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Administration November 10, 2004
PBGC Seeks $28M in US Airways Stock
October 23, 2003 (PLANSPONSOR.com) - When it appears
in the US Bankruptcy Court on Monday, the Pension Benefit
Guaranty Corporation (PBGC) hopes to be awarded between $12
million and $28 million in US Airways stock set aside for
unsecured creditor claims.
Reported by PS
US Airways filed Chapter 11 in August 2002 and its creditor protection ended March 31, 2003. When US Airways ended its defined benefit pension plan, the PBGC assumed responsibility for it, agreeing to pay pension benefits to roughly 7,000 active and retired US Airways pilots and beneficiaries.
Ten percent of US Airways stock, approximately $560 million, was reserved for settlement with unsecured creditors. Since the PBGC is an unsecured creditor, it would be paid with this post-bankruptcy stock.
When the PBGC took responsibility for the plan, it estimated the pension plan to be underfunded by $2.5 billion, since the plan only had $1.2 billion in assets to cover $3.7 billion in benefit liabilities. However, a recent assumed return on plan assets has led the airline to decrease the plan liability value to $890 million.
The pension agency will present their case to a US Bankruptcy judge in eastern Virginia, where US Airways filed Chapter 11, and if the court sides with the PBGC, it could be awarded between $12 million and $28 million.
Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2003 is $43,977.24 a year. However, pilots must retire at 60, so the maximum paid by the pension agency per year to beneficiaries is approximately $28,500.
More information about the US Airways’ pension plan for pilots is available at the PBGC Web site, www.pbgc.gov/usairways . Workers and retirees with additional questions may contact PBGC’s Customer Service Center toll-free at 1-800-400-7242.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act (ERISA). It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in about 32,500 private-sector defined benefit pension plans.
Alison Cooke