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PBGC Responds to American Airlines’ Letter on Employee Pensions

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PBGC Responds to American Airlines’ Letter on Employee Pensions
January 26, 2012

WASHINGTON—The Pension Benefit Guaranty Corporation today pushed back on misleading statements to American Airlines employees by its management about their pension plans.

"American Airlines is telling their workers and retirees not to worry, but they should," said J. Jioni Palmer, PBGC's director of communications.

A recent letter to employees from management downplayed the serious consequences of what could happen if the company terminated its pension plans, Palmer said. The letter ignored that PBGC doesn't insure retiree health benefits, which are usually canceled when companies terminate pension plans.

The American letter also downplayed the pension cuts that would occur if American's plans are terminated and PBGC benefits are substituted. Although the figure appears nowhere in the management letter, the airline itself estimates that some 13,000 current or retired employees will have their pensions cut.

American's recent statements, through its lead bankruptcy counsel and in employee communications, have signaled the airline's intent to dump its retirement obligations on the PBGC. "American said nothing's been decided yet, but didn't even bother to pretend that it was trying to preserve its employees' pensions," Palmer said.

Since the airline sought Chapter 11 protection on Nov. 29, 2011, the agency has been working to try to preserve American's pension plans. PBGC has repeatedly stated that the airline must be preserved, but that if it can do so while preserving its plans, that would be better both for PBGC and American's employees. PBGC noted that other airlines had reorganized successfully without terminating their plans.

About PBGC

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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