>The agency that insures the nation’s private defined benefit pension plans said in a news release that the PBGC will cover $2.3 billion of the new plans’ shortfall. The three funds are 40% funded. Together with the air carrier’s pilot’s pension plan taken over in April 2003 (See PBGC Assumes US Airways Pension Plan ), US Airways plans will carry a total $3 billion price tag. That is second in the history of the PBGC only to the $3.7 billion cost of Bethlehem Steel’s plans (See PBGC Takes On Its Biggest Liability Yet ).
>The PBGC said that the pension plans of the machinists and flight attendants were terminated as of January 10 while the plan for other employees was terminated a week later. The latest plans taken over include:
- the Retirement Plan for Flight Attendants
- the Retirement Plan for Machinists
- the Retirement Plan for Certain Employees of US Airways.
“The PBGC will protect the pension benefits of US Airways’ workers and retirees,” said Executive Director Bradley Belt in the news release. “But the pension safety net is badly frayed. The (Bush) administration has put forward a comprehensive proposal that requires companies to pay for their promises, strengthens the insurance backstop, and sheds light on plan finances (See Chao Releases Administration DB Reform Proposal ). We look forward to working with Congress to enact these reforms promptly.”
>Retirees of US Airways will continue to receive their benefit checks without interruption, according to the announcement and current employees will still receive their benefits when they are eligible to retire. However, under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2005 is $45,613 per year. Workers and retirees with questions may consult the PBGC Web site, www.pbgc.gov/usairways or call toll-free at 1-800-400-7242.
This development will put an even greater strain on the already gravely stressed PBGC, which has had to shoulder a particularly taxing burden by taking over pension funds from the hard hit airline and steel sectors in recent years (See PBGC Exec: Pension Insurer Hit by ‘Perfect Storm’ ).