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Take Over US Airways Pension Plan
Press, April 1, 2003
government's pension protection program assumed control Tuesday of US
Airways pilots' underfunded pension plan, but only
will fund about a fourth of the losses.
means significant cuts in retirement pensions for the 6,000 pilots of US
Airways, which emerged from bankruptcy protection a day earlier. The pension
issue was the remaining hurdle for the airline's restructuring.
plan was underfunded by $2.5 billion, but the Pension Benefit Guaranty Corp.
will fund only about $600 million.
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."
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 government program.
Pilots would have received average annual benefits of $50,000 to $70,000 in
the company pension plan.
Airways said it will replace that retirement plan with a smaller, less
generous program. Those benefits will be paid to pilots to help supplement
their losses from the government takeover of the old plan.
Monday, US Airways won approval for a $900 million loan backed by the
government and emerged from bankruptcy after eight months. The airline will
save an estimated $600 million in the next seven years under the new pension
pilots' pension plan is the PBGC's sixth-largest claim in its 28-year
history. Four of the 10 largest claims are from airlines.
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
which posted a record $3.6 billion deficit last year, 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
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.
some lawmakers are concerned that PBGC is increasingly dipping into money
set aside for pension benefits to cover escalating administrative costs -
just as an increasing number of employer-provided pensions go broke.
A General Accounting Office study said the PBGC now relies on pension funds to cover 95 percent of its administrative costs, or $214 million.