pilots will see significant cuts in their retirement pensions.
Federal law sets a maximum benefit of $43,977.24 for retirees enrolled in pension
plans that terminate this year and are taken over by the PBGC, the AP notes.
Under their company pension plan, the pilots would have received average annual
benefits of $50,000 to $70,000.
"I'm sympathetic toward the US Airways pilots who will lose some of the
pension benefits they were promised," said Steven A. Kandarian, PBGC's
executive director. "To prevent this from happening to other workers, pension
plans need to be funded in a way that better protects the benefits participants
have earned."
US Airways, which had emerged from bankruptcy protection a day earlier, said
Tuesday that it will replace its old retirement plan with a smaller, less generous
program. Those benefits, it said, will be paid to pilots to help cover their
losses.
Taking over the US Airways pension plan represents the PBGC's sixth-largest
claim in its 28-year history. Four of the 10 largest claims are from airlines.
Overall, according to the AP, the airline industry accounts for 17 percent of
PBGC's claims, but less than 2 percent of all private pensioners. Only the steel
industry's claims are larger.
The PBGC posted a record $3.6 billion deficit last year. It receives no funds
from taxpayers and is financed by insurance premiums set by Congress and paid
by employers. The agency also gets its funding from the pension plans it takes
over.
Kandarian has said the agency may be forced to seek higher premiums from employers.
He also is urging Congress to rewrite pension laws to require some companies
to increase their contribution levels to their retirement programs.
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