Compliance November 29, 2011

PBGC: American Airlines Bankruptcy Could Hurt Financial Position

November 29, 2011 (PLANSPONSOR.com) - Pension Benefit Guaranty Corporation (PBGC) Director Josh Gotbaum said based on the agency’s estimates, American Airlines employees could lose a billion dollars in pension benefits if American terminates its plans.
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American’s parent company, AMR Corp., announced it has filed for bankruptcy. American Airlines sponsors four traditional pension plans that cover almost 130,000 participants.  As of today, the plans collectively had about $8.3 billion in assets to cover about $18.5 billion in benefits.    

According to Gotbaum’s statement, if American Airlines were to end their plans, the agency would be responsible for paying about $17 billion in benefits; about $1 billion in benefits would be lost.

A termination would also weaken the financial condition of PBGC, which has a record $26 billion deficit as a result of failed plans the agency has already assumed (see Some Positives Exist Amid Dire PBGC Financial Picture).

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