PBGC Director Josh Gotbaum Responds to Comments Made by American Airlines’ Counsel Harvey Miller
FOR IMMEDIATE RELEASE
December 16, 2011
WASHINGTON—Pension Benefit Guaranty Corporation Director Josh Gotbaum released the following statement today in response to comments made by American Airlines' Counsel Harvey Miller:
When American Airlines filed for bankruptcy they took great pains to say to their customers that nothing will change, that they will still have their frequent flyer miles and service will continue. But they didn't make the same promises to their employees about the future of their pensions.
Recent comments by the company's bankruptcy counsel, Harvey Miller, suggest that American wants to back out of its retirement commitments. For that to happen, American will have to prove it can't successfully reorganize if the pensions continue.
Mr. Miller also said that traditional pensions no longer work because of unpredictable market conditions. That may come as a surprise to the 60 million Americans that have them. Traditional pensions remain the best option for a secure retirement for most people. Those who have moved into 401K-type plans are discovering that investing is hard, the results are far from guaranteed, and they may end up having to work longer than expected. A defined benefit is always there, you can't outlive it, and it gives people real retirement security.
PBGC has helped dozens of companies in bankruptcy keep their pensions, so their employees and retirees get the benefits they worked for.
- For instance, Visteon, the former Ford Motor Co. auto-parts subsidiary, initially planned to terminate three of its pension plans in bankruptcy. We showed Visteon they could reorganize successfully without terminating their employees' plans. Today, the company's 23,000 workers and retirees continue to receive all the benefits they've earned.
- Contrary to Mr. Miller's comments, airlines have reorganized successfully without damaging the retirement security of workers and retirees. In the most recent airline bankruptcies, Northwest Airlines emerged without terminating its plans. Delta terminated its pilots plan, but reorganized with its other plans intact.
PBGC is a pension safety net, not a convenient option for companies that want to sidestep their retirement commitments. We step in when we have to and pay all benefits the law allows. When the agency assumed airline plans in the past, many people's pensions were cut, in some cases dramatically. That's why PBGC always tries first to preserve plans. We will continue to encourage American to fix its financial problems and still keep its pension plans.
PBGC protects the pension benefits of 44 million Americans in 27,500 private-sector pension plans. The agency is directly responsible for paying the benefits of more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums and with assets and recoveries from failed plans.
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PBGC No. 12-11