FOR IMMEDIATE RELEASE
December 30, 2004
PBGC Public Affairs, 202-326-4040
PBGC to Assume Responsibility for Pilots Pension Plan at UAL
WASHINGTON-The Pension Benefit Guaranty Corporation announced today that it
is moving to assume responsibility for the pensions of more than 14,000
active and retired pilots at United Airlines. Participants in the company's
other pension plans are unaffected. Today's action follows the agreement the
pilots union entered into with the company on Dec. 17 regarding the
termination of the defined benefit plan in exchange for other benefits and
considerations.
"The PBGC will protect the pension benefits of United Airlines' pilots up to
the limits set by law," said Executive Director Bradley D. Belt. "Retirees
will continue to receive monthly benefit checks without interruption, and
other pilots will receive benefits when they retire."
The United Airlines Pilot Defined Benefit Pension Plan is 49 percent funded
on a termination basis, with $2.8 billion in assets to cover $5.7 billion in
benefit liabilities, according to PBGC estimates. Of the $2.9 billion in
underfunding, the PBGC expects to be liable for approximately $1.4 billion
in guaranteed benefits, making the United pilots plan the third-largest
claim in the history of the insurance program.
"Ideally, the company would maintain all four of its pension plans and honor
fully the promises it has made to its employees," Belt said. "However, in
conjunction with the company's bankruptcy proceeding, PBGC's financial
advisers have come to the conclusion that United Airlines can afford at most
only three of its pension plans."
By stepping in now to assume the pilots plan, the PBGC protects against the
possibility of up to $140 million in additional losses. The termination of
the pilots plan also gives the company a greater financial capacity to
maintain the remaining plans.
"With a $23 billion deficit and more than 1 million workers and retirees
directly dependent on us for their pension benefits, the PBGC must be
vigilant in guarding against unnecessary losses," Belt said. "The decision
to take over a pension plan is never made lightly, especially in situations
where participants won't get everything the company promised but failed to
fund. I hope the plight of participants in airline pension plans puts an
exclamation point on the need for Congress to strengthen the funding rules
for defined benefit plans."
With the termination of the United pilots plan, five of the 10 largest
claims in PBGC's history are now from airline companies. Overall, the
airline industry accounts for nearly 20 percent of total PBGC claims but
fewer than 2 percent of insured participants. Losses suffered by the pension
insurance program must be covered by premiums paid by other companies that
sponsor defined benefit pension plans. The PBGC receives no general tax
revenue and is not backed by the full faith and credit of the U.S.
government.
Under federal pension law, the maximum guaranteed pension at age 65 for
participants in plans that terminate in 2004 is $44,386 a year. For now, the
United Airlines Pilot Defined Benefit Pension Plan remains under the
sponsorship of the company. General information about the PBGC's pension
insurance program is available at www.pbgc.gov. Workers and retirees with
additional questions may contact PBGC's Customer Service Center toll-free at
1-800-400-7242. For TTY/TDD users, call the federal relay service toll-free
at 1-800-877-8339 and ask for 800-400-7242.
The PBGC is a federal corporation created under the Employee Retirement
Income Security Act of 1974. It currently guarantees payment of basic
pension benefits earned by 44 million American workers and retirees
participating in more than 31,000 private-sector defined benefit pension
plans.
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PBGC No. 05-18