PBGC Assumes Pensions of Aloha Airlines
FOR IMMEDIATE RELEASE
April 28, 2006
WASHINGTON - The Pension Benefit Guaranty Corporation today announced it has assumed responsibility for the pensions of nearly 4,000 employees and retirees of Aloha Airlines Inc. The Honolulu-based carrier, which serves inter-island destinations in Hawaii and several cities in the western U.S. mainland, recently emerged from bankruptcy reorganization.
The PBGC determined that three Aloha Airlines defined benefit plans ended as of December 14, 2005: the Pilots' Fixed Retirement Plan, the Pension Plan for Non-Represented Employees, and the Pension Plan for Employees Represented by the International Association of Machinists. Together the plans are 55 percent funded, with $190 million in assets to cover $345 million in benefit promises, according to PBGC estimates. The agency expects to be responsible for $117 million of the $155 million shortfall. Assumption of the plans will have no material effect on the PBGC's balance sheet, as an estimate of the liability was included in its fiscal 2005 financial statements according to generally accepted accounting principles.
Aloha Airlines filed for bankruptcy protection on December 30, 2004, and notified employees on October 14, 2005, that it would seek bankruptcy court approval to terminate its pension plans. On February 2, 2006, the court approved a settlement between Aloha and the PBGC providing for termination of the three plans. The settlement also provides that a fourth Aloha plan, the Pension Plan for Dispatchers, will remain ongoing under the company's sponsorship.
The PBGC will ensure that participants in the terminated Aloha pension plans receive their benefits up to the limits set by law. Retirees will continue to receive monthly benefit checks without interruption, and other workers will receive benefits when they become eligible. Within the next several weeks, the PBGC will send trusteeship notification letters to all participants in the terminated pension plans.
Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2005 is $45,613 per year. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
Workers and retirees with questions may consult the PBGC Web site, www.pbgc.gov or call toll-free at 1-800-400-7242. TTY/TDD users should dial 711 to reach the federal relay service and ask for 800-400-7242.
Aloha Airlines retirees who draw a benefit from the PBGC may be eligible for the federal Health Coverage Tax Credit. Further information may be found on the PBGC Web site at http://www.pbgc.gov/workers-retirees/benefits-information/content/page13692.html .
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 over 30,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns
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PBGC No. 06-46