PBGC To Take Over TWA Pensions
Pichin Corp., a Carl Icahn entity, formally notified the PBGC that it wants to terminate the Retirement Plan for Employees of Trans World Airlines and the Retirement Plan for Pilots of Trans World Airlines on January 1, 2001.
The Pilot’s Pension Plan covers around 4,000 workers and is underfunded by $200 million. The Employees’ Pension Plan, with about 32,500 participants, is underfunded by more than $500 million, according to the PBGC.
Delaying the Inevitable?
TWA emerged from bankruptcy in November 1993, following a settlement reached in January of that year between:
- The Pension Benefit Guarantee Corporation (PBGC)
- TWA’s creditors
- TWA’s unions
- Carl Icahn, former owner of TWA
That agreement resolved Icahn’s and TWA’s liabilities for the two defined benefit pension plans, underfunded by about $1 billion at the end of 1992.
Under that agreement, Icahn provided TWA with $200 million in financing and relinquished control of the airline to its employees and creditors. Pichin was to be responsible for minimum funding payments and the liabilities of the two pension plans.
At the time, TWA gave the Plans promissory notes that required TWA to pay $300 million into the Plans over a period of 15 years. The agreement provided that if the plans terminated in the future, PBGC was to receive the balance of the TWA notes, as well as annual payments totaling $240 million from Icahn’s group of companies over eight years.
The pension plans were ongoing, but were frozen with regard to future benefit accruals.
That same agreement gave Icahn the right to unilaterally terminate the plans at any time after Jan. 1, 1995.
Most covered workers will receive the same benefits they are now receiving or would be entitled to receive, up to the maximum guarantee under federal law. However, higher salaried employees and some early retirees may experience benefit reductions because of federal pension law limits on the benefits guaranteed by the PBGC.
The PBGC has set up a TWA information link on the agency’s Web site, as well as a special TWA telephone hotline, 1-800-707-PBGC (7242).
– Nevin Adams firstname.lastname@example.org
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