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Part of the savings the company seeks to achieve by terminating its defined benefit plans and transitioning to defined contribution plans is included in the overall direct employee cost savings of $1.25 billion that American Airlines says is necessary as part of the restructuring process. Not included in the total direct employee cost reductions in the restructuring proposals is the unfunded pension liability for previously-accrued benefits. “If this liability is not eliminated, we will need to have more than $800 million each year in additional savings to service the unfunded liabilities. This represents the annual cost of paying off our liability over the term of the contract,” the company said. American proposes to amend all of the collective bargaining agreements so the company is not required to maintain, fund or provide benefits under a defined benefit pension plan. This will permit the company to seek to terminate its defined benefit pension plans for unionized employees, as well as those of management, support staff and independent employees. “If we receive court approval to terminate our plans, every active employee’s and retiree's vested defined pension benefit will be turned over to the PBGC and guaranteed up to the PBGC's 2011 maximum benefit limits,” American said on the website. American also proposes to replace the existing defined benefit plans with a defined contribution plan for all employees. All active, eligible employees would be offered retirement benefits under the $uper $aver – 401(k) plan. All non-pilot employees would receive a company match dollar-for-dollar of up to 5.5% of salary deferred. Pilots would participate in a new defined contribution plan which will replace its defined benefit plan and B Plan.
Part of the savings the company seeks to achieve by terminating its defined benefit plans and transitioning to defined contribution plans is included in the overall direct employee cost savings of $1.25 billion that American Airlines says is necessary as part of the restructuring process.
Not included in the total direct employee cost reductions in the restructuring proposals is the unfunded pension liability for previously-accrued benefits. “If this liability is not eliminated, we will need to have more than $800 million each year in additional savings to service the unfunded liabilities. This represents the annual cost of paying off our liability over the term of the contract,” the company said.
American proposes to amend all of the collective bargaining agreements so the company is not required to maintain, fund or provide benefits under a defined benefit pension plan. This will permit the company to seek to terminate its defined benefit pension plans for unionized employees, as well as those of management, support staff and independent employees. “If we receive court approval to terminate our plans, every active employee’s and retiree's vested defined pension benefit will be turned over to the PBGC and guaranteed up to the PBGC's 2011 maximum benefit limits,” American said on the website.
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