WASHINGTON—Pension Benefit Guaranty Corporation Director Josh Gotbaum released the following statement today on the Bankruptcy Filing of AMR Corp.:
"Today American Airlines' parent company filed for bankruptcy. When this happens employees and retirees worry — and they should. In past bankruptcies, workers and retirees have lost their healthcare and seen their pensions cut. Based on our estimates American Airlines employees could lose a billion dollars in pension benefits if American terminates their plans.
"This is true even if PBGC becomes responsible for those plans, because Congress has limited the size of the pensions we can pay. Unfortunately, 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, even after companies enter bankruptcy. As we did with Visteon, and with some plans at Delta and Northwest Airlines, we will encourage American to fix its financial problems and still keep its pension plans."
American Airlines sponsors four traditional pension plans that cover almost 130,000 participants. As of today, the plans collectively had about $8.3 billion in assets to cover about $18.5 billion in benefits. If American Airlines were to end their plans, the agency would be responsible for paying about $17 billion in benefits; about $1 billion in benefits would be lost.
A termination would also weaken the financial condition of PBGC, which has a record $26 billion deficit as a result of failed plans the agency has already assumed.
In cases where plans cannot be saved, PBGC steps in and pays benefits. Currently, the agency is responsible for about 1.5 million people in more than 4,300 failed plans. Each month, on average, PBGC pays about $460 million to more than 870,000 retirees and is responsible for future payments to 628,000 people who haven't retired.
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.