Human Capital & Careers

PBGC Takes Over US Airways Pensions

''The pension safety net is badly frayed'' after the second-largest claim in the history of the insurance program.
Stephen TaubFebruary 4, 2005

As expected, the Pension Benefit Guaranty Corp. has taken over the pension plans for more than 51,000 flight attendants, machinists and other employees of bankrupt US Airways. The move will cost the pension insurance program $2.3 billion, in addition to the $726 million claim from the US Airways’ pilots plan in 2003.

The total claim of $3 billion is the second largest in the history of the pension insurance program, after Bethlehem Steel at $3.7 billion.

“The PBGC will protect the pension benefits of US Airways’ workers and retirees,” said executive director Bradley Belt. “But the pension safety net is badly frayed.” The pension insurer estimated that the plans are 40 percent funded, with $1.7 billion in assets to cover $4.2 billion in liabilities; the PBGC will guarantee payment of all but $200 million of the $2.5 billion shortfall.

Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2005 is $45,613 per year. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.

This is the second time the PBGC has taken over a pension plan in the past two weeks. On January 19, the agency announced that it will assume responsibility for the pensions of about 4,500 workers and retirees of Murray Inc., a Brentwood, Tennessee-based manufacturer of outdoor power equipment.

In November, the PBGC announced that its deficit had surged to $23.3 billion, compared with $11.2 billion just a year earlier.