I worked for Hawker Beechcraft for many years. At first I was covered by the Hawker Beechcraft Hourly Plan, and then transferred to the salaried pension plan. I retired before the salaried plan ended and have been getting a benefit every month.
PBGC is now the trustee of the salaried plan. I understand that legal limitations apply to the salaried plan benefits, and that I may see a reduced benefit. But the hourly plan is still ongoing, and hourly plan retirees are not facing reductions. Why is PBGC applying the limits to the benefits I earned under the hourly plan?
When you retired, Hawker Beechcraft transferred money from the hourly plan to the salaried plan to cover your hourly plan benefits. The transfer was spelled out in the documents of both pension plans and is legally binding. Our lawyers looked at this issue very carefully and determined that PBGC is not allowed to transfer that money back to the hourly plan. We are required to treat your total benefit as coming from the salaried plan and to apply the legal limits.
I transferred from the Hawker Beechcraft Hourly Plan to the Hawker Beechcraft Salaried (or Base) Plan. The benefit I receive from the salaried plan includes benefit accruals I earned under the hourly plan. The hourly plan is still ongoing, and PBGC is not its trustee. Will PBGC apply the legal limits to the portion of my benefit that comes from the hourly plan?
Yes. The limit on recent benefit increases will apply to your hourly plan benefit. To be fully insured, a benefit increase must be effect for a full five years before the employer files for bankruptcy. If the benefit increase was in effect for less than five years, PBGC's insurance guarantee is "phased-in" at a rate of 20% per year. Hawker Beechcraft increased the benefit multiplier in the hourly plan from $44 to $51 on January 1, 2009. This increase was in effect for only three years when the company filed for bankruptcy protection on May 3, 2012. Therefore, PBGC can pay only 60% of this benefit increase (three years X 20% per year).