The Atlanta-based carrier and the Pension Benefit Guaranty Corporation (PBGC) made the announcement Friday in separate statements that the PBGC formally took control of the plan as of December 31, 2006. The plan ended operations as of September 2, 2006.
According to the PBGC, the plan is underfunded by about $3 billion, with $1.7 billion in assets to cover more than $4.7 billion in benefit liabilities. Of the $3 billion in underfunding, the PBGC estimates it will be liable for almost $920 million, making the Delta pilots plan the sixth-largest claim in the agency’s 32-year history.
The latest developments come about as a result of a December 2006 pact between the company and the PBGC (See PBGC Reaches Agreement with Delta on Pilots Plan ) – an agreement Delta said had the support of its Official Committee of Unsecured Creditors in its US Bankruptcy Court case. The agreement later received approval by a bankruptcy judge (See Court Upholds Delta Pilot Pension Plan Termination ), who had previously determined Delta could not reorganize or emerge from Chapter 11 unless the Pilot Plan was terminated.
The Delta statement said the PBGC will be allowed a pre-petition unsecured claim against Delta of $2.2 billion, and the debtors’ proposed plan of reorganization will provide for the distribution to the PBGC of $225 million in senior unsecured notes.
As previously announced, retired Delta pilots will receive more than $800 million in allowed claims with respect to their lost non-qualified pension benefits.
The maximum guaranteed pension at age 65 for
participants in plans that terminated in 2006 is $47,659.08
a year. At age 60, the maximum is $30,978.36. If the plan
has sufficient assets, however, participants who are
already retired or near retirement can receive more than
the guaranteed amounts under the asset-allocation rules of
the Employee Retirement Income Security Act of 1974
(ERISA), the PBGC said.
Within the next several weeks, the PBGC will send trusteeship notification letters to all active and retired Delta Air Lines pilots. After the transfer of plan documents, the agency will review individual records and calculate each person’s benefit according to plan provisions, asset allocation rules, and federal guarantee limits. Delta workers and retirees with questions may contact PBGC’s Customer Service Center toll-free at 1-800-400-7242.
Delta’s active pilots are now covered by a defined contribution plan previously negotiated with the Air Line Pilots Association, the union representing Delta’s more than 6,000 active pilots, according to the company.