PBGC To Absorb $117M of Aloha Airlines Pension Shortfall

April 28, 2006 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation (PBGC) has assumed responsibility for the pensions of nearly 4,000 employees and retirees of Aloha Airlines Inc.

The PBGC determined that the Honolulu-based carrier’s three defined benefit plans – Pilots’ Fixed Retirement Plan, the Pension Plan for Non-Represented Employees, and the Pension Plan for Employees Represented by the International Association of Machinists – ended on December 14, 2005.

The PBGC will allow for a fourth Aloha plan – the Pension Plan for Dispatchers – to remain under the airline’s supervision.

Together the three terminated plans are 55% funded, with $190 million in assets to cover $345 million in benefit promises, according to PBGC estimates. The agency – which can take over the ailing pension plans of private-sector companies – expects to be responsible for $117 million of the $155 million shortfall.

The PBGC does not expect the assumption of the plans to have any material affect on its balance sheet, as an estimate of the liability was included in its fiscal 2005 financial statements.

The company got the nod from PBGC in February to emerge from bankruptcy reorganization if it agreed to terminate these three plans (see Aloha Bankruptcy Exit Plan Approved for Take-off ) . The carrier also came under fire during the bankruptcy hearings for using pensions to repay bank loans (see Aloha Now Being Investigation for Misuse of Pension Funds ).