PBGC Takes on Brazilian Air Carrier's Pension Plans

October 22, 2007 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation (PBGC) is taking over two pension plans that cover the 800 U.S. employees of Brazilian air carrier Varig S.A.

According to a press release , the Varig Brazilian Airlines Pension Plan and the Varig Brazilian Airlines Hourly Pension Plan are 74% funded, with $59.4 million to cover about $80.6 million in liabilities. The PBGC said it expects to be responsible for the full $21.2 million shortfall.

The company entered reorganization proceedings in Brazil in June 2005 and filed for bankruptcy in the U.S. Bankruptcy Court in Manhattan.

Varig’s former cargo unit Varilog purchased most of the company’s operating assets and intellectual property for $20 million in cash and $46 million in debt instruments on July 20, 2006. The transaction did not include the pension plans, so the PBGC stepped in because the company wouldn’t be able to pay its benefits when they were due, the agency said

Varig no longer has operations in the U.S. and has no flight operations in Brazil.