>The request by plaintiff the Association of Former Pan Am Employees (AFPAE) came in the group’s 1996 lawsuit in the US District Court for the Southern District of New York, according to an AFPAE news release. The suit alleges that that the Pension Benefit Guaranty Corporation (PBGC), the agency that backs private sector traditional benefit pensions for bankrupt or ailing companies, has underpaid former employees of Pan Am since taking over their five plans in July 1991.
>Among those taken over was Pan Am’s Cooperative Retirement Income Plan, which was underfunded by over $900 million. The PBGC currently pays out $900 million in benefits annually to 14,000 former Pan Am employees.
>Since the plan was taken over, the Oceanside, New York-based AFPAE has been waging a campaign to draw public attention to what it claims is the agency’s mismanagement. The group faults the PBGC for poor administration and six years of delays in notifying Pan Am retirees and beneficiaries of its calculation of their retirement benefits. In some cases, the AFPAE also says the agency’s calculations were wrong.
>The objective of the lawsuit is to have a third party appointed trustee instead of the PBGC, which would then recalculate the benefits. The plaintiffs expected that would raise the benefits about 75% from the levels the PBGC is currently paying to early retirees (See Reversal Of Fortune).
>Early retirees, such as the lead plaintiffs , are particularly unhappy with the PBGC’s decision to set their benefits at levels they feel are lower than what the Pan Am pension plan provided. The plaintiffs claim that the agency is paying only 45.2% of prior salary levels, while participants are, in fact, owed 79% under agreements Pan Am had with its workers. The PBGC contends that those early retirement benefits could only be given to those who were age 55 with 10 years of service at the time of the plan’s termination. Those who have reached 55 since 1991 are not eligible for those benefits, the agency has contended.